NEW YORK — On the campaign trail, Donald Trump repeatedly described the U.S. economy as a hollowed-out disaster of high unemployment and stagnant growth.
But the latest numbers show the president-elect will in fact inherit a fairly robust economy with the lowest jobless rate in nearly a decade, record home and stock prices and a healthy growth rate.
It’s a radically different position from the one President-elect Barack Obama found himself in 2008 with markets crashing, the financial crisis spinning out of control and joblessness headed toward 10 percent.
Trump instead will take office with an economy near full employment and wages and spending rising. The economy is in such strong shape that the Federal Reserve is likely to raise interest rates again later this month to try and cool things off.
“President-elect Trump will inherit a much stronger economy than his predecessor did,” Standard & Poor’s economists said this week. “Largely forgotten in all the rhetoric and fanfare of the campaign is the fact that data show the world’s largest economy continuing to expand at a reasonably good pace.”
The recent gains are now allowing outgoing Obama officials to take something of a victory lap as they head out the door.
“I’ve been here eight years and it is really exciting to see that number, 4.6 percent. I didn’t think I’d ever see the unemployment rate that low,” Jason Furman, chairman of Obama’s Council of Economic Advisers, told CNBC on Friday. “It’s fallen more than half. It’s because we’ve just created these steady jobs, month after month, 15.6 million of them in the private sector.”
The latest positive news came Friday, with the government reporting a gain of 178,000 jobs in November and the jobless rate falling to 4.6 percent, the lowest level since August 2007.
Some of the drop came from a decline in the size of the labor force. But the trend in the labor force has been up. Wages ticked down slightly in November after a large gain in October. But take-home pay is now rising at a solid annual rate of 2.5 percent.
And other major economic indicators are rising fast.
U.S. house prices this week hit new record highs, finally erasing the steep declines following the financial crisis. The Dow Jones Industrial Average on Thursday closed at another record high, hitting 19,191. The Nasdaq and Standard & Poor’s 500 also hit records last month. Consumer spending and incomes are both rising at a solid pace.
“Between surging consumer confidence levels, a booming stock market and home prices back above pre-recession levels, a number of boxes indicative of a healthy economy are being checked off,” Bankrate.com senior economist Mark Hamrick said in a note on Friday.
Put together, the picture is radically different than the one painted by Trump on the campaign trail, where he railed repeatedly against the Obama economy. “We have no growth right now,” Trump said in August. “The country’s a disaster.”
On the campaign trail in February he suggested the government’s numbers were faked.
“Don’t believe those phony numbers when you hear 4.9 and 5 percent unemployment,” Trump said in his victory speech after the New Hampshire primary. “The number’s probably 28, 29, as high as 35. In fact, I even heard recently 42 percent.”
No figures ever backed up Trump’s claims of soaring joblessness and no growth. The economy grew at a 3.2 percent pace in the third quarter. It could slow down again in the final quarter of the year. But the pace of job growth remains quick enough to keep the jobless rate falling and wages rising as employers compete for a smaller share of available workers.
“The labor market is pretty healthy and it’s clearly growing enough to stabilize the jobless rate,” said Jim O’Sullivan of High Frequency Economics. “In fact it’s booming relative to our underlying demographics right now.”
Despite the strong overall numbers, the economy is far from perfect and Trump and other Republicans continue to focus on pockets of weakness — including in manufacturing states in the Rust Belt that delivered the GOP nominee his stunning Electoral College victory last month despite losing the popular vote by over 2 million.
The November jobs report showed manufacturing employment declining for the fourth month in a row. Workers without at least a high school diploma continue to suffer far higher jobless rates while the unemployment rate for those with a college degree or higher is just 2.3 percent. Productivity gains remain low and the U.S. corporate tax code continues to discourage companies from expanding domestically.
Trump went to Indiana on Thursday to tout a deal with Carrier to keep around 1,000 jobs in the state that were slated to move to Mexico. The deal reportedly offered $7 million in tax breaks to Carrier and the company still plans to move more than 1,000 jobs south of the border.
Still, Republicans say Trump’s plans for lower tax rates and fewer regulations will unleash even faster and more widespread growth and keep more jobs in the U.S. “We need to create more opportunities for all Americans,” House Ways and Means Committee Chairman Kevin Brady said in a statement after the jobs report. “For eight years, the American people have watched Washington focus on everything but jobs — and that’s about to change. I’m very pleased that the incoming Trump administration is already making it clear that job creation and economic growth are their top priorities.”
The question for economists, however, is whether Trump’s recipe is actually what the economy needs. While there is widespread agreement that the U.S. corporate tax code is broken and in need of a fix, there is far less consensus around the kind of massive individual rate cuts Trump is proposing — not to mention his trillion-dollar infrastructure package and calls for a boost in defense spending — that could increase the long-term debt and deficit.
“This is an economy that’s pretty close to full employment. It would have been great to have even more fiscal stimulus eight years ago but I don’t know that’s the case now,” said Luke Bartholomew, Fixed Income Investment Manager at Aberdeen Asset Management. “There’s clearly a case for infrastructure spending and taking advantage of rates that are this low. But big individual rate cuts especially for high earners to unleash this kind of supply side magic that they think works, I don’t think the evidence is very strong for that.”
And Democrats are using the strong economic numbers to argue for keeping Obama’s approach to the economy in place rather than switching to big across-the-board tax cuts. “Today’s jobs numbers show just how far we have come in the past eight years. When President Obama took office in 2009, we were losing 800,000 jobs every month,” Rep. Carolyn Maloney (D-N.Y.), the ranking member of the Joint Economic Committee, said on Friday. “I hope that the Trump administration and congressional Republicans will not undermine the great progress we have made by taking us back to the policies that led to the Great Recession in the first place.”
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