United States

Trump waves his magic wand

Print edition : March 02, 2018

President Donald Trump at the podium in front of Vice President Mike Pence (left) and Speaker of the House Paul Ryan during his first State of the Union Address to a joint session of Congress in Washington, D.C., on January 30. Photo: Win McNamee/REUTERS

Traders on the floor of the New York Stock Exchange on February 5, the day U.S. stocks plunged and sent the Dow Jones Industrial Average down almost 1,600 points. Photo: Michael Nagle/Bloomberg

At an Amazon fulfilment centre in Tracy, California, on November 28, 2016. Wall Street loves it when companies such as Walmart and Amazon cut their workforce and increase the productivity of those who remain. Photo: Noah Berger/REUTERS

In his first State of the Union Address, President Donald Trump spoke slowly and at length but said little; it was vintage Trump.

Donald Trump offered his assessment of his first year in office when he delivered the annual State of the Union Address. Vintage Trump was on display, including his casual applause for himself. His smug smile defined the speech, which went on for an hour and a half. It was the slowest speech recorded in American history, 72 words a minute (Barack Obama delivered about 109 words a minute). It was that pseudo-precise delivery along with his broad smile that seemed to drag the speech on forever.

Television viewers could easily be forgiven if they prayed for an advertisement break. Anything would have been more enjoyable. Forty-five million Americans did indeed watch Trump make his speech, 17 million fewer than the people who voted for him. One of the features of American television is that most networks broadcast nothing during the time slot for the presidential address. It is done out of respect for the office. The main contenders against Trump were college basketball and reruns of old television shows. It is probably the case that rather than watch nothing, many Americans decided to keep the television on while Trump spoke.

Nothing pleases Trump more than the feeling that he has been able to draw the biggest crowds or get the highest ratings. This is fodder for his Twitter account. Whether his claims are based on facts or not is irrelevant. It helps that Fox News provides Trump with material for some of his claims. It was Fox that ran a story, on shaky ground, that his was the most watched State of the Union Address. When confronted by the data that it was not, the White House retreated behind the specious argument that it was the highest rated such speech on cable television. Trump’s political landscape is saturated with his ego. It is not enough to be President. He has to have done everything better and bigger than anyone else.

Wages

Trump spoke slowly and at length but said little. The most interesting part of his speech was his claims about the United States economy. “Since the election,” Trump said, “we have created 2.4 million new jobs, including 200,000 new jobs in manufacturing alone. After years of wage stagnation, we are finally seeing rising wages.” In fact, according to the U.S. government’s own data (Bureau of Labour Statistics), only 1.8 million Americans have found work over the last year. This is the slowest rate of job growth since 2010. This did not deter Trump from his braggadocio.

Nor did it worry Trump that he exaggerated the number of manufacturing jobs that had been created in the past year (184,000 compared with 200,000). It bothered him less that the total number of manufacturing jobs in the U.S. is a million less than it was in 2007, a decade ago. The rate of growth of manufacturing jobs will not be able to bring the total number back to what it was before the recession of that year.

Reuters, in a new major study on unemployment and wage growth (February 5), found that unemployment had indeed fallen in the U.S. and wages were now growing for the first time in decades. Average hourly earnings were up by 2.9 per cent, noted Reuters. This is significant, although in a Reuters poll (January 29), the results showed that very few adults in the U.S. reported bonuses or wage gains (only 2 per cent). The evidence seems spotty. It is not clear. Workers in the U.S. have not seen wages rise above inflation since the 1970s. The situation seems bleak today. There are of course pockets of the U.S.—San Francisco, for instance—where a competitive jobs market has put pressure on wages. Labour campaigns, such as the Fight for Fifteen, have been able to make gains for some sectors of workers, but these are few and far between. There appears to be no conclusive evidence that the U.S. workforce is finally seeing some modest increase in its previously precarious existence.

Stocks

Reports that wages have risen and that unemployment has gone down sent tremors through the stock market. One would imagine that higher wages would mean more demand for goods, which should be good for the economy. But higher wages also signal that inflation might be on the cards: prices will rise as people with money now bid them up. If there is to be inflation, then the bond market, at historically low levels, now begins to react. This is what happened on February 2 (Friday), when the markets reacted negatively to the reports on higher wages. On February 5 (Monday), the stock indices fell like a stone.

There is often an inverse relationship between workers and stock markets. Markets go sour if workers benefit, and markets celebrate when workers are hit hard. Trump’s tax breaks to the corporate elite allowed Walmart, Sam’s Club and Kimberly-Clark to use the windfall as a way to lay off workers. Higher benefits and wages that were announced to workers on January 11 afforded the good publicity that provided cover for the February 1 lay-offs of thousands of Walmart workers. Those that remained were promoted into more intensive work, with their productivity now higher and the expectations on them increased.

Walmart is in a head-to-head struggle against other logistics firms such as Costco and Amazon, each of which has also begun to “streamline” its workforce—in other words, fire a section of the workers and increase wages marginally for those who remain and force them to work harder at the job. In November last year, Mirror reported that Amazon workers “are suffering panic attacks as they struggle to keep up with demand”. The workers are asleep on their feet, struggling to keep up with the expected pace: to process a package every nine seconds.

Wall Street loves it when companies such as Walmart and Amazon cut their workforce and increase the productivity of those who remain. Amazon gives out pink slips, and it can report earnings of $1.9 billion over the last three months of 2017. Revenue soared, Amazon’s stock rose and its CEO’s net worth reached $105 billion. Amazon’s Jeff Bezos is now the richest man in the world. If you add the net worth of the other nine richest men, then the total wealth is $674 billion, more money than is held by the bottom half of humanity. Bezos wants to be the first trillionaire in world history.

Trump’s own ambitions are pedestrian in comparison. He merely wants to be the Saviour of American capitalism. And he wants to Make America Great Again. Everything is written in capital letters. The tumble in the markets will settle down. Interest rates will rise. Countries dependent on foreign direct investment will suffer. The rich will make more money. Wages will level off. Trump will smirk. He will take credit for whatever he can make to appear as a miracle. He might even be re-elected in a few years.

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