1,000,000 new jobs. You’d think you’d hear a lot about such an impressive number. So far, it’s made little splash in the media. Nonetheless, since the Republican tax cuts were signed into the law the U.S. economy has created one million new jobs. And that’s just the beginning of the good news.
In May 2018 alone, defying the expectations of many economists, 223,000 jobs were created. The unemployment rate has dropped to 3.8 percent, its lowest point since April 2000. Unemployment among black people and Hispanics is at the lowest point since the numbers were first broken out by race during the Nixon Administration.
The American economy is surging, even before the new, lower corporate and personal tax rates go into effect. The promise that companies and most individuals will soon be able to keep more of what they earn has, alongside the Trump Administration’s successful effort to deregulate vital sectors of the economy, produced a boom unlike any seen since the Reagan tax cuts goosed the economy out of the near-depression Jimmy Carter’s policies had put it in.
Wages are up too. According to the Congressional Joint Economic Committee the average hourly earnings of production and nonsupervisory workers is 28 percent higher than it was 12 months ago. That’s the largest gain since July 2009.
The reason it’s all working is simple. “When you tax something you get less of it. When you tax something less, you get more of it,” says Phil Kerpen, president of the group American Commitment and a longtime advocate for pro-growth policies. “Republicans cut taxes on investment and job creation and created an economic boom—in a year that might otherwise have seen a recession. As a result, a million more people are working and many million more are enjoying rising wages for the first time in a long time.”
Lots of supposedly smart people laughed when Trump and his senior economic team suggested the days of 3 or even 4 percent annualized growth might be just around the corner. The New York Times’s Paul Krugman, as pro-growth economist Steve Moore likes to remind everyone, said the country was more likely to see flying cars than it was to see a return to growth at the rates President Trump said were now possible. That’s because the Obama economic team and its Amen corner among the financial and economic elites had successfully conditioned everyone to believe those day were long past and that something around 2 percent annual growth was the new normal.
U.S. President Donald Trump gestures toward journalists shouting questions as he departs the White House May 29, 2018 in Washington,
There are some potential pitfalls on the horizon. The possibility of a trade war with Europe and with Canada and China, as the just concluded G7 summit in Quebec made clear is causing considerable angst among some of the nation’s most significant trading partners. Nonetheless it’s unlikely such a thing would do much to hurt the long-overdue recovery America is now enjoying.
“We are just the first stage of tax cut being enacted and expect to see continuous job growth moving forward. As companies increase their capital investment, we should anticipate more jobs and higher wages for American workers. The risk is obviously higher tariff costs which could reduce animal spirits. But the size of the tax cut dwarfs any of the proposed trade policy tariffs currently being contemplated,” says Dan Clifton, head of policy research for Strategas Research Partners.
With Trump’s tax cuts in place and deregulation efforts continuing, the Atlanta Federal Reserve is predicting the U.S. economy will hit 4 percent growth this year. That’s offset by a slightly less rosy prediction coming out of the New York FED of something closer to 2 percent, but even if you split the difference, 3 percent is a solid showing. By some estimates there are more jobs out there than there are people looking for work.
It’s not all rosy. There’s talk of trade wars and other potential downers, but things should continue to get better for some time to come. “We are seeing strong demand for labor with strong but non-inflationary wage increases, driven by huge business capital investment, which in turn is driven by increased business confidence and general optimism about the future,” says James Lucier, managing director of Capital Alpha Partners, a leading Washington research and adviser firm advising institutional asset managers worldwide.
“It wasn’t too long ago that companies were sitting on cash they wouldn’t invest because they couldn’t see demand for their products,” Lucier adds, but that, it appears, is changing. It’s doubtful anyone’s going to call it “The Trump Effect.”
Few people outside the White House want to give the president any credit for the good news, but his bullish policies are producing real results. That will matter, come November, as the expected blue wave diminishes to a trickle as people once again vote with their pocketbooks.