Economy picks up in anticipation of Trump’s policies
Perceptions matter. People make decisions, even lifealtering decisions, based on what they perceive as likely to happen. To the extent that public policy affects such decisions, the perception of likely policy change can affect behavior even before the change happens — even if it never does.
Something like that seems to be happening in America — and around the world. In the two months since Donald Trump was inaugurated as president, people have been making decisions based on perceptions of how he may change the country’s direction.
Take the economy. The numbers in the jobs report for February, Trump’s first full month in office, showing an increase of 235,000 jobs, are not wildly out of line with some monthly reports in recent years.
In contrast with the years of the Obama stimulus program, when the bulk of new jobs came in the public sector, it appears that the increase here is in the private sector. Moody’s Analytics says there were 298,000 new private-sector jobs in February, far more than the 189,000 it expected.
Construction jobs were up 58,000. Private educational services jobs were up 29,000. And manufacturing jobs were up 28,000. This suggests that lots of employers, small as well as large, are taking the plunge and creating new jobs.
Can I prove that they’re doing so because of perceptions that regulations and taxes will be decreased by the Trump administration? No, and I’m not sure any economist’s statistical model could, either. But it sure looks as if that’s what’s happening.
Big players in the financial markets seem to think so. Federal Reserve Chairwoman Janet Yellen suggested the Fed will raise interest rates twice more this year after doing so twice in the past three months. That’s a significant shift from her longstanding reluctance to increase rates at all for fear of dampening the economy.
JPMorgan Chase CEO Jamie Dimon said March 10 that Trump’s agenda of cutting corporate taxes, building infrastructure and rolling back regulations has unleashed the “animal spirits” — economist John Maynard Keynes’ phrase — of business people. “Even if he gets (just) part of it done,” Dimon, a Democrat and Hillary Clinton contributor, told Bloomberg, “it’ll be good for growth.”
Does the unusual speed with which Paul Ryan is leading the House to vote on the first of three promised initiatives to repeal and replace Obamacare suggest that he and Trump are trying to strengthen the perception that the privatesector economy will boom? Given the significant risk of political damage and policy bollix, it certainly looks as if the answer is yes.
People at the high end of the income spectrum — a category that obviously includes the bulk of job creators — are not the only ones making decisions in response to perceptions. So, it appears, are undocumented immigrants and people deciding whether to cross the border illegally.
U.S. Customs and Border Protection reported that apprehensions of people who crossed the southern border illegally in February were down 39 percent from January and down 36 percent from February 2016. They were also lower than the border crossings in December — traditionally by far the lowest month — in the years 2016, 2015, 2014, 2013 and 2012.
That’s a startling drop. And it’s one that seems likely to reverberate far beyond Mexico, seeing as most people who have crossed the border illegally since the Great Recession have come from Central America.
Under Obama administration policy, Central American children (or adults claiming to be younger than 18) seeking asylum were mostly allowed to remain in the United States, effectively free of border enforcement.
Trump’s executive orders on immigration law enforcement have created the perception, probably accurately, that that policy has changed.
Of course, perceptions can change. Perceptions of an incoming president’s likely policies can shape the behavior of many; perceptions of an outgoing president’s policies, not so much.
As a president’s term goes on, perceptions of a president’s policies are replaced by the realities of actual policies, and perceptions of likely effects are modified by conditions on the ground. The wisdom of crowds is not always spot on.
But it’s sometimes superior to the wisdom of experts. Most experts predicted that Britain’s vote for Brexit and America’s for Trump would crater those countries’ respective economies. That hasn’t happened yet — and most people seem to perceive it won’t.