In his State of the Union address on Tuesday, President Donald Trump will try to convince the Americans that the US economy is booming – and that everything is due to him.
He will probably point to the low unemployment rate and robust job growth as evidence of his entrepreneurial skills. He'll probably remind the Americans that the US stock market had a great month in January – although 2018 was the worst year for stocks in a decade. (He will also definitely disregard the fact that manufacturing jobs are far from "bringing them back to life" because of his new trade deals.)
Here's the truth: The US economy under Trump is doing well , The President has monitored a slow but steady economic expansion that began, however, under President Barack Obama.
However, there is a big problem: growth has benefited the richest Americans, while average workers have barely seen their paychecks grow.
In the face of this, many Americans are not surprised. Nearly half (48 percent) of Americans believe that economic conditions are worsening, from 45 percent in December and 36 percent in November. This resulted in a January poll by Gallup a consulting firm in Washington, DC
Most companies have welcomed the president's voluntary approach in regulating the government, but not all benefit from its agenda. The US steel industry benefits from hefty tariffs that its government put on imported steel and aluminum last year. So too aluminum factories. But Trump's obsession with taxing foreign goods has inadvertently harmed farmers and American carmakers who export their products overseas.
Even the GOP's signature economic performance, the Tax Cuts and Jobs Act, did little to boost wages and business investment.
The economy is not shrinking, so it could be a lot worse. And it is possible that they will become like that. The banks of Wall Street are already preparing for a slowdown in the US economy in 201
So Trump can be sure that he has been monitoring steady economic growth in the White House for the first two years. But the story is more complicated. And warning signs are flashing.
Here are five things you should know about the state of the US economy.
The tax cuts of the GOP are … meh
If there is an economic policy that Trump and his Republicans have in Congress Oversold, it was the idea that cutting taxes would drive US economic growth into space.
In November 2017, the President assured Americans that lowering taxes on businesses and private companies would deliver the rocket fuel that our economy needs to increase more than ever. "And when Trump signed the tax cuts on December 22, 2017, at the Oval Office, Jobs also promised that companies would invest this tax savings in their companies and give their employees   billion and billions of dollars. "He pointed to a handful of big companies that promised to raise wages and give employees 1,000 cash bonuses – including Walmart, Bank of America and Comcast.
More than a year later, economic data shows that the tax credit for workers was largely an illusion.
The left-leaning Economic Policy Institute has recently compiled  compensation data from the Bureau of Labor Statistics, indicating that the much lauded bonuses did not boost workers' paychecks. Over the past 12 months, cash bonuses have given employees only an average of 2 cents an hour of compensation compensation, adjusted for inflation. (This does not include premiums tied to productivity goals.)
Instead, US companies issued a record amount this year to repurchase shares in company stock to increase shareholder value. US companies have announced that this year […] will spend one trillion $ on share repurchases. According to CNN Business this represents an increase of 64 percent over 2017 . It is therefore no mystery why the savings from the GOP tax law were not transferred to the employees. Only a handful of companies (19459005) 34 from the Fortune 500 ) said they use the tax savings to invest in US operations.
Economists believe that the tax bill has been supporting economic growth for a short time, at least. The economy has grown by around 2.2 percent per year since the end of the recession in 2009, reaching 4.2 percent in the second quarter of 2018, immediately after the tax cuts came into effect. The third quarter was also strong at 3.5 percent. By the end of 2018, however, annual economic growth dropped to 2.6 percent. Economists expect growth to slow further in 2019, and to decline further in 2020.
To anticipate, tax cuts instead of rocket fuel were more of a sugar equivalent. They gave the US economy a short jolt as they triggered a $ 800 billion hole in the federal budget.
The stock market is … yikes
Trump's favorite benchmark for US economic development, the stock market, has been extremely unstable in recent months. The President loves to borrow when the stock market roars, but remains silent when he falls.
That's what happened in 2018.
Trump bragged when the big stock indices reached record highs at the start of the year, insisting that the market "shatter one record after another". But in the last months of 2018 it went downhill fast. It was indeed the worst year for stocks since 2008 – the year the country sank into the Great Recession.
As stated by Emily Stewart of Vox some of the factors behind it were The slippage had something to do with Trump, and some did not:
The current economic expansion and stock market (until recently) take so long – and so much longer than many economists expected – that investors were asking me for quite some time when that luck would end. It seems as if a combination of global and domestic events are beginning to convince Wall Street that the time has come.
The Trump War of Trade with China caused a series of concerns that affect the impact of US farmers until their potential consumer prices on their economic impact in China and the US. Economic growth has slowed in Europe and is expected to slow next year in China . Drama over Brexit also causes waves, as well as the signals of the US Federal Reserve that it will raise interest rates further, which may dampen the stock market and the economy.
How the Market From October to December, Trump fell silent.
But he unintentionally showed what a bad year 2018 was for US investors, in a tweet he posted last week, and celebrated that the Dow Jones Industrial Average hit 25,000.
As Voxs Aaron Rupar and Javier Zarracina point out in this chart, Trump tweeted the same milestone a year ago. This means that the Dow did not win a total score last year.
The month of January, however, was a much better month for the stock market, so Trump is almost certain about it during his address to the congress. He will probably ignore the rest.
