New data challenges Trump's economic narrative
BY NIV ELIS - 08/25/19 10:50 AM EDT 1,295
President Trump has repeatedly said the U.S. economy under his watch has been extraordinary.
His tweeted descriptors have included "BOOMING," "GREAT," "stronger than ever" and "perhaps the greatest ECONOMY and most successful first two years of any President in history."
But a slew of recent data suggests the Trump economy has fared no differently than other expansions at this stage. And those same numbers indicate the president's economy may be headed toward a downturn.
“I would actually say it’s been a weaker recovery than what we’ve seen previously, particular in comparison to the expansions of the '80s and '90s,” said PNC Bank Chief Economist Gus Faucher.
That viewpoint has been shaped by figures like the ones released by the Bureau of Labor Statistics on Thursday. The agency issued a downward revision showing the economy added 500,000 fewer jobs from January 2018 through March 2019.
What was once an impressive 223,000 jobs added each month last year, on average, may have been closer to 191,000, according to the new data.
Even before the revision, average monthly job growth since Trump took office has been 193,000, below the 208,000 average in former President Obama's second term. The recent revision puts Trump's overall monthly average at 177,000.
“We thought we had a bit of acceleration in job growth in 2018, but it looks like instead what we had was roughly the same trend we had before,” Faucher said.
Economic growth has exhibited a similar pattern.
A downward revision in gross domestic product by government economists robbed the Trump administration of a talking point that it had achieved four consecutive quarters of growth averaging 3 percent, a threshold Trump has long argued is sustainable over a 10-year period.
Goldman Sachs now estimates that growth will slow to 1.8 percent in the fourth quarter of 2019, a figure Trump is unlikely to trumpet.
“If you judge the economy based on how he’s judged the economy, it’s pretty mixed,” says Mark Zandi, chief economist at Moody’s Analytics, referring to Trump. “He took a lot of credit on the stock market, but it’s gone nowhere since January of 2018.”
Indeed, when it comes to the markets, Trump’s first year set him apart from his predecessors. Twelve months into his presidency, the Dow Jones Industrial Average had soared 31.6 percent, more than any other president, and nearly 6 percentage points better than Obama's first year, when the economy was still in recession.
But 31 months into his presidency, Trump now lags previous Democratic presidents when it comes to the Dow's performance. At this point in Obama's first term, the Dow was up 45.2 percent since he took office. For former President Clinton, it was up 39.3 percent. Trump clocks in at 32.2 percent.
In fact, the Dow's performance under Trump is closest to former President George H.W. Bush, who lost his reelection bid after the economy slipped into a recession.
Trump also came into office promising to wipe out the national debt and lower the trade deficit. Instead, the opposite has happened.
The federal deficit this year is expected to hit close to $1 trillion, up some 70 percent from its 2016 level of $587 billion. Meanwhile, the trade deficit, which stood at $502.3 billion before Trump came into office, has also ballooned.
“Notwithstanding the White House’s focus on shrinking the trade deficit, expect it to widen by 7 percent to 8 percent for all of 2019, to about $670 billion,” Kiplinger projected earlier this month in its economic forecast. “It’s up by 8 percent already in the first half of this year from the comparable first six months of 2018.”
But that's not say the economy is in dire straits. Some bright spots stand out.
“In terms of unemployment levels, the economy looks great,” said Barry Bosworth, a senior fellow in the Economic Studies program at the Brookings Institution.
He noted that the jobless rate is near 50-year lows, more people are working and wages have even started ticking up.
“But if you’re looking at growth rates, it’s unusually slow,” Bosworth added. “This is the longest economic expansion in history, but it’s also the slowest."
Economists point to lower productivity as one reason growth has not accelerated.
Then there are the concerns that a downturn could be on the horizon. In recent weeks, yields on long-term bonds have risen higher than those on short-term ones, creating what's known as “an inverted yield curve.” It's considered one of the best predictors of a recession, though on average the events are separated by 22 months.
“I would expect to see growth slow in the next couple of years, even if there’s not a recession,” said Faucher.
With the stimulus of the 2017 tax law wearing off and a trade war with China escalating almost monthly, Trump may have to answer for a slowing economy as he seeks a second term in office.
“I would say his economy is on borrowed time,” said Zandi. “He bought himself some time by borrowing lots of money and cutting a big check to business and high-income households, but I think his policies are driving the economy into the ditch.”