Trump’s head-spinning shift on the economy has left his…
Trump’s head-spinning shift on the economy has left his supporters behind
March 10, 2017 at 6:36 PM
In the opening moments of his presidency, Donald Trump used his inaugural address to paint a picture of a bleak economy, where wealth was consolidated among a cadre of insiders while the Americans he promised to support were left to languish in “carnage.”
On Friday, the president appeared to take a much brighter view of the American economy, keying off a monthly job growth report to declare, via a retweet of the conservative website Drudge Report, that the American economy was “GREAT AGAIN: +235,000.”
But while Trump’s fortunes have changed dramatically during his ascension from political outsider to president, it’s not so clear that life has changed for many of his supporters who had been stuck in economic distress. Indeed, the jobs report that Trump now touts as proof of renaissance shows the economy largely on the same path it was before he took office.
Wages continue to inch up, job growth remains on a steady upward track and those driven out of the work force during the Great Recession continue to slowly rejoin the ranks of the employed. And the people who Trump described as being left behind by the economy two months ago – that disconnected cohort of the white working class who buoyed the president into office – are still largely in the same position.
While the overall economy looks strong, economists say there are good reasons that some people feel left behind. One is the minimal progress most workers have seen in wages in past decades.
The February jobs report showed wages rising 2.8 percent in February from the prior year. According to Elise Gould, a senior economist at the Economic Policy Institute, economic growth is finally leading to worker shortages, which gives employees more bargaining power and translates into wage gains.
But wages still have a lot of progress to make, says Gould. In the decades following World War II, growth translated into broad-based gains for workers. But in the late 1970s and early 1980s, something in the economy shifted. For the last four decades, workers have been producing steadily more, but their wages haven’t kept pace.
“Why are people still feeling pessimistic? Because there is so much catching up to do,” says Gould.
Meanwhile, earnings have shot up for wealthier Americans. Gould says the dynamic has translated into a broader feeling of pessimism about the future, since many poor and middle-class households have not seen similar gains.
“There’s this feeling that families from one generation to the next are not able to get ahead the way their parents and grandparents were able to,” she says.
The U.S. economy also continues to face the challenge of discouraged workers — those who have given up looking for work entirely, after failing to find a good job for so long.
This is a favorite topic of Trump’s, though he sometimes gets the numbers wrong. In his address to Congress on Feb. 28, Trump said that “Ninety-four million Americans are out of the labor force.” While it’s true that roughly 94 million Americans 16 and older were not in the labor force in January 2016, according to the Bureau of Labor Statistics, that figure includes many people who do not want a job, including the retired, students, stay-at-home parents and the disabled.
One of the best metrics to look at when decoding this trend is the employment-to-population ratio for prime age workers 25 to 54 – a measure that shows just how much of the population is working but excludes all those retired Baby Boomers. That rate ticked up to 78.3 percent in February, but, as the chart below shows, it is still below peaks seen in the last 25 years.
Economists still debate the reasons for this trend. It may be due to increasing rates of incarceration that make it hard for ex-convicts to find jobs, or the broader de-industrialization that has left fewer people with good factory jobs. The recession could have knocked the economy down to a permanently lower growth rate, by encouraging some people to retire early, for example. Or the economy could just need more time to recover.
There’s also the issue of wide variation in regions and sectors of the economy. In general, the U.S. economy is likely close to full employment – the point where nearly all people who are willing and able to work have a job. But Jed Kolko, chief economist at the job site Indeed, says that growth remains slower in the Midwest and Northeast of the country than in the South and West.
“There’s been a decades-long shift in population and economic activity toward the Sun Belt, and that continues. So even though at the national level there’s strong job growth in many regions and in many sectors, the growth remains uneven,” said Kolko.
The map below, from new data by the Brookings Institution, shows the major cities where growth has been strongest and weakest during the current expansion. Many of the slowest growing metros, which are marked in yellow and orange, are concentrated in the Rust Belt, while the fastest growing cities, in blue, are spread throughout the South and West.
At the same time, decades-long trends like globalization, automation and deindustrialization are taking a toll on workers, especially those with less education and skills.
As more countries around the world engage in international trade, that has increased the returns in the United States to the kind of high-tech, advanced products and services that the U.S. excels in, and decreased the returns to basic manufacturing goods that can be made in lower cost countries. That has translated into lower wages and less economic opportunity for less educated and less skilled Americans.
Trump will be fighting against these larger economic trends as he seeks to fulfill his promise of bringing back manufacturing jobs and reviving the factory centers of the Rust Belt. As he claims the successes of the jobs report, he must also claim its challenges.
Josh Feinman, chief economist of Deutsche Asset Management, says it’s important to remember that the economy does look healthy, and that the country has made enormous progress since the recession.
Still, there’s longer-term trends “that have been at work for decades and that transcend this cycle, that have nothing to do with the Great Recession per se, and that have made a lot of folks feel insecure [and] politically, socially, economically marginalized,” Feinman said.