Friday’s jobs numbers, positive figures pointing to the creation of 164,000 net new jobs in July, serve as a reminder that President Trump still has a very good thing going for him with this economy.
That economy is clearly his best bet for a second term. One especially gets that impression after hearing credible Democratic candidates such as Sens. Elizabeth Warren, Bernie Sanders, and even Kamala Harris deliver Leninist diatribes against business, the wealthy, and the profit motive — and most especially against the insurers which, operating on slim margins as it is, pay for most Americans’ healthcare.
For now, Trump’s economy remains the strongest bulwark against the Democrats’ proposed socialist revolution.
As of July 31, the Bureau of Labor Statistics reports that Trump has already presided over the creation of 5.6 million net jobs in just 30 months. More Americans, and importantly, more black Americans, are working now than at any time in U.S. history.
Labor force participation is up. The number of people forced to work part-time for economic reasons is down 2 million since Trump took office, to its lowest point since the Sept. 11 attacks. Unemployment remains at a rock-bottom 3.7%, probably as low as an unemployment rate can go, unless workers actually stop moving between jobs. Anybody willing to work who wants a job right now can get one without extraordinary effort.
But last week also brought with it a reminder that Trump can still mess this whole thing up, with potentially dire consequences.
On Wednesday, the Federal Reserve cut short-term interest rates. In doing so, Fed Chairman Jerome Powell cited Trump’s protectionist trade policy as a justification. With the economy underperforming due to tariffs, Powell reasoned, a rate cut was needed to prevent stagnation.
What happened next confirmed the validity of this rationale.
Investors are famously obsessed with Fed rate cuts, yet they quickly got over the Fed’s unexpected decision not to commit to additional future rate cuts. They have not been so quick to get over Trump’s announcement Thursday afternoon that he would be imposing an additional 10% tariff on $300 billion worth of Chinese goods. The Dow Jones Industrial Average is down 636 points since the tariffs were announced, and even Friday’s positive jobs numbers did nothing to restore confidence.
Short-term stock market moves are not necessarily signs of where the economy is headed. Share prices could still recover next week. But they often do tell us what investors are thinking. In this case, they understand the deleterious effects of tariffs, which serve as both tax hikes on Americans and a self-blockade against the homeland. The people investing their money right now are much more scared of an escalating tariff war with China than they are even of the high interest rates about which Trump periodically gripes.
They’re right to be scared. Even if Trump feels justified in staring down China at this moment, when its economy is weak and its regime under both economic and political pressure, he needs to cobble together a China deal quickly. He also needs to focus on expanding free trade in other areas, beginning with passage of the USMCA, a broad new trade deal with Boris Johnson’s post-Brexit Britain, and, as quickly as possible, re-entry into the Trans-Pacific Partnership.
Trump’s administration has accomplished a great deal already through tax and regulatory reform. But if he allows the U.S. to become economically isolated through tariffs, he won’t have a strong economy at his back when next year’s election approaches.
