President Trump claimed credit for the strong economic growth numbers released on Friday morning, attributing them to his administration’s actions on taxes, trade, and regulations.
The economy did grow at a 4.1% annual pace in the second quarter, the best in four years. But most of the statistics that Trump cited as evidence of “an economic turnaround of historic proportions” require context to be fully understood.
For example, economic growth has topped 4% in four other quarters since 2009. And Trump’s claim that “we’re going to go a lot higher than these numbers” conflicts with the predictions of most bank and Federal Reserve economists, who forecast that growth will slow in 2019 and 2020.
“This is not sustainable,” said KC Mathews, chief investment officer at Kansas City-based UMB Bank. “Maybe we get a soft landing. Growth will slow, but we may not have a recession. Growth could go back to about a 2% to 2.5% level.”
To help put it all in perspective, here’s the context on some of the other economic data points Trump cited.
Annual GDP growth
By Lydia DePillis
Trump has been touting that economic growth will continue to be strong throughout his presidency.
“We are on track to meet the highest annual growth rate in over 13 years. During each of the two previous administrations, we averaged just over 1.8% GDP growth. By contrast, we are now on track to hit an average GDP annual growth of over 3%, and it could be substantially over 3%.”
The average of the annual real growth rates of the past two administrations was 1.9%. That included several years that covered the worst economic downturn since the Great Depression. It is true that many economists are projecting the economy will grow by 3% in 2018. That would be the highest since 2005, when the economy grew by 3.5%.
By Lydia DePillis
Trump claimed that unemployment has reached record lows for black, Hispanic and Asian Americans and for Americans with disabilities. He also said that the unemployment rate for women is the lowest in 65 years, and that veteran unemployment is the lowest in 18 years.
Those numbers are all correct. But they have been falling fairly consistently since 2010. Also, there weren’t many women out looking for jobs in 1953, the last time unemployment for women was 3.6%, as it was in May.
More broadly, unemployment and economic growth are not the only ways to measure the well-being of households. Another important element, worker pay, has been flat over the past year by some measures, such as real average hourly wages for rank-and-file workers. By others, such as Sentier Research’s median household income index, which takes into account all forms of income such as dividends and Social Security payments, it has risen.
By Katie Lobosco
Trump touted the number of jobs created since he won the presidency.
“We have added 3.7 million new jobs since the election. A number that is unthinkable if you go back to the campaign. Nobody would have said it. Nobody would have even in an optimistic way projected it. We are in the midst of the longest positive job growth streak in history.”
The economy has indeed added 3.7 million jobs since November 2016. June was the 93rd straight month of gains, which is the longest on record.
But the economy is cranking out jobs at a slower pace than it was before Trump was elected.
The United States added 2.7 million jobs in 2015 and 2.3 million in 2016. It added 2.2 million last year and is on pace for 2.6 million this year.
Food stamp enrollment
By Tami Luhby
Trump touted that his economic turnaround has helped millions of people leave the food stamp program.
“More than 3.5 million Americans have been lifted off food stamps, something that you haven’t seen in decades,” Trump said, noting that before he took office, more than 10 million Americans had signed up. “That’s because they are able to go out and get a job.”
It’s true that the food stamp program’s numbers ballooned in the wake of the Great Recession. Enrollment peaked at 47.6 million in 2013, up from 28.2 million in 2008.
Since Trump’s inauguration in January 2017, the rolls have shrunk by just over 3 million, according to US Department of Agriculture data. Some 39.6 million Americans received food stamps as of April, the latest figures available.
But the decline predated Trump’s presidency. Enrollment dropped by 3.5 million between 2013 and 2016.
Certainly, the strong job market has helped more people become self-sufficient. But policy changes have also contributed.
Adults ages 18 to 49 who aren’t disabled and don’t have dependent children can only receive food stamps for three months unless they work at least 20 hours a week. Many states waived this provision during the economic downturn, but started reimposing it in recent years as the job market improved.
This change may have forced up to 1 million people off the rolls in 2016, according to an estimate at the time by the Center on Budget and Policy Priorities, a left-leaning group. More states, including Kentucky, West Virginia and Tennessee, have reinstated the time limit in some or all of their counties since Trump took office.
The state of Obamacare
By Tami Luhby
Trump took the opportunity to blast Obamacare during his speech on the economy.
