Trump Claims He’s Making the Economy Great Again. Is He?

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President Donald Trump is likely to claim he’s already making America great again when he delivers his first State of the Union speech on Tuesday, a year after taking office. We set out to measure whether that’s true.

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. Since then, we’ve been tracking those indicators 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.”

1.

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 at an average annualized pace of almost 3 percent for the final three quarters, thanks in part 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 annualized rate of change

Companies’ Spending Spigots Are Opening: Business spending on equipment, structures and intellectual property was resurgent in 2017, posting the best full-year average growth since 2011. 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 annualized 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 196,000 workers last year, the most since 2014. 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 rate for men remains just 1 percentage point above its post-recession low, while women have gained more ground in entering the labor force.

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 low jobless rate should continue to reduce the share of Americans utilizing the federal government’s Supplemental Nutrition Assistance Program. The percentage of the population participating in SNAP has declined to 14.0 percent from a peak of 15.2 percent in 2012, with an October spike owing to temporary benefits for victims of the hurricanes that slammed Florida and Texas. The rate remains above the pre-recession low of 8.7 percent in 2006, while the Trump administration is eyeing changes to welfare programs that could reduce use of food stamps.

Percentage of population receiving food stamps
2.

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 the lowest since 2000 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
3.

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—was on pace in 2017 to be the widest in nine years, instead of narrowing as he desires. Trump 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 only slow progress 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 signed 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? We’ll continue to track these metrics and report back on whether Trump is making the economy great again.