Trump’s economy isn’t as strong as jobs numbers suggest

For much of Donald Trump’s presidency, the economy’s historically low unemployment rate has coexisted with the president’s historically low approval rating. “The fact that we have the strongest economy in 50 years and he’s stuck at 43% approval ought to scream volumes for his language and his overreach,” one Republican pollster said.
That’s one explanation. There is another: The US economy, far from being the strongest in 50 years, is not nearly as strong as the numbers would suggest.
Unemployment may be low, but broader measures of labour market are still well below their peaks of the late 1990s. Workers are only considered unemployed if they are actively looking for a job, and in the wake of the Great Recession, millions of Americans gave up. That situation is changing, but slowly.
In particular, the prime-age employment to population ratio, which measures how many working-age adults have a job, stands at 80.4%. That’s only a slightly above its reading of 80.3% in January 2007, just before the financial crisis began. In April 2000, it was 81.9%.
And the current number is helped by the increasing participation of women in the labour market. For men, the prime-age employment ratio is 86.8%, 4.6 percentage points lower than its all-time high of 91.4%.
During current expansion, percentage of prime-age men on disability has fallen dramatically. That’s part of how job growth continued even with unemployment near historic lows. If expansion were more robust, then more men would be drawn into the labour force.
Stalled wage growth is another sign that labour market isn’t as tight as low unemployment numbers suggest. According to Atlanta Federal Reserve, wages are growing at roughly 3.7%, just above the rate in summer of 2016. This is further indication that employers are responding to low unemployment by recruiting workers from the sidelines rather than giving larger pay raises to existing workers. That helps the labour market continue to heal, but it doesn’t produce type of blockbuster economy that America saw in the late 1990s.
In relative terms, the US economy is in a better place than it has been at any time since early 2001. But that relative comparison masks the overall stagnation of the last 20 years. Trump’s “language and his overreach” may well be hurting him among many voters. But the economy is not helping him as much as it might have in the past.
—Bloomberg

Andy Mukherjee is a Bloomberg Opinion columnist covering industrial companies and financial services. He previously was a columnist for Reuters Breakingviews. He has also worked for the Straits Times, ET NOW and Bloomberg News