Who gets credit for economy?
Analysts: President has benefited from what Obama left
WASHINGTON — President Donald Trump often congratulates himself for the healthy state of the U.S. economy, with its steady growth, low unemployment, busier factories and confident consumers.
But in the year since Trump’s inauguration, most analysts tend to agree the economy remains essentially the same sturdy one he inherited from Barack Obama.
Growth has picked up, but it’s not yet clear if it can sustain a faster expansion. Hiring and wage growth slowed slightly from Obama’s last year in office.
Consumers and businesses are much more optimistic, but their spending has yet to move meaningfully higher.
“I don’t see any noticeable break over the past year,” said Michael Strain, an economist at the conservative American Enterprise Institute. “We tend to overstate the degree to which the president has the ability to control the economy.”
The U.S. public appears to have a similar view, according to a recent Quinnipiac University poll. It found that two-thirds of American voters say the economy is “excellent” or “good,” the highest since the poll started asking about the economy in 2001.
Yet 49 percent of respondents credited Obama for the economy’s health, compared with 40 percent who credited Trump.
Trump’s successful push for income and corporate tax cuts and his steps to loosen regulations have helped drive a surging stock market rally fueled by the prospect of higher corporate profits. And most economists are optimistic that growth will continue at a solid pace this year.
“We have created more than 2 million new jobs since the election,” Trump said recently in Nashville, Tenn.
“Economic growth has surged past 3 percent, something that wasn’t supposed to happen for a long time. We’re way ahead of schedule. Unemployment is at a 17-year low.”
Those trends aren’t very different from what came before. Employers added more jobs in Obama’s last year in office — 2.2 million in 2016 — and nearly 3 million in 2014.
Economic growth did top 3 percent at an annual rate during the second and third quarters of 2017. But it had surged above 4 percent in the second and third quarters of 2014.
The unemployment rate fell from 4.8 percent when Trump took office to 4.1 percent now.
It fell by the same amount or more in 2013, 2014 and 2015.
When the government reports growth for the October-December quarter this week, it may show the economy expanded at a 3 percent or higher annual rate for the third straight quarter. That could lift growth in 2017 to the fastest pace since it reached 2.9 percent in 2015.
Some of that growth may reflect greater spending by consumers or businesses in anticipation of tax cuts.
But most economists expect it will take time for Trump’s deregulatory and tax policies to have their full effect.
There’s no question that businesses and consumers are more optimistic.
The Conference Board’s consumer confidence index jumped to a 17-year high in November before slipping a bit last month.
That hasn’t yet resulted in more Americans opening their wallets, though. Spending growth in the first nine months of 2017 was slightly slower than in the previous year.
Some economists are growing skeptical of consumer sentiment surveys because the responses seem skewed by political leanings. People in counties that voted for Trump reported a much brighter outlook on the economy after the election than did people in counties that backed Hillary Clinton, according to a report by the Federal Reserve Bank of New York.
People in Trump-voting counties were more likely just after the election to say their financial situation had improved in the last year, the New York Fed said, long before any of Trump’s policies were in place.
But the change in sentiment didn’t produce changes in consumer spending, the report said.
“It does somewhat undermine the message from the confidence surveys,” said Jim O’Sullivan, chief U.S. economist at High Frequency Economics.
American companies have stepped up their investments in machinery, software, and office towers this year after sluggish spending in 2015 and 2016. Such spending increased about 6.2 percent at an annual rate in the first nine months of the year.
Still, business investment topped 9 percent in the first three quarters of 2014.
In both cases, rising oil prices played an outsized role in spurring more corporate spending. When oil prices increase, drilling firms tend to buy more steel pipe and other goods that are used in drilling rigs.
Dean Baker, an economist at the Center for Economic and Policy Research, points out that when mining and oil and gas are excluded, investment spending has increased an anemic 3.3 percent this year.
Many economists expect growth to perk up in 2018, with the impact of tax cuts and the Trump administration’s deregulatory efforts spurring corporate investment and consumer spending.
So far, 15 regulations put in place by the Obama administration have been overturned by Congress. The administration has put dozens of others on hold.
“There’s just generally the feeling that there’s more pro-growth policy coming from Washington,” O’Sullivan said.
O’Sullivan forecasts that growth will reach 2.8 percent for all of this year, roughly in line with other projections.
“2017 was largely an Obama economy,” Mark Zandi, chief economist at Moody’s Analytics, said. “But going forward it will definitely be a Trump economy.”