The first 100 days: The time-honored test of whether or not a new president has the ability to advance his agenda in Washington ends on April 29 for the Trump Administration. Love him or hate him, Trump has had an effect on personal income as unemployment drops, consumer confidence soars and wages slowly inch up. Here’s what to watch for on the Monday, May 1 personal income and outlay’s indicator—Trump’s 102 day in office.
1. Personal Income’s Slow But Steady Growth
Trump’s goal of sustaining economic growth of 3% to 4% over the next 10 years may be an impossible task. Case in point, personal income in dollars rose by a mere 0.4% in February, down from an 0.5% increase in January. But there should still be continued growth in March—just don’t expect it at the same pace. Some estimates show an increase of only 0.3%.
“Personal income will be up but not particularly strong,” said David Sloan, senior economist of 4CAST-RGE in New York.
The slow rise of hourly earnings, from $26.09 in February to $26.14 in March, were also disappointing, but point to continued increases, not an indication that there is a problem in the market.
“There is no sign of going into recession,” said Stan Shipley, senior managing director and economist at International Strategy & Investment in Manhattan. “Almost every indicator is showing that the economy will continue strong in the second half of 2017. The economy is in good shape.”
2. Average Work Week Hours Rebound
The average work week declined from 34.4 hours in January to 34.3 hours in February and March.
Throughout most of 2016 the average work week was a steady 34.4 hours, peaking at 34.6 hours in Jan. 2016. While normally, work week hours will increase in positive economic times, resulting in higher individual incomes, the reduction may have been a result of auto manufacturers with relatively bloated inventories across the nation in March. Many had to cut employee hours to maintain a profit margin. Since inventories leveled off in April, production should increase this summer.
“The plan for April, May and June is to boost production,” Shipley said. “That means more hours.”
3. Confidence Levels May Start to Wane—But Not By Much
Confidence levels soared to unprecedented heights during the first two months of the Trump Administration despite Trump’s unpopularity ratings. From April 26-28, days 97 to 99, Gallup polls gave Trump an unremarkable B- for his performance, as 52% of the people expressed disapproval. Yet, confidence levels were at a 16-year high only a month prior. The increase may have been because of Trump’s continued promises to slash taxes and increase spending—yet it is unclear when or if these things will happen.
“I think it will be a difficult sentiment to see consumer confidence resume at the same rate,” Sloan said.
The confidence survey was also taken before Trump’s March 2017 failure to pass legislation that would replace Obamacare. Some investors may view this as Trump’s inability to pass legislation that can actually impact spending or slash taxes for the upper crust.
In April, the most recent survey showed that confidence levels did in fact dip slightly to 97.0 index points, a small decrease from the 98.0 expected by many economists. Still, numbers were higher than March’s final reading of 96.9—some of the highest numbers since before the start of the Recession.
“The unemployment rate is low. Wage gains are slowly rising. Job growth is solid,” Shipley said. “It’s hard to make a case that consumer confidence is on the downward trend with these indicators. It’s going to stay high.”
4. Unemployment Also Continues to Fall
In March, the unemployment rate hit a low 4.5%, down two-tenths from February’s numbers.
One reason for the lower unemployment rate despite seemingly fewer jobs is that the economy may have reached full employment.
While Trump has said he will help create 25 million more new jobs over the next decade with his policies, bringing the number of employed Americans from 152 million to 177 million people, maintaining this pace of job growth may be unrealistic. It would require every man, woman, elderly person and child to be employed.
“It can mean only one of two things: either the United States needs an enormous influx of immigrants, or a much higher share of the elderly population needs to be put to work,” Ben Zipperer wrote on the Economic Policy Institute’s blog.
Still, the unemployment rate should remain relatively low throughout 2017, even going down as low as 4.0% sometime between 2018 and 2019.
“Unemployment is going to continue to stay low,” Shipley said. “Over the next year it’s going to keep trending down, continuing at 4.5% in the second half of 2017.”
The good news: When people are employed they spend more money.
5. Consumer Spending Habits Are Changing
With two-thirds of the GDP made up of consumption, American consumers are still spending money—they just want different things.
In the retail realm, more and more brick-and-mortar stores are closing as online competition takes over. Last month ended with disappointing retail sales but an increase in online shopping. American e-commerce sales were valued at an estimated $322 billion in 2016 with gains expected to reach as high as $485 billion by 2021.
Retailers will be forced to adapt if they want to stay in the game.
“This is not the end of retailing as we know it,” Joel Bines, managing director of AlixPartners, a New York based consulting firm, told the WSJ.
In addition, some economists think last month’s low consumption levels are just temporary, a result of a historically warm winter around the nation that offset utility bills, a sizable chunk of consumer spending. The numbers should rebound in March.
The government’s concerns about fraud also caused delays in personal income tax returns, which led to less consumer spending. As individuals get their returns, spending also should increase.
According to Gallup reports, the average American still spends about $106 a day—hardly a frugal amount.
“Spending already has increased, as we’ve seen in prior years,” Shipley said. “There is no reason to pull back the horns and think people won’t spend more money next month. Most indicators show high consumer confidence and high wages. These indicators drive sales higher.”