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Positive fiscal signs amid a slow-growth economy

The U.S. economy has slowed since the 1990s, but in the final month of President Obama’s term, 156,000 jobs were added and unemployment held at 4.7 percent. As President Donald Trump took office last week, the Dow Jones closed above 20,000 points for the first time. Wall Street Journal Reporter Nick Timiraos joins Hari Sreenivasan from Washington, D.C., to break down the state of the economy.

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  • ALISON STEWART, PBS NEWSHOUR WEEKEND ANCHOR:

    The latest government numbers out yesterday show U.S. economic growth slowed in the fourth quarter of 2016, increasing at an annual rate of 1.9 percent. For the year, growth was only 1.6 percent, the slowest rate in five years.

    But in December, President Obama's last full month in office, the economy added 156,000 jobs, a record 75th month in a row of job gains. And the unemployment rate now stands at 4.7 percent.

    This week on Wall Street, the Dow Jones Industrial Average closed above 20,000 for the first time.

    Joining me now from Washington to discuss these varying economic indicators is "Wall Street Journal" reporter Nick Timiraos.

    So, Nick, that — there's mixed messages there. You have the Dow Jones with this record-breaking high, the jobless number is pretty good, yet, the growth is sluggish. Can you help us understand why?

  • NICK TIMIRAOS, THE WALL STREET JOURNAL:

    Yes, well, I think what we're seeing right now is an economy that is in its eighth year of expansion, and it's really been a steady but unspectacular expansion. It's now the fourth longest cycle of economic growth on record, but we've never really had breakout growth.

    So, I think what you're seeing from the markets right now with the Dow crossing 20,000, there's a sense of optimism that maybe now, the new government and the Republican Congress will be able to come together and put some pro-growth policies together. But I think the underlying dynamic is that the economy has been growing around 2 percent for the past several years, because we just have a less dynamic economy than we've had in the past. Everybody talks about getting four percent growth and that's because that's the level we had in 1990s. But there are a number of things in the economy that are different from the 1990s, including our slower growth rate in the labor force.

    So, these are kind of long run structural challenges that are going to be difficult for any set of policies to address.

  • STEWART:

    The dollar strengthened. Tell us what the impact of that's been.

  • TIMIRAOS:

    Yes, well, that means it's going to be harder for U.S. exporters. It's going to be cheaper for companies that rely on imports. And so, you have a tension here.

    The dollar has been rising because of some expectations around the policies of the new president, of Donald Trump. And that actually runs at odds with what the Trump administration wants, because they want to boost exports. They want manufacturing to be stronger here.

  • STEWART:

    And so, a stronger dollar is in some ways at odds with that and it illustrates the challenges of translating his new growth policies until action if you're going to want to do things like spend more money to boost infrastructure, if we're going to tolerate higher deficits, you may see the dollar continue to strengthen. And again, that's going to create kind of a headwind for some of the things that the Trump administration wants to do. Nick, demographics are going to play into our ability to grow our economy, because baby boomers are aging.

  • TIMIRAOS:

    Yes, this isn't unique to the United States. This is something that all industrial nations right now are facing. An aging population is going to slow the growth of the labor supply. It's going to slow labor productivity.

    And so, if you want to get 4 percent growth, an environment where we've had 2 percent year after year after year, you're going to have to fix some of those structural problems and those are different from some of the cyclical challenges that the Obama administration inherited. And this is something that both parties have struggled to do now for 15 years. So, that really will be the challenge of the day for the new president and the new Congress.

  • STEWART:

    Nick Timiraos from "The Wall Street Journal", thanks so much.

  • TIMIRAOS:

    Thanks for having me, Alison.

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