By Rick Manning
As we embark upon 2020, with the third year of Donald Trump’s presidency in the can, the American economy is as good as it has been in at least 70 years, and after what many economists predicted would be a mid-year downturn, 2019 has turned into a boon year for all Americans.
Three economic drivers over the past year will be examined, the labor market, American consumer spending power and the state of international trade as the first two directly reflect the economic situation over the year and the latter sets the stage for the economic environment which our nation will compete in for the future.
The Labor Front by the numbers
The unemployment is at a 50-year low of 3.5 percent. The January, 2019 unemployment rate was 4.0 percent, meaning the unemployment rate has continued dropping even as some economists claimed that the country was at full employment.
7.3 million jobs were available in Oct. 2019 according to the Dec. 20 released report by the Bureau of Labor Statistics.
5.8 million unemployed Americans are in the workforce seeking job. In January, 2019, there were 6.535 million unemployed, meaning that there are approximately 720,000 fewer Americans unemployed at the end of 2019, than there were at the beginning of the year.
Note that there are 1.5 million more jobs available then people looking for jobs, and while the skills required and location of the available jobs and workers don’t match evenly, the 1.5 million
1.4 million more Americans are employed in Nov. 2019, than were employed in January 2019.
1.2 million more Americans entered the labor force between Jan. 2019 and Nov. 2019. This means that more people got jobs in 2019 than entered the workforce.
Why these matter?
Many economic doomsayers were predicting that demand for workers would diminish as the economy inevitably slowed, yet over the course of 2019, we have seen the unemployment rate dive to the lowest rates since the Vietnam War was raging and Neil Armstrong walked on the moon.
Fewer Americans are unemployed than at any time since Dec. 2000, when there were 21 million fewer people in the workforce.
In practical terms, the number and percentage of people who are unemployed reflects the economic anxiety in the country. When neighbors and family members are unemployed and struggling to find work, those who have jobs worry that they too may be in jeopardy of financial hardship. Conversely, when everyone you know has a job and there are help wanted signs up all over town, you feel secure not only in your job but in the idea that you can risk quitting your job to get a better one if you want.
This is the liberating effect of the current economic situation, and the fact that the number of unemployed Americans dropped by 720,000 since Jan. 2019 tells a story of historic levels of job security as we 2020 gets underway.
What happened to wages and spending power in 2019?
The Commerce Department’s Bureau of Economic Analysis released personal disposable income information for the third quarter of 2019 which ended on Sept. 30. Since Sept. 30, 2018, Americans’ disposable, after tax, income has gone up by $1,811 to $50,184.
The Labor Department’s Bureau of Labor Statistics reports that average hourly earnings continues to grow at 3.1 percent with real earnings, which account for the bite that inflation takes out of a paycheck, continue at 1.1 percent in November. The net effect is that wage increases are outpacing inflation allowing American workers to have more real disposable income at the end of November than they had in Jan. 2019.
The old adage that the harder I work, the further I get behind was driven by high inflation rates combined with minimal wage growth, so the only way to even keep even was to work longer hours to offset the hidden tax bite of higher prices at the grocery store, gas pump and elsewhere. This was turned on its head in 2019 as on average, people earned more money in November than they did in January, and the increased earnings were only partially offset by a stable, low inflation rate.
While the real raises are not astronomical, they are a welcome respite from the hamster wheel feeling that has afflicted Americans for a generation, where no matter how hard you run, at best, you end up in the same place.
2019 has been dominated by trade talk, has Trump’s focus on trade mattered?
President Donald Trump’s legacy will be determined by his trade agenda. The President has not been shy rhetorically on trade, but 2019 marked major progress in not just undoing 75 years of outdated policy, but in creating 21st century trade deals which put America’s interests first.
Negotiating a trade deal with Japan has been at the top of many administrations’ agenda, President Trump announced the first phase of an agreement with the Japanese had been agreed to in October, which includes increased U.S. farm sales to Japan at low to no tariff levels, and a digital section which should increase U.S. exports of digital products to Japan.
The U.S. Trade Representative office notes that the digital section of the first stage Japanese agreement, “meets the gold standard on digital trade rules set by the USMCA.”
And while the House of Representatives was playing smoke and mirror games on impeachment, they finally passed the U.S.-Mexico-Canada (USMCA) trade agreement replacing the North America Free Trade Agreement (NAFTA). USMCA not only has digital protections in it, but creates both an intellectual property barrier and transparency rules against currency manipulation which has the effect of driving the costs of U.S. produced goods higher vis-à-vis foreign made goods.
The intellectual property protection provisions of USMCA are one of the foundational changes that is the benchmark of the Trump trade agenda, and can be expected to be replicated and even strengthened in future negotiations with Japan, South Korea, Australia, Chile, the United Kingdom, EU, India and Brazil.
The goal is simple. Recognizing intellectual property rights is a fundamental aspect of capitalism, after all, if a person doesn’t own the product of his/her own mind than any other case for private property ownership pales. By creating a IP trade wall around China, President Trump will force the Chinese to choose whether to accept private property rights in their country, and abandon communism, or return to living in economic isolation behind their “Great” wall while the rest of the world’s economies thrive.
The much talked about China trade deal is an initial foray into this decision, but the tariff increases of 2019 merely set the stage for future discussions as the Chinese government is unlikely to follow the agreement to any great degree.
However, as Brexit and other world events unfold, the Trump trade plan will take center stage and the finely honed globalist trade system will be replaced by a mutually agreeable one between countries determined to meet their citizen’s interests. However, the President must win a second term to finish this job and create a capitalist trade wall which resets the global trading partnerships for the next fifty years.
A great American jobs economy makes reconfiguring the world’s trade economy a possibility as the Trump team negotiates from a position of strength, and 2019 will be marked as the year when the Trump promises became the world’s reality.
Only a non-politician who builds structures where no one else dreamed they might be could tackle and remake the global economy to benefit American citizens. President Trump’s entire presidency will be judged for generations on whether he succeeds or fails in making this vision of fair and reciprocal trade a reality.
Rick Manning is the President of Americans for Limited Government.