A Tale of Two Economies

Trump says the economy's in the hole. Clinton says it's soaring. Neither is completely wrong.

 
Democratic presidential candidate Hillary Clinton and GOP nominee Donald Trump could have been talking about two completely different countries this week as they delivered economy-focused speeches less than half an hour apart.

Clinton acknowledged as much Thursday, speaking from Warren, Michigan – just a short drive north of where Trump spoke Monday in Detroit.

"It was like he was in a different place," Clinton said in the opening moments of her speech. "When he visited Detroit, he talked only of failure, poverty and crime."

Indeed, Trump spoke to a city Monday he described as "once the economic envy of the world" that had since become "the living, breathing example of my opponent's failed economic agenda." Clinton, meanwhile, praised the city's car manufacturers for helping the U.S. auto industry have "its best year ever" in 2015.

Trump eulogized the city's manufacturing jobs, which he said had been "shipped" to "Mexico and other countries." Clinton, meanwhile, highlighted what she sees as "a true manufacturing renaissance in America."

It behooves Trump to pick apart the economy's shortcomings as much as it benefits Clinton to point out its strengths. Trump positions his rival as "the candidate of the past" against his "campaign of the future." Clinton, meanwhile, paints Trump as a man who doesn't know what he's talking about, promising a continuation of policies that dragged the country out of the worst economic downturn since the Great Depression.

And although both candidates have claimed that the other is completely out of touch with what's happening in the "real" U.S. economy, both are in some ways right about the state of the domestic labor market, which to voters is all about perspective.

National statistics back up Clinton's claims that the U.S. economy is in some respects flourishing under President Barack Obama. The labor market has generated more than 14 million new positions over the last 70 consecutive months of labor market growth. The number of domestic job openings sits near an all-time high, and average hourly earnings were up 2.6 percent in July after climbing only 2.2 percent a year prior and less than 2.1 percent the year before that.

Her Republican rival Donald Trump's view of the economy, however, isn't nearly as rose-colored. Trump has repeatedly suggested that the national unemployment rate is a "phony number," that workers are "making less money" than they did years ago and that the "whole economy" is generally "rigged."

Trump's reliance on inaccurate and unrealistic numbers – that the unemployment rate is actually up around 42 percent, that Clinton and President Barack Obama alone have cost Michigan's coal industry more than 50,000 jobs, that Clinton "doesn't do very well with women" – often muddies his point. And his proposed solutions to what he thinks is ailing America aren't always viewed as realistic or actually helpful.

But it's hard to argue that, for millions of Americans, Trump's view of the economy is their daily reality. Large national averages often brush over the stories of the workers who have given up on finding work or have been forced into different, lower-paying industries.

Even though the labor market has created more than 14 million new positions over the last 70 straight months, only 39 percent of Americans surveyed by Gallup in early August said it was a good time to find a "quality job." Roughly 56 percent of respondents to a separate Gallup survey said they believe the economy is "getting worse."

That's partly a result of the types of jobs that employers are hiring for. U.S. employers in June made 5.1 million private sector hires. But nearly a third of those hires – 32.5 percent – were made by retail and accommodation and food services companies.

These are typically viewed as low-skill jobs that don't offer many options for those looking to climb into or maintain their status in the middle class. Average hourly earnings of retail trade employees in June sat at just $17.92, according to the Bureau of Labor Statistics. For accommodation and food services workers, hourly pay sat at $13.83. Both sit well shy of the $25.61 hourly private sector average.

"[T]here are many workers who may not feel as positive as the labor market continues to add jobs at the low and high end, but not enough opportunities in the middle," Tara Sinclair, chief economist at employment hub Indeed, wrote in a research note last week, suggesting that "the types of jobs [growing in the U.S.] causes concern about long-term economic strength and growth."

And even though mean annual family incomes are reported to have climbed more than $15,000 between 2005 and 2014, a McKinsey Global Institute report published last month found that about 81 percent of American income segments saw "flat or falling" real market incomes – measured by wages and earnings from investments.

Government intervention in the form of lower tax rates and unemployment and Social Security benefits were found to have turned almost all of these losses around – keeping consumers' after-tax disposable income pool intact. But McKinsey researchers expressed concern over whether the U.S. could keep up its pace of government assistance long term.

1990: 52,623

2014 CPI-U-RS Adjusted Dollars

Source: US. Bureau of the Census

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And the fact remains that the vast majority of Americans saw their pre-tax earnings slide over the 10-year window. The Federal Reserve Bank of St. Louis estimates real median household income fell more than 7 percent between 2000 and 2014.

Recent studies from the Center for American Progress and Pew Research Center, among others, highlight similar trends – the gap between the richest and the poorest is widening, wage growth over much of the last decade has been anemic and the types of jobs that are seeing the most opportunities and wage gains are concentrated at the top and the bottom of the income scale.

"The U.S. is facing a sustained trend of declining middle-wage employment that has serious implications not only for workers, but for the economy overall," Matt Ferguson, CEO of jobs site CareerBuilder, said in a statement last week accompanying a report that ultimately estimated that demand for high-wage and low-wage jobs will climb 5 percent between 2016 and 2021.

Demand for middle-wage jobs, meanwhile, is projected to expand only 3 percent, and 61 percent of the occupations that are expected to shed positions over the next five years are considered to be middle-wage positions.

"If we can't find a way to re-skill and up-skill workers at scale, middle-wage workers will become increasingly susceptible to unemployment or will have to move into lower-paying roles that may not support them and their families," Ferguson said.

Analysts have written at length about America's current state of political polarization and how income inequality is widely considered to be a complicating factor. The reality for many is that even as national statistics show an improving unemployment rate, rising wages and ample job openings, many people in many places across the country have seen their employment opportunities erode and their paychecks thin out.

Trump wields this idea at the front lines, saying Monday he hopes to "make America great again for everyone, especially – and I say especially – for those who have the very least." And it's these people who Trump has had a great deal of success courting.

Clinton, meanwhile, acknowledges that there's still room for improvement despite macroeconomic success.

"There is too much inequality, too little upward mobility. It is just too hard to get ahead today," Clinton said Monday, vowing to help make the economy "work for everyone."

The good news, at least, is that there are signs that wages are coming back, especially for middle-income earners. Robert Shapiro – co-founder and chairman of Sonecon economic consulting and advisory company, advisor to the International Monetary Fund and former U.S. undersecretary of commerce for economic affairs – privately analyzed income gains over the last several years based on demographic specifics like age, education, gender and race, rather than just at the macro level. He found that wages rebounded markedly across the board in 2013 and 2014 compared with what was seen during the decade prior.

"You see really remarkably strong income growth pick up across almost every demographic group," he says. "2013 and 2014 are the first two years of what had been very, very strong job growth – the kind of job growth you saw in the '80s and '90s and you didn't see in any of the intervening periods."

That job growth has kept up the pace in 2015 and 2016, so he says it stands to reason that income gains likely continued. He says public opinion, though, hasn't caught on to that trend, which allows Trump to cater to folks still dissatisfied with their economic status.

"If you had a dozen years in which your income has stagnated or declined or grew very little, and then you were hit by a crisis that wiped out half of your assets, and then you get two to three years of income growth – not explosive growth, but 2 to 3 percent – you don’t trust it yet," he says. "Your main experience over the last 15 years has been income decline and asset collapse. I think it'll take another couple of years for people to trust it."

But Democrats like Clinton don't have a couple of years to debate Trump about the state of the economy. They have a couple of months until Election Day. And at least for the time being, the bleak, flaccid economic landscape that Trump so vividly details rings true for millions of Americans across the country.

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