WASHINGTON — A portrait of a robust U.S. economy is sure to take center stage Tuesday night when President Donald Trump gives his third State of the Union address. It is an economy that has proved solid and durable, yet hasn’t fulfilled many of Trump’s promises.
Nine months before the election, the economy keeps growing steadily if only modestly. Unemployment is at a half-century low.
And consumers, the lifeblood of the U.S. economy, continue to spend. Average pay is rising faster than when Trump took office three years ago, with the largest percentage gains now going to lower-wage workers. Some research has found that this trend, which began in 2015 before Trump’s election, partly reflects higher state minimum wages.
Economists warn, though, that the U.S. expansion, now in its record-long 11th year, faces an array of threats.
Most immediately, China’s viral outbreak has paralyzed business with the world’s second-largest economy. Starbucks and Apple have closed stores in China, airlines have canceled flights and companies like General Motors have halted production there.
All of that could shave one-half percentage point off annual growth in the first quarter, Goldman Sachs economists forecast, though they expect the slowdown to be offset by a rebound in the second quarter.
Boeing’s decision to halt production of its 737 MAX should also weaken growth in the first six months of the year, economists say.
America’s manufacturing sector is struggling, a reflection of Trump’s trade conflicts. High corporate debt levels have sparked concerns.
Some analysts also worry that the Federal Reserve’s ultra-low interest rates have helped feed risky bubbles in stocks or other assets.
And leading Democratic presidential candidates, especially Sens. Bernie Sanders and Elizabeth Warren, have built their campaigns to unseat Trump around the message that the economy remains rife with inequality, with many workers struggling to afford college, housing or health care.
Trump is unlikely on Tuesday night to let any such doubts temper his standard message that under his stewardship, the economy is thriving, unemployment is falling, the stock market is roaring and that the best days are still ahead.
“I’m proud to declare that the United States is in the midst of an economic boom the likes of which the world has never seen before,” Trump said last month in Davos, Switzerland. “America is thriving, America is flourishing, and yes, America is winning again like never before.”
Yet what Trump calls an unprecedented boom is, by many measures, not all that different from the solid economy he inherited from President Barack Obama.
Economic growth was 2.3% in 2019, matching the average pace since the Great Recession ended a decade ago in the first year of Obama’s eight-year presidency.
During the 2016 campaign, Trump boasted that his tax cut plan would boost annual growth to 4% a year — a brisk pace not seen since the late 1990s. Instead, Trump, along with Obama, is one of two presidents since World War II not to have presided over a year of at least 3% growth. And few economists think the economy will hit that target this year.
Most analysts do think Trump’s tax plan helped accelerate growth, just not the way he had promised.
“The Trump tax cuts were a sugar high that juiced the economy temporarily,” said Ryan Sweet, an economist at Moody’s Analytics.
It put more money in Americans’ pockets, boosting consumer spending. The economy grew 2.9% in 2018, a healthy pace though the same as in 2015, the year before Trump’s election.
Trump has also recently highlighted what he calls a “blue collar boom,” pointing to solid wage gains for lower-paid workers and healthy hiring in construction and manufacturing. But manufacturing jobs barely grew last year as factories hunkered down in the midst of the trade wars.
And since Trump’s inauguration, manufacturing jobs have grown more slowly than employment overall has.
Still, despite modest growth, the record economic expansion has endured under Trump. There is also evidence that its durability has, in recent years, finally started to benefit a broader swath of Americans.