“We have also liberated millions of Americans from the crushing burdens of Obamacare,” he said. “The cruel individual mandate penalty is gone … And Obamacare is now on its last legs, fortunately.”
Congress did eliminate the penalty associated with the individual mandate, which requires nearly all Americans to have health insurance, as part of its 2017 tax reform bill.
But that doesn’t take effect until next year. The Congressional Budget Office estimates that the number of uninsured will rise by 3 million in 2019 because of this provision.
Meanwhile, enrollment in Affordable Care Act plans has remained fairly steady. The number of people signing up for 2019 plans during open enrollment dipped 3.8% to nearly 11.8 million, according to the Centers for Medicare & Medicaid Services.
But the number of people who actually enrolled – meaning they paid their first month’s premium – rose by about 3% to 10.6 million, as of mid-March, the agency said.
Also, Obamacare is enjoying a resurgence among insurers for 2019. Carriers are entering or returning to at least a dozen states, while others are expanding their presence in the states in which they operate.
This is quite a turnaround from a year ago, when insurers were fleeing the Affordable Care Act exchanges, worried about the law’s uncertain future with Republicans in control of the White House and Congress.
By Tami Luhby
The nation has gotten richer since Trump took office, a point he noted in his speech Friday.
“Since I was elected we’ve created approximately $7 trillion of new wealth,” he said.
It’s true the nation’s net worth has grown by about that amount, according to the Federal Reserve. It rose to $101 trillion in the first quarter, up from $94 trillion in the same period a year earlier, when Trump took office.
(The gain shrinks to just under $5 trillion if you adjust the figures for inflation.)
However, the country was getting wealthier long before Trump’s presidency. After taking a beating during the Great Recession, net worth rocketed back. It rose by nearly $40 trillion during the eight years of Barack Obama’s presidency, or $31 trillion when adjusted for inflation.
The booming stock market and rising real estate values contributed to the growth in wealth for both Obama’s and Trump’s presidencies.
Not everyone is sharing in the wealth boom, however. Only 54% of Americans have money invested in the stock market, according a Gallup survey from the spring of 2017.
By Lydia DePillis
Trump says it’s booming.
“The year before I came into office, private business investment grew at only 1.8%. Last year it jumped to 6.3%. This year it’s growing at 9.4%. That’s a very tremendous increase. There hasn’t been an increase like that in many many years, decades.”
Trump appears to be referring to real private non-residential investment — the money that businesses spend on things like commercial construction, tools and machinery.
His advisers have called this a key goal of the tax cuts. When businesses upgrade their equipment, they say, they can raise worker productivity and justify paying more.
The White House’s Council of Economic Advisers published a brief walking through the numbers. Weak investment in 2016 mostly had to do with an enormous drop in oil and gas drilling, and the rebound in 2017 came mostly because of that sector’s recovery.
But you don’t have to go back very far to get a similar growth rate. Real non-residential fixed investment grew by 9.5% in 2012 from the previous year.
The Republican tax cut
By Katie Lobosco
Trump praised Republicans in Congress for cutting taxes. As a result, he said, “six million Americans are now enjoying new bonuses, better jobs and far bigger paychecks.”
Hundreds of companies cited the tax cuts when they announced bonuses, wage increases and new employee perks this year. Walmart, Bank of America, and American Airlines were among the companies that handed out bonuses.
Still, six million employees represents less than 5% of the private sector work force. And for most of those workers, the benefit will be short-lived because it came as a one-time bonus or additional contribution to 401(k) plans.
Shareholders have received a much bigger benefit from the new tax law. Companies have announced hundreds of billions of dollars in stock buybacks since their taxes were cut.
By Tami Luhby
Trump boasted about the decline in the trade deficit in the most recent quarter.
“Perhaps one of the biggest wins in the report, and it is indeed a big one, is that the trade deficit – very dear to my heart because we’ve been ripped off by the world – has dropped by more than $50 billion. $52 billion to be exact,” he said. “That’s a tremendous drop. We haven’t had a drop like that in a long time.”
Yes, the trade deficit narrowed from $902 billion in the first quarter of 2018 to $850 billion in the second quarter. But the deficit in the first quarter was also the largest it’s been since 2006, according to the Bureau of Economic Analysis.
Even now, the trade deficit remains slightly higher than it was when Trump took office. It came in at $845.5 billion in the first quarter of last year.
Additional reporting by Paul La Monica