Growth: For eight years, economic indicators repeatedly came below forecasts. Now, there’s been a string of reports — the latest one is on jobs — that have outperformed economist predictions. What’s changed, we wonder?
The Bureau of Labor Statistics reported Friday that the economy added 235,000 jobs in February, when economists expected 200,000 new jobs. And that comes after January’s 227,000 gain, which also beat economists’ forecasts by a substantial margin.
That’s not all. Other recent indicators have come in better than economists had expected.
Orders for capital goods were higher in December than forecast.
There were supposed to be 5.55 million existing-home sales in January. The actual number was close to 5.7 million — which was the highest level since 2007.
Retail sales in January climbed 0.4%, where economists had predicted they’d advance only 0.1%. At the same time, the Commerce Department revised the December sales increase upward to 1%.
Now, obviously we can’t draw any broad conclusions from a few unexpectedly good economic results.
But it’s worth pointing out that this is a dramatic change from the Obama years, when about the only thing that you could predict with any degree of accuracy was that the economy would underperform economists’ predictions.
Month after month, sales figures, job creation, and a variety of other indicators would come in below forecast.
Every year there were promises of solid growth, usually after a disappointing start, and every year ended with the economy missing economists’ targets. In early 2011, for example, economists expected GDP to climb 3.1% for the year. The actual result was 1.6%.
As we noted in this space recently, Obama’s team of economists overestimated GDP growth every single year he was in office.
And every time this happened, it was “unexpected.” In fact, these “unexpected” disappointments became so common during the Obama years that the popular conservative blogger Instapundit turned it into a regularly recurring feature.
So does President Trump deserve credit for these recent upbeat results or is this just economy finally getting over the Great Recession? Normally, we’d say no to the former, since Trump has yet to enact his economic agenda.
But in this case, Trump’s pro-growth agenda marks a dramatic turnaround from the Obama years. And as a direct result, a multitude of surveys have shown a huge increase in optimism among business owners, investors, and the public at large. The National Federation of Independent Business’ small business optimism index hit a 12-year high in January. The IBD/TIPP Economic Optimism Index was the highest it’s been since October 2004. The Dow has gained nearly 17% since the November elections.
This sudden change of heart appears to be having an immediate impact on the economy. The unexpected rise in home sales, for example, is being driven in part by “a postelection jump in mortgage rates, led by optimism about President Donald Trump’s plans to ease regulations and spur economic growth,” noted Crain’s Business. The jump in capital goods orders “is a sign that businesses might be following up buoyant postelection sentiment by spending more after years of tepid global growth,” according to Bloomberg.
Whether this will last depends on whether Trump gets his economic policies in place.
In the meantime, it’s worth asking why it is that economists consistently overestimated the economic impact of Obama’s tax-regulate-and-spend policies, and now appear to be underestimating Trump’s pro-business agenda.