Market Watch

No, it wasn’t the “new normal.”

1st Quarter 2019

Market Watch
by Joe A. Hollingsworth, Jr.

In the Obama years, how many times did we all hear the words “get used to the new normal” – whether they were talking about Baby Boomers retiring, persistently high unemployment (if you included all the unemployment variations), lack of productivity increases, or the words “manufacturing jobs will never come back”?  Well, as it worked out, they had almost half of the country believing it by the end of 8 years. However, in the case of manufacturing jobs during the Obama years, overall employment grew faster than employment in the manufacturing sector; thus, causing the New York Times columnist and economist Paul Krugman on November 25, 2016 to say, “nothing policy can do will bring back those lost jobs. The service sector is the future of work, but nobody wants to hear it”.  We were destined to be a country of lower paying restaurant and retail outlet jobs which was the grand vision by the Obama administration. However, slightly more than the other half of the country decided they would take a gamble on Trump; and, with Trump’s policies (and expectation of those policies), things changed on manufacturing.

In the 22 months of Trump’s presidency, manufacturing employment grew by 3.1%, and non-farm employment grew by 2.6% which was just the inverse under Obama.  In fact, in the last 22 months of Obama compared with the first 22 months of Trump, more than 9 times the number of manufacturing jobs were being created under Trump – so much for Obama’s “new normal”.

Never have regulations been lifted, modified, or revised at such a rapid rate.  In fact, some estimates say as much as 3 times the rate of the Reagan years. However, that’s not the best of it.  We have finally got a tax code that makes sense for business, and thus industrial real estate. Whether it’s totally expensing off new building upfits or purchasing higher productivity equipment, this manufacturing resurgence is likely to continue at an extremely fast clip. Sure, we have a Federal Reserve that just went crazy with QT (quantitative tightening) and raising interest rates at the same time (December’s terrible decision) as well as the ever-evolving threat of higher tariffs. However, such variables are always present in a Democracy!

As Phil Graham constantly says, “Government can’t rescue the poor”. But, I believe higher paying manufacturing jobs stand a good chance.  After 50 years of the war on poverty, roughly 13% of Americans lived in poverty both at the start and the end of the 50 years. There is not enough federal money to make everyone rich; only individual initiative can accomplish this.

Less regulation and more individual initiative with less government dependency are greatly expanding the opportunities for an individual’s economic destiny, and it’s playing out in front of our eyes! Higher income jobs are being created; lower income jobs are being eliminated; and, in some cases, jobs are being replaced by robots or software.  Let the good times roll!