With all the noise after the election, it’s been a while since we checked in on the state of the economy. There’s a reason for that. Will the election results change what has been a slow but steady march to a strong economy? Will 2017 still be the year when we look around and realize that everything has changed?
It seems that, so far, it’s all still marching along. There is a good chance that jobs and general growth will indeed strengthen, making Trump look like a genius. Last Friday’s employment situation survey showed that it is still moving forward – and combined with a strong holiday season there is at least some reason to cheer as a dreary 2016 starts to fade into what promises to be a crazy 2017.
Let’s start with the jobs report. A gain of 178k jobs in November is not by any means at the high end of the recent range, which should be at or above 200k. But it was enough. The headline unemployment rate fell to 4.6%, a level which signals nearly full employment. The more important U6 “underemployment rate” fell to 9.3%, a level not seen since August of 2008. Employment is simply no longer the be-all and end-all of economic analysis.
The rosy predictions for a strong holiday shopping season appear to be coming true as well, showing a solid growth of 4.0% so far, beating the prediction of 3.6%. If anything, it’s stronger than anyone thought.
This is important for many reasons. Retail buying is both a strong indication of real consumer sentiment and a major employer. The two reports very much go hand in hand at this time of year, showing that retailers have enough confidence in the situation to hire and consumers have the confidence to buy. Anxiety about money issues, which seemed to reach a fever pitch in the mainstream media ahead of the election, are fading fast.
Of course, they were probably never real in the first place. If there’s one thing you can count on in economic reporting it’s that the mainstream is always a solid year behind what is actually going on.
Given this, are we ready to make predictions for 2017? There are growing signs of something like a trade or currency war developing. Trump’s rejection of the TPP and subsequent call to Taiwan demonstrates that we are due for a new policy towards China of some kind. The Obama administration’s two-pronged approach of engaging China as a potential friend while boxing them in among other Asian neighbors has been thoroughly rejected. How China responds to the changing landscape is anyone’s guess.
What we do know about China is that they don’t like surprises. They’ve had a few already. Seeing them brace for more will likely only cause them to insulate themselves more in both trade and finance. That is not likely to be a good thing.
A disturbance between the two largest economies in the world will be felt by everyone around the planet. Count on that.
Does this mean that our strength at the moment is going to fade? It’s likely that the promise we have going into 2017 will not be fully realized for a number of reasons. Rising wages have yet to make a large dent in the economic disparity in this nation, although that is the best possible remedy. There is reason to believe that we will not have much additional progress on this problem, either. It’s clearly the biggest barrier to our growth at this point and has to be addressed.
What we do know is that the US economy is coming into this period in relative strength, at least compared with any point in the last 16 years. What we do with that is anyone’s guess, but it is clear that the major opportunities are about to be squandered. Despite this, a coming worker shortage may be enough to create a feeling of good times all the same.
How are we doing economically? Rather well, all in all. There is still a long way to go, but compared to the hole we were in just a few years ago it looks pretty good. What exactly happens with this is still anyone’s guess all the same.