In December, the U.S. labor market heated up, creating more jobs than anticipated and boosting confidence that the steady march of economic expansion and wage gains for American workers won’t be halted by weaker growth elsewhere and rising interest rates.
It begs the issue of how strong the economy is going to be when President-elect Donald Trump takes office in less than two weeks, given the low unemployment rate, growing earnings, and inflation that has dropped to a third of its 2022 top.
“President Trump is inheriting an economy that is about as good as it ever gets,” Moody’s Analytics chief economist Mark Zandi told the New York Times last week. “The U.S. economy is the envy of the rest of the world, as it is the only significant economy that is growing more quickly postpandemic than prepandemic.”
According to Labor Department figures, Trump will inherit a lower unemployment rate than any president since Richard Nixon in 1969, which only strengthened Zandi’s case.
President Inauguration Unemployment rate (%) Richard Nixon Jan. 1969 3.4 Gerald Ford Aug. 1974 5.6 Jimmy Carter Jan. 1977 7.5 Ronald Reagan Jan. 1981 7.4 George H.W. Bush Jan. 1989 5.4 Bill Clinton Jan. 1993 7.3 George W. Bush Jan. 2001 4.2 Barack Obama Jan. 2009 7.8 Donald Trump Jan. 2017 4.7 Joe Biden Jan. 2021 6.4 Donald Trump Jan. 2025 4.1
The S&P 500 SPX is up 23.3% in 2024, according to FactSet, which is better than any clip for a calendar year before a White House transition since Reagan took office in the wake of a 25.8% increase for the S&P in 1980. Trump is also taking office again during a sweltering run for the stock market.
Even President Joe Biden’s biggest electoral vulnerability, the inflation rate, has decreased dramatically and is still well within the historical average.
Nov. 2024, In One Chart: This graph shows when American voters first became dissatisfied with the state of the economy.
According to the consumer-price index’s most recent measurement in November, prices were increasing at an annual rate of 2.7%. That is somewhat higher than the 2.6% average rate since 2000 but lower than the 3.3% average rate since 1980. (This Wednesday is the due date for another reading.)
However, it’s possible that these figures present a more optimistic picture than the majority of Americans’ economic circumstances actually demand.
The U.S. Energy Information Administration reports that on the day of a transitional inauguration, Trump will inherit the highest gasoline price in history, $3.50 per gallon.
The president-elect will take office with the highest average rate for a 30-year mortgage since George W. Bush in 2001, and mortgage rates are also extremely high compared to recent history.
Although mortgage rates were regularly higher in the years before to George W. Bush’s first term than the current average of 6.9%, the combination of high rates and high valuations has resulted in practically record-low levels of housing affordability overall.
According to the University of Michigan Surveys of Consumers, consumer mood is still much below its historical peak.
The most recent preliminary number, released on Friday, was 73.2, down from 79 at the beginning of the year and 74 the previous month. Additionally, it revealed that consumers anticipate inflation to pick up speed in the upcoming year.
Oliver Allen, senior U.S. economist at Pantheon Macroeconomics, wrote in a note to clients on Friday that “the stock market’s sway, the slight increase in gas prices, and the recovery in mortgage rates likely all weighed slightly on consumers’ confidence at the start of this month.” “But, reading between the lines, worries about the potential impact of some of Donald Trump’s economic policies seem to be denting confidence too.”
According to Allen, consumers anticipate that Trump’s proposed tariffs will “raise the prices of many goods” because one-year inflation predictions have increased from 2.8% to 3.3%, and a significant portion of respondents stated that now is a good time to make a significant purchase.
Other economic warning indicators include fewer Americans leaving their jobs for new ones, which is further supported by a University of Michigan survey that found a substantial increase in the percentage of respondents anticipating a rise in unemployment this year.
Carl Weinberg, chief economist at High Frequency Economics, stated in a research note on Friday, “We see a reflection of the great uncertainty around the economic policies put forth by the incoming administration in the [Michigan] results.”
“Inflation expectations are up as people wait to see the impact of tariff walls … on consumer prices, the impact of a reduced labor force after undocumented immigrants are sent home, and the effects of of cutting taxes in an economy already at full employment,” he stated. “Things are fine right now, and confidence is improving, but who knows what the future will bring?”
