An old Republican used to call them “nattering nabobs of negativism.” These days we call them down-in-the-mouth pessimists of the media. Their latest game is predicting – without data – a recession. Breaking news: The breaking news of recession has no place in breaking news.
The latest is a report from our Labor Department, released September 6th. What did it say? At a time when unemployment is at 3.7 percent, lowest in 50 years, and labor participation jumped to over 63 percent – another record – the New York Times headline: “Labor Report Shows Signs of Economy Losing Vigor.” Really?
The first sentence: “The great American jobs machine is flagging, showing signs of its age and damage from an intensifying trade war with China and a slowing global economy.” Let’s unpack that.
First, the “great American jobs machine” is not slowing. On the numbers, the unemployment rate is not rising. The labor participation rate is not falling – in fact, not even stagnant, but rising.
Second, “signs of age” is a nice way of saying, don’t you recall the long growth stretch under Obama? It must be time for a recession. Only is it? No, since the average growth rate under Obama was 1.48 percent, including the last quarter pop after Trump won. That is the weakest expansion since 1949; no president has turned worse numbers.
So, on that long Obama expansion, not really – it was a meager, barely positive climb with not a single quarter in eight years hitting 3 percent, which Trump has hit four times in two and a half years. Moreover, Obama’s economy experienced nearly zero growth over 16 of those 32 quarters.
What is more, Obama started with a 10.6 trillion-dollar public debt, which took decades to amass, and left us with an 18 trillion-dollar debt. How much of the growth was private sector, not slight-of-hand?
Third, let’s talk “damage from an intensifying trade war with China.” Several clarifications: China sells three times as much to us as we sell them, which is why there is an imbalance. We can live without their goods far more readily than they without our market.
While we need – in the long term – replacement markets for China, they will be hard pressed to replace the dynamic US market. Doing so will incur sizable opportunity and transaction costs. Other countries are eager for US-quality goods, and we for their low-cost goods. This could be their opening, and chance for us to widen the diversity of our global market.
As China’s rate of growth falls, leaders wrestle with debt, revaluation rattles their currency, internal economic bets become iffy, and economic disruption – from protests in Hong Kong – continue, China will have incentives to reach a deal with the US.
That is not, however, what the nabobs want to hear. They want to hear that Trump is overinvested in tariffs and losing; thus, the US economy is (going to be) flagging, all because he has called China out and Obama’s tenure was great for the economy. Only none of that is true.
There was no crazy Obama growth rate. Trump is not losing his bid to restore fairness to trade with China. The US economy is not flagging, even as we approach what economists call the low “structural” unemployment level; in other words, when all jobs are filled – minus labor transition.
Add an overlooked number in Labor’s report. Wages continued to grow, with high-growth, low unemployment, advancing labor participation and high consumer and business confidence. Average hourly earnings jumped 0.4 percent, more than analysts expected. So here again, far from negative, news is positive.
The sense one has is that these “media economists” are like teens playing their air guitar, imagining something that is not, but so wishing it were. They are primed for the recession – two quarters of negative growth – before November 2020. Only they cannot catch a scent. Nor will they.
They are hoping on recession, since how else to stop President Trump’s reelection, as wiser Democrats back away from a self-set impeachment trap. No, the only way to report a recession is to invent one, and so the headline – repeated twice – that our economy is “losing vigor.” Only it is not.
Last two counterpoints. First, volatility is not low growth, just as the tick-tock of tariffs does not portend a recession. Under current circumstances, both are signs of a global economy adjusting – to new factors. One is Trump’s claim on China for fairness. A second is sanctions on Iranian oil, to prevent Middle East war. Third is a topsy-turvy Europe, dragged down by Brexit, indebted southern countries, intransigent rich ones.
Finally, the Federal Reserve, which may see value in releasing pressure, appears to be considering a rate cut. Call that insurance for growth, or good monetary policy with no inflation – another good thing. Either way, a rate cut would add value to the market, sustaining growth not causing it to “flag.”
All this must be irritating for those primed to strum the blues on their air guitars, who can almost hear the groans, almost smell a recession. Only they are – on the Labor report confirms – drawing unsupported conclusions from solidly positive data. Bottom line: With no recession in sight, back to the drawing board or next jam session for the nattering nabobs.