I&I Editorial

The most surprising thing about the latest unemployment report isn’t that the rate dropped to the lowest level since December 1969. It’s that unemployment wasn’t supposed to get anywhere near that low under President Trump. At least, not if you believed mainstream Keynesian economists.

The economy created 136,000 jobs in September, according to the Bureau of Labor Statistics survey of businesses. The separate household survey, which is used to track unemployment, showed that the number of unemployed dropped by 275,000.

Not only did the job market pull 275,000 off the unemployment line last month, it pulled more than 100,000 who had dropped out of the labor force back into the job market.

This is good news, but it continues to confound mainstream economists, who solemnly predicted at the start of Trump’s administration that we faced a “secular stagnation.” Any talk of strong economic growth was a fantasy.

When the economy started to outperform expectations, liberals shrugged it off by claiming that the upturn in growth was all baked in the cake when President Obama was president.

That is false.

We can get a sense of the true impact of Trump’s economic policies by comparing the actual results since he took office to the forecasts made at that time. What did economists think the economy would be like if nothing changed over the next 10 years in terms of tax rates or regulatory policies

For the purpose of comparison, we used the Congressional Budget Office’s 10-year economic outlook released in January 2017. The CBO’s economic forecasts tend to mirror the consensus of other economists.

The results of this comparison are stark.

GDP growth has exceeded the CBO’s forecast in every quarter starting with Q2 2017. That includes the second quarter of this year, which saw 2% growth where the CBO had projected 1.5%.

As a result, the economy is now $590 billion bigger than it was supposed to be.

The CBO projected that unemployment would never get below 4.4%, and would start rising again this year. Instead, the unemployment rate fell from 4% at the start of the year to 3.5%. The current unemployment rate is now a full percentage point below the CBO’s forecast. That translates into 1.6 million more people employed than the CBO expected.

And, where the CBO had forecast a steady decline in the labor force participation rate – which measures what percentage of the working-age population is either employed or looking for a job – it has been climbing. The CBO projected it would go from 62.9% at the end of 2016 to 62.7% in the last quarter.

The actual figure for September was 63.1%.

Oh, and inflation has been running slightly lower than expected – which wasn’t supposed to happen either. A typical headline about the Trump economy was the one in the Wall Street Journal shortly after he won the election, which said, “Inflation and Interest Rates Forecast to Rise Under Trump Presidency.”

If Trump were a Democrat, the news media would be shouting hosannas from every rooftop – instead of braying for Trump’s impeachment.

So what changed after the CBO issued its forecast? Trump reversed as many Obama-era policies as he could, as fast as he could. He halted pending regulations, rolled back more than $30 billion of existing rules, brought corporate tax rates in line with our competitors, fixed the worst elements of Dodd-Frank.

The one big miss for Trump has been the national debt, which he predicted would be cut down, but which has exploded by nearly $3 trillion on his watch. This fiscal year, the budget deficit will top $1 trillion.

Blame for that belongs with both Republicans and Democrats, who’ve been on a spending spree the past three years, while refusing to confront the exploding costs of entitlement programs.

As for the rest of Trump’s economic program, it’s working pretty much as Trump promised. Whatever one thinks about Trump’s tweets or how he conducts himself on the phone, he deserves credit for delivering for the economy.

— Written by John Merline

CORRECTION: The charts originally had the wrong years indicated. They have been updated. Thanks to our readers for catching this!

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