As President Donald Trump and the Democratic presidential nominee Joe Biden trade boasts and barbs over the former and the current state of the economy, analysts have zeroed in on Trump’s claims of record-high job creation — which comes saddled with significant caveats.
“The job market is still a shadow of what it was prior to the pandemic,” Mark Zandi, chief economist at Moody’s Analytics, said.
The White House bragged about the jobless rate falling from a peak of 14.7 percent in April to 8.4 percent in August, but that decrease obscures the sobering deficit that still remains of more than 11 million jobs, compared to the pre-pandemic labor market.
The picture is even grimmer for some worker subgroups: By February, Black unemployment had already begun to creep up from the 5.5 percent low it hit in the fall of 2019, skyrocketing to 16.7 percent in April and then rising again in May, a month in which the overall unemployment dropped. Black unemployment was 13 percent in August and Hispanic unemployment was 10.5 percent.
The reality when it comes to the recovery in economic activity also falls short of White House claims. Third quarter gross domestic product is scheduled to be released Wednesday, and the Atlanta Fed’s GDPNow tracking tool indicates an unprecedented jump of 32 percent.
Bragging about the pre-coronavirus economy does little to reassure a worried electorate, Mark Hamrick, senior economic analyst at Bankrate.com, said. “The administration will tout the strength of the recovery in recent months, but that’s also within the context of steep declines in March and April, and the same is true of the annualized contraction in GDP. When people talk about the fact that there's likely a record rebound, the two cannot be viewed in the absence of the other,” he said.
“What’s most important is where the economy stands and where it’s headed … GDP will likely be contracting for the full year,” he said.
“The real risk, and the real issue, is Q4,” Zandi said. “Given the lack of momentum … you can cherry-pick numbers, but the reality is even after that strong Q3 number, we’re only going to get about half the GDP back."
Biden has said the middle class got a raw deal even before the pandemic, noting Trump’s policies exacerbated economic inequality. The Federal Reserve found that, in 2018, nearly 4 in 10 Americans would be unable to shoulder a $400 emergency expense without having to borrow money, an increase of a mere two percentage points from 2017, the first year of Trump’s presidency and the year the Tax Cuts and Jobs Act was implemented.
Likewise, the stock market increases the president touts have not been shared equally: According to the Pew Research Center, nearly half of Americans have no exposure to the stock market at all, and a mere 14 percent of households have any direct investments in individual stocks.
“We know there were disproportionate gains in income among the wealthiest Americans. That was because of the strength of the stock market and the way the tax cut was designed,” Hamrick said. “Those are inconvenient facts for the president.”
For a president elected on a platform of economic populism, the vast majority of Americans have gained remarkably little. In the first quarter of 2020, just before Covid-19 struck, the richest 10 percent of households held roughly 69 percent of the nation’s collective wealth, with just over 31 percent held by the richest 1 percent, while the poorest half held a mere 1.4 percent — figures nearly unchanged from the first quarter of Trump’s presidency.
Zandi said the tax cuts introduced in 2017 were a boon to rich Americans and corporations, and pointed out that financing those tax cuts also left the nation on shakier economic footing for the long term. The Urban-Brookings Tax Policy Center said the tax cuts could add from $1 trillion to $2 trillion to the federal debt — and most American households will have little to show for it, Zandi said.
“The prime beneficiaries were high-income, high-net worth households. They were the winners,” he said.