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writing for godot

The Stock Market is Not the Economy: With Notes on Trump’s Economic Performance

Written by Leonard   
Wednesday, 19 August 2020 08:49

You would think that after enough economic scholars and Nobel Prize Economics Recipients have made the statement “the Stock Market is Not the Economy,” that the media, news pundits, and politicians would start to discuss the US economy in terms of a broader set of economic indicators.  Instead, I continue to see the values of the DOW, the S&P and NASDAC flashed on the bottom right hand corner of my computer screen and my flat screen TV, Monday through Friday on MSNBC, CNN and my local news stations, as though these numbers are the only indicator of the US economy.  Never mind that only 30 companies are listed on the DOW (many multi-nationals) out of thousands and when one of the DOW companies fails it is replaced by a currently more successful company.

The stock market indices are among a larger group of economic indicators: leading (predictors), coincident (concurrent),  lagging (following) and others that when taken together as a whole are a far better indicator of the state of the economy than the DOW alone [1].  Paul Krugman goes as far as saying, “The relationship between stock performance - largely driven by the oscillation between greed and fear - and real economic growth has always been somewhere between loose and nonexistent. But I'd argue that there are deeper reasons for the current stock market-real economy disconnect: Investors are buying stocks in part because they have nowhere else to go.” [2]

Because the DOW (and S&P) have nearly completely recovered from this year’s March 2020, COVID-19 inspired “minicrash,” at least half the Nation thinks Trump is doing a good job with the economy because they believe, perhaps incorrectly, that the Stock Market is the full economy (this is one of a very few Trump positive poll numbers). But instead, and rarely mentioned, the Fed is keeping interest rates low, spending trillions to prop up the stock prices and many of the stock sales are buy-backs by the corporations at bargain basement prices. An examination of other economic indicators indicate that Trump has done a terrible job keeping the economy healthy.  In this short article we can only quickly review a few of the more than 50 economic indicators that reflect the state of the economy and just remember, Trump and his “Republican” followers claim ‘his economy is not just good, but the best ever.’

Other important economic indicators provide an explanation for the imposed misery and pain being suffered by millions of Americans, the reasons 1/3 of the American workforce is out of work and unsupported, and the hours long food lines in burning summer heat running that run out of basic staples, leaving millions of Americans with inadequate food supplies to feed their families.  This reflects the the real state of the US economy that is being felt by millions who are suffering because of Trump’s disastrous decision after decision on the COVID19 pandemic, which has led to huge unemployment numbers, loss of healthcare for millions, a massive number of small business failings and more than 160,000 deaths in the US.  That is not to say the economy was healthy before COVID-19 or as Trump would say "It's said now that our economy is the strongest it's ever been in the history of our country, and you just have to take a look at the numbers,” [1]. Here are a few other economic indicators to help us look at the numbers:

Leading Economic Indicators:

1. The number of weekly manufacturing hours: This indicator dropped more than 3% so far in 2020. Employees usually work fewer hours when employers plan to lay off workers in the future. While the CODIV-19 pandemic was the source of the problem, Trump’s incompetent handling of the pandemic led to the loss of millions of jobs, tens of thousands more deaths and it appears this may not be over yet....Hardly “the best performance ever!”

2. Average weekly initial jobless claims for unemployment insurance: The number of claims has been over 1 million per week since April with the total today  exceeding 52 million lost jobs. With a total workforce of 160,000, that indicates a jobless rate of ~33%!  Nation states in the EU and Asia have not seen numbers this bad and are on the road to recovery....Not only not the best performance ever but certainly close to the worst!

3. The GDP: The gross domestic product of an economy provides the overall value of the goods and services it produces and indicates whether an economy is growing or slowing. Trump’s average for his first three years, not counting the Covid19 year 2020, was 2.3% growth, somewhat lower than the economy’s performance under several of his predecessors and well below the Trump-Republican prediction of 4-5%....Well below Trump’s goal and the past long term average and nowhere near the best ever.

