Trump is putting out 4 big whoppers about today’s economy. Here’s what he’s saying, and here’s the truth:
1. “Best job growth ever.” Wrong. Job growth has actually slowed. In the last 19 months of the Obama administration the economy created 3.96 million jobs. In the first 19 months of Trump’s, 3.58 million.
2. “Lowest unemployment rate ever.” Rubbish. The unemployment rate is now down to 3.9 percent. That’s good. But it doesn’t measure how many people are still too discouraged to look for work or are working part time who’d rather be working full time. The labor participation rate (percent of prime working age work who actually have jobs) has been stuck at 88.9 percent for over a year.
And the current 3.9 percent rate is hardly better than ever in history. It was 3.4 percent in 1968 under Johnson, and below 3.9 percent for much of 1951, 1952, and 1953, under Eisenhower.
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The practical question is always how low the Fed will allow unemployment to fall before raising rates, for fear of inflation. In 1996, unemployment fell to 4.4 percent, but Fed Chair Alan Greenspan then raised rates. This time around, Fed Chair Janet Yellen and her successor Jerome Powell have been quite accommodating, but Powell is starting to raise rates again.
3. “Fastest economic growth in history.” Wrong again. The economy is now growing at annualized rate of 4.2 percent (that’s for the 2nd quarter). That’s not as good as the 5.1 percent and 4.9 percent achieved in 2 quarters in 2014, or the 4.7 percent in one quarter in 2011. During the Clinton years of 1997-1999, it grew by over 4.5 percent annually. Under Reagan, the recovery averaged 4.4 percent a year. Under Eisenhower, even faster.
4. “Best wages, ever.” Not even close. Today’s hourly wage has less purchasing power than it did over four decades years ago. Adjusted for inflation, the average hourly wage in January 1973 would be $23.68 today. Yet today’s actual average hourly wage is $22.73. And, of course, the lion’s share is going to the top.
Trump is having only one positive impact on the economy: His continuous P.T. Barnum lies about how good it is have improved consumer confidence. Which I suppose is good – until, like the character in the road-runner cartoons, consumers look down and realize there’s nothing under them.