"This is an incredible time for our nation. We have the best economy in history. The stock market is at record highs. Unemployment is at historic lows. And more Americans are working today than ever, ever, ever before.” — Donald Trump, addressing a political rally in Billings, Montana, September 6
Such remarks are a recurring theme for Trump. All summer long, he has made some variation of this claim:
"We have the strongest economy in the history of our nation." -- Trump, in remarks to reporters, June 15
"We have the greatest economy in the history of our country." -- Trump, in an interview with Sean Hannity on Fox News, July 16
"We're having the best economy we've ever had in the history of our country." -- Trump, in a speech at a steel plant in Illinois, July 26
"This is the greatest economy that we've had in our history, the best." -- Trump, in a rally in Charleston, W.Va., Aug. 21
"You know, we have the best economy we've ever had, in the history of our country." -- Trump, in an interview on "Fox and Friends," Aug. 23
"It's said now that our economy is the strongest it's ever been in the history of our country, and you just have to take a look at the numbers." -- Trump, in remarks on a White House vlog, Aug. 24
“We have the best economy the country's ever had and it's getting better." -- Trump, in an interview with the Daily Caller, Sept. 3
Do these claims square with reality?
Last year (2017), the US economy expanded just 2.2 percent.
In the first quarter of 2018, gross domestic product (GDP) registered 2.2 percent. Economic growth in the second quarter came in at 4.2 percent. However, quarterly measures are mere snapshots of economic health and they are volatile. Annual GDP measures are more illustrative and revealing.
Economists broadly expect growth to slow in the coming months, to round out the year at about 3%. Estimates for the current quarter range widely, from a forecast of 2% growth in the third quarter by the Federal Reserve Bank of New York, to 4.6% from the Federal Reserve Bank of Atlanta.
Historically, the GDP growth rate in the US averaged 3.22 percent from 1947 through 2018, reaching an all time high of 18.9 percent in 1942, during World War II.
Yet, over the last two decades, as with many other developed nations, our growth rates have been decreasing. In the 1950’s and 60’s the average growth rate was above 4 percent. In the 70’s and 80’s it dropped to around 3 percent. It has dropped even further in the 21st century.
Since 2001, GDP has reached at least 3 percent in just two years: 2004 (3.8 percent) and 2005 (3.4 percent). In every other year, through 2017, GDP failed to crack even 3 percent, a number that was once considered customary.
So, if GDP cracks 3 percent this year, it would be reason to celebrate. Yet, even if it somehow reaches 4 percent, it would still be nowhere near the record. Look at these double-digit growth rates from previous years:
1934 - 10.8 percent
1936 - 12.9 percent
1941 - 17.7 percent
1942 - 18.9 percent
1943 - 17.0 percent
It makes sense that the economy benefitted from the pent up demand of the Great Depression and the massive output generated by World War II.
Since 1943, the US economy has never again experienced double-digit growth. However, there were some very robust years, nonetheless.
The best year for the U.S. economy since 1943 came in 1950, when the economy expanded by 8.7%.
Here are the years since 1943 that GDP growth registered at least 5 percent:
1944 - 8.0 percent
1950 - 8.7 percent
1951 - 8.0 percent
1955 - 7.1 percent
1959 - 6.9 percent
1962 - 6.1 percent
1964 - 5.8 percent
1965 - 6.5 percent
1966 - 6.6 percent
1972 - 5.3 percent
1973 - 5.6 percent
1976 - 5.4 percent
1978 - 5.5 percent
1984 - 7.2 percent
It may have been tedious reading all of those yearly GDP numbers, but I listed them to illustrate a point: very clearly and demonstrably, this is NOT “the greatest,” “the strongest” or “the best” economy in US history. Since 1934, there were 19 years in which GDP significantly outpaced what we are experiencing in 2018.
Trump counts on his supporters naively and willingly believing everything that comes out of his mouth. However, his boastful claims are easily disproven.
How about unemployment?
The US unemployment rate was unchanged at 3.9 percent in August; the jobless rate ticked up slightly from the 3.8 percent low in May. However, those are quarterly snapshots. What matters is consistency — the unemployment rate for the entire year.
The unemployment rate in 2017 was 4.1 percent. The lowest annual unemployment rate this century was 3.9 percent in 2000. So, the current unemployment rate isn't even the lowest of this century.
To smooth out the distortions from the Great Depression and WWII, let’s look at the years since 1950 in which the unemployment rate fell to 4 percent or less:
1951 - 3.1 percent
1952 - 2.7 percent
1965 - 4.0 percent
1966 - 3.8 percent
1967 - 3.8 percent
1968 - 3.4 percent
1969 - 3.5 percent
1999 - 4.0 percent
2000 - 3.9 percent
Once again, Trump is full of it. The unemployment rate is NOT at historic lows. It would be wonderful if the annual unemployment rate finishes the year at or below 4 percent, but it will not be historic or “the greatest” or “the strongest” or “the best” ever.
How about the suggestion that, “More Americans are working today than ever, ever, ever before”?
In 2017, about 125.97 million people were employed on a full-time basis in the US. The number of full-time employees in the US has increased by almost 20 million people since 1991. In 1990, there were 98.67 million full-time employees.
However, the US population has grown considerably since 1990 and this must be taken into account. Since there are more people, surely there should be more working people.
