WASHINGTON - Americans increasingly rate this as the best economy since the late 1990s,...
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Americans say they feel the current economy is the best since the late 1990s
Heather Long, The Washington Post|February 10, 2020
WASHINGTON - Americans increasingly rate this as the best economy since the late 1990s, with a recent surge in optimism, even though many economic metrics show striking similarities to the final years of the Obama administration.
Fifty-nine percent of Americans say they are better off financially today than they were a year ago, the highest since 1999, according to a Gallup survey released last week. And nearly three-quarters predict they will do better a year from now, the most optimistic reading that Gallup's annual "Mood of the Nation" survey has ever recorded.
Other polls and surveys aren't quite as ebullient, but nearly all show that Americans are far less worried about the economy and their personal financial situations than they were during the last presidential election.
Upbeat sentiment is critical for the U.S. economy because it motivates consumer spending, the most important driver of U.S. economic growth. And President Donald Trump is counting on a strong economy to motivate voters to turn out at the polls and reelect him.
Bryan DeHenau runs a roofing business in Macomb County, Michigan, just outside Detroit. Around the time of the last presidential election, he had enough jobs to keep one crew busy, but some of the gigs were barely profitable. Today he can keep three crews busy during the spring and summer months, and he has been able to raise prices, regularly giving people estimates of $20,000 to totally redo a roof and finding that "they don't even bat an eye about it anymore."
"I'm driving a brand-new 2019 Ford F-250. I've got work coming out the ying-yang. I'm doing OK," DeHenau said. "Four years ago, I couldn't sleep at night. That's a pretty big turnaround."
Some of the biggest recent increases in consumer confidence have come from independent voters and less affluent households, according to Richard Curtin, director of the University of Michigan Surveys of Consumers. His team always asks people to explain why they feel confident, and lately they are hearing near-record levels of people saying their income and wealth are rising.
"We've only seen this many people mention income gains twice before: 1966 after the 1960s expansion and 2000 after the 1990s expansion," Curtin said.
In interviews with six small-business owners across the country, all acknowledged that the economy had turned around under President Barack Obama, but they pointed out that several more years of steady growth, solid job gains and additional stock market records under Trump had turned "cautious optimism" into full-blown optimism.
Business owners varied in how much credit they would give Trump personally, but all had examples of how they had more work than they could handle and were buying equipment and bringing on new people in ways that had not happened since before the Great Recession. Trump's approval rating on the economy hit an all-time high last month, according to a Washington Post-ABC News poll.
On Friday, the Labor Department reported that the U.S. economy added 225,000 jobs in January, beating forecasters' expectations and further dampening concerns about a recession. Many workers have also felt better off financially thanks to tax cuts, cheaper gas prices and minimum-wage increases in more than 20 states. Wage growth has inched up for rank-and-file workers in recent months, although it remains below the stellar levels of the late 1990s.
Economists say one of the biggest drivers of consumer confidence is job quantity. Confidence rises when people feel as if it is easy to get a job, even if it is not a high-paying one.
Job growth has slowed lately, averaging 182,000 a month under Trump vs. 220,000 a month in the 37 months at the end of Obama's tenure. But the health of the labor market is evident, with the unemployment rate near half-century lows at 3.6 percent. The nation has added over 2 million jobs every year for the past nine years, an unprecedented streak of steady gains.
"Your chance of going to work tomorrow and getting laid off is lower than it's ever been going back to 1948," said Ian Shepherdson, chief economist at Pantheon Macroeconomics. "That feeling of job security is very important."
DeHenau, 33, calls this the best economy of his working years. He voted for Obama and then Trump. He gives Obama credit for getting the upswing going, but he thinks the economy would not be as good as it now without Trump.
"I give Trump 80 to 90 percent of the credit," DeHenau said. "Even under Obama when it was good, there was no profitability."
There has been less praise for Trump in the manufacturing sector, which tumbled into a technical recession last year as the president's trade war drove up prices and hurt purchases from other parts of the world.
Jamison Scott, who runs a small manufacturing company in Woodbridge, Connecticut, remembers the ugly surprise he got after Trump enacted steel tariffs in March 2018 and steel prices soared about 20 percent.
Scott, who manufactures and distributes air ducts and says he uses American steel, was worried how his company could manage the extra cost - or even keep getting enough steel. One steel shipment he ordered that year showed up with about a quarter less material than what he requested.
But steel prices have come back down in recent months, a welcome relief for Scott, and his business from throughout the country has picked up. Enough cash has been coming in that he bought a new plasma cutter and seam welder, the types of big purchases he had not made in years.
"Customers we haven't heard from in a while are coming out of the woodwork," said Scott, the executive vice president of Air Handling Systems. "The biggest difference for me is the volatility is gone."
Manufacturing is now a smaller part of the overall U.S. economy, which is driven largely by the fast-growing service sector. Still, there are signs of a potential pickup, even for manufacturing. A popular manufacturing gauge, the Institute for Supply Management survey, recently reported its first expansionary reading since July.
Trump's recent "Phase One" trade deal with China includes promises that China will buy more U.S. manufacturing and agricultural products in the next two years, another reason for optimism in sectors hit hard by the trade war.
"The Chinese are sticking to the Phase One deal," Larry Kudlow, Trump's top economic adviser, said in an interview. "The president had a good phone call [Thursday] night with [Chinese President] Xi Jinping. Xi said, 'Look, the expected purchase of U.S. exports may be slightly delayed, but we will make it.' "
Michael Canty, president of Alloy Bellows & Precision Welding in Cleveland, is more confident about manufacturing after the recent China deal and Trump's signing of the U.S.-Mexico-Canada Agreement.
"All boom cycles have an end - we all know that. But I think this is going to continue for at least another two years," Canty said. "The reason for that is the trade deals and the regulations that have come off. They are having an effect now."
There are two big question marks for the U.S. economy this year - how bad the impact of the coronavirus will be and whether business spending will pick up. Kudlow and many private-sector economists have predicted a small impact from the deadly coronavirus on the U.S. economy, shaving off about 0.2 percent from first-quarter growth. But it is yet another reason for leaders of large multinational companies to worry.
While consumers have continued spending at a healthy rate, business investment outside the housing sector contracted from April through December. Many leaders of large corporations do not hold the same economic ebullience that consumers and small-business owners do.
"When we look at the CEO confidence survey, it's quite a different story," said Lynn Franco, director of economic indicators and surveys at the Conference Board. "They are much more pessimistic. Trade has taken a toll on business investment."
There are also concerns about the U.S. economy that Democratic presidential candidates have been talking up frequently, especially the lack of higher-paying jobs and the often burdensome costs of health care, child care and college.
Jobs that pay middle-class wages have been going away in recent years, replaced with really high-wage and really low-wage work. That trend is ongoing despite Trump's repeated promises of a "blue-collar boom."
"By and large, we are producing a lot of low-quality jobs," said Mark Muro, director of the Metropolitan Policy Program at the Brookings Institution. "But a job is a job for a jittery nation."
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The Washington Post's Scott Clement contributed to this report
