Economy

Exchange of the Day

The Economist interviewed President Trump, who claimed he came up with a new phrase:

ECONOMIST: But beyond that it’s OK if the tax plan increases the deficit?

TRUMP: It is OK, because it won’t increase it for long. You may have two years where you’ll… you understand the expression “prime the pump”?

ECONOMIST: Yes.

TRUMP: We have to prime the pump.

ECONOMIST: It’s very Keynesian.

TRUMP: We’re the highest-taxed nation in the world. Have you heard that expression before, for this particular type of an event?

ECONOMIST: Priming the pump?

TRUMP: Yeah, have you heard it?

ECONOMIST: Yes.

TRUMP: Have you heard that expression used before? Because I haven’t heard it. I mean, I just… I came up with it a couple of days ago and I thought it was good. It’s what you have to do.

Unemployment Rate Falls to 10-Year Low

“The pace of hiring picked up again in April and the unemployment rate fell to the lowest level in nearly a decade, providing reassurance the broader economy is poised for a strong spring after a lackluster start to the year,” the Wall Street Journal reports.

“The unemployment rate for April edged down to 4.4% from the prior month’s 4.5% reading. The unemployment rate hasn’t been this low since May 2007, and that matched the lowest rate of any point during the prior expansion.”

Economy Barely Grew In Q1

The Commerce Department said the U.S. economy barely grew in the first quarter of 2017, expanding at an annual rate of only 0.7 percent.

New York Times: “The first-quarter performance upset expectations for a Trump bump at the start of 2017. The economy’s weakness reflected new caution among consumers. Other sectors like housing and business investment turned in a stronger showing, but not enough to offset factors like weaker retail sales.”

Associated Press: “The slowdown primarily reflected slower consumer spending, which grew by just 0.3 percent. That was the poorest showing in more than seven years.”

Why Trump Backed Down from Pulling Out of NAFTA

President Trump “was set to announce Saturday, on the 100th day of his presidency, that he was withdrawing from the North American Free Trade Agreement — the sort of disruptive proclamation that would upend both global and domestic politics and signal to his base that he was keeping his campaign promise to terminate what he once called ‘a total disaster’ and ‘one of the worst deals ever,'” the Washington Post reports.

Said Trump: “I was all set to terminate. I looked forward to terminating. I was going to do it.”

“There was just one problem: Trump’s team — like on so many issues — was deeply divided.”

Trump May Sign Order Withdrawing from NAFTA

“The White House is considering withdrawing from NAFTA in the coming days, though President Donald Trump has not yet decided how to proceed,” CNN reports.

Politico: “A draft order has been submitted for the final stages of review and could be unveiled late this week or early next week, the officials said. The effort, which still could change in the coming days as more officials weigh in, would indicate the administration’s intent to withdraw from the sweeping pact by triggering the timeline set forth in the deal.”

Support for Immigration and Trade Hit New Highs

“Americans’ support for immigration and free trade hit record highs in a new Wall Street Journal/NBC News survey, just three months after the inauguration of a president who pledged to curtail both.”

“Six in 10 Americans said immigration helps the nation more than it hurts—up 6 points since the last sounding, in September 2016…. Support for free trade rose slightly in the latest survey, with 57% saying it is beneficial for the U.S. and 37% saying it isn’t—a gap of 20 points, and a record level of support.”

U.S. Moves Towards Imposing Steel Tariffs

“The U.S. has set the stage for a global showdown over steel, launching a national security investigation that could lead to sweeping tariffs on steel imports in what would be the first significant act of economic protectionism by President Trump,” the Financial Times reports.

“The decision to use a 1962 law allowing the US government to limit imports that threaten its security readiness is intended to deliver on Mr Trump’s campaign promises to bolster heavy industry and ‘put new American steel into the spine of this country’… But it risks setting off trade tensions with China just days after Mr Trump avoided another conflict by backing down on a promise to label Beijing a currency manipulator, citing in part its help in dealing with North Korea.”

