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Trump inherited a strong economy

by Eric Ferguson on February 7, 2017 · 1 comment

trump12The latest jobs report from the BLS shows the loser of the last election gets to be president with a healthy economy. 4.8% unemployment is roughly full employment. Economists generally seem to think full employment is 5%, though I recall it was defined as 4% back in Economics 101. The rate has ticked up a point each of the last two months, which seems contradictory to decent job growth, but it’s actually common for an improving job market (at least as defined by workers) to lure more people into the labor force.
 
The BLS actually has six definitions of unemployment, which it explains in the monthly release linked above, but briefly, they’re called U-1, U-2, etc. The 4.8% “official” rate is U-3. The broadest measure, sometimes called the “real” rate, is U-6. That rate is 9.4%, so like U-3, it’s less than half its peak from the financial crisis and and 2008-2009 recession. Much as we might wish policy makers hadn’t fallen for austerity so the recovery could have been much faster, at the end of the Obama administration, we find ourselves in a good place or, as the loser would call it, a catastrophe.
 
The bad news is Trump is claiming credit for the economy, much as he’s hailed for being a financial genius for being born extremely wealthy. The good news, for our day-to-day working lives, is that there’s no recession in the immediate future. Trump should thank Obama. Conventional wisdom assigns the economy of the first year of a presidency to the credit or blame of the prior president. Putting aside just how much presidents actually affect the economy, the economy moves slowly and policies take time to have an effect. Even the Recovery Act, the fiscal stimulus when Obama first took office, intended as an emergency measure, took until mid-2009 to have any effect, and a lot of it probably had no effect until 2010. In other words, no matter how much Trump screws up, he probably can’t screw up the economy until next year.
 

Of course, given how Trump’s policies generally seem as if they were whims of an emotionally immature crybaby, I offer no promises about the economy staying good. I’m more or less crossing my fingers that the economy is healthy enough, that Trump can’t give us a 2008 sequel before some real president can address the problems he caused. The fingers of the other hand are crossed in hopes that if he does cause another deep recession, it comes when he’s still president so the blame goes where it belongs.
 

Meanwhile, when Trump claims to claim credit for causing what he inherited, by, for example, bragging that big businesses are creating jobs because of him, keep repeating that big business takes a long time to formulate and carry through with expansion plans, and the jobs Trump is claiming credit for were planned even before the election. A few big announcements are actually dinky in the scale of the whole economy, but that’s the power of anecdotes.

 

The economy grew 1.9% in Obama’s final quarter, which isn’t a boom, but for an economy near full employment after seven and a half years of recovery, that’s pretty much what to expect. Since the depths of 2009, we’ve had nearly the fastest growing economy in the developed world. As Kevin Drum mentions in the link above, the only faster growing economies have been Switzerland and Norway. I’m not sure what conservatives think of Switzerland, but they sure aren’t going to point out that democratic socialist Norway is doing well.
 

And the supposed Trump inspired boom in the stock market? As much of a psychological lift as Wall Street got from the Dow Industrials crossing 20,000, have a look at this chart and notice that it’s just a continuation of a trend going back to 2009… though I suppose Trump wants to claim credit for the stock market doubling since 2009 because somehow investors knew a winning minority of voters would elect him in 2016. Wall Street may well approve of Trump and reasonably hope to get rid of regulations designed to stop 2008 from happening again, but all the stock market is really saying is that the economy looks good for the next few months.
 

So as the economy does well and Trump and trumpers want to crow, it’s up to liberals, Democrats, and realists everywhere to point out, however often we have to, that he inherited this economy. Perhaps the real good news is that though the economy can get a bit better, probably it can only get worse, and there nothing like a bad economy for getting rid of an incumbent. Getting Trump out of office because of a bad economy might be analogous to convicting Al Capone on tax evasion, but I’ll take it.

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