The Trump Economy: Not What It May Seem
January 31, 2018
During last night’s State of the Union address, President Trump heralded a set of economic indicators—including the unemployment rate—to suggest that his policies are resulting in an improving economic landscape for working Americans.
Unfortunately, the narrative Trump wove obscures the reality of our current economy for most Americans: jobs remain unstable and unavailable for many, and where there have been gains, they are largely due to progressive, rather than conservative, policy changes. Moreover, GDP, investment, and wage growth remain well-below the pre-recession trend. The structural flaws that underlie the sluggish economy have been exacerbated by the Trump Administration’s economic policy.
A closer look at economic data shows the reality of our current economy.
The low unemployment rate does not mean Americans have stable, family-sustaining jobs:
- Prime labor force participation rate—the share of people in jobs or looking for jobs—is at 81.9 percent. This is down from the pre-recession rate of 84.3 percent, meaning that people partly employed or who’ve given up looking for employment have not yet been pulled off the sidelines.
- Average wages inched up just 0.1 percent last year. Average wages are not growing the way they did in previous eras of low unemployment.
- All net new jobs created from 2005 to 2015 were in “alternative work arrangements”—meaning contract, temp, or outsourced work. Approximately 20 percent of all American workers are now contract workers—or those who have been brought on for a specific project or a fixed amount of time—and most of these workers don’t receive benefits.
- Black or African-American unemployment, at 6.8 percent, is at the lowest in decades—and we should cheer that. But it remains twice that of the white unemployment rate. Moreover, as is true when calculating any unemployment rate, lower black unemployment is caused, in part, by lower labor force participation, with incarceration playing a driving role in reducing black male workforce participation.
The apparent recovery—the closing of the gap between potential GDP and actual GDP—is due to downward revisions of the estimated potential output, not real growth.
- The U.S. remains well below the pre-recession trajectory for full employment and GDP. The Congressional Budget Office (CBO), for example, consistently revised downward estimates of potential GDP and full employment—when all productive workers, capital, and resources are engaged in the economy—to the point that we are 15 percent below the 2007 trend line.
Record-high profits and a soaring stock market are not translating into a well-functioning economy:
- Corporate investment—in research and development, innovation, and productive endeavors—still remains below pre-recession levels, yet corporate profits sit near their all-time high.
- Corporate consolidation—a chief driver of higher profits —has pushed wages downward. As concentration in a labor market goes up, average wages go down—by as much as 17 percent.
- Further, worker productivity, a measure of capital investment, has not returned to pre-recession levels.
- In fact, many of the same companies trumpeting their tax cuts with employee bonuses were simultaneously cutting jobs and promising record buybacks.
- Indeed, shareholder payments are 90 percent of reported profits—with fewer and fewer dollars available for the productive investments, including wages, that make our economy grow.
- Meanwhile, the share of the population that owns stock, even in retirement accounts, is at record lows. In 2016, the top 1 percent owned 40 percent of all shares, while the top 10 and 20 percent of households owned 84 and 93 percent of all shares, respectively.
Where there are gains, they are due to progressive—rather than conservative—policies:
- Despite pressure from conservatives—including then-candidate Trump—Fed Chair Janet Yellen raised interests slowly, allowing unemployment to fall below the level conservatives argued was “full employment.”
- State-level minimum wage increases—won by ballot initiative and legislation—have helped boost wages for millions of American workers.
The Roosevelt Institute has long been sounding the alarm on the various ways the economy isn’t working for the majority of Americans, a trend which has been exacerbated in the Trump era. From opinion pieces on the dangerous GOP tax law in outlets ranging from Boston Review to USA Today to publications from leading economists on how financialized corporate behaviors are one of the primary drivers of economic inequality, the Roosevelt Institute is leading the charge in changing the way we talk about the economy.