US President Donald Trump. Picture: AFP/NICHOLAS KAMM
US President Donald Trump. Picture: AFP/NICHOLAS KAMM

Washington/Houston — US President Donald Trump boasts that a robust economy will protect him from impeachment and ensure his re-election, but it’s an argument resting on a shaky foundation.

The middle-class Americans who are the main targets of Trump’s economic pitch aren’t sharing much in the gains of US growth. Worse yet for Trump, wage growth has been slower in the counties he carried in 2016.

That risks blunting his message with the Republican political base just as he’s turning to GOP law makers to defend him against an accelerating effort by Democrats to impeach him.

By several measures, middle-class Americans’ incomes have risen more slowly under Trump than during Barack Obama’s final years — hardly a period renowned for gangbuster pay increases. Workers should finally be getting big raises with the unemployment rate down to 3.5%. Yet while wage growth picked up last year, it is still subdued and slowing again after manufacturing output contracted in the first half of the year.

“That’s pretty disturbing,” said Heidi Shierholz, a senior economist at the Economic Policy Institute, a liberal-leaning think-tank in Washington. “In a labour market with unemployment rates this low, we should see much stronger wage gains.”

Meagre paycheck gains undercut the president’s “Make America Great Again” appeal promising better times for middle-class workers who felt left out of the tech and finance boom. The theme has resurfaced in Trump’s impeachment defence. “Impeached for what, having created the greatest economy in the history of our country?” Trump said in a recent tweet.

During Trump’s first two years, median household income, adjusted for inflation, grew at an average annual rate of 1.3%. That’s down from a 4.1% annual rate the previous two years

That argument is also a pillar of his re-election campaign, as Republicans look to make up for the president’s low job-approval ratings and the serial controversies swirling around his administration.

The economy’s overall performance hasn’t changed much since Trump took office, with GDP growth averaging 2.6% compared to 2.4% during Obama’s second term. That’s far below Trump’s own forecasts. On Wednesday, the US commerce department reported that the economy expanded 1.9% at an annualised rate in the third quarter, a level that, when Obama was president, Trump derided as a sign the “economy is in deep trouble”.

While the jobless rate continued to fall during during Trump’s first two years, median household income, adjusted for inflation, grew at an average annual rate of 1.3%. That’s down from a 4.1% annual rate the previous two years and a 1.8% annual rate during Obama’s entire second term, according to US Census data released last month.

Asked about the income and wage data, White House spokesperson Judd Deere said Trump’s “policies of lower taxes, deregulation, and fair and reciprocal trade have supported the longest economic recovery in US history with record low unemployment and rising wages”.

Heritage Foundation fellow Stephen Moore, a former Trump campaign adviser, has used estimates from Sentier Research to make a claim — repeatedly echoed by the president — of “gigantic” income gains for families of $5,003. But Moore set up a comparison that burdened the Obama administration with the aftermath of the recession, using as his starting point the recession’s official June 2009 end. Household incomes continued to drop for another two years amid high unemployment.

The Sentier estimates, which incorporate data up to and including August, still show better income growth under Trump — an average annual rate of 3% — but they use a different data source than the government’s usual household income measurement.

Multiple other measures of workers’ wages show tepid growth under Trump despite a roaring stock market, surging corporate profits and a $1.5-trillion deficit-financed tax cut Trump promoted as a way to rev up pay gains. This is especially so in Red America. In counties Trump won over Democrat Hillary Clinton in 2016, growth in real average weekly earnings slowed to a 1.2% annual rate under his presidency, down from 1.5% the prior two years, according to a Brookings Institution analysis for Bloomberg News of county-level wage data up to and including the first quarter of this year.

In the presidential battlegrounds of Wisconsin, Michigan and Pennsylvania — three closely fought states crucial to Trump’s election — the drop-off has been sharper, with weekly earnings in counties he carried up 0.8% annually compared to 1.8% the previous two years. The manufacturing recession threatens to further weaken pay growth in those states, where one in six  workers in Trump-voting counties hold factory jobs.

Trump often claims that wage gains have picked up since he took office, but once inflation is factored in, overall progress on wages doesn’t look much different. Real average hourly earnings under Trump have grown at an average annual rate of 1.1% up to and including September compared to 1% during Obama’s second term.

Workers in the middle fared worse. The median weekly pay cheques for full-time workers, adjusted for inflation, have grown at an average annual rate of 1% up to and including September compared to 1.5% during Obama’s second term.

Long-term changes

A measure created to minimise potential distortions from more low-wage workers entering the workforce also shows slower pay growth under Trump. The Atlanta federal reserve bank’s national wage growth tracker is based on surveying the same workers 12 months apart on their pay and calculating their median raise. Adjusted for inflation, the index increased at an average annual rate of 1.3% during the past two years compared to 1.7% during Obama’s second term.

Many economists blame long-term changes in the job market for the slower wage growth. Some researchers point to increasing corporate concentration in industries and the rise of “superstar firms” reducing the bargaining power of workers. Displacement of workers through automation and competition from overseas workers in a globalised economy can depress wages.

The job market also shifted away from some traditional middle-class occupations, such as manufacturing, which now employs fewer workers. And the atrophying of unions has eroded workers’ leverage to negotiate higher pay.

High school-educated men still haven’t caught up to their pay in 2000. Their $45,459 median earnings in 2018 was $2,128 lower than their counterparts at the turn of the century.

Democrats also blame Republican policies, including blocking an increase in the federal minimum wage and the Trump administration scaling back an Obama initiative to require overtime pay for more workers. And the trade war has contributed to the slowdown in manufacturing.

Still, in a dynamic economy, some groups are doing better than others. Real median earnings for high-school educated men — a key Trump constituency — rose at a 1.2% average annual rate during Trump’s first two years, up from a 0.4% rate the prior two years, according to census data for 25- to 64-year-old full-time workers. Conversely, high-school educated women’s real median earnings declined at a 1.1% annual rate under Trump compared to a 0.6% rise during Obama’s final two years.

High school-educated men still haven’t caught up to their pay in 2000. Their $45,459 median earnings in 2018 was $2,128 lower than their counterparts at the turn of the century. High school-educated women are further behind, with 2018 median earnings of $32,412, down $2,356.

Weak pay increases contribute to “ambiguous feelings” about the economy, even as unemployment remains at historic lows, said Alan Abramowitz, a political science professor at Emory University who studies public opinion and presidential election forecasting. “What matters politically is the subjective economy, how people feel about the economy,” Abramowitz said. “Real incomes aren’t rising that much, so it’s not obvious that things are that good.”


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