During the 2016 presidential campaign, Donald Trump pledged to grow the economy at a sustained rate of 4 percent with tax cuts, better trade deals and more manufacturing jobs. Economists said he was dreaming. So far, they’re right.
This week, the Commerce Department reported that the economy grew by 2.2 percent in the first quarter of 2018. That was revised down from an estimate of 2.3 percent because of a slowdown in consumer and business spending.
Consumer spending, which comprises 70 percent of economic growth, slowed to an annual growth rate of just 1 percent. It was the worst result in five years. Economists expected the slowdown because of high spending in the fourth quarter of 2017 and predict a rebound next quarter.
How is the Trump economy doing?
The economy hasn’t hit 4 percent growth for a single quarter of Trump’s presidency. The highest was 3.3 percent in third quarter 2017. (Sometime after taking office, Trump downsized his vision to 3 percent growth.)
On Memorial Day, Trump tweeted that the U.S. was experiencing the “best economy in decades.” Although unemployment is at a 17-year low, wage growth continues to lag. Trump and the GOP pledged that their $1.7 trillion tax-cut plan would improve things for the American worker, so far there’s little sign of that happening. The Economic Policy Institute says that wage growth remains “low and flat,” growing 2.6 percent year over year. That’s only slightly ahead of the Fed’s inflation target of 2 percent.
Workers need to see wage gains of 3.5 to 4 percent to truly feel the effects of a growing economy, the EPI says. Wage growth is usually at that level when the unemployment rate is as low as it is now.
The Federal Reserve has predicted the economy will grow by 2.7 percent in 2018. But Trump’s recent moves on trade threaten to reverse progress. Against the advice of economists, labor experts and some prominent Republicans, Trump announced this week that he would levy tariffs on steel imported from Canada and the EU. Economists estimate more than 146,000 Americans will lose their jobs as a result. Trump’s threatened trade war with China would result in even higher U.S. job losses, economists say.