Since taking office, President Trump has routinely touted stock market gains and positive jobs reports as evidence that he is succeeding.
Economists say that while he can take some credit for the stock market, it’s far too soon for his policies to have affected the job market.
That’s because the stock market tends to react to expectations as much as reality, so it’s reasonable to assume that traders responded to some of Trump’s campaign promises, such as cutting taxes. But employers make hiring decisions based on fundamental factors like the health of the economy, which a president can only influence indirectly.
“In the short term, presidents do have a major impact on the rise and fall of the stock market,” said Bob Bruner, current economics professor and former dean of the Darden School of Business at the University of Virginia. “Presidents can declare intentions to adjust taxes, impose antitrust enforcement on industries–such as Jack Kennedy did–declare war, or undertake military actions without the sanctions of Congress. All of those things dramatically affect the expectations of the capital markets.”
The growth in the stock market during Trump’s first 100 days was the most under any president during that period since 1989–the first year of George H. W. Bush’s presidency. This boom–which has been coined the “Trump Bump”–was likely driven by Trump’s promises to slash taxes and pass an infrastructure bill.
“No one ever knows why the stock market does what it does,” says Alan Blinder, an economics professor at Princeton University. “But it’s not an unreasonable supposition that the election of Donald Trump had something to do with it. Maybe a lot to do with it.”
However, despite the success of the stock market under Trump, its gains are somewhat contingent on the president actually getting that agenda signed into law, something he has struggled with. “Markets react to sentiment but they are sustained by facts and commitments,” added Bruner.
Trump has yet to succeed on getting any major part of his agenda passed. The Obamacare repeal recently died in the Senate, and little to no progress has been made on passing an infrastructure bill or tax reform–two other signature parts of Trump’s agenda. If nothing continues to get done, the gains in the stock market ignited by Trump could disappear.
Blinder says that in terms of economic policy Trump has “basically done nothing,” besides cutting back regulations in a “minor” way. However, Blinder also noted that Trump has “not done anything bad macro-economically either.”
The president’s ability to influence economic growth is sometimes overstated, economists agree.
Presidents can affect the economy through the decisions they make, but it often takes years to gauge the impact. For instance, most economists now say President Obama’s stimulus package helped pull the U.S. out of the recession, even though a majority of Americans at the time believed it didn’t work. Likewise, President George W. Bush’s decision to launch the Iraq War could have contributed to the Great Recession, economists note. But, even so, the president, Bruner says, is just one of the “many cooks in the kitchen” that influence the economy.
So, while Trump may deserve some credit for the boost in the stock market, his impact on job creation and overall growth remains to be seen. Yet the president, on Twitter, has repeatedly taken credit for the positive jobs reports.
“It’s premature,” said Stephen Moore, a visiting fellow at the Project for Economic Growth at The Heritage Foundation, of Trump’s tweets on jobs growth. “It takes a while for policies to translate into jobs. Stock markets react instantaneously to things. For jobs to come back–that takes longer.”
Job growth has increased steadily under Trump. Through the president’s first five full months in office, employers added 863,000 jobs and the unemployment rate decreased from 4.8 percent to 4.4 percent–an indication the economy is doing well. But the job growth under Trump is also similar to the last five months of Obama’s presidency, when 908,000 jobs were added, showing that the increase is likely just a continuation.
“The jobs results are the outcomes of many people,” said Bruner. “Trump is merely basking in the afterglow of solid economic news. The roots of which extend well back in time.”
Also, by taking credit for a robust economy so early in his presidency, Trump may be digging himself into a hole if there’s an economic downturn later on in his four year term.
“It’s dangerous for a president to take a lot of explicit credit for a good economy this early in a presidency because the economy won’t stay good,” said former Labor Secretary Robert Reich. “It’s the application of Isaac Newton’s theorem to economics–what goes up must come down. Recessions are inevitable.”
Reich added that Trump will have to “figure out a way” to avoid blame when the “inevitable” downturn happens. “But Trump being Trump, he will…”
Correction: An earlier version of this story misspelled Alan Blinder’s last name.