President Donald Trump spent the morning bragging about the economy. At least one of his claims didn’t come close to being true.
“The GDP Rate (4.2%) is higher than the Unemployment Rate (3.9%) for the first time in over 100 years!” the president said in a tweet.
The first two numbers are correct, although they measure completely different things, and in different ways.
The overall US economy grew at a 4.2% annual rate in the second quarter. Unemployment was between 3.8% and 4% during the quarter, and it came in at 3.9% in August.
That’s all good news.
“It’s definitely better when it’s true than when it’s not,” said Justin Wolfers, professor of economics at University of Michigan. “I like high GDP growth and low unemployment.”
But Trump got it wrong — way wrong — when he said it hasn’t happened in a century.
In the last 70 years, it’s happened in at least 62 quarters, most recently in 2006.
“He wasn’t even in the neighborhood of right,” Wolfers said in an interview.
Kevin Hassett, the chairman of the White House Council of Economic Advisers, acknowledged to reporters later in the day that the president’s tweet was incorrect. He pointed out it was the first time in 10 years that GDP growth exceeded the unemployment rate.
“And at some point, somebody probably conveyed it to him, adding a zero to that, and they shouldn’t have done that,” he said.
Wolfers had tweeted a response to Trump’s claim soon after he made it. In fact, it took him two tweets to list all the quarters in which economic growth was higher than the unemployment rate. He added a chart.
“It certainly not a natural comparison,” Wolfers said. “I’ve never seen it made before. It’s not one that a macroeconomist would make. They’re not comparable.”
That’s not just because lower unemployment is better, while higher GDP is preferable.
The unemployment rate is a monthly reading on the percentage of people in the labor force who are looking for work. It is a snapshot of a current condition.
GDP is a reading of the output of the overall economy. When economists talk about GDP growth, they’re not talking about a snapshot of a current condition. They are measuring the change compared with a year earlier. Quarterly GDP growth is also adjusted to come up with the annual rate.