Two charts

It's perplexing but not unusual to hear hosts on news programs refer to the economy as "hot," which is mostly a reaction to the low unemployment rate and the high stock market. As economists are wont to remind, the market is not the economy. And that low rate is not a reflection of hotness in the economy, but rather its unusually extended tortoise-like expansion, which has resulted in a long, protracted accumulation of jobs. By the standards of previous genuinely hot economies, this one has actually been somewhat tepid. Still, there's something to be said for persistence. And even for tepidness run sufficiently long.

So I've been waiting for the preliminary second quarter GDP numbers, and they're now in. As expected, GDP growth slowed to 2.1 percent in Q2, down from a less-than-meets-the-eye 3.1 percent in the first quarter. More interesting, GDP growth for all of 2018 was revised down to 2.5 percent. Uh-oh. Trump, who excoriated Obama (whose best year was 2.9 percent) about never reaching 3 percent, hasn't either. And won't.  Growth for Trump's first year, 2017, was only 2.4 percent. Oh, how hot this economy is! Best ever, Trump said again, the other day.

How hot? Well, the Federal Reserve has been considering an interest rate cut due to concerns of economic weakness. Interest rates are still well below what we used to consider normal. But inflation ticked up significantly in the recent report, suggesting the Fed will stand pat.

Speaking of cuts, the 2017 Republican tax cuts aren't carrying their water, which should be a surprise to nobody. Investment of all types declined in the second quarter. That's not what you want to see in the wake of a massive tax cut. Further, Trump's tariffs and trade wars have had a decided negative effect. What's carrying this economy is strong consumer spending. As an aside, in selling their tax cuts Republicans said "all" they needed to do to have them pay for themselves was achieve sustained 3 percent GDP growth, which the cuts themselves, they said, would surely accomplish. Not gonna happen. Meanwhile, tax cut driven deficits continue to soar.

On the jobs front, Trump continues to under-perform Obama as gauged by average monthly job creation. We now have 28 full months of job creation under Trump, over which the president has created a total of 5.6 million jobs, for an average of 200,500 per month. Over his final 28 months in office, Obama created 6.1 million jobs, which averages to 218,300. Regardless of how you slice and dice it, Trump has under-performed Obama at every point in his (Trump's) presidency. You can view the latest monthly job numbers from the Bureau of Labor Statistics, here.

The two graphs below show total jobs in the economy, and the unemployment rate. In both instances, Trump has done nothing more than essentially maintain the long term trend. There are no points or regions on the graphs where any kind of "Trump effect" is evident whatsoever. The reason the unemployment rate is near a 50-year low is that we are in the longest economic expansion in history—the majority of which occurred under Obama. Steady employment gains maintained over a decade are what drove the rate continually lower, and produced this result. Trump was lucky to get in at the end, which allows him to falsely take credit for all that came before.

So in many respects, Trump's accomplishment has been to not screw up Obama's economy. Yes, I am taking deliberate pokes at Trump, but on his own terms, in a way that calls nonsense to his repeated claim that he has presided over an economic miracle of his own making.

All the usual caveats apply, such as that presidents get too much credit and blame for the economy, and others I have dealt with elsewhere, such as here, here, and here. I would add, however, that with Trump's harmful trade interventions, in the present situation some blame is actually deserved.

Click on the graphs below for a larger view.

Total (nonfarm) employment:

Source: St. Louis Fed

Unemployment rate:

Source: St. Louis Fed

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

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