President Donald Trump on Thursday cited the economy as a primary reason to pull the US out of the Paris Agreement on climate change, and he also used the opportunity to tout what he described as massive strides the economy had made since he took over in January.
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Trump says the US economy is 'absolutely tremendous' — but it still looks like the 'mess' he says he inherited from Obama
President Donald Trump on Thursday described "tremendous, absolutely tremendous economic progress," but the economy looks mostly the same as it has for years.
Donald Trump.
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"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 8," Trump said. "The economy is starting to come back, and very, very rapidly."
On Friday the Bureau of Labor 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 lackluster.
The US economy added 138,000 jobs during the month, fewer than the 180,000 expected by economists. Average hourly earnings grew by 2.5% year-over-year, lower than the 2.6% anticipated by economists and still under prerecession levels. Unemployment did tick down to 4.3%, lower than the stable 4.4% expected.
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Trump likes to say he "inherited a mess" when he took office, but four months into his presidency and despite his proclamations of rapid improvement, the economy still looks similar to the way it did before Trump won.
Economic data is ... fine
For one thing, the jobs report confirms that the labor market is roughly sticking with the trends of the past few years: decent headline job growth, iffy wage growth, and low labor-force participation.
While there are some strong numbers on the unemployment front — the lowest black unemployment rate since 2000, the lowest U-6 unemployment, or underemployment, rate since November 2007, the lowest unemployment for people with less than a high-school diploma since 2006 — these are continuations of long-holding downward trends and not a sudden revelation.
Looking more broadly, US economic growth in the first quarter of Trump's presidency was humdrum at just 1.2% annualized gross-domestic-product growth. While some seasonal factors weighed on the number and the second quarter seems poised to 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.
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On more industry-specific levels, economic data is looking similar to that of the Obama presidency. Data points including retail sales, consumer spending, and industrial production have stayed on track with their preelection 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 has been moving sideways since November and isn't drastically higher than it was before 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 suggests the economy will continue to grow and may even have room to accelerate. But it supports a continuing steady upward trend, not the breakout described by Trump.
But what about the stock market?
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Trump and his surrogates also like to draw attention to the recent record highs set in the stock market. During his speech Thursday, Trump even cited the "$3.3 trillion in stock market value to our economy" during his presidency.
But the stock market is not the economy.
On one level, the composition of the market is not reflective of economic contributions or the industries in which people are employed. For instance, industrials are weighted much more heavily in most stock indexes than in relation to 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 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.
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