Donald Trump is doing the wrong things for the economy, at least according to most economists. So why is it still growing?
America has a curious history when it comes to presidential scandals and the economy.
You might think, for example, that the titanic misconduct of Watergate would have coincided with economic troubles for President Richard Nixon. Yet, although inflation was a worry, unemployment actually declined as the constitutional crisis gathered.
The economy was strong during Ronald Reagan’s Iran-Contra scandal, and especially so while Bill Clinton was facing impeachment over the Monica Lewinsky affair.
So it’s not surprising that President Trump’s troubles failed to stop a strong January employment report. The 304,000 jobs created last month are finally at the level we saw in the strongest periods of the historic 1980s and 1990s expansions. According to economist Jared Bernstein, the three-month average is 241,000.
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“Jobs, jobs, jobs,” Trump triumphantly tweeted.
What is more surprising: It’s happened despite Trump’s actions that are destructive to the economy. These include the record-length federal government shutdown and, especially, tariffs against China and even Canada (provoking retaliatory duties against U.S. exports).
Is it possible that mainstream economists are wrong and Trump is right? Maybe, but doubtful.
The more credible explanation is that, as the New Yorker’s John Cassidy put it, “the American economy isn’t a zippy speedboat that can stop and start at short notice. It’s a vast supertanker that tends to plow ahead once it has built up some momentum.”
So far, the trade tensions haven’t been bad enough to stop the Big Mo’. No financial crisis seems in the offing (although weakening the Dodd-Frank law might set the table for one). And the Federal Reserve is taking a “patient” approach to raising interest rates, which helped calm markets.
The GOP stimulus also gave a short-term boost — not with infrastructure but tax cuts mostly benefiting the wealthy and corporations. This temporary rising tide lifted some boats — beneficiaries of corporate stock buybacks — more than others. But the cost will be adding $1.9 trillion to the national debt over a decade.
And don’t forget the earlier stimulus, from the Obama administration and Congress, and from the Bernanke Federal Reserve, that pulled the country out of the Great Recession and started it on a slow but steady recovery.
This expansion has its discontents, especially inequality and failure to use the better times to address climate change.
The employment to population ratio (EPOP), which measures the share of the working-age population that is actually employed, remains low for this point in an expansion. One has to go back into the 1960s, before women entered the workforce in large numbers, to find a similar low figure.
Maybe some of this comes from retiring baby boomers. The ratio for workers age 25 to 54 is closer to the normal trend line.
But the larger EPOP weakness may also signify whole sectors automating or becoming obsolete.
The biggest near-term threat remains trade, with Washington as America’s most trade dependent/vulnerable state. With government data running late because of the shutdown, we don’t know the latest effects of the tariffs. Meanhwhile, U.S. and Chinese negotiators are working against a March 1st “hard deadline” or the levies will go up.
• The Northwest Seaport Alliance, comprising the ports of Seattle and Tacoma, recent released its economic-impact analysis, prepared by the consultancy Community Attributes. According to the report, the combined ports are the fourth-largest container gateway in North America. They directly support 20,100 jobs and $1.9 billion in labor income. The marine cargo sector’s average annual wage was $95,000.
• A new Brookings Institution report finds that 43.6 percent of jobs in Seattle-Tacoma-Bellevue are susceptible to automation. That’s actually lower than many metros. “Among the country’s 100 largest metros, workers’ education attainment will prove to be decisive” in protecting them from automation job loss, says Brookings.