The Trump Effect

 

Although some may claim otherwise, President Donald Trump has been working hard to fix an economy in desperate need of a spark of growth. Since the November presidential election, the economy has been on fire; there are several objective indicators that prove the economy is finally on a far more significant upswing than it ever was under the Obama Administration.

So how has the economy been since November’s election? The unemployment rate has been the lowest since May of 2007 at 4.4%. In the past three months, according to the U.S. Bureau of Labor Statistics, “job growth has averaged 174,000 per month over the past 3 months”. The largest private sector in the U.S. economy, retail sales, has continued on an upward trend. Within the retail industry, two of the most important indicators of recession are the year over year retail sales ratio and the ratio of inventory to sales. In December of 2008, the year over year retail sales ratio reached a record low of -11.50 percent, while the adjusted inventory to sales ratio was 1.44. Now, the year over year retail sales for the first quarter has been above 5%, peaking at 6% in January, and the inventory to sales ratio is down to 1.35. The Purchasing Managers Index, an index economists use to measure business confidence, was at 52 in October 2016. Post-election, keeping in mind that 50 is a benchmark for a well-performing economy, the Purchasing Managers Index soared to 56 in January 2017.

While people might attribute this change to Barack Obama, he was not the one who campaigned to lower corporate tax rates to 15 percent, has instituted an executive order to remove two regulations for each regulation added, nor was he the president during February 2017, when the PMI increased again to 57.7. The PMI has stayed above 52 since November 2016: after the election. Additionally, the NFIB Small Business Optimism index shows an incredible change in business confidence with a strong hike in confidence coming in November and December, peaking in January and staying above 104 for March and April. This January’s 105.9 is the highest small business confidence has been since November 2004.

Furthermore, since the election, the S&P 500 closed on a decline to 2,085.18 on November 4th 2016. At close on May 9th, 2017, the S&P 500 was at 2,396.92, a 14.95% growth. According to Earnings Insight’s FactSet, as of May 5th, “the blended earnings growth rate for the S&P 500 is 13.5%”: incredible numbers. The Dow Jones Industrial Average also saw a surge from November 4th’s 17,888.28 closing numbers to May 9th’s 20975.78: a 17.25 percent increase and historically high level. The Independent UK news, reporting on the Wilshire 5000 Total Market index, shows that investors, from November 8th to March 3rd, have made 3 Trillion dollars, showing the “steepest rally from election day to inauguration for a first-term president since John F. Kennedy…”. Lastly, the U.S. Department of Labor reported that during the week that ended on April 22, the number for people with insured unemployment — one of the most important objective measures of how well an economy is doing — reached 1,964,000: the lowest it has been since April 15th of 2000.

Even though many credit Obama for these drastic changes in the economy, his regulations imposed on the economy are the ones that have been repealed by Trump, which in turn has electrified the economy. This is apparent as a recent survey taken by the National Small Business Association of small business owners showed that, on average, regulations costed them 12,000 dollars, and 58 percent of respondents claimed federal regulations were the most burdensome. Fighting for the domestic companies, Trump has repealed several regulations, including one that “threatened to put domestic extraction companies and their employees at an unfair disadvantage”; the rescindment of this one regulation could also “save American businesses as much as $600 million annually in regulatory compliance costs and spare them 200,000 hours of paperwork”. Another repealed regulation targeted an inefficiency in the government contracting process, and another on internet privacy, which “would have imposed new privacy standards on Internet service providers, allowing bureaucrats in Washington to pick winners and losers in the industry”, a direct conflict with the free-market capitalism the United States upholds.

Few people foresaw this kind of surge in confidence; even economists predicted a “Brexit-like stock plunge” if Trump was elected. So, the notion that Obama is the only reason we are on the brink of economic prosperity is far-fetched and simply not true. Obama, if at all, had very little to do, with the prolonged surge in the economy in the last 6-7 months; rather, it was the election of Donald J. Trump to the presidency.

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