By Bob Shanahan
Don’t tell me this economy sucks. Sure, it’s far from perfect, but look at the statistics, look at Americans getting back to work, and tell me that we are doomed. Of course the party won’t last forever and the downturn will eventually come. That said, through the first year-and-a-half of the Trump economy, we are seeing and are poised for significant growth.
The Trump administration’s America First economic policies are employing many Americans who have been out of work for some time. Second quarter’s GDP growth of 4.1 percent is the latest example of Trump’s deregulatory pro-jobs policies working wonders for the country. And the third quarter could be even stronger.
Although we are still less than halfway through the third quarter, early indicators point to an even higher GDP number, scheduled to be announced on October 26. The Atlanta Federal Reserve’s GDPNow model, which sifts through and analyzes current economic data to predict the current quarter’s GDP growth, stood at 5 percent last week, up slightly from an initial estimate of 4.7 percent.
The GDPNow model is not perfect, but it does have a strong track record. Neil Dutta, head of U.S. economics at Renaissance Macro, recently said the data is likely to hold up and end close to 5 percent. The average move for the reading over the course of a quarter was a drop of 0.6 percentage points. The biggest downward move in GDPNow’s history over the course of a quarter was 2.2 percentage points and the largest upward move was 1.5 percentage points. If we see an uptick all the way to 6.2 percent, we would witness the highest quarterly GDP total since 2003.
President Trump’s fiscal policy is giving a boost to the economy.
Federal, state, and local fiscal policies enacted by the Trump administration boosted GDP growth by 0.6 percentage points in the second quarter, according to an analysis by the Hutchins Center on Fiscal & Monetary Policy at the Brookings Institution. This analysis, called the “fiscal impact measure,” tracks how much fiscal policies contribute to economic growth. Over the last three quarters during Trump’s time at the helm, we have seen a significant upturn after falling below zero in 2011, when we saw a four-year period of fiscal policies pushing growth into the negative under President Obama. Federal spending was a significant contributor to growth during the second quarter, rising 3.5 percent as Trump continues to reveal himself as a big spender.
Image courtesy of the Hutchins Center on Fiscal & Monetary Policy
The economic reality is more than encouraging during the first 18 months of the Trump administration. Although there are still millions of Americans out of the workforce, are bankrupt, underemployed, or riddled with debt, there are many other positive trends worth noting.
For example, more than 2.8 million people have dropped food stamps since Trump took office. After food stamp enrollment hit an all-time high in 2013 under Obama, food stamp enrollment has fallen to an eight-year low. President Trump continues to clamp down on fraud and an improving economy is providing more jobs for Americans who can get to work if they want to. The jobs are out there. Trump has changed the dynamic and has prioritized getting food stamp recipients off the government dole and back in the workforce. Over the last 18 months, millions of Americans have discontinued their food stamp benefits due to the Trump administration’s impactful reforms of the program at both the federal and state level.
Although wage growth continues to stay stubbornly below 3 percent annual increases, employment is still expanding at a healthy pace. The economy added 157,000 jobs in July, according to the Bureau of Labor Statistics as the unemployment rate ticked down to 3.9 percent. Though the unemployment rate is incomplete because it does not factor in the number of people out of the workforce or underemployed, it still paints a current economic snapshot. Economists are in agreement that there is a strong job market nationwide and jobs available for those seeking employment.
The labor force participation rate stayed at just under 63 percent in July, unmoved from June. Job growth was seen business support, manufacturing, and healthcare. Recently released job growth numbers were also revised upward for both May and June. Job creation has averaged a 224,000 increase per month over the last three months, roughly twice as high as is needed to keep unemployment on its downward trend. Furthermore, layoffs and closures (outside of retail), have been rare in recent weeks, signalling a continuation of employment growth in the months to come.
“Over the past couple of months what we’re seeing is a response to a very attractive labor market for job seekers,” said Cathy Barrera, ZipRecruiter’s chief economist, in a recent interview. “Like last month, it seems that we are seeing people come off of the sidelines.”
