The past two Democratic Presidential debates have featured questions from the moderators asking the candidates how to respond to the improving economy and Trump’s boasting on that subject. These are pointed questions, since polls like CNN and Quinnipiac show 70% of Americans believe the economy is in good or excellent shape. The candidates have responded that the middle class is getting squeezed or crushed, that Americans aren’t getting paid enough, that the economy is only working well for the wealthy and the well-connected. There is truth in those statements and reflect how many Americans feel. Trump, of course, will be bragging endlessly about the economy and the stock market and is sure to make a great economy (his words, not mine) a central pitch during the Presidential election.
Challenges to the American people, both now and in the future, go far beyond the fact that there has been some decent job growth for a few years and the unemployment rate is low. Meeting those challenges, like health care, global warming, and inequality, and the concerns of Americans about those issues and many others, will no doubt form essential elements of the Democratic campaign.
But can the Democrats directly confront Trump on the economy ?
Yes, they can.
Economic improvement has flowed from a pace of growth occurring in the Obama administration’s second term, for which the nation must give credit to President Obama and the Democrats. In fact, job growth in Obama’s second term was at a higher pace than Trump’s first three years. Median household income growth ( the ordinary middle-class household) grew faster in Obama’s second term, than the first three years of the Trump administration. And median weekly wages, adjusted for inflation, grew faster in that final three years of Obama than the first three years of Trump.
These critical indicators of economic growth and American well-being in Obama’s second term measure the economic momentum coming into the Trump Presidency. The data show firmly that Trump inherited a healthy and growing economy from his predecessor, one that was actually growing faster. Trump inherited a vast fortune from his father, and used it mostly to make the rich richer. Similarly, he inherited a growing economy from a predecessor, which he used mostly to make the rich richer.
JOBS AND INCOME GROWTH: GROWTH SLOWS DOWN UNDER TRUMP
From January 2013 to January 2017, the last four years of the Obama administration, the American economy created 10.4 million jobs, 2.6 million a year, meaning a growth pace of nearly 217,000 jobs a month for four years. In the first 35 months of the Trump Presidency, employment grew 6.69 million, or about 191,000 jobs a month from January 2017 to December 2019. That’s an annual pace of 2.29 million, compared to an annual pace of 2.6 million in the last four years under Obama. One writer pointed out that the Trump economy created 1.1 million fewer jobs in its first 34 months (6.55 million) than the last 34 months of Obama ( 7.7 million).
Overall, the US economy created 16 million jobs from February 2010, when job losses bottomed out after the Great Recession, to January 2017, about 192,500 a month. That average includes the years 2010-2012, when the pace of growth was uneven as the American economy struggled to recover from a devastating recession. 5.6 million jobs were created from February 2010 to January 2013, and then 10.4 million jobs in the final four years.
But the proper look forward for the beginning of the Trump Presidency is the preceding 4-year momentum of job growth of 217,000 a month under President Obama. From that vantage point, the Trump economy has actually slowed modestly to a growth rate of @ 191,000 a month.
Median household income growth followed the same pattern. It was rising faster in the last four years of the Obama administration than Trump’s initial three years. According to the US Census 2018 Income and Poverty report, US median household income in 2012 was $ 56,079, and was $61,779 in 2016, more than 10% higher. The annual growth rate over the four year period was 2.5% per year. From 2016 to 2018, median household income rose to $ 63,179, 2.2% growth over two years or 1.1% per year, only half the growth rate of the prior four years under Obama.
WAGE GROWTH AND WAGE STAGNATION: AMERICANS NEED A PAY HIKE
Americans need a pay increase. As will be seen, median weekly wages for American workers have suffered from the same problem as median household income. Looking back over time, wages have been stagnant.
No matter how you look at it, ordinary Americans need a pay raise. Wages have been stagnant for decades. But statistics do show faster wage growth adjusted for inflation in Obama’s last three years, compared to Trumps’ first three years.
By the fourth quarter of 2019, median usual weekly earnings of full-time workers were $933/ wk, according to the Bureau of Labor Statistics (BLS). But the BLS publishes weekly earnings tables going back decades using the years 1982-1984 as the baseline to adjust for inflation. Here is the inflation-adjusted wage table for the Obama-Trump years.
Using the inflation-adjusted baseline puts the Obama-Trump years in perspective. Weekly usual median earnings declined during the recession from $340/wk in the 4th quarter of 2008 to $333/wk in the 4th quarter of 2012. They stayed nearly flat for one more year (2013-$334/wk), and then recovered from $334/wk in the 4th quarter of 2013 to $349/week in the 4th quarter of 2016. The weekly increase after inflation was $15 in the next three years, an average increase of 1.5 % per year.
From the fourth quarter of 2016 to the fourth quarter of 2019, median usual weekly earnings grew to $362/wk, an additional $13 a week adjusted for inflation, or a rate of 1.24% a year, a slower rate than President Obama’s preceding three years. It should also be noted that many states have been raising their minimum wages since 2016 to improve economic justice, ignoring the national indifference of the Trump administration and the Republicans in the US Senate. These increases may also have contributed to improved earnings. These were state level legal changes having nothing to do with actions of Trump.
