Through 2018 business owners and consumers delivered continued bursts of momentum to the economy by investing and spending. It really was a good year, with economic growth above 3 percent and lots of hiring. In December, the government reported Friday, employers added 312,000 jobs, far more than analysts expected. An average of 220,000 jobs were added each month last year, the best performance since 2015, but an especially sound number given the already tight labor market.
The overall unemployment rate is below 4 percent, at a record low for Hispanics and near a record low for African-Americans. Just about anyone who wants to work can find a job. "If we're not right at full employment, we're very close to that," Atlanta Federal Reserve President Raphael Bostic said Friday, The Wall Street Journal reported.
Some wags are waiting for the economy to slow down, as if recession is inevitably around the corner. Maybe so, maybe not. So much of economic growth, especially hiring and business investment, is a reflection of positive expectations and momentum. Employers who expect the good times to continue will hire workers. The more jobs available, the greater the competition for skilled workers, which inevitably leads to wage increases and more spending. That virtuous cycle is playing out right now: Average hourly earnings are up 3.2 percent over the past year, the highest increase since 2008.
Business sentiment picked up noticeably with the election of President Donald Trump. That continued as the administration cut the regulatory burden on industry and worked with Republicans in Congress to pass a tax reform package that reduced corporate and personal rates and incentivized investment. If the president had taken credit and then gotten out of the way, the economy — and the markets — would look even perkier. But no, Trump is an undisciplined leader whose unforced errors are creating headaches for businesses and Wall Street.
Trump's goading efforts to start a trade war with China have become a drag on the U.S. economy. Agriculture exports from Illinois and other farm states have been hit hard. Apple also is reporting a China-related sales slowdown, due to a weakened economy there but also due to trade tension. In Washington, Trump picked a pointless fight over the future path of interest rates with Fed chief Jerome Powell. If Trump could stay focused on the big picture (job growth) and stop rattling cages, the markets probably would keep better balance and the recession wags would have less to fear.
Inevitably, politics will intersect with the economy as the Democratic-controlled House sets its priorities and the 2020 presidential primaries approach. Democrats opposed tax reform and deregulation. What do Dems support? Will they embrace or reject an economy with 3.9 percent unemployment?
We hope Republicans and Democrats, from the president to newly seated members of Congress, recognize what's at stake: the future prosperity of millions of working Americans.