Certain segments of society are enjoying unprecedented levels of employment during the Trump economy.
Hispanic unemployment plunged to a new record low in July, falling to 4.5 percent from 4.6 percent in June. Jobless rates for high school dropouts also fell to a record low in July. Although not all of this economic success can be attributed to the Trump administration as the economy is in its ninth year of expansion following the 2008-2009 recession and unemployment has been steadily dropping since 2011, the gains in employment have accelerated over the last 18 months and Trump is accomplishing more in that amount of time than Obama was able to do with eight full years.
President Obama, the first African American chief executive, was unable to improve the lives of African Americans in this country. Black unemployment sits at 5.9 percent, the lowest since the government started tracking this statistic in 1972. With African Americans getting back to work and seeing their lives improve under a Republican president, Donald Trump’s approval ratings among black voters has doubled over the last year, rising to 29 percent, up from 15 percent at the same time a year before.
The one economic disruptor remains Trump’s escalating trade war with China. With the back-and-forth continuing through the summer months, companies are getting nervous that earnings will be pared back dramatically in the months to come with increasing tariffs. However, American businesses have shown resounding resilience in recent months. Analysts expect businesses to take the latest signs of a trade war in stride just as they have done with previous threats from Trump and responses from China and elsewhere.
“The economy generally is so strong that, despite the challenges of the potential trade war, the strength of the economy is more than offsetting that,” according to Randy Frederick, vice president of trading and derivatives at Charles Schwab & Co. Inc. “Corporations have posted record profits this quarter that we haven’t seen in over a decade.” We will see if that continues since increasing tariffs are bound to have a significant drag on profits and earnings.
The recent announcement of future tariffs are making manufacturers and export-reliant companies especially nervous. The Office of the U.S. Trade Representative just finalized a set of 25 percent tariffs to be imposed on China. U.S. Customs and Border Protection will begin collecting the duties covering $16 billion worth of goods from China on August 23rd after the first round of tariffs directed at China impacted $34 billion worth of goods.
The Trump administration states that it is imposing these tariffs to pressure China into changing its unfair trading practices against American companies. Something many politicians have promised to do and our president is actually doing. Trump has been railing against China and its trading tactics as far back as the 1980s. He wants fair international trade and he is doing everything he can to make that a reality. But there are going to be some growing pains as the president ratchets up the trade war and takes on China directly.
A hearing will be held from August 20-23 to consider a third round of tariffs covering $200 billion of Chinese products, which means the trade war is only going to get more disruptive through the rest of 2018.
Despite uncertainty on trade, the Trump economy is firing on all cylinders. People are getting back to work. American consumers have more money in their pockets to spend. Jobs are available for people who want to work. We need to focus more on retraining our population to be able to fill the jobs that are available but cannot be filled by qualified workers.
Looking forward to the third and fourth quarters, we could see a huge economic year if things continue on this positive trajectory. 4 percent annual GDP growth could become a reality. 3 percent wage growth could be attainable. Record-low unemployment should continue to go lower and lower. President Trump will likely be the greatest jobs president of all time.
But that all depends on Americans getting off the sidelines and getting back to work. It’s starting to happen but there are still many out there that refuse to work for a living. We need to encourage those people to support themselves. We need implement a merit-based immigration system that brings people into this country that will contribute to our society and fill open jobs. But most of all, we need to support President Trump in his pursuit of putting America, its economy, and its people first and foremost.
Make sure you get out and vote in November to keep the Democratic Socialists out of office and out of our pockets.
Follow me @BobShanahanMan
Bob is a freelance journalist and researcher. He remains forever skeptical of the mainstream media narrative and dedicated to uncovering the truth. Bob writes about politics (in DC and CA), economics, cultural trends, public policy, media, history, real estate, Trump Derangement Syndrome, and geopolitics. Bob grew up in Northern California, went to college in Southern California, and lived 4+ years in Seattle. He now lives in sunny Sacramento. His writing also appears in Investment Watch Blog and has been posted on ZeroHedge and Signs of the Times.