The difference between Obama and Trump may not be large in inflation-adjusted wage growth, but the final three-year growth rate of Obama is higher. Basically Americans have been getting a bit over 1% raise adjusted for inflation every year since 2012. The broader story is wage stagnation going back decades.
By one measure, ordinary Americans’ real weekly earnings have fallen since 1973. A major reason for that is that average weekly hours worked have fallen., which fell from 38.8 hours a week in 1973 to 33.5 hours a week in 2019.
Further measures of stagnant wages are revealed in the inflation-adjusted weekly earnings tables from 1979 to 2000.
The data here show the continuous negative impact of recession after recession. Although weekly median earnings are $335 in the first quarter of 1979, after two early eighties recessions, they fall to $313 in the 1st quarter of 1984.. Earnings recover to $331 by the 4th quarter of 1986, but after the 1990-91 recession, they fall again to $312 by the 4th quarter of 1992. After eight years of a growing economy, wages recover again to $334-$335 weekly earnings by 2000, but adjusted for inflation they are the same as 1979.
The 2001-2007 table shows wages rising to $341 by the 1st quarter of 2002, but a recession in 2001, with negative impacts in manufacturing and finance, results in a decline by 2007 back to $336 in the 1st quarter. The 2008-2009 wage impact data have already been presented above.
Wages at the bottom of the pay scale remain horrendous. The national minimum wage is still $7.25 an hour, and 21 states still have $7.25 as their minimum wage, which I estimate represents about one-third of the American population. Eight more states still have minimum wages of less that $10/hr. as of the beginning of 2020. One-fourth of full-time year round workers earn $ 32,000 a year, or about $17.60 an hour or less. The House of Representatives passed a bill in July 2019, which sits on Mitch McConnell’s desk, to bring the minimum wage to $ 15/an hour in five years, by 2025.
THE STOCK MARKET: PACE OF GROWTH HAS SLOWED, BUT IS STILL NOT A GOOD INDICATOR OF HOW ” AVERAGE ” AMERICANS ARE DOING
Trump boasts about how great the stock market is doing. Once again, however, the pace of growth for the S&P 500 Index from the beginning to the end of the Obama administration, was higher than the first three years of Trump. Before looking at that data, however, one must note that wealth associated with the stock market leaves out much of the American population.
Nearly half the American population has no interest in the stock market, either directly through stock ownership, in investment vehicles like 401ks, mutual funds, or claims on a pension invested in the market. The top 10% of households are also estimated to hold almost 85% of the value of stock holdings in whatever form. If you have no assets, you don’t benefit from an increase in their value.
The S&P 500 Index was 1438 on Jan. 1, 2007, 1378 on Jan. 1, 2008, 826 on Jan. 1, 2009, as Bush was leaving office, and hit another low of 735 on Feb.1,2009, as Barack Obama became President. By January 2013 the Index had recovered to 1498, doubling from the beginning of the Obama Presidency, and reached 2198.8 on Oct. 31, 2016, a tripling in value from the low point, or a 300% increase.
From Oct. 31, 2016, to Jan. 1, 2020, the S&P Index rose to 3246, a 50% increase from the moment just before Trump won the election. During the Obama Presidency, the stock market tripled in value, and has increased in value another 50% under Trump.
THE UNEMPLOYMENT RATE: ITS DECLINE HAS ALSO SLOWED
The unemployment rate was at 3.5% in December 2019, and Trump boasts about it being a fifty year low. Under the Bush administration, the unemployment rate stood at 4.8% in February 2008 as the recession was beginning. By February 2009 it had risen to 8.3%, and peaked at 10.0% in October 2009 before finally starting to decline. It declined to 8.0% in January 2013 and to 4.7% in January 2017, a decline of more than 40% in Obama’s final four years. The unemployment rate declined another 25%, to 3.5%, in the first three years of the Trump administration. That means the pace of the decline in the unemployment rate in Obama’s second term exceeded the pace of decline under Trump.
THE TURNAROUND FROM THE RECESSION UNDER PRESIDENT OBAMA: YES, HE DID IT
The American people need a reminder that the Great Recession of 2008-2009 was the deepest recession in the United States since the Great Depression itself. The Great Recession was not just a Financial Industry Recession, meaning a near-collapse of the banking, financial, mortgage, and real estate industries, with hundreds of thousands of job losses in those sectors. It was also a full-on industrial recession, with the bankruptcies of General Motors and Chrysler occurring in the spring of 2009, after those companies and Ford had also been shedding huge numbers of jobs in 2007 and 2008. The US lost 283,000 manufacturing jobs in 2007, 1.16 million manufacturing jobs in 2008, and 1.08 million more manufacturing jobs in 2009 before job losses came to a halt in February 2010, the same month as the halt to overall job losses in the economy.
Obama entered the Presidency against the Perfect Storm over the economy. His policies rescued both the auto industry and the overall economy in his first term. In his second term, as the above data have shown, the economy found its footing and began healthy growth, creating the momentum that lasted into the first three years of the Trump Administration.
The Dems can honestly claim it was the last Democratic administration that both rescued the economy and set it on its solid footing. Trump has been reaping some benefits, but warning signs are flashing that in Trump’s first three years, real gains for the average American have slowed.