CAN TRUMP DELIVER 4% GROWTH?

MANY ECONOMISTS CONSIDER IT A LONG SHOT, WITH 2% MORE LIKELY

Can President Trump give the aging U. S. recovery a B- 12 shot? He has promised 3% to 4% economic growth over the long run, compared with the modest 2% average throughout the 8- year- old recovery.

But economists think he will be hard- pressed to deliver because of some inherent shackles on the economy. They include a labor market already at full employment, an aging population and sluggish business productivity. Trump faces significant hurdles pushing his economic blueprint through a deficit- wary Congress. If he does, that likely would blow up the deficit, creating its own drag on the economy.

“There’s no way to connect the dots between his policies and that level of growth,” says Mark Zandi, chief economist of Moody’s Analytics.

Don’t grade Trump yet. The government reported last week the economy grew at an anemic 0.7% pace in the first three months of the year, but Trump took office about a third of the way through the period, and his policies have yet to be implemented.

The challenge for Trump in moving the needle on hiring is this: The current 4.5% unemployment rate means there are relatively few jobless Americans actively looking for work. As a result, monthly payroll growth this year is expected to slow to an average of 160,000, from 180,000 last year and 226,000 in 2015. The labor force, which includes people who are working and those who are looking for jobs, is also expanding more slowly because an average 10,000 Baby Boomers are retiring each day, says Carl Tannenbaum, chief economist of Northern Trust. Immigrants, he says, could pick up the slack but Trump has vowed to restrict immigration.

Boosting workers’ output significantly also will be a tall order. Growth in productivity has been feeble for years. Businesses have been hesitant to invest in new tech that could raise each worker’s output, partly because de- mand from customers has been tepid. Also, many have seen little reason to buy machines to replace workers when slow wage growth has made those workers relatively inexpensive.

Fewer people have moved around the country to find jobs that better tap their skills since many owe more on their mortgages than their homes are worth after the housing crash. And the recession discouraged risk- taking start- ups, which tend to be more productive than established companies.

Now that wages are rising more rapidly, fewer homeowners are underwater and business confidence is booming, Zandi expects productivity growth to accelerate somewhat. But at best, he says, that likely will simply offset the slowdown in employment gains, keeping economic growth treading water at just above 2%.

“There’s no way to connect the dots between his policies and that level of growth.” Mark Zandi, chief economist of Moody’s Analytics

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