The U.S economy is humming, and President Trump will undoubtedly take credit when he delivers his first State of the Union address on Tuesday.
“The stock market is shattering one record after another,” Trump told his Cabinet earlier this month. “Unemployment is at a 17-year low.”
In a recent ABC/Washington Post poll, nearly 6 out of 10 Americans described the economy as “excellent” or “good” — the most positive rating in 17 years. But only 38 percent said Trump was largely responsible for the country’s economic health. Fifty percent gave more credit to former President Barack Obama.
Indeed, many of the positive trends that Trump has seized upon — including the rising stock market and falling unemployment — began under his predecessor. Job growth actually slowed during Trump’s first year in office, compared to the last year of Obama’s tenure.
Economic growth also slowed in the final months of 2017. According to a preliminary report from the Commerce Department released on Friday, the economy grew at an annual rate of 2.6 percent in the fourth quarter — short of the previous six months and the 3 percent-plus growth rate the Trump administration has been aiming for. For all of 2017, GDP grew at a rate of 2.3 percent, faster than 2016 but slower than the two previous years.
The U.S. economy is benefiting from a global recovery in which major markets around the world are expanding simultaneously for the first time in years. That’s especially helpful to export-oriented manufacturers. U.S. factories added nearly 200,000 jobs in 2017, the strongest showing since 2014.
Trump has also highlighted job gains among African-Americans and Latinos. Unemployment in both groups is at or near record lows.
The stock market is surging. Last year, the Dow Jones industrial average, the S&P 500 and the Nasdaq all logged their biggest gains in four years, and the runup has continued in the first month of 2018. That’s good news for investors and anyone with a stock-based retirement plan. The vast majority of gains, however, have gone to people who are already at the top of the income ladder. Nearly half of all Americans don’t own any stocks at all.
Ordinary wage-earners have yet to see big pay raises, despite the steadily improving job market. Wages grew by an average of 2.5 percent last year, just barely ahead of inflation.
Gary Cohn, who directs the president’s National Economic Council, acknowledged there is a lot of room for improvement.
“For the last three, four, five years, we’ve had no wage growth in the United States,” Cohn told reporters last week. “We need to see wage growth in this country, something we haven’t seen in almost a decade.”
Trump and his aides have been highlighting companies like Walmart and Bank of America that have pledged to give some of their savings from the newly passed GOP tax cut to employees in the form of bonuses or higher wages. So far, though, only a fraction of the corporate tax cuts are being passed on to workers. It will take a much larger trickle-down effect to justify the president’s oft-repeated claim that a tax cut so heavily weighted toward the wealthy will primarily benefit the middle class.
Cohn says rewards for the middle class are coming, thanks to Trump’s policies of low taxes and limited regulation.
“Part of our tax reform plan was to get people back into the workforce,” Cohn said. “When you compete against the rest of the world, you grow your business, you hire people. When you hire people, you compete for labor. When you compete for labor, you compete by wages.”
U.S. energy production is also booming. Domestic oil producers are expected to pump a record 10.4 million barrels per day this year, surpassing Saudi Arabia’s output. The Trump administration has encouraged that growth by opening more land and offshore waters to drilling, including the Arctic National Wildlife Refuge in Alaska. But the energy surge was already underway when Trump took office, largely driven by technological developments such as hydraulic fracturing or “fracking.”
“The global energy market has been turned upside down by what’s happening in the United States in terms of shale gas and shale oil,” said energy historian Daniel Yergin of IHS Markit.
That’s having positive ripple effects far beyond the oil patch. “Inexpensive natural gas has led to well north of $100 billion of new investment in U.S. manufacturing and has made the U.S. a destination for manufacturing investment which was hardly the case a decade ago,” said Yergin, author of The Prize and The Quest.
Although Trump campaigned against America’s rising trade deficit, it has only widened on his watch. In the first 11 months of 2017, the deficit was 12 percent larger than the year before.
On Jan. 22, the administration announced new tariffs on imported washing machines and solar panels. Trump hinted that additional tariffs could be coming. The administration has been exploring a possible crackdown on imported steel and aluminum.
“Our companies will not be taken advantage of any more,” Trump said, in signing the tariff orders. “Our workers are going to have lots of really great jobs with products that are going to be made in the good old USA.”
Domestic manufacturers cheered the move.
“These workers and manufacturers make some of the best products in the world,” said Scott Paul, president of the Alliance for American Manufacturing. “But they cannot compete against surging unfair imports from countries like China, which are dumping product into the United States in an attempt to put American companies out of business and control the global marketplace.”
The U.S. Chamber of Commerce sounded a note of caution, though, about Trump’s protectionist instincts.
“If we aren’t leading on trade, we’re falling behind,” warned chamber president Tom Donohue. “As the administration has pulled back on trade agreements, governments around the world have rushed forward to fill the void.”
Donohue argued while there’s room to make improvements to trade deals with Mexico, Canada and South Korea, pulling out of those agreements — as Trump has threatened — would be a grave mistake.
“The bottom line is that growth will be weakened, not strengthened or sustained if we pull back from trade,” he said.