Did Donald Trump Create Jobs?
The stock market is booming, unemployment is down to about the pre-recession level, labor force participation is holding steady after declining for several decades, and gross domestic product is at an all-time high. Things seem to be doing pretty well. After the election of Donald Trump last year, predictions of economic demise abounded because of the anticipated policy actions he would take. Things didn’t blow up, however, much to the distress of his detractors.
Government aggregate statistics are rather crude measures that have a lot of hidden assumptions built in, but, consistently applied, they do give an idea of where things are. According to those statistics, the number of actual jobs in the United States is growing. There are more jobs and more people employed now than ever and unemployment is still declining. President Trump is taking credit for the current state of the economy, but was it really his doing? Of course not, any more than it was for his predecessor, Barack Obama. A president does not and cannot create jobs, at least not in the private, productive sector. What a president can do is set the tone for how much government is expected to interfere with the job creation.
Business owners are the actual private sector job creators. Even jobs in non-profit and charitable organizations are dependent on the productivity and wealth-creation of the producers, the employers and employees in business organizations. President Trump tends to have a pro-market stand on many issues, and that helps, but he also has some protectionist and interventionist tendencies, and that mitigates a lot of the positive effect.
The stock and financial markets have been steadily gaining since the bottom of the great recession, and the current record prices are not either President’s doing. They are actually the result of Federal Reserve Bank expansionary monetary policy. Flooding the economy with money and keeping interest rates artificially low is the Keynesian dream world of economic stimulation, but the Fed has not found it feasible to take its foot off the gas, even ten years after the bottom of the recession. The money supply increased nine percent in 2017. The justification for the continued stimulus is that consumer price inflation remains low. Of course it has. All of the inflation has been in financial markets, just as it has in every other bubble market.
Ultimately that bubble will burst, though it is impossible to time just when it will happen. It will most likely be some time before the end of the President’s first term, and the longer into the term, the less likely he will be reelected. As with jobs, a president does not deserve the credit for stock run-ups or for bursting bubbles. That is the natural and inevitable outcome of inflationary monetary policy.
What a president can be blamed for is the level of intervention in the economy, directly through executive orders and influencing of regulatory policies, and indirectly through influence on law-making bodies. When the melt-down does occur, we will see how much Donald Trump trusts the markets. Will he follow Presidents Bush and Obama in their stimulist-interventionist efforts? Will he follow the path that led to rapid recovery from the 1920 depression, or will he repeat the interventionist mistakes that turned the Depression of 1929 into the Great Depression and the 2008 recession into the Great Recession?
Though a president cannot create jobs, a president can create the environment in which job creators are most likely to prosper. A president can build road blocks or can take them away. Trump’s rhetoric is about removing them, but the reality is not so clear. Let’s hope that the positive outweighs the negative and that job creators remain free to create.