Is Trump boosting the Economy?

US June Jobs report has come out, and unlike the previous mistrust from Trump  regarding the official numbers of unemployment rate he and his supporters seem to be astonishingly happy for a unemployment decrease that according to experts is just an extension of the trend that was observed in 2016 under the Obama administration in terms of Job Creation.

According to data, in June nonfarm payroll employment, which is any job with the exception of farm work, unincorporated self-employment, and employment by private households, the military and intelligence agencies, increased by 220,000 in June. The unemployment rate suffered little changes, considering the 2 previous months (4,4% in April and 4,3% in May) being now at 4.4 percent. Special highlight for the Health Care, Social Assistance, Financial activities and mining, in terms of jobs creation.

Many Trump supporters, and specially his vice president Mike Pence believe this Jobs report just show Trump’s commitment to create “tons of jobs” is being delivered. At the same time there is an urge by some people to believe investors and economic agents are confident on the economy and the way things will evolve.

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Employment by Selected Industry, source: US Labor Statistics

Taking into consideration the chart above we can clearly see that the Education and Health Services was the industry that had added more jobs to the economy in June, around 59,100, not the type of industry that depends on business owners feelings but more on the needs of the population. Retail Trade which only added around 8,100 jobs in June and Utilities, which added 1,800 jobs, this past month are betters examples of industries driven by economic feelings and weren’t that much expressive as it was Education and Health Services, even if take into consideration their added jobs together.

This happens for a reason, optimism towards the economy is seeing a decline, referring to pre-election levels, as we can see in the chart below.

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Source: New York Times, Neil Irwin’s article

This decline in optimism between consumers can be expressed in their practically stagnant wage. As the June Jobs reports states, in this month average hourly earnings for all employees on private nonfarm payrolls rose by 4 cents to $26.25 in comparison to May. However if we look from June 2016 to June 2017 average hourly earnings rose only 63 cents, around 2.5 percent. This is an important factor to take into consideration because if consumers don’t have a reasonable disposable income or aren’t pretty confident on their future economic conditions they won’t consume which won’t create a Demand for business owners to invest and hire more people to meet the demand for more products/services.

In the end a question still has to be answered, “Is Trump boosting the economy?”

Not even 6 months have passed since his inauguration and even though there is a urge to say this economic evolution is due to the “Trump factor” to justify the argument that “He isn’t so bad after all” I do believe it’s really early to make such assumptions. Yes he already signed legislation to roll back some regulations to promote jobs creation and expressed his intention to cut taxes, even though trickle down economics has proven to be mislead, but some things take time to start affecting the economy this is just one of them, we’ll probably have to wait the first year or two to see if he is really boosting the economy or just continuing the trend that started under the Obama administration.

 

 

Luís Carvalho, economics bachelor student and proud 2015 Graduate of Democracy