4. Consumer Spending: The rate of Consumer spending increased by 1.4%/year in the first three years of Trump’s presidency.  However, Consumer Spending in the United States decreased to 11796.65 USD Billion in the second quarter of 2020 from 13118.41 USD Billion in the first quarter of 2020, because of Trump’s mishandling of the Covid19 pandemic.  This raised great concern that Trump, in 2020,  ignored expert advice, caused tens of thousands (maybe even a hundred thousand) more deaths than necessary and the economy seen by the average American is much worse than when he assumed the presidency. It could take years for the economy to recover, just as it did from 2010 to the present. Given the instability of consumer spending in 2020 and 55 million applicants for unemployment insurance it is difficult to see this indicator improving....Below past average and certainly not the best ever.

5. Manufacturers' new orders for non-defense capital goods: Looking at the Total Value of Manufacturers' New Orders for Capital Goods 2008 through 2020 we conclude the following:

a. The value dropped in 2008 from $70 billion to $50 billion

b. From 2010 to 2012 the Obama economy brought the average quickly back to $70 billion

c. From 2012 to 2020 (Obama & Trump)  the indicator stayed steadily between $60-70 billion....Trump’s performance under this indicator was average because the value stayed the same as Obama’s for his 3 ½ years so far.  Again, not the best performance ever and 2020 is not over yet.

Coincident Economic Indicators:

6. Personal Income: Median household income for the nation has been increasing every year since 2013, but the year-to-year increase from 2017-18, at 0.8% is smaller than the prior three years. “It’s difficult to compare [the median household income across time]” due to “changes in data methodology,” says Elise Gould, a senior economist at Economic Policy Institute (EPI). According to EPI analysis, the median household income in 1999 was higher than in 2018, which is the latest data year available....Inconclusive performance

7. Unemployment: The unemployment rate for Trump's first three years continued to decrease at about the same rate or slightly slower than it did under Obama who inherited a terrible economy from the previous administration.  Because Trump totally mishandled the COVID pandemic, more than 52 million Americans lost their jobs and filled for unemployment insurance .  The Bureau of Labor Statistics (BLS), to me,  has a strange way of calculating unemployment rate.  The labor force is approximately 160,000 people of working age.  When 52 million people who want to work are out of work I would say that about 33% of the workforce is unemployed in 2020 even if the BLS states the unemployment rate is ~14-16%....Because Trump’s handling of the COVID pandemic caused 1 in 3 Americans to lose their jobs and he is still mishandling the “reopening of America,” his performance in this indicator is among the worst ever.

A few of Trump’s decisions, which are causing serious problems for many sectors of the US economy:

  • “The Congressional Budget Office on Tuesday released its economic projections for the remainder of 2020 and for 2021. “CBO estimates that real (inflation-adjusted) gross domestic product (GDP) will contract by 11 percent in the second quarter of this year, which is equivalent to a decline of 38 percent at an annual rate [2].
  • On August “We estimate that the Trump administration’s imposition of tariffs, along with retaliatory actions taken by our trading partners, will reduce economic output, income, and employment. The Trump administration has so far imposed $80 billion worth of new taxes on Americans by levying tariffs on thousands of products, which is equivalent to one of the largest tax increases in decades.  Tariffs imposed so far by the Trump administration are estimated to reduce long-run GDP by 0.23 percent, wages by 0.15 percent, and employment by 180,300 full-time equivalent jobs.  The administration’s outstanding threats to impose additional tariffs would, if acted upon, further reduce GDP by 0.24 percent, wages by 0.17 percent, and employment by 184,200 full-time equivalent jobs [3].
  • During the 2016 presidential campaign, Republican candidate Donald Trump promised he would eliminate the nation’s debt in eight years.  Instead, his budgets would add $8.3 trillion during that time. It would increase the U.S. debt to $28.5 trillion at the end of (his proposed) eight years,...” By the way, where are the conservative Republicans on this one?  [4]

Conclusion: On the basis of just a few of the common economic indicators, and the three examples, instead of just the DOW Index, Trump’s performance on the economy seems to be close to the bottom of the performance of all Presidents and not the best performance ever that he often claims in his public addresses.  Perhaps we can go back to 1980 when a Republican candidate for President asked:

“Are you better off than you were four years ago?,”   Ronald Reagan........I wouldn’t ask that question in 2020 if I were Mr. Trump!




[3] Trump, in an interview on “Fox and Friends,” Aug. 23, 2018 (and many more places)



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