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Op-ed views and opinions expressed are solely those of the author.
Recently released numbers from the Bureau of Labor Statistics indicate that the economy added a whopping 2.5 million jobs in May. This figure surprised nearly all economists who were forecasting up to 8 million job losses. This very positive number signals the beginning of a robust recovery from the deep, yet short-lived recession.
In January and February of this year, it appeared that the economy was on track for its best economic growth year in nearly two decades. GDP last grew at annual rate of 4% in 2000. In 2020, prior to the Coronavirus pandemic, 4% growth was possible this year.
But then the Coronavirus forced nearly the entire economy to shut down in Mid-March. The complete shutdown lasted until the end of April. Beginning in May the economy began to slowly re-open. But by the end of May a total of 40 million workers had become unemployed.
Nearly all economists forecasted that the unemployment rate for May would increase significantly from the 14.7% rate recorded in April. Most economists were forecasting an unemployment rate in the 20% range. Yet the data shows, the number of jobs added to the economy in May, exceeded 2.5 million.
That means the recovery from this deep recession brought on by non-economic factors, is over and the recovery has begun. Very few economists thought the recovery wouldn’t begin until the end of the summer at the earliest and most likely in the Fall. Looks like they missed the mark here.
Just as President Trump’s economic policies ended the decade long stagnation from 2006 to 2016, his policies this year have jump started the recovery. The strong jobs report from May is only the beginning, even though May saw the largest number of new jobs ever created in a single month.
What exactly did President Trump do?
Working with Congress, Trump passed a number of stimulus packages. The stimulus provided three key components. First there was free money he gave to nearly every tax paying adult. This amounted to $1,200 for an individual and $3,400 for a family of four. Americans received this money whether they had been negatively impacted by the virus or not.
Secondly, all unemployed workers received an extra $600 per week on top of the unemployment benefits paid by the state. For more than two thirds of the unemployed workers, the total unemployment benefits exceeded their weekly income. That means not only were they not harmed, but they are actually better off financially being unemployed.
Those two actions gave nearly all consumers more money to spend. As the economy re-opens consumers were eager to spend this extra money. That helped to shorten the recession.
Trump also made sure that small businesses had the resources to maintain business operations during the shutdown and the re-opening. The stimulus packages also included loans to small business to pay their entire payroll and some other expenses. If the business retained all of their workers, the loan turned into a grant that did not have to be repaid.
As a result, as the economy re-opened consumers were spending and businesses were maintaining their staff or at least were calling them back to work if they were laid off.
Although many economists are very cautious about reading too much into the May jobs report, the reality is that the report is just the beginning. When the jobs report for June is released in early July, we will likely see another record number of jobs added, perhaps approaching 4 million jobs created.
Economic growth which was negative in the first quarter and will be very negative for the second quarter, will turn positive in the third quarter. Growth will skyrocket in the fourth quarter and into 2021. That means the US will see a V shaped recovery indicating a very rapid return to growth.
Because Trump removed burdensome regulations, repealed the negative aspects of the Dodd/Frank law and cut taxes for all Americans including corporations, the stage is set for the most robust recovery since the late 1940’s. Regulations, Dodd/Frank and high taxes were the reasons the recovery from the 2008-2009 recession was the worst in history.
The unemployment rate will quickly fall from 14.7% in April, to 13.3% in May and under 10% by September. As bad as things are today, we have just begun the strong recovery. The jobs numbers will look even better in the months to come.