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Trump’s claim that job growth is due to companies ‘moving back’

President Trump attributed strong job growth to companies coming back during a news conference on Jan. 4. (Video: The Washington Post, Photo: Melina Mara/The Washington Post)

“I imagine you’ve all seen the incredible job growth — 312,000 jobs — which took everybody by surprise. … This is a great number. I think it has a lot to do with the factories and with the companies that are moving back into the United States, who have left, and now they’re coming back to us instead of being in other countries.”

President Trump, remarks during a news conference, Jan. 4, 2019

President Trump was justifiably pleased with the Labor Department’s December report on job growth, the second-biggest monthly gain in his presidency. We were struck by his reasoning that he thought the gain largely was because of factories and companies that had returned to the United States.

He prefaced his comment with “I think,” which he has said in the past is a way to avoid Pinocchios because it reflects an opinion. But still, we were curious: What do the data show?

The Facts

Because Trump was talking about factories moving back to the United States, we need to concentrate on manufacturing jobs. The gain in December was 32,000 — and for all of 2018, 284,000. The November and December data is preliminary, so the numbers could change, but without a doubt, it’s a great result: the largest annual gain in manufacturing jobs since the Great Recession wiped out nearly 1.4 million just in 2009.

With the December figures, the number of U.S. manufacturing jobs is almost back to the level of December 2008 — though still 1.4 million jobs lower than the official start of the recession in December 2007.

The 284,000 gain in manufacturing jobs came right after a 207,000 gain in 2017, which basically matched President Barack Obama’s best years (208,000 gain in 2014 and 207,000 gain in 2011). In fact, the rebound in manufacturing stalled out at the end of Obama’s term, with a gain of just 69,000 jobs in 2015 and then a decline of 9,000 in 2016.

So Trump certainly has bragging rights. How much can be attributed to him? It depends on the figures you look at, but regular readers know we are often wary of giving presidents credit for broad economic trends.

President Trump and former president Barack Obama have both claimed credit for the booming economy. Who's right? (Video: Meg Kelly/The Washington Post)

The Reshoring Initiative, a group that encourages companies to come back to the United States, keeps track of company announcements, including partial shifts. Harry Moser, founder of the Reshoring Initiative and former president of machine-tool maker GF AgieCharmilles, says the spike in manufacturing can be attributed to Trump’s arrival, especially his push to lower corporate taxes and reduce regulations.

“President Obama showed interest in this. He talked about it,” Moser said, noting that Obama focused on increasing exports and what he called insourcing. “Trump definitely put the foot on the accelerator in his own way.”

The data from the Reshoring Initiative shows that companies started to return jobs to the United States — or other countries invested in the United States — during the Obama administration, but the trend really started to pick up in 2017. About 73,000 jobs were brought to the United States in 2015, 113,000 in 2016 and 171,000 in 2017, Trump’s first year in office. That’s a gain of more than 50 percent between 2016 and 2017.

Moser said there is about a one-year lag between announcement and hiring, so the effect of the 2017 announcements would be felt in 2018.

So the 2017 gains in manufacturing jobs might well be attributed to announcements when Obama was president, but the more impressive gain in 2018 could be attributed to announcements during Trump’s tenure. Moser said that about 40 percent of the total gain in manufacturing jobs could be attributed to reshoring.

“Clearly manufacturing employment is stronger,” Moser said. “We believe that losing fewer jobs to offshoring and reshoring a lot more than in the past is a key factor.”

The group tracks another metric, “kept from offshoring,” which reflects U.S. companies that announced they had considered moving overseas but stayed domestic. There was also a big gain in 2017, going to 34,000 from 19,000 in 2016.

But Trump may have also just been in the right place at the right time. China became less attractive as its wages and prices have increased. The rise of e-commerce has meant that some companies have returned to the United States to be closer to customers, who expect quick deliveries.

Moreover, there are other metrics that are not as positive. A.T. Kearney’s fourth annual U.S. Reshoring Index, released in July 2018, presents a different picture: record imports from traditional offshoring countries in 2017 — a sharp reversal of the glimmers of hope seen in 2016. The Reshoring Index, unlike the Reshoring Initiative, does not count foreign direct investment or partial job shifts. So it focuses much more on actual moves by entire companies.

“The 2017 Reshoring Index shows that reshoring continues to be a drop in the bucket, and US manufacturers are not exactly coming back in droves,” the July report said. “Although 2017 was a strong year for US manufacturing, both imports and domestic gross output of manufactured goods grew at rates that have not been matched since 2011.”

Scott Paul, president of the Alliance for American Manufacturing, told CNN that “it’s still a two-way street. We still have manufacturing that is leaving the US, but you also see some reshoring.” CNN cited a survey of 800 manufacturers conducted in mid-October by IHS Markit, in which respondents on average said the new U.S. tariffs and escalating trade war would make them slightly more likely to move production overseas over the next two years.

While the numbers are not yet complete, Moser said job announcements in 2018 will amount to about 130,000, off the 2017 pace by nearly 25 percent but still higher than in 2016. He attributed the slowdown to the trade disputes engineered by Trump, as well as dysfunction in Washington, along with a rise in the value of the U.S. dollar.

The Pinocchio Test

Trump said he believed that the gain in manufacturing jobs “has a lot to do” with companies returning to the United States. It’s certainly an important factor, but not the only factor — and the trend started under Obama, even as it accelerated under Trump. The president should also note the storm clouds caused by his trade disputes in 2018. We are generally reluctant to let any president give themselves too much credit for the economy, but Trump can certainly claim some bragging rights. Besides, it’s not often that we find ourselves concluding that the president is mostly on target.

One Pinocchio

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