Donald Trump is delighted with a rebound in the US economy six months after the onset of the health crisis. While the numbers do point to an increase in employment, there is no room for optimism.
Donald Trump repeats over and over again that the economy is doing better and that the post-Covid recovery is here because of the “incredible work” done by his administration. "We had to close the economy because of the Chinese virus but now we are reopening it and our companies are breaking activity records", he defended during the first presidential debate opposing him to Joe Biden, on September 29. . According to Donald Trump, his administration put 10.4 million Americans back to work in just 4 months.
Rise in income and rebound in stock market values
The assertion is correct: the figures, which come from the US Bureau of Labor Statistics, remind us that there has indeed been a turning point since May. They give hope that this historic recession may be short-lived.
This hope is fueled by other encouraging news about the state of the US economy. In 2019, before the start of the pandemic, the United States saw a rise in the income of the median American household - an increase that also benefited the poorest Americans. The current economic difficulties should therefore not eclipse the progress made, in favor of the most disadvantaged in particular - result, say the supporters of Donald Trump today, of the efforts of this administration in terms of deregulation and the tax reform of 2017. which has enabled the private sector to invest and undertake again.
Added to this is the rebound in stock market values which is boosting the morale of part of the population. In the second quarter of 2020, the value of Americans' wealth saw a rebound of nearly 7% in the second quarter - the largest rebound in the history of the country. This rebound in the value of Americans' assets contributes to optimism, at a time when public debt is widening under the effect of the massive stimulus plan of the spring. We now know that some Americans have used the money they received from the federal government to invest in the stock market.
But this claim on job creation is also misleading, since according to the same source, 22 million jobs were destroyed in the spring of 2020, with the start of the pandemic. It also masks the fact that a number of jobs could have been permanently, or even permanently, destroyed. According to calculations by Indeed, an American recruiting firm, job vacancies in key states of New York or California are down 30% from 2019.
The end of the longest period of economic expansion
Other regions, which had experienced a short-term upturn, are seeing the number of job vacancies drop again. The mobility of American workers, which once helped redress imbalances in the labor market, no longer works as before, as the pandemic has hit the country as a whole. The prospect of a lasting slowdown in job creation is more than plausible. Certain sectors are particularly affected, such as the airline industry hit by new waves of layoffs since last week, or tourism, as shown by the layoff of 28,000 people at Disney.
Ultimately, UBS bank economist Brian Rose estimates that the number of Americans who have lost their jobs permanently could reach 5 million people. In October, the US economy created fewer than 700,000 jobs, a sign of an undeniable slowdown in labor market vitality that has been observed since the turn of May. The effects of the stimulus plan which widened the American debt are thus showing their limits.
This is why Donald Trump's enthusiasm should not make people forget that the recovery could be difficult, as the uncertainty hanging over the economy is significant: the strategy of reassuring the public by relying on a massive stimulus plan is no longer bearing such fruit in a context of deep political divisions and a health crisis caused by a virus whose functioning we do not really understand. Those who hoped for a “V” shaped recovery, with a real and rapid rebound in the economy once health restrictions are lifted now fear the scenario of a “swoosh” recovery (the name given to the logo of a large sporting goods brand), with a very short-lived recession, but a rebound that was as slow as it was fragile.
Worse still, the prospect of a recovery in "K": a part of the economy and the wealthy population, strong of its economies and relying on the stock market upturn, manages to pull out of the game, while other sectors and minorities, more vulnerable, see their lot durably affected by the effects of the health crisis. In particular, we can underline that the distribution and tech sectors have greatly benefited from the crisis, while the airline industry and tourism have suffered deeply. Figures from the US Census Bureau for food retail and distribution confirm this. Likewise, the disconnect between the US consumer confidence index and stock market growth suggests that this recovery may not benefit everyone.
The health crisis halted the longest economic expansion in U.S. history. This officially ended after 128 months of growth - eight more than the previous record, between the cold war and the attacks of September 2001. Is this recession to be blamed on the executive? Or is it the result of an external shock, independent of the actions of the Trump administration?
What impact on the election?
The way in which the stake of this election will be formulated is fundamental: poll after poll, we see that Americans have a positive image of Donald Trump's economic record, but remain more reserved in relation to his management of the crisis. A recent New York Times poll confirms this. And these perceptions are all the more important since, in the electoral campaign, the programs will have occupied very little center stage, as we could see during the first presidential debate. For this reason, if the economic record of the outgoing president returns to the heart of the campaign, the creation of 10.4 million jobs in the space of 4 months can favor Donald Trump. On the other hand, if the debate focuses above all on the management of the health crisis by the tenant of the White House and on the future of the health system, then the difficult and uneven recovery which does not benefit all Americans risks deeply affect his chances of re-election.