By Heather Long / The Washington Post
WASHINGTON — President Donald Trump has a new talking point: This economy ranks among the greatest in U.S. history. He tweeted late Monday that “In many ways this is the greatest economy in the HISTORY of America and the best time EVER to look for a job!” He followed that up Tuesday with a tweet saying the current conditions could be “the best economy in the history of our country.”
Trump did hedge, but if he’s suggesting his economy is the best ever, he’s got a problem: The numbers don’t back him up.
This is a good economy and Trump deserves some credit for it. But calling it the “greatest ever” goes too far, as it can’t top the late 1990s or the stellar growth in parts of the 1940s, 1960s and 1980s, according to key data.
There are many ways to judge an economy, but the typical measures are growth, jobs, wages, inflation and debt. Inequality also usually gets tossed into the mix.
In today’s economy, jobs are plentiful, the stock market is at record levels and confidence — both business and consumer — is high. Inflation has also remained tame. But growth, while showing signs of picking up, is still below what it was in many eras. Wage growth is also disappointing compared with what it was in prior boom times, and the deficit has also surged, which experts warn could be a drag on the economy for years to come.
Let’s break down the good, the so-so and the not great parts of the current economy. (And let’s add the caveat that presidents usually get more credit for good or bad economic times than they probably deserve.)
The really good: America has a lot of jobs right now
The United States has a record number of job openings and the unemployment rate is the lowest it has been since April 2000. If it falls any lower (and most economists say it will), Trump would be presiding over the lowest rate since 1969 (when unemployment fell to 3.5 percent).
Unemployment is at the lowest level for African Americans since the government started measuring it in 1972, and the gap between black and white unemployment rates is the narrowest ever. Hispanic unemployment is near an all-time low, as is unemployment for Americans who have high school diplomas but didn’t attend college.
Neil Irwin of The New York Times put it this way: “We ran out of words to describe how good the jobs numbers are.” Kevin Hassett, head of Trump’s Council of Economic Advisers, said Tuesday, “The job market right now is about as strong as I’ve ever seen.”
While hiring has been strong for years and the trend began under President Barack Obama, 2018 has looked especially good. The monthly average job gains this year are actually faster than last year or 2016. Trump deserves some credit for that, and business leaders such as JPMorgan Chase chief executive Jamie Dimon say the tax cuts and deregulation under Trump have boosted their profits and spurred many companies to hire more workers.
The only drawback is that a smaller share of Americans are working now than in 2000. The labor force participation rate — a measure of the total number of people working against the total number of people who could be working — is under 63 percent now, vs. 67 percent in 2000. While some of the decline is explained by baby boomers retiring, not all of it is, raising concerns that some Americans who could work still aren’t.
The good (but not great): Economic growth is picking up (but still below the 1990s)
On the campaign trail, Trump liked to call the Obama economy “weak” and “anemic.” He often pointed to 2 percent economic growth as puny and said he could achieve growth of 4 or 5 percent a year. Yet under Trump so far, the economy isn’t growing much faster than it did under Obama. In his first year in office, economy grew by 2.3 percent. It’s possible to argue that Trump’s policies had not taken effect, but the economy grew by just 2.2 percent in the first quarter of this year.
Growth is expected to pick up during the rest of 2018. The nonpartisan Congressional Budget Office estimates that growth will be at 3.3 percent for the year, the best since 2005, and Trump deserves some credit for that, although a global rebound has also helped. But almost no forecaster thinks that level of growth will last; most expect it to fall back down quickly.
To put it another way, growth in the Trump era looks likely to be far short of the late 1990s or 1980s, when growth averaged above 4 percent a year or much of the 1960s when growth averaged above 5 percent a year.
The disappointing: Wage growth is still lousy.
Trump has tapped into the frustration and insecurities of many American workers whose pay has been basically flat for the past two decades — or more. Once you adjust for inflation (a.k.a. cost of living), median household income in America was several thousand dollars lower in 2014 than in 2000. It has improved a tad — 2016 was the highest middle-class income on record, but it’s still barely topped the level from 1999.
The problem for Trump is that it’s not getting much better. Wage growth is still hovering around 2.6 to 2.8 percent, which is barely above inflation. That’s far short of the 4 percent wage growth during much of the 1990s.
There’s optimism that Americans will finally get wage growth over 3 percent later this year. There are many signs that companies can’t find enough workers and are finally willing to pay more to get (and keep) employees. But while there are many anecdotes of companies saying they are raising pay, the official wage growth statistic for the entire country still isn’t rising much.
After Trump’s tax cuts, some companies opted to give one-time bonuses. That’s real money for employees, but it only comes once and isn’t a true wage bump.
The really disappointing: Trump’s $1 trillion deficits
As a candidate, Trump once promised to eliminate the national debt within 8 years. But projected deficits have exploded on his watch.
America’s annual government budget deficit will hit $1 trillion by 2020, according to the Congressional Budget Office, and it’s expected to stay that high for years to come. It’s mainly driven by the tax cut Trump pushed hard for and signed in December. His team started off wanting to make it “deficit-neutral” so it would not add to the debt, but that was quickly abandoned. The end result is a tax cut that CBO estimates will add $1.9 trillion to the debt because of lost revenue and added interest costs.
On top of that, Trump pushed for more government spending, especially on the military, and he has refused to make any changes to Medicare or Social Security, the two programs that many budget hawks say must be tweaked in the coming years or else the debt will become unsustainable. He has also sought cuts to safety net programs for the poor, which could exacerbate inequality.
While debt has grown under many recent presidents, it happened during sour economic times when the government tried to spend to revive the economy and save jobs. It’s highly unusual to have this kind of buildup of debt during good economic times, and many have warned the economy could suffer down the road as the U.S. government lacks the money to help during the next downturn, let alone make needed investments in infrastructure and education.
Bottom line: Most economists call this a very solid time for the U.S. economy. Some even call it “hot” or “strong.” But they aren’t calling it history-making.