Wednesday, February 06, 2019

Keeping Trump honest

Donald Trump has narrowed but not closed the job creation gap I've previously written about between himself and his predecessor. Trump has created a little less than 4.9 million jobs over his first full 24 months in office, for a monthly average of 203,000. (Update: Trump's monthly average sank to 196,000 with the February 2019 jobs report. Only 20,000 jobs were added in the most recent month.) Which isn't bad. Barack Obama created almost 5.1 million over his final 24 months, for a monthly average of 212,000. Obama's monthly average over his final 5 years in office was 207,000.

Dishonest as always, in his State of the Union address Trump claimed 5.3 million new jobs, but as usual he's counting from the election and thus stealing some of Obama's jobs. Even if we give them to him it doesn't help his monthly average, but it would bump Obama's average up to 221,000. Whatever. That's assuming 27 months for both presidents.

Do your own calculations. It's fun. Here are the latest monthly numbers back to 2009. Click on the table that follows, and the graphs below, for a larger view.

Source: Bureau of Labor Statistics

And here's a graph of the unemployment rate over the past decade:

Source: St. Louis Fed

Never mind that slight uptick at the end. These things happen, and anyway increases in the unemployment rate can sometimes represent positive developments, such as previously discouraged individuals electing to look for a job, thereby re-entering the workforce after a long absence. Trump is still correct that the rate is the lowest in quite some time, but as always he takes liberties with the truth when he said in his address that "unemployment has reached the lowest rate in over half a century."

It hasn't. Today's rate is 4 percent. The lowest rate of the Trump presidency was 3.7 percent last November. The rate in April, 1969, was 3.4 percent, three tenths of a percent better than Trump's best. That was not quite 49 years ago. Oh, and the rate was 3.8 percent in April of 2000, less than two decades ago. Follow the links in the graphs' captions and do your own analysis. You can put in any date ranges you want. Run your mouse pointer over the graph on the Fed's web site and it'll tell you the exact rate for particular months.

Source: St. Louis Fed

Looking at the graphs, you'd be excused for thinking Trump simply rode the downward momentum of Obama's long steady decline in the unemployment rate; that of course the rate was bound to keep falling, and in any case the graphs show Trump hasn't done anything to alter the trajectory prevailing when he took office.

Except if you squint you'll notice that the curve has flattened slightly under Trump, which means the decline has actually slowed a tiny bit. To be fair, that is what you'd expect as the economy approaches full employment. But there is simply no point on the graphs that shows Trump doing anything other than continuing the unemployment reduction achieved by Obama, while slightly under-performing his predecessor in terms of raw numbers of jobs and in the slope of the unemployment rate curve. As I've said before, in a lot of ways this is still Obama's economy.

The point here is not about dissing Trump's economy. Rather, it's to keep Trump honest—a never ending duty that musn't be shirked. Trump wants you (well, not you but—let's be blunt—his information-challenged base) to think he came in and turned things around, when what he actually did was keep things more or less rolling along as they'd being going for quite some time.

So honesty is the objective. We must reject self-aggrandizing hyperbole which shades into propaganda. Hyperbole and propaganda such as this: "An economic miracle is taking place in the United States," said the president Tuesday night in the well of the House. That's what he says now, but candidate Trump didn't think Obama's economy was miraculous, even though Obama created more than 10 million jobs in his second term, the one abutting Trump's. As I said, Obama averaged 207,000 per month over his final 60 months.

Trump wants to claim he's done something remarkable. "In just over two years since the election, we have launched an unprecedented economic boom, a boom that has rarely been seen before," said the president in his speech. "There has been nothing like it." [my emphasis]

Which is both false and laughable. By what metric is Trump's economy "unprecedented," and in what sense has he achieved a "boom?" (Funny: Trump's "boom" is reminiscent of his Electoral College "landslide.") Not in job creation, as we have seen, where he's been late to the party, taking unwarranted credit for what he was given. What about GDP growth?

Trump's big hurrah was 4.1 percent GDP growth in Q2 of last year. That was a one-off result that followed from a confluence of factors that won't be repeated. The growth rate has subsequently declined, and is expected to continue declining significantly going forward. Q3 came in at 3.4 percent. Q4 could be a little under 3 percent. (Apparently the Q4 report has been delayed thanks to Trump's partial government shutdown.) For all of 2018, GDP growth should be approximately 3 percent, which is solid but hardly breathtaking.

Obama's best year was 2.9 percent in 2015, as the economy was still digging out of depression. Obama's best quarters saw 4.5, 4.7 and 5.1 percent growth, but those occurred in a time of great volatility and were thus accompanied by very weak quarters as well.

The most recent example of a true boom was in the 90's under Bill Clinton: 1994 - 4 percent; 1995 - 2.7 percent; 1996 - 3.8 percent; 1997 - 4.5 percent; 1998 - 4.5 percent; 1999 - 4.7 percent; 2000 4.1 percent. That was a pretty good run. Even George W. Bush had years of 3.8 and 3.3 percent GDP growth. Trump's best year is worse than those, and is already behind him.

Indeed, Goldman Sachs downgraded its GDP forecast for 2019 to just 2.1 percent. The Congressional Budget Office forecasts GDP growth of 2.3 percent this year, and 1.7 percent next year. Last year the CBO forecast annual GDP growth of just 1.9 percent through 2028.

Some miracle. Some boom.

Copyright (C) 2019 James Michael Brennan, All Rights Reserved

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