As expressed in recent tweets, the current United States President claims economic victory as if he is the individual worth crediting. Economists measure economic growth with three macroeconomic goals: Full employment, all around economic growth, and price stability. These tools help determine the success of an economy through a neoclassical economists’ perspective. An alternative goal to measuring the success of the economy is the stock market. By studying these three major macroeconomic goals, we can determine how well the economy is doing since Donald Trump was elected President. He recently tweeted on Twitter, “Unemployment is down to 4.1%, lowest in 17 years. 1.5 million new jobs created since I took office. Highest stock Market ever, up $5.4 trillion.” If these four major principles of economics are analyzed more closely, it can be determined that the United States economy has been growing since the recent power shift in the White House. Because economists have proven that full employment is being met, economic growth is increasing, prices are stable, and the stock market has been hitting record highs, it is reasonable to validate Donald Trump’s claims and give credit where credit is due.
When looking at full employment, it is clear that the current state of the economy has indeed met its first goal. Full employment and unemployment are interconnected with the concept that the economy is at full employment when the unemployment rate equals the natural rate of unemployment. The natural rate of unemployment is seen to be healthy between 4%-6%. Economists measure unemployment by using the ratio of the number of people unemployed to the total of people in the labor force. To be considered unemployed, you must be actively searching for a job within four weeks since unemployment. Since Donald Trump has taken office, he has claimed that unemployment is the lowest it has been in 17 years. As of January 2017, when Trump first took office, the Bureau of Labor Statistics reported that the unemployment rate was 4.8% and began to go down from there. In August it was 4.4%, and the most recent report of the unemployment rate was announced to be 4.2% in September. The current 4.2% of unemployment falls perfectly within the natural rate of unemployment. Therefore we are achieving our macroeconomic goal of full employment. Credit is due to the President due to his ability to stimulate job growth within the United States. As of August, local reporters in Oklahoma reported that Trump has added 1.07 million jobs to the United States economy within his first six months of office. A great way to lower the unemployment rate is to add to the workforce by creating more job openings and filling them with qualified American citizens.
Because the unemployment rate is declining, it is important that the economy is still growing substantially. Economic growth is measured using the gross domestic product (GDP), the total value of product and services created in a country. It is concerned only with new and current domestic production. Old output is not current GDP because it was already counted when it was originally produced. There are two main differences when determining GDP that include both the nominal and real. Real GDP is adjusted for inflation and utilizes the base year when calculating, whereas nominal GDP is measured in current dollars and does not adjust for inflation. The current nominal GDP in billions of dollars is 19,495.5 and the real GDP in billions of dollars is 17,156.9. The Bureau of Labor Statistics reported that the growth rate in 2016 was up +1.5% for the year. As of right now, the growth rate is +2.3% from a year ago today and +3.0 from the third quarter of 2017. The switch of power contributed to the overall growth of GDP and is helping achieve the economic goal of growth because the GDP is continuing to increase. While the growth in GDP may not be solely dependent on the presidency, it is effected by the individual in power and their relations with the American Economy.
The third approach to measuring the current state of the economy is price stability meaning that the general price level in an economy does not fluctuate much over time. You can determine how stable the economy is by looking closely at rates of deflation and inflation. The Federal Reserve has not established a formal inflation target, but policy makers generally believe that an acceptable inflation rate is around 2 percent or a bit below. The current state of the economy has an inflation rate of 1.7% according to the Bureau of Labor Statistics. Some may argue that any inflation is a bad thing for the economy but overtime the status quo confirms that small doses of inflation or deflation do stabilize the economy. The United States economy has been at an inflation rate of 1.7% for 5 months successfully reaching the goal of price stability. The debate on rather or not President Trump has played a significant role in maintaining a low inflation is a critical one. Some economists think similarly to Mark Haefele, the chief investment officer at UBS. He says: “Donald Trump's platform has an inflationary bias: His fiscal policy is likely to be expansionary, and he leans toward protectionism, which is inflationary due to the effects of tariffs and curtailed immigration.” This is challenged by the fact that in August of 2016 the inflation rate was 2.3% and ever since Trump has gained office the inflation rate has actually decreased and stabilized over the course of his months in office. The main point is that the current state of the economy in the United States is doing well based off of the neoclassical economists’ goal of price stability.
An alternative goal in determining how well the economy is doing can be seen through how the stock market has been acting since the election took place. The stock market refers to the overall collection of exchanges and markets where trading takes place through formal exchanges. Dow Jones, one of the largest businesses and financial companies in the world is up +19.11% within the last year right alongside the Nasdaq which surged +20%. Some economists say the fact that one party controls the White House and both branches of Congress have also helped boost the stock market, since many investors believe it will lead to less gridlock. Chiavarone, economist for Fortune, continues by saying that, “The election seemed to signal the arrival of a unified government that could make progress after years and years of stalemate.” The market has reacted positively to the change in power and has grown immensely within the last few months that Trump has been in office. For those who challenge the Presidents politics, his actions in office have increased confidence in the market and there are certainly the numbers to prove it. And while the failure of the effort to repeal the Affordable Care Act has led to some concerns about the effectiveness of Congress right now, the market has not yet reacted in a negative way. With the stock market on the incline, there are very good benefits set for the United States economy. When the stock market is doing well citizens tend to feel more secure in not only investing their money, but spending as well. This helps the flow of money within the economic system and encourages growth. The trend in a decrease in unemployment and good price stability has helped the nature of the stock market and assisted it in expanding.
Each macroeconomic goal is mutually exclusive to one another and by evaluating each one, the story of a strong economy comes together smoothly. The positive effect of Trump’s presidency on the market has allowed for a great state of the current economy. The trends within these goals demonstrate a strong correlation between the change in power and the successful economy. In another analysis, economists might determine whether or not these trends will remain effective but as of right now it is positively just to say that the economy is growing. Trump’s comments on social media tend to be a creative and interesting way to approach his constituents, however, when researching his claim, it has been made evident that he is right. Unemployment has decreased, output is increasing, prices are stable, and the stock market is growing rapidly. Hopefully with the help of his influence, the economy continues to reach the three main macroeconomic goals and benefit America in all aspects.
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