Trump's trade wars are … ouch
When Trump arrived at the White House, he promised to upgrade free trade, which he blamed for losing well-paid manufacturing jobs. He definitely disturbed international trade, but his restrictions have done more harm than good.
Last year, America placed about $ 200 billion in tariffs on Chinese goods to make Chinese products more expensive, so Americans did not buy them. The government has also imposed hefty tariffs on all imported steels, angering other major US trading partners.
The intention was to balance the trade deficit with China and get China to buy more US goods, but as expected, China responded by tapping its own tariffs on American imports.
Trump's protectionist trade agenda hit America's farmers hardest, with the foreign country raising tens of billions of dollars in retaliatory tariffs on American agribusiness. China, Mexico and Canada have responded to Trump's taxes on imported steel, aluminum and electronic taxes with taxes on American soybeans, dairy products, pork, apples and potatoes and other American goods.
American farmers are desperate.
A total of 84 farms in the Upper Midwest filed for bankruptcy between July 2017 and June 2018, according to opposite the Minneapolis Star Tribune . This is more than double the number of submissions from Chapter 12 over the same period in 2013 and 2014 in Wisconsin, Minnesota, North Dakota, South Dakota and Montana.
Farms producing corn, soybeans, milk and beef suffered from low global demand and low prices, so economists and Trump's trade war compounded the problem even more.
The problem has gotten so bad that the Trump government has launched a US $ 12 billion relief package for American farmers to deal with retaliatory tariffs that foreign countries have imposed on their products. In September, the government reduced the security reviews for agriculture.
But even the security is not enough to keep the farms open. Bankers in the Midwest are worried that too many farmers are lagging behind in loan payments .
In short, Trump's strategy was to try to impede the Chinese economy at all costs, without neglecting the country's impact on the US economy. Now the trade imbalance between the two countries is worse.
In September, the US trade deficit against China reached a new high: $ 34.1 billion . This is an increase of by 13 percent over last year. Ford America's second-largest automotive company, said in August that the Trump tariffs cost the company $ 1 billion. The company now expects massive layoffs. On Monday, GM began the dismissal of 4,000 workers in Ohio, which was partly to blame for Trump's steel tariffs.
Trump's trade war could help the small US steel industry, but he hurt almost all other sectors the economy. And now the taxpayers are stuck with the bill of Trump's $ 12 billion bailout .
Employment opportunities are … pretty good
Employers created an average of 223,000 new jobs last year – far more than the 170,000 expected.
But most of all, Trump inherited a healthy economy and job growth from the Obama administration. During the last two terms of President Obama, the economy added 5 million jobs, compared to 4.8 million in the first two years of the Trump White House.
Employment figures show a promising trend: The US economy created more factory jobs in 2018 than any other year since 1997. The president will certainly announce – and he should – the 284,000 new jobs in the manufacturing industry – but that's hardly one A sign that US manufacturing is "coming back to life". Compare that to the 1.2 million factory workstations that have disappeared since the Great Recession began a decade ago and lost to the other 8 million factory workplaces.
However, general unemployment is no longer a problem. The US unemployment rate has been in a steady downward trend since the end of the Great Recession, dropping from 9.8 percent in January 2010 to 4.8 percent when Obama resigned. Unemployment reached a low of 3.7 percent in September under Trump, although it has gradually increased in recent months.
Trump will certainly try to ensure that the extremely low unemployment rate applies to African American workers.
In September, the black unemployment rate fell for the first time to 6 percent. This set a new record that illustrates progress to close a long-standing employment gap between black and black white workers. The black unemployment rate has since risen to 6.8 percent, but still low by historical standards.
As Voxs PR Lockhart points out, the falling unemployment rate lacks the context:
Trump's claims about the black unemployment rate are [19459005supporting. While it is undeniable that the rate has reached a new low, it is also true that black unemployment declined during the Obama administration and has steadily declined since in recent years .
In sum, the number of employees under Trump are great. But they were also great before taking office.
Paychecks are … blah
Slow income growth has been the most persistent problem of the US economy since the end of the recession around 2010. Wages have barely kept pace with the cost of living, even as the unemployment rate dropped and the economy expanded .
In January, private sector workers (excluding farm laborers) received an average increase of 3 cents an hour, an average hourly wage of $ 27.56. In the past 12 months, average hourly wages have risen by just 85 cents or 3.2 percent, and this does not even take inflation into account.
The average hourly wage increase of 3 cents in January suggests that the trend has not really shifted.
It's true that wages are rising faster than in a decade, as Trump is likely to point out, but that's just because the US economy collapsed ten years ago. Comparing current wage growth with wage growth from the recession is a fairly low standard.
And last year, prices rose, and payrolls continued to rise. Taking into account the inflation rate (based on the Consumer Price Index ), wages of workers rose only 1.3 percent last year. a miserable amount compared to the sky-high payouts to corporate CEOs.
Frustration over stagnant wages is also the main reason for the widespread strikes the country in places like California, Oklahoma and West Virginia. The congressional Republicans had promised that their massive corporate tax cuts would help the average worker, but the profits were small .
Do not expect Trump to raise that.