US Population by Year:
1990 - 249.6 million
2000 - 282.1 million
2010 - 309.3 million
2018 - 327.2 million
In the past 28 years, the population has grown by 77.6 million. The fact that there are more people working today is not the least bit surprising. In fact, it is entirely predictable.
However, the labor force participation rate in August was 62.7, which tied the lowest rate this year. However, in January 2008, it was 66.2. The rate had reached an all time high of 67.30 percent in January of 2000.
The Bureau of Labor Statistics defines the labor force participation rate as the percentage of the civilian labor force, ages 16 years and over, currently employed or seeking employment.
Labor Force Participation Rate by Year:
1990 - 66.5 percent
2000 - 67.1 percent
2010 - 64.7 percent
2017 - 62.9 percent
Though the number of working Americans has grown due to population growth, the participation rate continues an alarming tumble. Additionally, the number of persons employed part time for economic reasons (referred to as involuntary part-time workers) stood at 4.4 million in August.
Yes, the retirement of the Boomers affects the participation rate, but the Millennials are now the largest generation in the US labor force.
The president can try to spin this, but the reality is that 96.3 million working-age people were not in the labor force in August. Add in the 4.4 million people involuntarily working part-time jobs and we’ve got a big problem.
Lastly, lets examine the record high stock market the president regularly brags about.
The Dow Jones Industrial Average closed at an all-time high of 26,616.71 on January 26, 2018. It now trading at about 25,900, well off that high, but still robust, nonetheless.
The S&P 500 closed above 2,900 for the first time on August 29, 2018.
The NASDAQ Composite closed at a record high of 8,109.69 on August 29, 2018.
This is all great news… for those who are invested in the US stock market.
The reality is that a huge segment of Americans have little, if anything, in the market.
The Chicago Tribune put it this way:
Nearly half of country has $0 invested in the market, according to the Federal Reserve and numerous surveys by groups such as Gallup and Bankrate. That means people have no money in pension funds, 401(k) retirement plans, IRAs, mutual funds or ETFs. They certainly don’t own individual stocks such as Facebook or Apple. Wall Street is not Main Street.
The rich are far more likely to own stocks than middle or working-class families. Eighty-nine percent of families with incomes over $100,000 have at least some money in the stock market, compared with just 21 percent of households earning $30,000 or less, a recent Gallup survey found.
Stock ownership before 2008 was 62 percent, Gallup found. Even after recent inflows, only 54 percent of Americans are invested now. More adults in the United States own homes than stocks.
People overseas seem to be benefitting, however. Foreign holdings of US securities rose to a record $18.4 trillion at the end of June, according to the Treasury.
It’s been said time and time again: the stock market is not the economy.
In truth, the stock market is not an accurate measure of the health and strength of the economy. The markets are simply a bet on the future performances of a select group of companies listed on a few stock exchanges.
Most American companies aren't even publicly traded. In fact, less than 1 percent of the 27 million businesses in the U.S. are publicly traded on the major exchanges.
Additionally, the number of public companies in the U.S. decreased by nearly 50 percent from 1996 to 2014, according to the National Bureau of Economic Research.
So, in reality, Wall St. is not a true reflection of how the average American worker, or the average family, is faring.
The following is an excerpt from the New York Times. Ask yourself if this sounds like a healthy stock market:
The US stock market is half the size of its mid-1990s peak, and 25 percent smaller than it was in 1976. In the mid-1990s, there were more than 8,000 publicly traded companies on exchanges in the United States. By 2016, there were only 3,627.
Profits are increasingly concentrated in the cluster of giants — with Apple at the forefront — that dominate the market. In 2015, for example, the top 200 companies by earnings accounted for all of the profits in the stock market. In aggregate, the remaining 3,281 publicly listed companies lost money.
Aside from the top 200 companies, the rest of the market, as a whole, is burning, not earning, money.
In sum, the economy is indeed healthier now than it was 10 years ago, during the throes of the Great Recession. But, unless you take an exceptionally narrow view of the economy — that the stock market is the end all, be all — it is primarily serving corporations.
Corporate profits in the US are now at record highs. Profits increased in the second quarter by $47.3 billion, or 2.4 percent, to an all-time high of over $2.12 trillion, following an 8.2 percent jump in the previous quarter.
Meanwhile, median household net worth remains below where it stood in 1998, according to the Federal Reserve, even as households take on more debt than ever before.
Household debt grew for the 16th consecutive quarter in the April-to-June period, rising by 0.6 percent, or $82 billion, to $13.29 trillion, the New York Fed reported. Overall household debt is now 19.2 percent above the post-financial-crisis trough.
That’s not a sign of health. Excessive indebtedness spurred the last economic collapse and it is now even higher.
Rising prices have erased US workers’ meager wage gains. The cost of living was up 2.9 percent from July 2017 to July 2018, according to the Labor Department, outstripping a 2.7 percent increase in wages over the same period.
This occurred despite the fact that the US economy continues to grow. However, that growth just isn’t trickling down to workers. It's part of a 40-year trend. After adjusting for inflation, today’s average hourly wage has just about the same purchasing power it did in 1978.
In short, if you’re part of the top 1 percent, this economy probably seems great. Otherwise, you’re probably not buying all of Trump’s boasts about this being “the greatest,” “the strongest” or “the best” economy in US history.
That’s because it’s not.