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Booming economy has Trump taking a well-deserved victory lap
Yes, Virginia, the economy can grow at 4 percent. It just did, much to the annoyance of Trump critics.
Even as the numbers were coming over the tape on Friday, analysts for CNBC and MSNBC were explaining why the 4.1 percent GDP growth notched for the second quarter - the highest in nearly four years - was "unsustainable." The Washington Post released the numbers, along with a warning that economists think it might be a "blip."
But, the figures show the quarter was boosted by numerous factors; it featured strong consumer spending, exports and nonresidential fixed investment. One of the few soft spots was inventory accumulation; low inventories argue for ongoing good growth in the third quarter.
Let's face facts: Accelerating GDP growth is exactly what the Trump White House hoped to achieve through cutting taxes and rolling back over-reaching regulations.
The "X" factor, unimaginable given the sustained assault on everything Trump and endless #Resistance from Democrats, is how those policies and a change in tone from the White House have lifted the country's animal spirits.
There is simply no denying that the public's mood brightened almost immediately after the election of Donald Trump - notwithstanding the hordes that took to the streets - and the optimism remains at extremely high levels.
That optimism, revealed in surveys of consumers and business managers, has jacked up consumer spending, led to increased hiring and, perhaps most significantly, raised capital investment. That could be the key to several more quarters of expansion.
The president took a well-deserved victory lap soon after the numbers were released, crowing about several features of the robust second quarter. He touted the shrinking trade deficit (which, in fact, might prove short-lived) and the job gains recorded in the past 18 months.
He also spoke of record-low unemployment for African-Americans, Hispanics, Asian-Americans, women and the disabled. He spoke of large numbers of people falling off the food-stamp rolls and the influx of people coming back to the workforce.
He also suggested that the economy might well grow at 3 percent overall this year; Brian Coulton, Fitch's chief economist, wrote to clients that the second-quarter results "bring the possibility of 3% growth for 2018 as a whole into the frame."
These are all milestones to be celebrated. But it was National Economic Council Director Larry Kudlow who zeroed in on perhaps the most important data point of all: a 5.4-percent rise in business fixed investment.
True, that marked a downturn from the first quarter's sizzling 8-percent rate, but it is still a sound figure, above recent trends, which will lead to productivity gains and, ultimately, higher wages.
If Democrats have any life preserver that might help them survive this tidal wave of good economic news, it is still-sluggish wage growth. Senator Robert Menendez recently tweeted that the Democrats' agenda will guarantee "an economy that works for everyone, not just the wealthiest, not just big corporations."
He and his colleagues cling to government reports that show disappointing wage gains. On July 17, the Bureau of Labor Statistics reported that "median weekly earnings of the nation's 115.8 million full-time wage and salary workers were $876 in the second quarter of 2018 (not seasonally adjusted)... This was 2.0 percent higher than a year earlier, compared with a gain of 2.7 percent in the Consumer Price Index for All Urban Consumers (CPI-U) over the same period."
In other words, their data shows no progress at all for workers if you take inflation into account. But those figures are misleading. Some 600,000 people entered the workforce in June, resulted in a tick up in the unemployment rate.
That increase is good news: Many folks who had given up looking for work are being lured back by the hot jobs market. Some of those are people who previously struggled to find work, like felons and those with little education. Those folks are presumably earning entry-level wages, probably bringing the averages down.
Other data supports that theory. A group called Glassdoor, which maintains a website on which employees anonymously review companies and managements, monitors pay for various occupations.
Millions of participants share salary data, which analysts at Glassdoor summarize each month. In early July, Glassdoor reported that median base pay for U.S. workers rose by 1.6 percent in June, the fastest rate since October 2017.
Glassdoor Chief Economist Andrew Chamberlain commented on his blog, "This continued pay growth is a likely sign that today's 18-year-low unemployment rate is finally translating into broad-based wage gains."
He further explained in a press release, "With unemployment hovering around historic lows...more workers, especially in high demand industries like healthcare, finance, and e-commerce, are in the driver's seat to negotiate for better pay..."
Pay hikes were recorded for all kinds of jobs. Chamberlain reports, "Many lower-paying roles are seeing strong pay gains today, such as retail key holder (4.9% percent to $29,746 per year), security officer (4.7% percent to $35,554 per year) and bank teller (8.1 percent to $31,108 per year).... For years, slack in the labor market has helped hold down pay for these roles. But with the economy running hot, we're finally starting to see raises for many lower-paying jobs."
Blue-collar workers in numerous slots did well; truck drivers saw pay go up 7 percent compared to last year, as did warehouse associates.
Bottom line: There's a reason a higher percentage of Americans are satisfied with the direction of the country than we have seen in the past 12 years. People are more confidant in their prospects and in the economy.
When growth accelerates, as it did in the second quarter, nearly everyone participates. That is good news for workers, for the country and - yes - for the GOP as we approach the midterm elections.
Liz Peek is a former partner of major bracket Wall Street firm Wertheim & Company. For 15 years, she has been a columnist for The Fiscal Times, Fox News, the New York Sun and numerous other organizations.