Column: Don’t judge the economy by Trump’s Tweets

Courtesy of Creative Commons

Adrian Tolstoy, columnist

You have most likely heard President Donald Trump bragging about how well the economy has been doing under his leadership. Only recently Trump tweeted, “BEST USA ECONOMY IN HISTORY!” And sure, there has been a steady stock market rise, with constant record-breaking performances. It is fair to say that if there is anything Trump has going for him, it is the stock market and certain economic indexes. Judging from his countless brags on how well the economy is going, that is what he is basing his reelection campaign on. But for students voting, it is important to understand whether the key arguments of Trump’s reelection platform are sound. 

By looking at the metrics Trump often highlights, we can determine whether he is accurate in his claims. Among his go-to indicators are a low unemployment rate, job gains and a steadily rising stock market.

The unemployment rate has decreased during his presidency from 4.7 percent to 3.6 percent. During the Obama administration, unemployment went from 8.3 percent to 4.7 percent and under President George W. Bush unemployment climbed from 4.1 percent to 7.8 percent. From 2016 to 2019, over an average of 189,000 jobs were gained per month, compared to Obama, who added on average 110,000 jobs per month during his tenure. Lastly, the Dow Jones Industrial Average — the stock performance of the 30 largest publicly traded companies — has rocketed from 18,333 to hitting 29,000 multiple times. During Obama’s presidency, the Dow Jones Index climbed from 7,949 and 18,333. Conclusively, these measurements point in favor of Trump’s economic policies. 

However, they do not necessarily provide a holistic view of the economy. There are other significant indicators that require review in order to understand the health of the U.S. economy. The stock market alone does not necessarily correlate with how well the economy as a whole is doing. 

The stock market is an incomplete measure of the economy because it can be fueled by ingredients other than pure economic growth. For example, corporate tax cuts, geopolitics, lower interest rates, quantitative easing and stock buybacks can all have significant effects on the stock market. Some of these are out of Trump’s control. Data shows that the boom is particularly fueled by buybacks, when a company decides to repurchase stocks from investors, decreasing the supply of shares in the market in an attempt to raise their price. This practice grows the total stock market, but brings no real value to anyone apart from the few who own that stock. 

Furthermore, 2018 was an example of how the stock market can be misrepresentative. In 2018, 2.8 million jobs were added, there was a 2.9 percent gross domestic product growth and record low unemployment rate of 3.8 percent. However, the stock market went down 5 percent. This shows that the intrinsic health of the economy is not necessarily correlated with the stock market.  

Furthermore, the wealthiest 10 percent of Americans hold 84 percent of all stocks and only about 50 percent of all Americans own any stock at all. That means that almost half of the population does not directly benefit when the stock market climbs, but the top 10 percent get increasingly richer. Over-emphasizing stock market performance effectively leaves out almost 50 percent of the population, and ignores the problem of increasing income inequality.

Low unemployment and job gains are also positive economic developments. However, they need to be studied in context. Jobs might increase, but it is vital to look at the quality of those jobs. During Trump’s presidency, wages have grown slightly slower than during Obama’s time in office. Productivity growth has been growing fairly steadily, growing by 1.7 percent in 2019, suggesting jobs are growing in a fairly sustainable direction. However, median household income growth slightly decelerated during Trump’s first two years in office. GDP growth rate has been growing steadily, peaking at around 3.5 percent GDP growth during his tenure, but significantly lower than Obama’s peak at 5.5 percent quarterly economic growth. These indicators illustrate that the current economic prosperity under Trump is rather an after-effect of Obama’s and Fed’s stimulus policies.

The economy has recovered relatively well from the recession. The recovery has been mostly due to Obama’s $787 million recovery act and Federal Reserve’s $2.1 trillion quantitative easing. Furthermore, stock markets correlate indirectly with interest rates set by the Federal Reserve, so when rates go down, stocks go up. Thus, the current stock market boom can also be attributed to low interest rates since 2008. U.S. consumers also play a large role in the health of the economy. Consumer confidence and spending are at all time highs, which is fueling the economic growth and the stock market. However, there are some stimulus policies that Trump has enforced that can be traced to this expansion.

The economy is strong, but not as strong as Trump’s Twitter feed portrays it to be. It is also questionable whether the economic expansion can be attributed to Trump’s policies. Don’t mistake the stock market and low unemployment rate for definitive signs of economic prosperity. Go to other news sources and try to look at indicators that actually represent the health of the economy.