Trump has set economic growth on fire. Here is how he did it:
President Donald Trump is more than 19 months into an administration engulfed in so much controversy that it may overshadow a tremendous achievement, namely an economic boom uniquely his.
During his time in office, the economy has achieved feats most experts thought impossible. GDP is growing at a 3 percent-plus rate. The unemployment rate is near a 50-year low. Meanwhile, the stock market has jumped 27 percent amid a surge in corporate profits.
Friday brought another round of good news: Nonfarm payrolls rose by a better-than-expected 201,000 and wages, the last missing piece of the economic recovery, increased by 2.9 percent year over year to the highest level since April 2009. That made it the best gain since the recession ended in June 2009.
His critics, a group that includes a legion of Wall Street economists, most Democrats and even some in his own Republican Party, don’t believe it will last. They figure the current boom will begin petering out as soon as mid-2019 and possibly end in recession in 2020.
But even they acknowledge that the current numbers are a uniquely Trumpian achievement and not owed to policies already set in motion when he took office.
“I still believe the big story this year is an economic boom that most folks thought impossible,” Larry Kudlow, director of the National Economic Council and a chief advisor to Trump, said in a recent interview with CNBC.com. “I understand that he’s been in for a year and a half, but when you look at those numbers, this is not going away.”
Indeed, the economy does seem to be on fire, and it’s fairly easy to draw a straight line from Trump’s policies to the current trends.
Trump’s economic achievements
Business confidence is soaring, in part thanks to a softer regulatory environment. Consumer sentiment by one measure is at its highest level in 18 years. Corporate profits, owed in good part to last year’s tax cuts, are coming close to setting records.
Each of those accomplishments can be tied either directly to new policies or at least indirectly through a brimming sense of hope from businesses that the White House is back on their side.
“When you look at those confidence indexes, they’re telling you something,” Kudlow said. “His attitude is, we’re not punishing business, we’re not punishing success, we want to make things easier to do business and to hire, and I think it’s had a very positive effect and a very palpable effect.”
GDP most recently gained 4.2 percent in the second quarter, the best performance in nearly four years.
At the same time, the unemployment rate is 3.9 percent, just one-tenth of a percentage point above the lowest level since 1969.
But there are some more telling figures about just how much progress has been made under Trump.
At a time when most economists had been using the term “full employment” to describe the economy, 3.9 million more Americans have joined the ranks of the working during the Trump term. During the same period under former President Barack Obama, employment had fallen by 2.6 million. The economy in total, while still not in breakout mode, has grown by $1.4 trillion through the second quarter under Trump; the same time period for Obama saw a gain of just $481 billion, or a third of Trump’s total.
Businesses are investing, consumers are spending and innovation is on the rise as well.
Trump pledged that he would pare down regulations that were choking business activity. While the actual moves toward deregulation haven’t been quite as ambitious as planned, the approach has won him converts in the business community.
The most recent reading from the National Federation of Independent Business was the second highest in history dating back 45 years. Small business owners reported aggressive hiring plans, the only obstacle to which has been a dearth of labor supply. The end of June saw 6.7 million job openings and just 6.6 million Americans classified as unemployed, an unprecedented imbalance.
“Expansion continues to be a priority for small businesses who show no signs of slowing as they anticipate more sales and better business conditions.” NFIB President and CEO Juanita Duggan said in a statement.