There is quite a bit of talk around about the outlook for the economy these days, Bloomberg is reporting this week. President Trump has been saying that “a robust economy will protect him from impeachment and ensure his re-election.”
However, Bloomberg says that argument rests “on a shaky foundation,” and goes on to explain.
It says that the middle-class Americans who are the main targets of the President’s economic pitch “aren’t sharing much in the gains of U.S. growth.” Worse yet for the administration wage growth has been slower in the counties the president carried in 2016.”
By several measures, middle-class Americans’ incomes have risen more slowly in recent months than during Barack Obama’s final years, which were “hardly a period renowned for gangbuster pay increases.” Workers should finally be getting big raises with the unemployment rate down to 3.5%. Yet while wage growth picked up last year, it is still subdued and slowing again after manufacturing output contracted in the first half of the year, Bloomberg said.
The economy’s overall performance hasn’t changed much since Trump took office, with GDP growth averaging 2.6% versus 2.4% during Obama’s second term, far below the president’s own forecasts, Bloomberg says. On Wednesday, the Commerce Department reported the economy expanded 1.9% at an annualized rate in the third quarter, a level that when Obama was president Trump derided as a sign the “economy is in deep trouble.”
While the jobless rate continued to fall during the president’s first two years, median household income, adjusted for inflation, grew at an average annual rate of 1.3% – down from a 4.1% annual rate the previous two years and a 1.8% annual rate during Obama’s entire second term, Bloomberg said.
Asked about the income and wage data, White House spokesman Judd Deere argued that Trump’s “policies of lower taxes, deregulation, and fair and reciprocal trade have supported the longest economic recovery in U.S. history with record low unemployment and rising wages.”
However, Bloomberg noted that there are numerous measures of workers’ wages that show tepid growth under the current administration despite a roaring stock market, surging corporate profits and a $1.5 trillion deficit-financed tax cut that is often promoted as a way to rev up pay gains.
Nevertheless, in counties Trump won in 2016, growth in real average weekly earnings slowed to a 1.2% annual rate under his presidency, down from 1.5% the prior two years, Bloomberg said.
In the presidential battlegrounds of Wisconsin, Michigan and Pennsylvania the drop-off has been sharper with weekly earnings in counties he carried up 0.8% annually versus 1.8% the previous two years. The “manufacturing recession” threatens to further weaken pay growth in those states, where 1 in 6 workers hold factory jobs, Bloomberg says.
The president often claims that wage gains have picked up since he took office. But with inflation factored in, overall progress on wages doesn’t look much different. Real average hourly earnings under President Trump have grown at an average annual rate of 1.1% through September versus 1% during Obama’s second term. Workers in the middle fared worse. The median weekly paychecks for full-time workers, adjusted for inflation, have grown at an average annual rate of 1% through September versus 1.5% during Obama’s second term.
A measure created to minimize potential distortions from more low-wage workers entering the workforce also shows slower pay growth under the current administration. The Atlanta Federal Reserve Bank’s national wage growth tracker is based on surveying the same workers 12 months apart on their pay and calculating their median raise. Adjusted for inflation, the index increased at an average annual rate of 1.3% during the past two years versus 1.7% during Obama’s second term.
And, there is considerable diversity among groups, Bloomberg says. Real median earnings for high-school educated men – a key Trump constituency – rose at a 1.2% average annual rate during the administration’s first two years, up from a 0.4% rate the prior two years. Conversely, high-school educated women’s real median earnings declined at a 1.1% annual rate under this administration versus a 0.6% rise during Obama’s final two years.
High-school-educated men still haven’t caught up to their pay in 2000. Their $45,459 median earnings in 2018 was $2,128 lower than their counterparts at the turn of the century. High-school-educated women are further behind, with 2018 median earnings of $32,412, down $2,356.
Weak pay increases contribute to “ambiguous feelings” about the economy even as unemployment remains at historic lows, said Alan Abramowitz, a political science professor at Emory University who studies public opinion and presidential election forecasting. “What matters politically is the subjective economy, how people feel about the economy,” Abramowitz said. “Real incomes aren’t rising that much, so it’s not obvious that things are that good.”
So, we will see. Much depends on the current medium-term economic policy trends and trade developments. Clearly, the administration intends to lean heavily on the “economic growth and prosperity arguments,” but whether these prove persuasive remains to be seen – and should be watched closely by producers in the coming months, Washington Insider believes.
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