The U.S. economy is growing at such a fast clip and the unemployment rate is so low that … there must be something terribly wrong. Does that make sense? No, but the healthy state of the country seems to be too much for some economists, talking heads and others in the chattering class. They struggle to find something nice to say about 3.2 percent growth accompanied by 3.8 percent unemployment.
We’re puzzling over the negativism because we’re certain everyone will miss the good times when they inevitably fade. The debate we’d like to see is how to extend this era of prosperity — and delay the next recession — as long as possible. Instead, there’s skepticism in the air, which is potentially damaging because part of what drives economic growth is confidence. If business owners and consumers turn skittish, they’ll invest and spend less. Fear of recession could hasten one.
Here’s what we’re talking about: The Bloomberg consensus estimate for first-quarter annualized GDP growth was just 2.3 percent, meaning the experts had undershot the actual result by nearly a full percentage point. That happens, given that forecasting is an inexact science. But when Friday’s numbers were released, a scramble ensued to downplay the results to justify previous pessimism. That 3.2 percent growth figure? It was illusory, due to a host of one-time factors, such as companies boosting inventories as a precaution against escalating trade friction with China. This fast growth can’t last, said the experts. “The first-quarter number is overstating the strength of the economy,” Ben Herzon of Macroeconomic Advisers told The Washington Post.
Well, who’s to say the good times can’t last? That’s what JPMorgan Chase CEO Jamie Dimon said during his investor conference call earlier in April. Consumers are in good shape, he said. People are re-entering the workforce. And companies are feeling positive and have plenty of capital, all of which means growth can go on for years. “There’s no law that says it has to stop,” Dimon said.
In fact, the economy’s been growing for a full decade. The Great Recession ended nearly 10 years ago, in June 2009. Barring catastrophe, in July this will become the longest period of expansion in U.S. history, surpassing the 1990s. On President Barack Obama’s watch, the federal government rescued the economy, but for much of his tenure growth traipsed along at about 2 percent. Then came President Donald Trump, who set a goal of 3 percent growth. His strategy: Cut the burden of federal regulation and cut the corporate tax rate through the tax reform legislation passed in late 2017.
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The results have been excellent but also criticized as an unsustainable “sugar high” and a precursor to recession. As writer James Freeman noted in The Wall Street Journal, experts at the Brookings Institution plan to meet in May to discuss … how to prepare for the next recession. It may be a short meeting.
There are always things to worry about. Trump needs to end his trade tussles with China. The federal deficit is rising, due in part to the cost of tax reform. Inflation, now tame, may return. Trump’s management of the economy will be one of many issues in the 2020 presidential race.
But right now employers are investing in their businesses and hiring more workers. Wages are rising at a healthy pace. Consumers are spending. Hit the total button:
The economy is growing at a robust rate. No matter what you hear from the chattering class.