Many can make a reasonable case that the economy is not strong.
Just last week, the government announced that annualized Gross Domestic Product grew at a disappointing 1.2% in the second quarter, giving further evidence to claims that this recovery has been one of the weakest on record. Income levels have been stagnant for years. Global demand is soft. Orders for durable goods have fallen. The stock market has been volatile. Federal deficits have skyrocketed. Healthcare costs are going up again, as are minimum wage rates, paid time off, and overtime costs.
You would think that all of these ominous signs would be a help to Donald Trump and anyone else challenging President Obama’s economic record. And they are. Except for one thing. Jobs. Even with all of the negative economic news, people are working. Particularly in small businesses.
The national unemployment rate is below 5%, according to the Bureau of Labor Statistics. Some argue that the rate is misleading because the calculation doesn’t include millions of people who have dropped out of the workforce and are no longer looking for jobs. But the government’s rate isn’t the only evidence of a tight labor market. The Paychex |IHS Small Business Index—an employment metric based on payroll data from the company’s 350,000 small business clients with less than 50 employees—tells a similar story.
The index, announced this week, declined slightly in July, following a 2016 peak in June. It remains very much a strong number and an economic positive sign. In fact, the HR services company’s calculation shows an index throughout 2016 that has been riding at levels matching (and exceeding) those from ten years ago. “The July index reflects a year-to-date trend of steady employment growth,” said Paychex’s President and CEO.
Many of the small businesses located in the country’s larger states—including California, Texas, and swing states such as Ohio, Florida, and Wisconsin—have shown strong small business employment gains over the past year as well as major cities like New York, Philly, Dallas and Atlanta. The construction, hospitality, education and services industries have all seen rises in employment. Small businesses account for more than half of the U.S. workforce, according to both the Census Bureau and Small Business Administration. So say what you want about how the government’s monthly unemployment rate is calculated. The Paychex I IHS Small Business Jobs Index is hard to refute: small businesses are hiring, even in a slow economy.
No one can give a definitive reason why this is happening. It may be that we’re bringing on more part-time workers than full-time. Or that we’re less productive—we bring on more people to do added work rather than technology or machinery because we’re reluctant to make capital investments. The rise in unemployment may be a response more to the local demand fueled by restaurants and Main Street shops offset by the challenges faced by larger companies who are more exposed to global activities and are holding back on their hiring.
Whatever the case, none of this is especially good news for Donald Trump.
Trump’s economic policies are pro-growth. He is proposing a dramatic decrease in taxes that, according to the bi-partisan Tax Foundation, could increase GDP growth by 11.5% and employment by 5.3 million jobs over the next ten years—while unfortunately (and alarmingly) adding another $12 Trillion to the national debt. His positions on trade are designed to “level the playing field” with other countries. His immigration policies are intended to protect U.S. jobs from being taken by people who are illegally in the country.
Trump will attack the President’s economic policies and continue to make the case that voting for Clinton will be akin to voting for another four years of President Obama—and anemic economic growth. He will argue that his opponent’s policies—an increased commitment to Obamacare, more federal spending, open immigration, and the support of costly measures to employers such as the expansion of paid family leave—will further prohibit growth and hurt the economy. And these tactics may work.
But in the end, it’s about jobs. If people are working and earning, they’re generally happy. Clinton’s economic policies, like Trump, have many weaknesses. But one thing’s for sure: people are working. Yes, pay levels could and should be higher. And other things in the economy need fixing. But there are independent reports, such as the Paychex I IHS Small Business Jobs Index that continue to show steady levels of employment growth, especially among the critical small business sector. If those numbers continue to hold for the next few months, Trump will have a harder argument to make.