Is Trump Making the Economy Great Again?
Kind Of.


President Donald Trump’s “Make America Great Again” campaign slogan has been the driving vision of the federal government since January 2017. But how can we measure just how great America is becoming?

Before Trump’s inauguration, we picked the best indicators to judge the impact of his policies and determine whether the economy is living up to Trump’s pre-election promises. Now, almost a year later, we return to see if they’re doing great, just all right, or worse.

Beyond gross domestic product growth and better-known figures such as wages and the trade deficit, other metrics worth watching include the percentage of the population on food stamps and the share of prime-age workers in the labor force. With the help of Carl Riccadonna, chief U.S. economist for Bloomberg Economics, we’ve divided the indicators into three groups: those improving, the ones staying about the same and figures that are going in the wrong direction. We’ll also tell you how he expects them to perform in the years ahead.

So, is Trump making America great again? Riccadonna’s answer: “Kind of.” “The economy is strengthening of its own merit,” and outgoing Federal Reserve Chair Janet Yellen put the U.S. firmly on the path to being great again, he says. “That being said, business confidence has soared under Trump—and animal spirits are a critical ingredient of capitalism.”


Right Direction

These indicators have been showing improvement since Trump took office.

Economic Growth Has Been Solid, But Sustaining 3 Percent Remains Challenging: The U.S. economy has picked up a bit in 2017, growing by more than 3 percent for two quarters, thanks to a burst of business spending. The Republican tax legislation may provide an additional jolt that results in some nice numbers into 2018. But reaching Trump’s goal of a sustained pace of 3 percent will remain elusive unless consumer spending definitively shifts into a higher gear or companies manage to vastly improve productivity gains that have been disappointingly weak.

Gross domestic product, seasonally adjusted annual rate of change

Companies’ Spending Spigots Are Opening: Business spending on equipment accelerated in the first three quarters of 2017 and posted the strongest average annual rate of growth since the first nine months of 2014. In a tightening labor market that’s put a premium on skilled and experienced workers, companies are likely to continue to boost investment in equipment and software. What’s more, just-enacted tax cuts could spur businesses to spend more and lift productivity.

Private domestic investment, seasonally adjusted annual rate of change
Four-quarter moving average
Note: 4.4% reflects average pace from 1Q 2002 to 4Q 2007

Manufacturing Jobs Are Gaining, With Caveats: Manufacturing showed some impressive strength in 2017, providing more opportunities to the millions on America’s assembly lines who helped elect Trump. Factories added nearly 190,000 workers in the year through November, the biggest 12-month increase since March 2015. While gains should continue in 2018 amid growth in business investment, consumer spending and the global economy, payrolls are likely to remain far short of levels from decades ago. Another caveat is the U.S. dollar: After weakening in 2017 and underpinning producers’ sales to overseas customers, a sharp strengthening of the greenback could limit hiring.

Workers on manufacturing payrolls

Prime-Age Americans Primed to Return to Work: Americans aged 25 to 54—a range that measures labor-market participation well because it tends to exclude students and retirees—are increasingly returning to the workplace. An improving economy and strong job gains are pulling people off the sidelines, such as those who were taking care of family members or had given up looking for work. Some issues could be serving as tougher impediments to participation gains, such as the opioid epidemic. And the increase over the past year is largely the result of women entering the labor force, while the rate for men has failed to budge much.

Labor-force participation rate for Americans aged 25–54

Full-Time Work to Stay Out of Reach for Many Part-Timers: Full-time workers are making up a bigger portion of the labor force. That’s a good thing. But the share remains below its pre-recession high, which may reflect a range of issues, including the gig economy and an aging population. Yet economists say broader changes have left many workers stuck with shorter hours, weak wages and poor benefits. Ideally, people who prefer full-time work should be able to get it as the labor market tightens. Such jobs may remain out of reach for those who are coming in from the fringes and lack needed skills.

Full-time workers as percentage of labor force

Food Stamps Set to Decline as Poverty Eases: Steady economic growth and a jobless rate near a 17-year low should continue to reduce the share of Americans utilizing the federal government’s Supplemental Nutrition Assistance Program. The percentage of households participating in SNAP has declined to 12.9 percent from a peak of 15.2 percent in 2012. Even with the decrease in assistance, the rate remains above the pre-recession low of 8.7 percent in 2006. The Trump administration is also eyeing changes to welfare programs that could reduce use of food stamps.

Percentage of population receiving food stamps

Middling Performance

Indicators that have been so-so in 2017.

Americans’ Paychecks May Finally Grow Faster: Wages disappointed again in 2017, rising moderately instead of posting the sustained acceleration expected in this tight labor market. But 2018 could finally deliver fatter paychecks. The jobless rate is at an almost 17-year low and solid hiring is helping to shrink the pool of available, qualified workers. Now the labor shortage seems poised to finally force employers to do more to attract and retain employees. It remains to be seen whether cuts in corporate taxes also end up sparking bigger wage gains.

Average hourly earnings, percentage change year-over-year

Wrong Direction

Indicators Trump isn’t boasting about.

The Budget Deficit Will Grow: The White House says its policies will balance the budget within 10 years, ending a tradition of deficits. Good luck with that. The budget gap has already been growing since Trump took office amid lower-than-expected tax revenue, and an aging population is likely to add strains in coming years. Now lawmakers are about to pour gasoline on the fire with tax-cut legislation that’s estimated to cost $1 trillion over 10 years when factoring in economic-growth effects.

Federal budget balance as percentage of GDP

The Trade Deficit Won’t Narrow: The U.S. trade deficit—which Trump has frequently pointed to as a sign of China and Mexico taking advantage of the nation—has been steadily widening in 2017, instead of narrowing as he desires. He can at least take solace in the fact it’s getting bigger because of improvement in the economy, with demand for imports jumping. Meanwhile, corporate tax cuts have the potential to boost incoming shipments further, and Nafta negotiations that were supposed to get American exporters a better deal are making little headway on major sticking points.

U.S. monthly trade balance
12-month moving average

So, that makes six significant indicators that are getting better under Trump, one moving sideways and two that aren’t so great. A good chunk of the economic momentum was already there before he took office, though some figures—such as the pickup in business spending—can probably be partly attributed to a jump in confidence since the real estate developer took office. The tax-cut legislation championed by Trump will only marginally fuel growth that is still largely being driven through improving fundamentals, according to Riccadonna. How will it all shake out? Come back next year for another look at whether Trump is making the economy great again.