U.S. Growth in Real GDP and Jobs in the Trump Era

July 30, 2020

Real GDP contracted 32.9% at an annualized rate (AR) last quarter, more than six times faster than during the prior quarter. Personal consumption, which accounts for roughly 70% of U.S. aggregate demand, plunged 34.6% annualized. Non-residential and residential business investment sank by 27.0% and 38.7%, respectively, and exports and imports plummeted 64.1% and 53.4%. These are all extraordinary changes and clearly exacerbated by the efforts to contain Covid-19. Sadly, such a big sacrifice slowed the infection’s spread only fleetingly.

Combining the two quarters still results in a massive first-half GDP contraction of 20.1% at an annualized rate, and real GDP was 4.6% lower than in the first half of 2019. Over the 14 calendar quarters of President Trump’s stewardship, GDP on average fell at a 1.09% per annum pace. That’s some five percentage points weaker than the potential 4% goal that administration officials believed would be unleashed by the radical fiscal, regulatory, and border policies that were pursued. Negative 1.09% per year growth compares unfavorably with annualized growth of 2.58% during the Obama years, 1.76% under George W. Bush’s administration, 3.80% in the Clinton years, and 2.23% with George H. W. Bush. On average, too, U.S. inflation-adjusted GDP expanded 3.8% per year in the half century between the final quarters of 1949 and 1999.

If one only counts the first three years of Trump’s stewardship, real GDP went up 2.50%, just fractionally less than the pace under his predecessor. However, 2.58% over 8 years is a much more impressive accomplishment than 2.5% sustained over 3 years, and if Trump is to get a mulligan for the pandemic, shouldn’t one make a similar adjustment for the mess of an economy that Obama inherited?

Comparisons of employment growth tell a similar story. Non-farm payroll employment in June compared to January 2017 when Trump took office represents an annualized contraction of 1.78% per year. That contrasts with positive jobs growth in the second half of the twentieth century of 2.22% per year. Under Trump’s predecessors, jobs grew 1.04% per year with Obama, 0.15% per year under George W. Bush, and 2.38% per year with Clinton.

For obvious reasons, President Trump has graded his economic policy performance by the stock market rather than objective indicators like GDP or employment. It is correct that the U.S. economy from the start of the 21st century was not measuring up well compared to the previous fifty years. However, Trump’s promise to make America great again in an economic sense has proven remarkably unfulfilled. And yet according to many opinion polls, voters give him better marks for economic policy than in other areas where a president is required to lead.

Copyright 2020, Larry Greenberg. All rights reserved. No secondary distribution without express permission.


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