President Donald Trump’s State of the Union address on Tuesday night is sure to make the U.S. economy a centerpiece of his remarks. While his administration has often been mired in controversy on other issues, the country’s economic gains last year give the White House something to crow about — and campaign on heading into next year’s presidential election.
At the same time, Mr. Trump has also taken economic policy in unorthodox — and sometimes unpredictable — directions, as he has in challenging China and even longstanding American allies on trade. As Americans prepare to hear the president speak, here are some key measures of the economy’s performance in 2018 to remember.
The economy grew at its fastest rate in 13 years
- GDP growth for 2018 is estimated to be near 3 percent—the target that the president’s economic team has set as a benchmark for success
While the government is still finalizing estimates for economic growth last year, most economists, as well as the Federal Reserve, project it at roughly 3 percent — that would be the fastest rate since 2005. Most experts also think that economic growth peaked in late 2018 and is now slowing to a moderate, though still respectable, pace.
GDP is an important gauge of economic growth, but for individuals it tends to matter a lot less than whether they can find gainful employment. So how is the labor market doing?
Job creation has been strong by nearly any metric
- Employers added 2.4 million jobs in 2018, the strongest pace for hiring since 2015.
- The unemployment rates for African-Americans and Latinos, while near record lows, , to 7.1 percent and 4.9 percent, respectively. The black unemployment rate is double the rate for white Americans.
The last time unemployment was below 4 percent, as it is now, was in 2000. Still, the labor market isn’t perfect: Nearly 40 percent of the adult population isn’t working–that’s much higher than it’s been in previous expansions.
The reasons for that don’t only fall into Mr. Trump’s lap. Inequality in the U.S. has been growing for the past four decades, and moving up the income ladder has become harder. Many Americans who exited the labor force during the last recession have yet to return. While the share of people with a job has been creeping up, the last time it was this low, not counting the Great Recession, was in 1986.
On a happier note, the lowest unemployment in decades means workers are finally getting a boost where it counts — their paychecks.
Wage growth is picking up
- Through January, average hourly wages grew 3.2 percent from a year ago. They rose an even stronger 3.4 percent for non-managers, who represent the large majority of the U.S. workforce.
That represents the fastest rate of wage growth in nearly a decade, and is a sign that the economic expansion is finally reaching lower-paid and lower-skilled workers. But it’s far lower than the pay growth seen in prior economic recoveries. At the peak of the previous two economic expansions, in 2000 and 2007, average workers’ wages grew between 4 and 4.5 percent annually.
Another key pocketbook issue is taxes. And on that score President Trump delivered on his campaign-trail promises to lower federal income-tax rates. That comes with a major caveat: We won’t know until later this year whether most Americans will benefit from the tax reset or if critics are right in saying that most of the gains will go the rich.
The 2018 tax cuts were big, though not the biggest ever
Ronald Reagan’s 1981 tax overhaul is considered the largest cut because it amounted to 2.9 percent of GDP, according to the Tax Policy Center, while Mr. Trump’s cuts amount to 2.6 percent of GDP. In terms of a drop in tax rates, the biggest cut in U.S. history happened under Warren Harding, who slashed the top rate from 73 percent to 43.5 percent. The 2017 Tax Cuts and Jobs Act lowered the individual rate for high income-earners from 39.6 percent to 37 percent.
Although economists agree Mr. Trump’s tax cuts boosted growth last year, most businesses say they had no effect on their hiring plans. If lower taxes haven’t done much to drive job growth, one group has taken the resulting jump in corporate profits to the bank–investors.
Stocks are up nearly 20 percent since Mr. Trump’s inauguration
- Since Mr. Trump’s inauguration, stocks are up nearly 20 percent. That’s better than in the first two years of President Clinton and both Presidents Bush, but trails the first two years of President Obama.
Despite the turmoil in stocks in the last months of 2018, the current bull market is the second-longest on record. Since Jan. 20, 2017, The S&P 500 is up 19 percent and the Dow is up 27 percent. Still, the stock market isn’t a proxy for the economy–only half of Americans own any stock, and those with significant holdings are overwhelmingly concentrated among the wealthy, according to the Federal Reserve.
Also looming over investors is another threat that could destabilize global markets — the Trump administration’s simmering fights with China, and even longstanding allies, on the rules for global trade.
U.S. trade deficit with China surges
- The U.S. trade deficit with China — a major bone of contention for Mr. Trump — surged to a record $323.3 billion in 2018, according to Chinese data (U.S. data isn’t yet available because of the shutdown.)
To put pressure on Beijing to make concession on trade, the U.S. has so far imposed tariffs on over $250 billion worth of Chinese goods, and has until March 1 to reach a trade deal before more tariffs kick in. In October, the total U.S. deficit with the rest of the world was also at a 10-year high, according to Census Bureau data.
America’s total debt keeps climbing
- The Congressional Budget Office projects that what’s known as debt held by the public will reach $16.6 trillion by year’s end. That would amount to 78 percent of GDP, nearly twice its average over the past 50 years. By 2029, debt is estimated to hit nearly $29 trillion, or 93 percent of GDP—a higher level than at any time since just after World War II.
- The U.S. deficit — the difference between how much money the government takes in and how much it spends—hit a of $779 billion in the first full fiscal year under President Trump.
Debt held by the public is money the federal government has borrowed from individuals, companies, state and local governments, foreign countries, and other parties. It differs from total national debt — the money owed by federal agencies to the U.S. government. That figure, too, is rising, last year topping $20 trillion for the first time.
The surge in debt since the recession stems from a sharp increase in federal spending and shrinking tax revenue. At the end of 2018, the U.S. had collected just 72 percent of the tax from corporations that it had the previous year. Tax revenue from individuals was down 0.5 percent from 2017, according to the District Economic Group.
The country’s rising debt and falling tax revenue could hinder another of President Trump’s priorities–repairing America’s aging infrastructure.
Infrastructure spending: Think trillions, not billions, experts say
- The American Society of Civil Engineers estimates that the U.S. would need to invest a whopping $4.5 trillion in the next six years for infrastructure improvements.
Mr. Trump last year proposed investing $200 billion in federal money on infrastructure as a way to attract $1.5 trillion in private funding. That amount is a drop in the bucket given the country’s aging roads, bridges, rail lines, dams, airports and other critical infrastructure, and both partisan politics and budget deficits could continue to impede progress on this front.
Prescription drug prices continue rising above rate of inflation
- Drugmakers kicked off 2019 with , with an average increase of 6 percent, according to RX Savings Solutions. In 2018, total spending on prescription drugs (by individuals and institutions) jumped 4.4 percent, according to the research group Altarum, slightly below the 5.7 percent increase in 2017.
Among industrialized nations, the U.S. spends the most on prescription drugs on a per-person basis, according to the OECD.
— With reporting by Rachel Layne, Sarah Min, Irina Ivanova, Alain Sherter, Megan Cerullo and Aimee Picchi