Just How Good Is the Economy?
Terry H. Schwadron
Sept. 10, 2018
Another good monthly jobs report suggests that the U.S. economy is doing great, and, as the White House would have it, that the media and we citizens/voters are not paying enough attention to it.
President Trump reminds us regularly that near-record unemployment figures (3.9% overall and lowered rates for various groups of workers), higher productivity and corporate tax cut-induced profits are his doing, overlooking the 90 months of similar-looking improvements that preceded his administration.
But fine. Let’s give the president the credit he so wants in his slogan-ridden rallies.
The larger question for those of us who are not professional economists is whether the economic goodies are delivering what they promised.
CNBC, for example, reports that the president’s push for tax cuts, his campaign to eliminate regulations and more aggressive government spending are boosting all the main characteristics of a burgeoning economy, including consumer confidence.
But there also are wide suggestions of underlying weaknesses.
- Many economists believe that the boom will not last because the stimulus is aimed only at near-term growth. That’s why there already is talk of yet another tax cut, with much less talk about how to pay for it. Republicans in Congress who used to start every day by pointing at the rising national debt hardly mention that the tax cuts and Trump’s budget demands for the military and the Wall alone have ballooned the debt.
- The jobs report from last Friday showed the leader in new jobs again is the health industry, where growth is largest among low-paid jobs, and there were increases again in less-than-fulltime jobs. While the numbers of new jobs were impressive, there also was a slight drop in the percentage of people particlpating in the job market.
- The report said wages were starting to inch up, from 2.6% to 2.9%, but equal to the amount that inflation has risen. That’s why the Fed takes a somewhat warier view of the economy gains than the White House.
- There was no single measure of the impact of the growing tariffs that Trump wants to impose on companies, but there has been softness in auto manufacturing jobs, for example, one of the industries affected by international tariffs on steel and aluminum. Still, manufacturing jobs are increasing.
The tariffs issue alone can change the national economic figures virtually overnight. The Wall Street Journal suggested that Apple is weighing raising prices for all its electronic goodies that are manufactured at wages lower than the United States as a result of tariffs being lowered on a wide range of Chinese-made goods.
Tariffs also raise the question of international trade accords like NAFTA which the president attacked and then seemed to more-or-less ratify as a bilateral agreement with Mexico with relatively small changes in a set of developments that has left Canada hanging. The markets have responded with caution rather than in some kind of rising applause for the ever-changing Trump economic strategies.
The tariffs issue continues to taunt declarations of success because they involve intricate, international supply chains that the president’s desire for America First thinking will end up disrupting. Every economic study I’ve come across suggests that there will be bad consequences for U.S. employment even if tariffs fulfill some political mandate for the president.
My sense is that there are a number of other underlying issues that threaten the economic progress to date and suggest problems ahead.
The country lacks a coherent approach to health care coverage, and without it, employers are loath to offer permanent employee wage hikes. Health care coverage includes the approaches to mental health, of course, where we are seeing more and more issues arising daily, and treatments for such things as the opioids crisis, which the Trump administration wants to look at as a police matter rather than a health issue. Health coverage and prescription drug costs are such a big part of the national cost that declaring economic victory without it seems hollow.
An adaptable, practical public spending plan for needed infrastructure improvements for transportation, airports, bridges and the like is nowhere in sight — except for the president’s obsession with a Wall on the southern border. Again, these are big ticket items that should be achievable even in the highly partisan Congress we have in place, but again declarations of economic nirvana without them seem incomplete.
Trade issues aside, currency issues also abound with the U.S. dollar riding high in value in the international marketplace, making American exports less popular overseas.
And, as the president continues to insist that we pay attention to coal and oil interests instead of pursuing bio-energy and solar, we are failing to recognize emerging industries like electric cars and ceding leadership to China and others.
It seems easy to look at the jobs topline number and conclude that this is a Golden Age. A more realistic look might suggest a more comprehensive approach.