Economy: As the media have once again reported, the economy “surprisingly” grew at a 3% pace in the third quarter, despite the impact of three major hurricanes. Has the U.S. economy finally left its 2% growth rut?
While presidents aren’t the sole determinants of economic growth, their policies do matter. As such, President Trump seems to be steering the economy onto a faster growth track than during the slow-growth Obama years.
GDP growth of 3.1% in the second quarter and 3% in the third quarter is the fastest since 2014’s two-quarter spurt of 4.6% and 5.2%. But this year’s third quarter was even better than it looked, since most economists had marked down their estimates to just above 1% or so due to the impact of Hurricanes Harvey and Irma on the economy.
Those who keep expecting a major slowdown should look at what’s really going on in the economy.
The IBD/TIPP Economic Optimism Index, the Conference Board’s Consumer Confidence Index, the National Association of Manufacturers survey and the Institute for Supply Management all report stronger optimism and rising factory output. Overall optimism hasn’t been this high in over a decade.
The current unemployment rate at 4.2% is the lowest since before the financial crisis. Total employment has jumped more than 2.2 million since Trump entered office. Even the broadest U.S. unemployment measure, so-called U6, now stands at 8.3% — its lowest since June of 2007.
Meanwhile, all major stock market indexes are up strongly since Trump’s unexpected win last November, with the Dow Jones industrial average breaching 23,000 for the first time this month. The stock market, as we’ve said before, is a reliable if imperfect predictor of future economic activity. Its message today is unequivocal: Expect more of the same.
So why is the economy suddenly growing briskly?
Trump has embarked on one of the most sweeping deregulation campaigns in recent presidential history. He got rid of President Obama’s disastrous “Clean Power Plan,” and walked away from the growth-killing Paris Climate Accord. He’s now removing restrictions on federal energy lands. Along with the fracking revolution, this will make the U.S. a global energy powerhouse once again.
The result of all this deregulation is that tens of billions of dollars of dead weight have been lifted from the economy’s shoulders, virtually overnight. With one or two exceptions, Trump’s nine months in office have been marked by pro-growth policies that will increase investment, boost jobs and lead to higher economic growth.
And it ain’t over yet. Congress’ new budget includes a tax reform package that will lower tax rates for corporations, entrepreneurs and the middle class, bringing an estimated $1.5 trillion in tax relief. That will encourage more companies to invest in plants, equipment and training, and to hire more workers. Get ready: A virtuous cycle of growth is about to begin.
Can anything stop it? Sure. If Congress fails to pass tax reform, or the Fed overshoots and raises rates too many times, the economy could hit the rocks. Still, back in July, we asked: “Is Trump’s goal of 3% growth realistic?” Our answer hasn’t changed: “You bet it is.”
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