Trump proves that even a bad stimulant can be good for the economy for a little while

The fiscal stimulus works.

This is the main benefit of another month of strong job growth, which kept the unemployment rate at 3.7%, its lowest level in almost 50 years. More specifically, the last report indicated that we created 250,000 additional jobs in October, bringing our monthly average for the year to 213,000 jobs. It was a slightly slower 182,000 in 2017.

The good news did not stop there. So many people were looking for and finding work while the share of employed adults increased by 0.2 percentage points to a high of 60.6% after the crisis, while the share of 25 to 54 year olds – who should be in post the best of their working years – people who work increased another 0.4 percentage points, to reach a new high of 79.7% after 2008. It's still a bit less than before the bursting of the housing bubble and a little less than at the technology level, but that's where the problem lies: there are still "missing workers" on which we should be able to go out. the sidelines so we can keep the recovery going. Especially if wage growth continues to accelerate, as has been the case recently. It has risen to 3.1% in the past year – its highest level since 2009 – which should make the job more attractive to those who want it but who for some reason do not work currently.

Gather everything together, and you get an image of an economy that draws as many bottles as it has done for a long time. We are in a virtuous circle where more people work and are better paid for this job, but since there are still a lot of people looking for a job, these increases are not so great that inflation could become too high. It is a solid economy in the Goldilocks area, where growth is fast enough to improve the standard of living of citizens, but does not raise concerns about price stability at the Federal Reserve.

The difference between the 2.5 million jobs the economy is adding this year and the 2.2 million jobs created the previous year should not be exaggerated. But it should be emphasized for one simple reason: it's not what we expected. After all, the lower the unemployment rate, the fewer people who want a job but do not have one. This alone should slow the growth of employment. This was not the case, however, for an even simpler reason: the Trump administration pushed a lot money in the economy. Reducing corporate taxes may not be very effective in terms of stimulus, but it does not matter too much when you talk about $ 1.5 trillion. That will do something, and it does.

But the question, of course, is how long will it last? The Trump tax cuts were intended not only to put more money in the pockets of wealthy investors in the short term, but also – and more importantly – to further encourage companies to invest in factories and equipment to increase productivity, the long term too. So far, this has not really happened. Business investment rose only 0.8% in the third quarter of this year, and the deluge of money believed to be coming from abroad was more like a slightly above average net.

The lesson to be learned is that even a bad stimulant can be good for the economy for a little while. Of course, a better stimulant would be better, but no matter what type can put people back to work, even when you may not think that there is still a lot of people looking for something. a job. The real question is whether today's boost will be worth the higher interest rates it will bring tomorrow. The Trump tax cuts do not seem to pass this test, but new infrastructure spending, which would probably have created more jobs now and would also allow us to create more in the future by increasing our production capacity, certainly could.

Unfortunately, Trump preferred to reduce the taxes of the rich than to build essential things Take advantage of this mini-surge while you can: it's living with borrowed time and money.