For cynics who are longtime season ticket holders to Washington’s political theater, the State of the Union Address is an annual eye-rolling and yawn-inducing performance of the Machiavellian master thespian who lends credence to the H.L. Mencken philosophy of politics being “the art and science of running the circus from the monkey cage.” While most executions are by the book, like your typical community rendition of a William Shakespeare play, other U.S. presidents are successful at tugging at our partisan heartstrings. President Donald Trump’s third national address in front of a divided chamber was nothing short of an award-winning performance that, in theory, would have united a fractured country. Pessimists would aver that every hour-long speech is filled with embellishments and equivocation, but the latest economic data may prove that Trump’s address was the exception to the rule.
Going Data Way
It was a great end to 2019 and a hot start to 2020 for the world’s largest economy, refusing to bow down to the analysts’ expectations of an exacerbated slowdown. Despite the recent MIT study that suggests a 70% likelihood of a recession by June, every metric contradicts comparable projections. So, what does the data say?
In January, the U.S. economy added 225,000 new jobs, up from an upwardly revised 147,000 in December. The market had anticipated a gain of 160,000. Also, average hourly earnings jumped 0.2% to $28.44, average weekly hours were unchanged at 34.3, and the labor force participation rate picked up 0.2% to 63.4%.
According to the Department of Commerce, productivity rose 1.7% last year, up from 1.3% in 2017 and 2018. This is the best annual showing since 2010, when the measurement advanced 3.4%. Since 1947, yearly productivity levels have averaged a little more than 2%. It also found that factory orders increased to an 18-month high of 1.8% in December.
The number of Americans filing for unemployment benefits slumped to a nine-month low for the week ending February 1. The Department of Labor reported that initial claims fell 15,000 to a seasonally adjusted 202,000, and the four-week moving average dipped 3,000 to 211,750, which are both the lowest readings since April 2019.
In January, U.S. companies hired 291,000 workers, up from the 199,000 gain in December, the ADP Research Institute reported. This is the most the private sector has hired in nearly five years, indicating that the labor market is still robust, even as business investment weakens.
The Institute for Supply Management (ISM) released its manufacturing and non-manufacturing business activity readings – anything above 50 indicates expansion. Manufacturing new orders surged from 47.6 in December to 52.0, while manufacturing purchasing managers’ index (PMI) advanced from 47.8 to 50.9. The non-manufacturing business activity reading came in at 50.9, while non-manufacturing new orders jumped to 55.5.
And, for the tariff men and women in your life, the annual trade deficit fell for the first time in six years.
While it is important to refrain from concentrating too much on month-over-month data, a key component of politics is short-term memory. Who plays the long game in politics anymore? With all these figures coming out around the same time as the SOTU, it is perfect timing for the president.
The Democrats’ Fall This Fall?
The Democrats are campaigning in New Hampshire and a string of states are participating in Super Tuesday. It is going to be difficult for the candidates to espouse anything more than just their disdain for President Trump. Instead, if they are going to target Trump on his bread and butter – the economy – the presidential candidates are going to need to copy the famous Chico Marx bit, “Who are you going to believe? Me or your own eyes?”
Indeed, for the last couple of years, the Democrats have dismissed the success of Trumponomics by interchangeably using one of two excuses: the expansion is because of former President Barack Obama or the economy is not doing well. You could say there is a grain of truth to the former, though the recovery under his watch was one of the worst in U.S. history. But to say that the economy is not performing at an impressive level is just a mendacious big steaming pile of malarkey.
Even the perception of the country is the highest it has been in more than 20 years.
Like every economy – good or bad – some gaping holes and hiccups need to be addressed. And, when the crash happens, it is going to be ugly and make the Great Depression and the last recession a cakewalk. That said, the boom phase of the business cycle will keep on going as long as the Federal Reserve remains accommodative with a distortive concoction of money-printing and low interest rates.
Should everything remain the same come November, the Democrat appearing on the debate stage against President Trump may need to pull a rabbit out of a hat. From a realpolitik perspective, it is going to be difficult to slam Trump on his record. The opposing party, as well as the fake news media, has used up all three Rs (Russia, racism, and recession) ad nauseam. What is left?
The quintessential political question of “are you better off now than you were four years ago?” is one of the best campaign tactics for a president who is presiding over a roaring economy. No matter how much you loathe the incumbent leader, it is hard to respond with, “No! My 401(k) is higher, my paycheck is bigger, and my energy costs are lower! I am worse off because the man is a racist and MSNBC told me he wants to exterminate Latinos!” Sure, Trump euphoria may disguise some of the underlying problems with the economy, but the numbers cannot tell a lie: Americans, for the most part, are better off than they were in 2016. Whether that was caused directly by Trumponomics is worth a conversation, but the creeping socialist Democratic platform can be tough medicine to sell and not for its efficacy, but for its inevitable consequences.
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