Trump’s Economy Is Decelerating
The U.S. Bureau of Labor announced that the economy added 164,000 jobs in July, which matched expectations of 165,000. However, there were downward revisions to May’s weak result (72,000 to 62,000) and June’s strong outcome (224,000 to 193,000) which means July’s total should be viewed as 123,000 jobs being added and not 164,000.
Having job growth slow isn’t a huge surprise since the economy has now been growing for 10 years; the longest streak post World War II. However, President Trump’s statements that this is the best economy ever don’t hold up when looking at the numbers.
Job growth is slowing
To help smooth out any one months result it is worthwhile to look at 3, 6 and 12-month trailing numbers. You can see the slowdown in the number of jobs being added when you look at these averages.
- 12 months per month average of 187,000 equals 2.25 million per year (and the third month in a row it has been under 200,000 per month)
- 6 months per month average of 141,000 equals 1.69 million per year (and had been running at 172,000 per month last month)
- 3 months per month average of 140,000 equals 1.68 million per year (and had been running at 171,000 per month last month)
Another signal that the tax cut created a sugar rush in the economy
As the economy exited the Great Recession there was a steady stream of job creation starting in 2011 with 173,000 being added per month. It peaked in 2014 with an average of 251,000 per month and saw a decline until 2018 when 223,000 per month were generated. As the one-month averages show below the falloff this year to 165,000 is an indication that last year’s tax cut was just a sugar rush to the economy.
2011: 173,000 per month added
June’s GDP report shows the economy growing in the mid-2% area
The Bureau of Economic Analysis or BEA reported that the economy grew at a 2.1% rate in the June quarter, falling from 3.1% in the March quarter. The report also shows that the economy’s year-over-year growth rate peaked a year ago at 3.2%, right in the middle of the tax cuts impact.
For the June quarter inventory changes and trade had negative impacts to the reported GDP result but were partially offset by a large positive impact from government spending. GDP growth was 2.7% with these adjustments.
Reported GDP growth: 2.1%% (2.05% when not rounded)
NEGATIVE impact from Inventories: (0.86)%
POSITIVE impact from Government spending: 0.85%
NEGATIVE impact from Trade: (0.65)%
Adjusted GDP: 2.71% or 2.7%
However March quarter’s adjusted GDP remained a weak 1.3%
The BEA updated previous quarter’s results and the March 2019 quarter remained especially weak. Personal consumption increased by 16 basis points but this was more than offset by trade’s impact increasing by a negative 21 basis points. Overall the adjusted growth rate only moved from 1.2% to 1.3%.
Reported GDP growth: 3.1% (3.10% when not rounded)
POSITIVE impact from Trade: 0.73%
POSITIVE impact from Inventories: 0.53%
POSITIVE impact from Government spending: 0.50%
Adjusted GDP: 1.34% or 1.3%
Yearly GDP growth has fallen since mid-2018
Taking a look at how the economy is performing from the prior year’s quarter gives a better read on the economy as using this statistic smooth’s out the volatility of any one quarter’s result.
When looking at the year-over-year comparisons, in last year’s June quarter GDP growth was 3.2% and has fallen to 2.3%. Since Trump has been in office the year-to-year comparisons have ranged from 2.1% to 3.2%, and have only been above 3% for the June and September 2018 quarters (3.2% and 3.1%, respectively) when the tax cuts were probably having their largest impact.
Over 30 months Obama added almost 1 million more jobs than Trump
Trump entered office on January 20, 2017, and starting with February 2017 he has been President for 30 months. Total job growth during that time has been 5.736 million or 191,000 per month with those results being helped by the tax cut.
Working back from January 2017, Obama’s last month in office, there had been 6.611 million jobs added or 220,000 per month. The difference for the 30 months is 875,000 more jobs or almost 30,000 more per month than Trump.
Note that back in January this year the total difference was only 194,000, which means over the past six months it has increased by 681,000. And looking at the next five months with Obama’s job numbers of 221,000 to 327,000 per month, the gap should only increase and cross 1 million.