Top Obama Economist: GDP Even Stronger Than It Looks

Team Trump is looking to get ahead of the next jobs crisis

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The recent stretch of subpar growth - just over 2 percent annually - is unprecedented.

This rate of growth, however, was less than what was forecasted by economists.

A measure of domestic demand surged at a 4.3pc rate in the second quarter.

"Once again, we are the economic envy of the world", he said. "Yet when I say we're going to tax them everyone goes insane and says it's not free trade", he added.

With Gross Domestic Product hitting 4.1 percent for the second quarter - on track for the highest annual growth rate in more than a decade - the predictions by Democrats that a Trump administration would spell doom for the economy are being recalled. President Trump has suggested that America will quickly win the trade wars he is unleashing, so retaliatory tariffs will be short-lived. This is a strong economy. Friday's report "isn't a one-time shot", he said. If Trump's trade wars continue or intensify, growth will suffer more. Earlier this month, the Commerce Department said United States soybean exports surged in the second quarter, delivering an outsize boon to economic growth even as China shifted much of its sourcing to Brazil in response to its worsening trade relations with the US. This too will likely not be sustained.

Exports are a particularly dramatic example.

Ian Shepherdson, an economist at Pantheon Macroeconomics, said following Friday's report, "In one line: Looks great; won't last". And that gave the overall export numbers a big lift. Apparently, lots of foreigners were buying our soybeans in anticipation of the tariffs China was about to place on them.

GDP Goal Compared with a year earlier, second-quarter GDP rose 2.8 percent, just shy of the 3 percent mark, which was last reached in 2015.

The acceleration in real GDP growth in the second quarter reflected accelerations in PCE and in exports, a smaller decrease in residential fixed investment, and accelerations in federal government spending and in state and local spending, the BEA said in its release Friday.

Another factor at play here is tax cuts.

Trump's implementation of the tax overhaul and deregulation also boosted the number, he said. But, he says, that growth in spending will fizzle.

The 4.1 percent growth figure may or may not be sustainable.

The economy faces two significant structural drags that could keep growth closer to 2 percent than 3 percent: an aging population, which means fewer people are working and more are retired, and weak productivity growth, which means that those who are working aren't increasing their output as quickly as in the past. Shepherdson predicts about the same.

Note, too, that the trade war with the European Union is on hold and that the future for soybean exports now seems rosy (elsewhere, the Post, borrowing from Nancy "Crumbs" Pelosi's play book, writes off this good news as "beans"). If that escalates and disrupts supply chains and damages exports further, they say all bets are off on whether the economy will be growing at all or sliding toward a recession.

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