Last summer, more than a few commentators lampooned Donald Trump and some of his sycophants for touting wage growth figures that didn’t take into account inflation.
Long story short, Trump and folks like, for instance, former CNBC “money honey”-turned Trump apologist Maria Bartiromo got in the habit of shouting about average hourly earnings and ECI, but they conveniently failed to net those figures for inflation.
To be honest, it’s by no means clear that omission was intentional. Trump isn’t a guy who likes to do math (unless it involves instructing subordinates to inflate the value of his assets for accounting purposes), so it’s entirely possible it didn’t even dawn on him that real wage growth was in fact negative last summer.
It’s also possible that Trump didn’t generally like talking about inflation because after all, that was a period when market participants, analysts and policymakers alike were worried about the prospect that between the president’s fiscal policies overheating the US economy and tariff-related price pressures, inflation might well surge, prompting the Fed to lean even more hawkish than they already were.
By the end of last year, however, Trump was talking about inflation any chance he got, because by December, he had managed to engineer a oil price collapse and his incessant badgering of Jerome Powell leaned heavily on the notion that because inflation was under control, the Fed needn’t keep hiking rates.
In that context, it is worth noting that between last Friday’s hotter-than-expected AHE print and Tuesday’s cooler-than-anticipated CPI numbers, real wage growth has cemented a healthy bounce off of last summer’s sub-zero doldrums.
If you look at core, we’re near a cycle high. “Yesterday’s well-behaved CPI data and last Friday’s strong wage growth combine to deliver the best real wage gains since the crisis and the trend is clearly upwards”, SocGen’s Kit Juckes wrote on Wednesday.
Of course the irony is that if Trump supporters were generally oblivious to the fact that real wage growth was negative last summer, it likely means they’re equally oblivious to the marked improvement in their (figurative and literal) fortunes over the past six or so months. That’s the give and take when your political capital is concentrated among an ignorant base – they don’t know when things are going poorly, but they also don’t know when things have improved.
And that might actually be just fine with Trump, because he relies on the politics of rage. While the official mantra is “Make America Great Again”, there is no set definition of “great”. That ambiguity – the amorphous character of the slogan – is at least a little bit intentional. We can’t ever really achieve “great”, because if we do, the rage capital that feeds the Trumpian fire dissipates.
As long as Trump can find a scapegoat (i.e., deflect blame for failures), it’s entirely possible to argue that the less “great” things are, the more support he’ll be able to garner by insisting that he’s still necessary.
SocGen’s Juckes alludes to that (albeit not explicitly, but rather in a roundabout kind of way) in the same Wednesday note cited above.
He begins by referencing the Bloomberg Opinion piece from Danielle DiMartino Booth that made the rounds on Tuesday, noting that in the opening paragraph, she (DiMartino Booth) charges that “In the decade between ’60 Minutes’ interviews, the [Fed] has sparked a recovery without inflation, but not much else”. That’s an allusion to Powell’s nationally televised weekend chat with CBS and a similar interview with Bernanke 10 years ago.
Juckes then acknowledges that what the Fed has managed to engineer in the US post-crisis is “better than Japan’s lost decades after 1989, and better than Europe’s lurch towards Japanification since 2009” but he also observes that Booth’s Op-Ed “catches some of the mood that took President Trump to the White House.” He goes on to cite the stark juxtaposition between what Fed policy has done for asset prices compared to real economic outcomes, a contrast captured in the following popular chart from Goldman (and there are a couple of different versions of this visual):
Juckes’s point is to say that the recent upturn in real wages is a step in the right direction, but bringing this all together, he poses the following question:
What’s really worrying, is that if this kind of economic growth [in the US] isn’t good enough, how much will the mood sour when the economic downturn that is now so evident elsewhere in the world, really gets its claws into the US economy?
That, in turn, raises another uncomfortable question: Is it possible that a US recession will actually bolster Donald Trump by allowing him to capitalize on an even larger store of rage?
If so, and if that means again convincing the public that somehow a billionaire narcissist is the man for the job when it comes to resurrecting the middle class and restoring lost “greatness” to flyover America, it will be an even more damning indictment of the cognitive dissonance that grips large swaths of the voting public. Because at that juncture, people would not only be voting for a narrative that is absurd on its face (i.e., billionaire reality TV show host as the savior of blue collar America), but doing so even after watching that candidate’s policies fail to produce the promised outcomes over the course of a four-year term.
Again, that’s the “beauty” of the whole thing: When you rely on the politics of rage for political survival and when you’ve deliberately injected so much ambiguity into the end goal of your platform that it’s always possible to suggest we’re not there yet (i.e., when are we “great again”?), the only way you can lose is if someone comes along who’s more adept at marshaling public disaffection than you are.