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The Trump Rally

How will the left explain an improving economy?

By James Freeman March 2, 2017 12:39 p.m. ET
A screen shows the Dow Jones Industrial Average soon after the market opened on the floor of the New York Stock Exchange (NYSE) in New York, U.S., March 1, 2017. REUTERS/Brendan McDermid TPX IMAGES OF THE DAY
A screen shows the Dow Jones Industrial Average soon after the market opened on the floor of the New York Stock Exchange (NYSE) in New York, U.S., March 1, 2017. REUTERS/Brendan McDermid TPX IMAGES OF THE DAY Photo: brendan mcdermid/Reuters

Small businesses are more eager to hire than at any point since the end of the Clinton presidency. That’s according to the February jobs survey from the National Federation of Independent Business, due out later today. As for big companies, the Dow surged to another record close on Wednesday. Investors impressed by the President’s Tuesday speech figured he can deliver on his promises of tax and regulatory relief. But for those who convinced themselves—or at least tried to convince others—that the Obama economy was about as good as it gets, this is no time to celebrate.

Early this afternoon, NFIB will announce that a full 32% of small-business owners in February reported at least one unfilled position, the highest reading since December of 2000. Can they find the employees they need? “Seventeen percent of owners cited the difficulty of finding qualified workers as their Single Most Important Business Problem (up 2 points), revisiting the high for this recovery,” writes NFIB Chief Economist William Dunkelberg in the draft release. He calls this “one of the tightest labor markets in the 43-year history of the NFIB survey.”

This demand for workers underlines the need to expand legal pathways to immigration even as President Trump seeks to crack down on illegal immigrants who commit crimes. More broadly, this picture of small-business owners looking to hire and big-business owners expecting a brighter future is a daily repudiation of those who claim the American economy just can’t grow as fast as it used to do.

Harvard’s Larry Summers served both Presidents Clinton and Obama and sat on mortgage reform during the Clinton years. He’s been spending years promoting the idea of “secular stagnation,” a new normal of economic mediocrity that can only be relieved by even bigger government. Almost non-stop since Election Night, investors have been telling him he’s wrong by bidding up stock prices. About a month and a thousand points ago on the Dow, Mr. Summers wrote, “I remain persuaded that markets and the economy are most likely enjoying a sugar high that will not last a year.”

He might be right. Markets fluctuate. And it’s possible Mr. Trump will not meet expectations. But what if he does? Over at the New York Times, Neil Irwin calls Wednesday’s market rally “the latest development to make a mockery of what savvy economic commentators thought they knew about the world.” He adds, “An economy that seemed locked in some form of ‘secular stagnation’ or ‘new normal’ is at long last showing some signs of being in something closer to an ‘old normal.’”

But old Keynesian myths die hard. Even as he realizes that markets are kicking the stagnation theory in the groin, Mr. Irwin just can’t seem to let go of the idea that there are strict limits to U.S. growth. He wonders how Trump policies will influence an economy “already running at full blast.”

It seems we are about to find out how fast the economy can run once it’s no longer being regulated by people like Larry Summers. After spending a year exposing the flaws in conventional political wisdom, Mr. Trump may now do the same in economics. And it could be a blast.

Bottom stories of the day will return on Friday.

(Carol Muller helps compile this report.)