President Donald Trump cited the economy as a primary reason to pull out of the Paris agreement on climate change on Thursday, and also used the opportunity to tout the massive strides the economy has made since he took over in January.
“Before we discuss the Paris Accord, I’d like to begin with an update on our tremendous, absolutely tremendous economic progress since Election Day on November 8th,” Trump said. “The economy is starting to come back, and very, very rapidly.”
On Friday, the Bureau of Labour Statistics released the May jobs report, one of the most important indicators of whether the economy is growing “very, very rapidly” and it was decidedly lacklustre.
138,000 jobs were added to the US economy during the month, less than the 180,000 expected by economists. Average hourly earnings grew 2.5% year-over-year, lower than the 2.6% anticipated by economists and still under pre-recession levels. Unemployment did tick down to 4.3%, lower than the stable 4.4% expected.
Trump likes to say he “inherited a mess” when he took office, but four months into his presidency and despite proclamations of rapid improvement the US, the economy still looks a lot like the “mess” it was before Trump won.
Economic data is… fine
For one thing, the jobs report confirms that the labour is roughly sticking with the trends that are well established over the past few years: decent headline job growth, iffy wage growth, and low labour force participation.
While there are some strong numbers on the unemployment front — lowest black unemployment rate since 2000, lowest U-6 unemployment rate since November 2007, lowest unemployment for people with less than a high school degree since 2006 — these are continuations of long-holding downward trends and not a sudden revelation.
Looking more broadly, US GDP growth in the first quarter of Trump’s presidency was humdrum at just 1.2% annualized growth. While there are some seasonal factors that are weighing on the number and the second quarter looks to be a bounce back, it isn’t as if the boom times are suddenly back. The low and slow recovery of the past seven years is still intact.
On more industry-specific levels, economic data is looking similar to the Obama presidency. Data points from retail sales to consumer spending to industrial production have stayed on track with their pre-election trends.
Even the much touted consumer confidence numbers have come back down to Earth a bit.
The University of Michigan’s consumer confidence index topped out at its highest level in over a decade, but it’s been moving sideways since November and isn’t drastically higher than it was prior to the election. For instance, the final April 2017 reading was only 1.1 points higher than the level in April 2015.
None of this is necessarily bad, in fact it shows that the economy will continue to grow and may even have room to accelerate, but not if it matches the night-and-day rhetoric of Trump and his team.
But what about the stock market?
Another figure Trump and his surrogates like to draw attention to is the recent record highs set in the stock market. Trump even cited the “$US3.3 trillion in stock market value to our economy” during his Paris agreement speech on Thursday.
The only problem is that the stock market is not the economy.
On one level, as we’ve made mention of repeatedly, the composition of the market is not reflective of economic contributions or the industries where people are employed. For instance, industrials are weighted much more heavily in most stock indexes than the percentage of Americans they employ.
And on a more conceptual level, the market is also a forward-looking measure of investors expectations for profit growth at individual companies, not a referendum on the state of the current economy.
To the degree that the market is pricing in Trump’s impact at all, it is most likely for the possibility of a tax cut in the future. If Trump fails to deliver that cut, the market may not look so excellent. Additionally, it’s uncertain whether Trump’s rough outline for a tax cut will even stimulate the economy substantially.
So if Trump wants to argue that the economy is booming compared to the Obama years, the data has to show it and so far it doesn’t.