New York Times: “From Mr. Trump’s ‘buy American, hire American’ rallying cry in Wisconsin this week to Vice President Mike Pence’s warnings to Japan and South Korea about the need to rewrite trade deals, the Trump administration is moving against free trade on multiple fronts.”

Election Flips Views of the Economy

Milwaukee Journal Sentinel: “Trump’s election did more than change the expectations of Republicans and Democrats about the economy’s future performance. It altered their assessments of the economy’s actual performance.”

“When GOP voters in Wisconsin were asked last October whether the economy had gotten better or worse ‘over the past year,’ they said ‘worse’ — by a margin of 28 points. But when they were asked the very same question last month, they said ‘better’ — by a margin of 54 points. That’s a net swing of 82 percentage points between late October 2016 and mid-March 2017.”

Trump Appoints Critic of Ex-Im Bank to Lead It

Just a few days after declaring his support of the Export-Import Bank, President Trump will nominate former Rep. Scott Garrett (R-NJ), a leading critic of the bank, to head it, the Wall Street Journal reports.

“Mr. Garrett voted in 2012 and in 2015 against renewing the charter of the Ex-Im Bank, which guarantees loans for companies that export U.S. products. Mr. Garrett, a New Jersey Republican who served seven terms in the House, lost a bitterly contested election in November to Rep. Josh Gottheimer (D-NJ).”

Garrett called the Ex-Im Bank a “corporate welfare program” and said it is “crony capitalism.”

Playbook: “To those who say Trump’s decision-making process is becoming more linear — explain putting a staunch opponent of the Export-Import Bank at its helm just days after the president trumpeted its import… Most people don’t know what the Export-Import bank is, or does, so putting someone atop the bank who wants to destroy it won’t garner a ton of attention. But it’s a pretty clear sign that Trump isn’t quietly abandoning his unconventional approach to governing.”

Tourism to U.S. Falls Way Off

Washington Post: “Demand for flights to the United States has fallen in nearly every country since January, ­according to Hopper, a travel-booking app that analyzes more than 10 billion daily airfare price quotes to derive its data. Searches for U.S. flights from China and Iraq have dropped 40 percent since Trump’s inauguration, while demand in Ireland and New Zealand is down about 35 percent. (One exception: Russia, where searches for flights to the United States have surged 60 percent since January.)”

“The result could be an estimated 4.3 million fewer people coming to the United States this year, resulting in $7.4 billion in lost revenue… Next year, the fallout is expected to be even larger, with 6.3 million fewer tourists and $10.8 billion in losses. Miami is expected to be hit hardest, followed by San Francisco and New York.”

Trump Shifts Gears on Economic Policy

President Trump “is abandoning a number of his key campaign promises on economic policy, adopting instead many of the centrist positions he railed against while campaigning as a populist,” the Washington Post reports.

“The statements represent a move toward the economic policies of more centrist Republicans and even at times align with the approach of former president Barack Obama. Should he follow through on the newly articulated positions, it would suggest that the candidate who ran as the ultimate outsider is increasingly adopting a more moderate economic agenda.”

Politico: “From health care and the Export-Import Bank to NATO and to China’s alleged currency manipulation, Trump has made moves that would leave a more traditional politician labeled a flip-flopper. But for Trump, who sold himself in part on a businessman’s flexibility, the moves fit his reputation for unpredictability.”

The Hill: Trump flips on four policies in one day.

Trump Says Dollar Is Too Strong

President Trump told the Wall Street Journal that the U.S. dollar “is getting too strong” and he would prefer the Federal Reserve keep interest rates low.

Said Trump: “I think our dollar is getting too strong, and partially that’s my fault because people have confidence in me.”

He also made a full reversal from the campaign by stating his support for the U.S. Export-Import Bank: “It’s a very good thing. And it actually makes money, it could make a lot of money.”