As the two charts below show, it is far from sure that there is a Trump economic boom. Of course, we must remain open to surprises. What is perhaps most surprising at this point, however, is how certain Trump’s economic policies and policy attitudes haven’t wrecked the economy. Yet, let’s keep in mind that, contrary to Juan Perón or Nicolás Maduro, a US president, thanks God, does not yet run the economy, as much as he can try. We probably overestimate the power of the big chief (which is not new in the history of mankind).
What happened since the end of the Great Recession in 2009 is a slow and gradual recovery. The first chart below shows this with the unemployment rate. It is as clear as anything can be that the unemployment rate (seasonally adjusted on the chart) has followed a gradual downward trend since 2010 or 2011, and there is no indication that it has decreased faster under Trump than under Obama. If anything, it might be the contrary, which would not be surprising as the economy approaches or reaches full employment.
In fact, since international trade follows comparative advantage, protectionism could, ceteris paribus, bring lower unemployment than would otherwise obtain—just like the destruction of machines or computers would. Protectionism means producing previously imported things at higher cost, that is, with more factors of production. If an economy is at full employment, of course, producing more of something implies producing less than something else. But that was just an aside.
The second chart shows the percent change in real GDP from quarter to quarter, again from the beginning of 2008 to the first quarter of 2019. From the third quarter of 2009 (the start of the recovery) to the end of 2015, high growth rates have alternated with low rates and even a couple of negative dips. In 2016, growth was less variable, without either the high or the low rates of before. Since the second quarter of 2017, growth rates are indeed consistently higher, but without the high peaks of 2009 to 2014. Perhaps we can interpret this as an improvement, but the whole trend still shows a slow recovery.
Whether the analyst is willing to die for Obama or for Trump, or for neither, he must remember that extreme prudence is warranted when interpreting quarter to quarter GDP changes. Only a longer trend can be meaningful.
If one does discern a new trend of economic growth since the beginning of 2017, it could be partly attributed to Trump’s tax cuts and to “deregulation.” It must not be forgotten, however, that the tax cuts have been accompanied by higher budget deficits, which does not presage well for the future. And I put “deregulation” in quotes because, if Trump reduced the flow of new regulations (a good thing in itself, for sure), it is not clear that the stock of regulations is decreasing. We are waiting for the 2019 edition of Clyde Wayne Crews’s Annual Snapshot of the Federal Regulatory State (Competitive Enterprise Institute) to tell us more.
READER COMMENTS
Benjamin Cole
May 5 2019 at 8:11pm
For decades and decades I worried about rising federal debts. Ruin, Doom and Gloom were certain.
But then the Fed bought back about 3 trillion dollars of us Treasuries, without inflationary result. The Bank of Japan but back about 45% of that nation’s heroic levels of outstanding national debt. Japan is teetering on the edge of deflation at any moment.
In real life, the evidence is that national debts can be monetized.
Orthodox macroeconomics is in a discredited shambles.
I gather that certain commentators have been shorting US Treasuries since about 1980.
Keep the faith!
Thaomas
May 6 2019 at 7:32am
“Orthodox” were not on CNN predicting inflation: that was Moore. 🙂
Todd Kreider
May 5 2019 at 11:40pm
If you ignore 2009 and 2010 as recession and immediate recovery years, you get the following per capita growth rate after the smoke settled:
2011 0.9%
2012 0.8%
2013 0.9%
—————
2014 1.9%
2015 1.3%
2016 1.2%
2017 1.8%
2018 2.3%
There were slow growth years following the recession but the past 5 years have been strong per capita growth at an average of 1.9% as unemployment has fallen from 6% in 2014 to under 4% in 2019.
Bob Murphy
May 9 2019 at 12:18am
Pierre wrote:
“In fact, since international trade follows comparative advantage, protectionism could, ceteris paribus, bring lower unemployment than would otherwise obtain—just like the destruction of machines or computers would.”
That’s an interesting take, Pierre. Have you said that previously, that Trump might be right that his tariffs would create net jobs for Americans?
(I saw elsewhere that you made the point about “job creation” not being the right criterion, since work is a cost not a benefit, but have you previously argued that tariffs might promote employment?)
Pierre Lemieux
May 9 2019 at 11:45pm
Bob: I am not sure I have written it before, but I would not be surprised if I had–although perhaps not speaking about Trump. Destroying computers would increase employment, as would returning to caves. (There might be an increase in unemployment in an intervening recession, just as computers have been destroyed and the population of New Jersey has started moving to caves.) There was no unemployment among slaves. It is prosperity that allows leisure. Which brings me to my main point that employment is not the good criterion.
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