How much better can things get?
That’s the kind of question that politicians hate and the public loves. The two dozen Democratic candidates heading into the Iowa caucuses in a few weeks would love to accuse the president of mismanaging the economy. But with a jobs report like the one that came out early Friday morning, Trumponomics are roaring.
Consider the unemployment rate of 3.5 percent. Most living Americans have never seen an unemployment rate this low, because most Americans are under the age of 50 and the U.S. economy hasn’t had such low unemployment since 1969.
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As every college student preparing for their final exam knows, some amount of unemployment is natural. When I was in college, the natural rate was considered to be around 5 percent; roughly 1-in-20 workers was between jobs due to moves, marriages and various life changes. In fact, if unemployment gets too low, it signals that companies are hurting for workers, which is good for wages but not for productivity. Sure enough, average hourly wages are nearly 4 percent higher than 12 months earlier, a clip of real wage inflation that’s near a 25-year high.
The Bureau of Labor Statistics publishes a wide array of statistics in its “first Friday” report, and the real surprise of Friday's report was the strength across the board. For example, the payroll report, which is collected differently from the unemployment data’s survey of households, showed a net increase in payroll jobs of 266,000 in November alone. Analysts predicted far fewer jobs, but November outpaced 2019’s monthly average of 180,000 jobs. There’s even a silver lining: Previous months' payroll estimates were revised up by 41,000 more jobs.
And, so, critics of America have to face this puzzle: How much better can things get?
The 2017 corporate tax cuts worked, pure and simple. They weren’t, as critics warned, a sop to the rich. Instead, lowering tax rates from 35 percent to 21 percent on corporate income led to firms hiring more workers and paying higher wages, exactly as theory in economics textbooks predicted.
There’s a larger lesson here, not just a political or economic one. It’s worth stepping back from the daily sparring in Washington to think big about what America’s economic strength means, because there is a nearly constant narrative that something is broken in just about every policy area.
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Immigration is broken, they say, and poor migrants are stealing jobs. Or technology policy is broken because robotics and AI are a threat to jobs. How about trade policy — clearly broken, because cheap imports are costing jobs. Notice a trend? Every one of these narratives is proven wrong by the facts.
So maybe it’s time to recognize that those “broken” policies are, on the contrary, working perfectly. America has freer trade and more open immigration and lower corporate taxes than just about any other country in the world. We certainly have more economic freedom than Europe or Japan, let alone China.
While it is true that China is an emerging superpower, its economy is not half as productive as the United States’. It is a stupendous error to think the U.S. should learn from China’s economy, but we see pundits urging us to admire Beijing's central planning all too often. They are falling for what I call the "Nietzschean Trap." As the German philosopher Friedrich Nietzsche said: “Battle not with monsters lest ye become a monster.”
America’s only battle is with itself: How can we go faster? How can our factories become more productive, our entrepreneurs more creative, our children more inspired? If trend lines of the past 20 years tell us anything, it is this: The jobs of the future will come naturally from the marketplace in sectors that no government can anticipate. There are more big-data analysts being hired than anyone imagined ten years ago. But there also are more household delivery trucks from Amazon. There are more YouTube stars, more gardeners, more life coaches.
The bottom line on the jobs report is this: Don’t worry. Jobs are plentiful in a free country. It’s a perfect message.
Tim Kane, Ph.D., is the J.P. Conte Fellow in Immigration Studies at the Hoover Institution at Stanford University and an economist. His most recent book is, “Total Volunteer Force.”
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December 07, 2019 at 09:00PM
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