How we’ll know if Trump is making America Great Again

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US President-elect Donald Trump gestures before being sworn in as President on January 20, 2017 at the US Capitol in Washington, DC.AFP/Mark Ralston

Donald Trump’s “Make America Great Again” campaign refrain will become the driving vision of the federal government when the billionaire developer takes the oath of office as president. But how will we know just how great America is becoming?

Beyond Gross Domestic Product (GDP) growth and better-known figures like wages and the trade deficit, other metrics worth watching include the pace of business creation and the share of prime-age workers in the labour force. Incorporating the forecasts of Bloomberg Intelligence Chief U.S. Economist Carl Riccadonna, we’ve divided the indicators into three groups: those most likely to improve, the ones that will stay about the same and figures that will probably go in the wrong direction.
These indicators are likely to go in the wrong direction, despite policy shifts that come out of Congress and his administration.

Sorry, factory jobs probably aren’t coming back. Trump generated some of his strongest support in the Rust Belt and other areas that had been hit hardest by the decline in U.S. factories in recent decades. While manufacturing jobs have crept back up since the recession, the president-elect has pledged to do more. But positions that have been automated or moved overseas are unlikely to return. And in manufacturing, workers need more skills than before, so training programs and STEM education would need to ramp up. What’s more, if the economy continues to improve and the dollar strengthens, that will make American exports more expensive, adding to headwinds for U.S. factories.
Reducing the Trade Deficit Is Going to Be Tough. Trump has repeatedly labelled the $500 billion trade deficit a sign that China and Mexico have unfairly taken jobs away from American workers. He’s vowed to narrow that gap, threatening to impose tariffs that would make imports more expensive — which would also hurt corporate profits, trigger inflation and slow down U.S. growth. That’s on top of likely court challenges and retaliation from other nations, a so-called trade war that could cost Americans millions of jobs. But consider another scenario: Trump’s trade policy proves benign and the U.S. economy continues to improve. The dollar keeps strengthening. That will make exports more expensive and imports even cheaper, probably widening the trade deficit.

Budget Gap Turning Into a Surplus? Fuhgeddaboutit Running up Uncle Sam’s tab has become an entrenched American practice, and an aging population and heavy defence spending have made it near-impossible for presidents to substantially trim the bills. While the deficit had been steadily narrowing since the recession ended, it increased in fiscal 2016 to 3.1 percent of GDP. With the once self-proclaimed “king of debt” pledging big-league tax cuts and infrastructure investment, signs point to a widening gap.

Economic Growth Will Get a Boost, but not enough to satisfy Trump. Getting growth to ramp up to Trump’s goal of at least three percent to four percent won’t be easy, yet it’s not entirely unattainable. While third-quarter growth was 3.5 percent, economists aren’t yet convinced it will stay there in coming years. Expansion has been running at a shade above two percent since the recession ended in 2009 and hasn’t exceeded three percent for a full year since 2005. Boosting Gross Domestic Product (GDP) gains will depend on how much of a stimulus Trump will provide and how soon, along with his policies such as easing regulations. His threats on trade could be a setback, too.

Number of Americans Living in Poverty Won’t Go Down by Much. Seven years of economic growth helped reduce the proportion of Americans in poverty, after peaking in 2010 following the financial crisis. Yet the rate of 13.5 percent in 2015 remains above the 11.3 percent reached in 2000 — though it’s close to the average over the past 40 years. An improving economy is one factor that can further push that down. How much it falls will be a key measure of whether Trump’s policies lift boats across the income spectrum — or contribute to widening inequality. One issue is that poverty over the last 15 years has become more concentrated in individual neighbourhoods, rather than spreading evenly, making barriers even higher to moving up the economic ladder, according to a Brookings Institution study.

Pace of Business Starts Could Get a Small Boost. The establishment of new businesses is a vital source of growth for the economy and will serve as another gauge of Trump’s economic, tax and regulatory policies. It wasn’t until the third quarter of 2010, more than a year into the current expansion, that births of new companies exceeded the number of those shutting their doors for good. The pace has picked up but remains slower than in the years before the last recession. With small companies increasingly complaining about government red tape, Trump’s plan to reduce regulatory burdens could sow the seeds for more business formation but don’t look for a gangbusters pace.

Full-Time Work Is Likely to Stay Elusive for Part-Timers. Trump has highlighted the number of part-time workers in the U.S. economy, saying “far too many people” are working in positions for which they are overqualified and underpaid. While the proportion of full-time workers in the labour force remains below its pre-recession high, it’s made up most of the ground lost during the downturn. But it hasn’t budged much in the last two years, even as the job market has gotten tighter. Some economists point to the gig economy as the driving force (pun intended) behind part-timers. Others see a broader shift in the labour market that’s left many workers stuck with shorter hours, lower wages and weaker benefits.

Corporate America and Small Businesses Will Start Spending Again For the last two years, American companies have scaled back. They’ve delayed or even shelved plans to spend on equipment and factories for a host of reasons, including modest economic growth, a collapse in the energy industry and weak export markets. Business fixed investment has climbed an average of 4.3 percent during the current expansion, slower than the 6.3 percent in the five years leading up to the 2007-2009 recession. Trump’s focus on reducing regulations and cutting taxes has rekindled spirits across the business community, a positive backdrop for more investment. The recovery in the oil patch will go a long way as well.

Americans’ Pay Raises Are About to Get Bigger and Better Fatter pay checks have come very late to the expansion party, feeding a debate over how much faster wages can grow, and what could help. Average hourly earnings climbed 2.9 percent from a year earlier, up from the 2.1 percent average since the end of the last downturn in June 2009. Pay could pick up even more, with the jobless rate near a nine-year low and openings near a record high. That’s increasingly forcing employers to give raises to attract and retain staff. Assuming Trump’s policies juice growth, they’re going to have to pay even more, though the rise could be mitigated should labor-force dropouts return to work.

Prime Time for Prime-Age Workers Heading Back to Jobs Labour-force participation by prime-age workers, which removes the intense effects of retiring baby boomers, will be a tell-tale sign as to whether full employment has really been achieved. The Trump team has highlighted this measure in its criticism of the job market’s performance under Obama. It’s shown a bit of a revival since the end of 2015, even if still down since a four-decade climb peaked in the 1990s. Faster wage gains will help bring back workforce dropouts, but even within this age cohort, Trump faces long-term hurdles. More Americans are in school or caring for children or elderly relatives. Others are disabled or suffering from drug addiction. Trump has also nodded toward policies on child-care and family leave that might help women re-join the workforce.

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