Something funny happened on the way to the major and widespread economic pain America was supposed to suffer from because of the trade war with China.
It didn’t happen.
Friday’s jobs report made that more abundantly clear than any data we’ve seen since this dispute with Beijing began.
The 128,000 net new jobs added last month aren’t exactly a boffo number, but the total was almost 70 percent higher than expected. More importantly, the upward revisions to the August and September numbers were even more substantial.
During those two months, the total number of net new jobs added was 31 percent higher than last reported. That’s especially significant because August was precisely when the trade negotiations between the U.S. and China hit a low point and global stock markets endured a multi-day selloff, including a day in early August when the Dow lost 760 points.
There have been other signs that the trade war pain has been overblown, including a generally better than expected series of third quarter earnings reports and a better than expected first reading on third quarter GDP.
Naturally, much of this encouraging data will be put in the context of the political landscape. President Trump and his supporters will
Wow, a blowout JOBS number just out, adjusted for revisions and the General Motors strike, 303,000. This is far greater than expectations. USA ROCKS!
— Donald J. Trump (@realDonaldTrump) November 1, 2019
and the president’s opponents will spend too much time trying to find ways to debunk the numbers. But that’s just the usual partisan bickering that defies facts and logic. Let’s focus on what these economic figures really tell us.
First, the American position in its trade negotiations with China is at its strongest yet. While the U.S. is still experiencing significant job growth and a stable GDP, China’s GDP growth is at 27-year low… and that’s based on economic reports out of Beijing that many experts say have been exaggerated for years.
Yes, farmers in many parts of America are still suffering and the manufacturing sector is shrinking again. But neither one of those sectors has played a major role in the overall U.S. economy for some time, and even some of these beaten-down players are not exactly in freefall.
Even Caterpillar shares opened Friday’s trading 12 percent higher than a year ago, even though it has consistently been used by some pundits as the definitive example of a major American corporation most domed by the tariff war.
None of this means the U.S. is “winning” the trade war with China. Free market purists who insist that no one really wins a tariff and protectionism battle remain technically correct. But it does mean that the U.S. is proving something more relevant right now than economic theory: the American economy is clearly more durable than most experts gave it credit for. Also, the more politically pragmatic policy of turning to a more varied list of trade partners will clearly not exact a widespread economic cost to this country.
Second, what does this mean as the U.S-China trade negotiations grind on? Now more than ever, the Trump team can stick to its guns or even walk away from the table.
Despite the assertions made in a recent speech by Vice President Mike Pence claiming that the Trump administration is not seeking a so-called “decoupling” from the Chinese trade partnership, the facts say otherwise.
Picture the U.S. as a married couple having a tough time negotiating with a local car dealer, but then suddenly realizing they have the freedom to walk across the street to another showroom where they can get a better or less aggravating deal.
The dwindling recession fears also lessen the chances that President Trump will suddenly agree to a less favorable deal just to get a boost in the polls. Based on the polling data we’ve seen for this president since the trade dispute began, relations with China don’t seem to have much of an effect.
What would likely have a bigger effect is a significant economic downturn or a recession. Recessions can sometimes sneak up on an economy quickly, but with just 12 months to go before Election Day, the chances are running out for two consecutive negative growth readings on quarterly GDP.
None of this gives the president total ballot box immunity from the continuing impeachment inquiry into his dealings with Ukraine. However, it is beginning to look like President Trump will have the benefit of a strong economy throughout the impeachment process in the same way that President Bill Clinton did and President Richard Nixon did not.
But again, the more important lesson here is that the U.S. economy and the American consumer are more durable than they’ve often been given credit for. That should give this administration and future administrations more confidence to pursue better China policies, from economics to human rights.