01.26.2018 0

After slowdown in fourth quarter, Trump economy could be set to soar in 2018

By Robert Romano

The U.S. economy grew at an inflation-adjusted 2.3 percent average, annual rate in 2017 as the Trump economy enters 2018, according to data published by the Bureau of Economic Analysis today.

After President Donald Trump’s first year in office, the momentum in the economy can be seen, but after two quarters above 3 percent, the fourth quarter came in at 2.6 percent growth, underscoring the challenges facing the economy.

Annually, the economy has not grown above 4 percent since 2000 and not above 3 percent 2005.

2007 to 2016 was the slowest economic 10-year growth rate in U.S. history.

Now, a decade after the financial crisis and the weak recovery, the U.S. economy needs to turn the corner. For those hoping the U.S. would break out of that funk, the latest numbers are sure to disappoint.

But could 2018 finally be the year the U.S. could break its sub-par, slow growth losing streak?

Annual GDP growth is calculated by the taking the four readings of the real GDP using chained dollars for two consecutive years, averaging each year out and then calculating the growth rate.

So, all that is needed to get an average annual reading of 3 percent for 2018 will require, above all, a strong first quarter of at least 3 percent annualized.

This cannot be emphasized enough.

If it’s less than that, just like in 2017 and preceding years, a weak first quarter will mean the amount of growth needed to get to 3 percent actually rises by tens of billions of dollars. If it’s above that, then hitting the annual number becomes that much easier.

Technicalities of how the numbers are calculated aside, there are many reasons to be optimistic about 2018.

Between deregulation and the corporate and individual tax cuts that were just implemented, plus the repatriation of hundreds of billions of dollars of foreign earning being reinvested in the economy, there is real stimulus on the supply side being provided that can boost not only growth by attracting new investment, but also increase wages and create jobs.

Meaning, even if growth is still lagging, one thing that won’t be is your own pocket book.

Headwinds continue to include the slowing growth of the working age civilian labor force, thanks to a combination of slower population growth and relatively fewer working age adults looking for jobs.

A key data point to watch is the Bureau of Labor Statistics’ growth of the 16-64-year-old labor force. If it remains sluggish, then the economy might have a harder time reaching the robust growth everyone is hoping for.

For robust economic growth to be sustained, more people need to be participating in and entering the economy.

That is why the President’s proclamation of putting American first at the World Economic Forum in Davos, Switzerland is so critically important. By pushing for better trade deals, in his words “fair and reciprocal” trade, for the U.S. and stronger economic partnerships abroad, Trump is fighting to bring back job opportunities to the American people and to boost exports.

All of these things work together. Obviously, it is impossible to predict future growth, but thanks to President Trump’s productive first year, there are new reasons to be optimistic. And one thing’s for sure, we could use the good news. Stay tuned.

Robert Romano is the Vice President of Public Policy at Americans for Limited Government.

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