Economy runs strong in Trump's first year

President Donald Trump took office a year ago, and I proposed a baseline by which we could judge the nation's economic performance under his administration.

Fairly, or unfairly, the public holds the president responsible for the national economy and their financial well-being. Economists spend entire careers debating about how much influence a president has over normal economic cycles and commodity super-cycles, but ocean-goers judge the captain based on their experience, even if the shipmaster can't control the weather.

Trump's first year has been smooth, fair-weather sailing for the economy.

A year ago, the U.S. unemployment rate was 4.7 percent, and today it is 4.1 percent, according to the Bureau of Labor Statistics. Traditional economic theory holds that 4 percent is full employment, so this is a good number.

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Yet the U.S. only created 2.1 million jobs in 2017, the lowest number in seven years. Trump is also off pace to keep his promise of creating 25 million jobs by 2027.

During his campaign, Trump pointed to the labor participation rate as an important statistic to consider, and he was right. Especially important is how many 25- to 54-year-olds are working or seeking work, because it excludes adults who are obtaining an education or who have retired.

Before the Great Recession of 2007, the participation rate for prime-age workers was 83.4 percent, according to the St. Louis Federal Reserve Bank. By September 2016, it had dropped to 80.6 percent.

Today, the participation rate is a healthier 81.9 percent, but not quite the 84.6 percent peak registered in January 1999.

The unemployment rate has also dropped in the Rust Belt, where voters helped Trump win the Electoral College. The labor force participation numbers, though, are murky. Official rates won't come out for months, but the raw numbers show fewer people in the workforce in Michigan, Pennsylvania and West Virginia, which could be from baby boomers retiring. Wisconsin and Ohio show more people in the workforce and lower unemployment.

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Texas, meanwhile, remains a jobs juggernaut, driving the unemployment rate from 4.8 percent to 3.8 percent.

Last year, I wrote that only higher wages would raise labor participation. Many people have been sitting out the labor market, especially men, refusing to work for $7.25 an hour, the federal minimum wage. I was right.

Inflation-adjusted wage growth started picking up in the summer of 2015 and has continued to grow at annual rates of more than 2 percent, according to the Bureau of Labor Statistics. Annual wage growth peaked at 2.8 percent in September, the highest rate since the Great Recession, but it remains below long-term norms of between 3 percent and 4 percent.

The average American household earned more in 2016, when adjusted for inflation, than at any time in the nation's history, collecting $59,039, according to the latest available data. While Trump can't take credit for anything before January 2017, the remarkable climb from $54,398 in 2014 has placed the nation on a strong trajectory that likely continued in his first year in office.

Following tax reform, the real question will be how much of the higher household income is going to wealthy Americans, and how much is pulling people out of poverty. We won't know for sure for years.

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Trump's failure to significantly increase manufacturing jobs, once one of his top campaign priorities, does not bode well for income inequality. The U.S. added only 184,000 new manufacturing jobs in 2017, continuing a very slow upward trend that began in December 2009 and fails to keep up with population growth.

The undisputed economic headline of Trump's first year, though, is the accelerated growth of gross domestic product, which topped 3 percent for two consecutive quarters. The last time that happened was mid-2014.

Trump is claiming credit for this success, and record high stock indexes, but fate can be cruel.

The number of job openings is currently exceeding the number of workers hired, which means employers can't find enough qualified workers. The fastest-growing sub-sector has also been temporary jobs, a hiring pattern that usually foretells recessions, according to FactSet Insights, a financial data analysis firm.

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The current economic expansion is the third-longest in U.S. history, and if it lasts through mid-2019, it will break the 10-year record set in the 1990s. While there is no sign of a recession on the horizon, students of history always warn of black swans, the unknown unknowns that can strike at any time.

Presidents of every party claim credit when the U.S. economy is strong and deflect blame when it's not. This year Trump has plenty to brag about.