Tim Mullaney, The Independent
By now, you know the US economy added 128,000 jobs in October — a not-great number, if better than consensus forecasts. Even so, the number masks a weird duality in recent economic news, one America will revisit throughout its election year.
The economy is working worst for many of the exact industries — and people — President Donald Trump set out to help most. Six months ago, we debated whether a “boom” that was never really a boom would toss him to re-election despite ethical follies now threatening him with impeachment. Now, it’s whether the economy is cracking on him at the very worst time — as ethical follies still threaten him with impeachment.
The bad news for Trump is that the people he needs for re-election are in the path of that.
Consider this week’s news beyond the jobs report, which showed unemployment ticking up to 3.6 per cent, still near a 50-year low. Manufacturing is the smallest percentage of GDP it has been in 70 years, according to a new Commerce Department report.
The manufacturing sector is in an earnings recession, with second-quarter profits down 9 per cent, stocks underperforming the S&P 500 as third-quarter reports roll in, and another profit drop expected in the fourth quarter, according to CFRA Research. And coal companies! Murray Energy, the largest US coal producer, filed for bankruptcy this week, the 8th coal company to do so in the last year. Coal’s share of the market for US electricity fuel has fallen by half, to about 24 per cent, since 2000.
These are Trump’s tribe, or so we’re told. They’re why he carried Ohio by eight points in 2016, and gave him narrow wins in Michigan, Pennsylvania and Wisconsin.
Yet, General Motors is closing its Lordstown plant near Youngstown, Ohio and manufacturing employment is down in all four states this year. “Get ready,” Trump promised miners in 2016. “You’re going to be working you’re a***s off!” He promised factory workers a “new industrial revolution.’’
The story’s the same in the GDP report, released on Wednesday. What’s holding things back is sluggish corporate investment — a category where manufacturers from Boeing to General Motors play an outsized role. Equipment spending shrank 3.8 per cent. Spending on structures fell more, partly because oil rigs are structures and crude is relatively cheap.
That’s a terrible performance, since investment is about 18 per cent of the economy — and was supposed to get juiced by the corporate tax cut. At the same time, manufacturers like Caterpillar and 3M also depend on exports to sustain profits (and jobs), and net exports subtracted a tenth of a point from third-quarter GDP.
What do these areas have in common? They were supposed to rise based on Trump policies that failed. Manufacturing’s weakness, like exports’, is mostly about trade policy. Trump wanted a smaller trade deficit, so he raised tariffs. China responded in kind. Companies like GM and Alcoa warned of the impact — as many as a third of Standard & Poor’s 500 index companies have blamed trade policy for hurting business. Slower business freezes investment.
Coal is the most obvious case of Trump’s (perfectly predictable) policy failure. The president’s signature move — and centrepiece of his claim that his deregulation boosts growth — is rolling back the Clean Power Plan, Barack Obama’s signature move to reduce carbon emissions that cause climate change.
To own Obama, Trump decided to bet on a fading technology. We’ve seen that movie before — on a VHS cassette. Coal can compete when natural gas costs $6 per million British Thermal Units of heat, Moody’s Investors Service says. It costs $2.52 now, thanks to hydraulic fracking. Trump may as well sell Honda Accords for $100,000.
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