The presented idea behind the Republican tax cuts passed in December 2017 was simple: Slashing taxes on companies would spur hiring, which would drive up wages and boost the economy — so much so, in fact, that the tax cuts would pay for themselves in the form of increased tax receipts on corporate profits. The markets, President Trump promised, would surge as a result.
For much of the American public, only the beginning part of that really mattered. More jobs and higher wages are never unpopular, and, if Trump et al. could deliver despite the fact that unemployment was already quite low, who could complain?
On Friday, the Bureau of Labor Statistics released the last employment report for 2018, giving us a complete look at the first full year after those tax cuts. And, to some extent, the sales pitch held up.
We can consider this in two contexts: How things looked relative to 2017 and how the first two years of Trump’s administration looked compared to the last two of President Barack Obama’s.
On the unemployment rate, 2018 saw the lowest overall level of any of the four years — but that was certainly in part because the unemployment rate is already so low. In fact, the rate climbed two points in December, in part thanks to people willingly leaving jobs to seek better employment.
(The chart above shows rates of change, month over month.)
Looking at the change in the number of people working nationally, 2018 added 2.6 million new jobs, thanks in part to the 310,000 added last month. That figure, we’ll note will be revised over the next two months.
What really stands out is the change in hourly earnings. From 2015 to 2017, the change over the course of the year ranged from 63 to 69 cents an hour. In 2018, earnings increased by 84 cents over the year, a 3.2 percent increase.
That’s an increase of nearly $1,750 for a person working 2,080 hours in a year.
This, too, is probably linked to some degree to the lower unemployment rate. It’s expected that, as unemployment drops, wages will rise, since employers will need to compete for employees who have more choices about where to go. That there was a boost in the number of people willingly leaving their jobs in December bolsters this idea: You can more easily leave your job to go somewhere that pays you more if there are more jobs and fewer job candidates.
Regardless: Good news. But, then, there are those markets. By now, you’re aware that things didn’t go as Trump had hoped on that metric, with the Dow Jones industrial average and the Standard & Poor’s 500-composite index both dropping over the course of 2018.
Shortly before the jobs report was released, Trump sought on Twitter to downplay the market declines as being the fault of his political opponents.
The problem with that, as the graph above should make clear, is that the market began to stagnate early in 2018, well before the midterm elections.
It’s also not the case that the tax cuts have, over the short term, boosted federal income taxes. As we noted last month, corporate taxes are the only category of taxes where receipts declined in fiscal year 2018 relative to 2017.
For most Americans, that’s not the important thing. Trump and the Republicans promised more jobs and wage increases. In 2018, both of those things happened, at paces faster than 2016 or 2017. How much of that is a function of the tax cuts is more than debatable, but, especially given the miss on the markets, it’s clear the president will take it.