President Donald Trump inherited an economy with an admirable trajectory, thanks to solid job growth, low unemployment and sound economic fundamentals. However, in the last one year job gains and wage growth have been less steady. This has fueled talk on whether the US economy is bouncing back or losing steam two years after Donald Trump took over the reins of leadership from President Barack Obama. According to NBCNews.com, the US economy created 196,000 jobs in March 2019, beating the 175,000 forecast that analysts had projected.
This figure was a big leap from the dismal 33,000 jobs created in February. The worrying job statistics sent jitters across Wall Street, but the White House dismissed it as an outlier instigated by the 5-week long government shut down and a string of bad weather. The drop raised fears that the Federal Reserve could step in to rein in the interest rate as it did in 2018 when it announced an unprecedented four rate adjustments. President Trump was among those who decried the adjustments. The 3.8% unemployment rate recorded in March was the lowest in 50 years.
According to the Bureau of Labor Statistics (BLS), the wages took cue with a 1.14% rise, which was an impressive 3.2% year on year growth. It will be remembered that the US economy created 225,000 jobs monthly in 2018. Economists expect the economy to ease somewhat this year as the President’s $1.5 trillion fiscal stimulus package doubles down. The tweaking of the economy follows the tepid growth being witnessed around the world. Fears have also been raised regarding continued trade spat between two global economic powerhouses, the US and China.
In spite of the uncertainty, there is a reason to believe Trump has a lot to with the economic vibes reverberating across the country. According to a USA Today report published on October 2018, economic growth under Trump averaged 2.9% at the time. The Trump’s economy has also added 3.6 million jobs and pushed the unemployment rate down to 3.9% from 4.8% when he took over as president. It should be noted that people of color, including Latinos and African Americans are witnessing some of the lowest unemployment rates in decades.
Small Business Owners
Lots of optimism is also coming from small business owners. Another key indicator of fair economy is the 3% growth in real disposable income that is up from a flat rate under Obama’s presidency. In spite of the prevailing positive outlook, some analysts say it is too soon to make conclusive proclamations regarding Trump’s initiatives in the wake of hot button issues like taxes and regulatory cuts. There is also nervousness as to whether the growth will be sustained over the coming years. Optimists are pointing to growth in government spending as a sign of a strong future.
The government spending rose to 7% over the 2017 figures, which shows the GDP is growing and might maintain the momentum. On the downside, the deficit is expected to hit $1 trillion and the national debt, a staggering $30 trillion by 2025. Matters might come to head if the debt begins to pull down the economy. The other fears come from Trump’s tough immigration stance and trade policies. As workers, employers and poly makers ponder over the future, there are a few fundamental questions that need to be asked to gauge the health of the economy.
According to Forbes magazine, stakeholders need to question how much growth the tax reforms will generate and what Trump’s trade agreements like NAFTA portend for the economy. The answers to these questions will go a long way to impact economic growth and the direction of the stock market indices. The magazine lists the key indicators for assessing the US economy as:
• DOW 30 and S&P 500 Index
• GDP growth figures
• Monthly and annual jobs growth
• Manufacturing jobs growth and future outlook
• Unemployment rate
• Growth in hourly wages
• Federal deficit
• Trade deficit
Reading Economic Indicators
The performance of key economic indicators can make or break investor confidence and investment prospects. Rusty Tweed has spoken and written many articles about market indicators. The highly regarded economist recently commented about the housing market, specifically how the rising market can affect the sector the stock market.
His assertions centered on financial institutions lending and interest rates; the imbalance in the housing supply and demand and the impact of higher down payment and its repercussions on real estate investors. Tweed sees an eerie correlation between investment in the housing sector and stock market. For instance, investors are often drawn to a rising market, but fall back on their positions when things begin to look down.