All of the links from the discussion on Edition 27 of Rob Talks Money
The private sector in the United States added 1.7 million jobs in 2017. Further, unemployment neared 4%, and the GDP is up 2.5% over all for the year.
This leads us to the question of how does all of this happen?
I am not an economist and the how of this question very well could take an entire book to answer. So allow me the luxury of simplicity as I explain this at a sky level. Deal?
CONFIDENCE IN THE MARKET
Consumer and investor confidence is immeasurable in some respects but plays a large part in job growth and unemployment levels. Who is quarterbacking the country and how it is being lead plays a key part in all of this. According to Business Insider a republican administration seemingly brings about a much more lenient regulatory environment and therefore the financial sector has more confidence in the market.
If a bank knows that they are not going to be bombarded by unnecessary regulation, they may be more likely to lend more money--which means more homes are being built and more jobs in the construction industry are being brought about. Regulations, and how they are implemented, can make or break an economy.
The same can be said of the stock market. The freer a market is, the more likely the stock market is to rise. However, when regulation is too lenient in certain areas, financial crisis can ensure, hello 2008. So like anything, there is always a balance which is why regulations need to be justified and understood on all sides.
How does our GDP work?
The Balance has a good article detailing how our GDP is calculated, but in short there are four things taken into account:
2. Business Investment
3. Government Spending
4. Net Exports of Goods/Services
The better each of these categories perform, the more our GDP rises. Since 1929, it has been as high as 18.9% annually (1942) and as low as -12.9% (1932). It is worth noting a country cannot have an overall negative GDP but in times of a recession, a country can have a negative GDP for the quarter or year.
Back to the Good Stuff
It is worth answer the title question, here. Yes, Donald Trump is partly responsible for this boom, as is President Obama and the policies he put forth. Towards the end of his presidency, the economy was growing and Trump continued the rise based on (1) consumer confidence and (2) market leniency. The second point is subjective but seemingly implied in what we are seeing in nearly all markets as the stock market is break records almost weekly, mortgage applications are up, and lenders are writing more loans.
Who is really responsible for the growth are those in the private sector leading the charge, innovating industries, and putting people to work. I think 2018 is going to continue on the same trend as the GOP tax plan will continue to strengthen businesses and free up capital to be passed along to employees as well as open up new positions. Overall, the tax reformation is a good short-term plan as long as spending cuts are produced in the next year.
I know we have bounced around a lot here but I wanted to give you my $0.02 on how the economy is performing under our new President and who is truly responsible. Like anything, the people who are putting in work day in and day out are the ones responsible.
People first. Government second. That is how economies ought to be structured.