During his State of the Union address Tuesday, President Donald Trump said the U.S. economy is the best it’s ever been. It’s not.
Perhaps more interesting, though, were comments that focused on the working-class economy, made up of many voters who were key to Trump’s election.
“This is a blue-collar boom,” Trump said during his speech. He made the same statement late last month at the World Economic Forum in Davos, Switzerland. And Trump’s top economic adviser, Larry Kudlow, has repeated the line in recent weeks.
It’s a hard claim to prove right or wrong, given that you can’t exactly quantify a “boom,” at least in economic terms. Instead, Barron’s attempted to evaluate the working-class economy through states with relatively high shares of employment and economic output tied to the blue-collar manufacturing and construction industries. To do so, we looked at state-by-state economic output (gross state product), personal income, and personal consumption expenditures data for seven states, many of which are considered swing states in the 2020 race.
There is truth to some of Trump’s statements about the state of the economy. Unemployment is indeed at a half-century low, and he’s not far off when he says that his administration has created half a million manufacturing jobs (it’s 487,000 so far). Still, it’s worth noting that manufacturing has taken a big hit from the trade war with China and the sector has been in or near recession since August for the first time since the beginning of 2016.
Moreover, manufacturing and construction job growth has slowed, says Elise Gould, a senior economist at the Economic Policy Institute, which focuses on low- and middle-income workers. Over the past six months, factories have created just 3,000 jobs. Data released on Friday from the Labor Department showed factories shed 12,000 workers in January. Construction hiring rose, thanks to mild weather, but that trend is cooling as builders report labor shortages.
It’s not surprising that states relatively more oriented toward production have underperformed the broader economy. Among states with the highest manufacturing employment and manufacturing as a share of gross state product are Indiana, Wisconsin, Michigan, Iowa, North Carolina, Ohio, and Pennsylvania. Each of these states went for Trump. And in six of seven, the rate of economic growth has slowed since the third quarter of 2016, when Americans last went to the polls to vote for president, at a time when U.S. gross domestic product has grown at a steady 2% clip. The outlier—long a reliable Democratic state—is Michigan.
The story is similar when you look at personal income data. All but one of those seven states—Pennsylvania—have fallen short of gains in national income. Ohio ranks in the bottom 10 when you consider growth in personal income in 2018 compared with 2017 (that’s the most recent data available from the U.S. Bureau of Economic Analysis), followed closely by Indiana.
Union data is another way to evaluate the blue-collar economy. EPI’s Gould says the share of union workers is at a low (11.6%), with just about 7% private-sector workers represented by a union. More than a third of public-sector workers, meanwhile, have union representation. Data from the Bureau of Labor Statistics show most of the wage gains across union workers is in the public sector, or across federal, state, and local jobs. Those wages rose 4.4% in 2018 versus 2017, compared with a 2.6% rate for public-sector union workers. Average hourly earnings across all jobs rose 3%.
Gould notes that some of the recent pay advances among lower-paid workers, irrespective of industry, are directly attributable to 22 states and a host of cities recently raising their minimum wages as the federal minimum range has sat at $7.25 an hour since 2009. “You can’t attribute that to federal policy,” she said.
Investors trying to read the 2020 tea leaves might take note of the economic conditions across the manufacturing sector, not least because it has an outsize effect on the handful of states that could again determine who wins. It may not matter, of course: Plenty of voters cast their vote for reasons beyond economics, and plenty of workers may feel better than the data suggest they would.
Write to Lisa Beilfuss at [email protected]