Business Insider
Trump is inheriting a worse economy than the last time he took office

Neil Dutta
Updated Mon, December 9, 2024 at 3:37 PM EST 10 min read

There is conventional wisdom developing in Washington and on Wall Street that President-elect Donald Trump has been handed a gift when it comes to the US economy. I get it. By most traditional metrics, the economy looks like it's in good shape: Unemployment is low, GDP growth is strong, and labor productivity has been robust. Any president would want to ride into the White House on the coattails of this kind of expansion, the thinking goes. However, I think the reality is somewhat more complicated in ways that are not so traditional.

For Trump, this economy looks like a mirror image of the one he inherited in 2017. At the start of his first term, there was plenty of room to grow, and the cyclical momentum was turning up. Trump 1.0 came into office at a time of low inflation, some slack in the jobs market, and, importantly, a synchronized upturn in global manufacturing activity: Well over half of the global manufacturing purchasing managers' index — a private measure of factory activity — stood in expansion territory in early 2017.

This time around, the US economy is operating at a reasonably strong level, but its momentum is slowing. The labor market is cooling, over half of the world's manufacturing industries are in contraction, and the American consumer is losing steam rather than picking up speed. These challenges are coupled with the limited ability of the Trump team to address the underlying problems: Thanks to the large stimulus and buildup of federal debt during the pandemic, there's not as much fiscal room to respond to a downturn as there once was. Those factors leave the new administration in a tougher position than it may initially appear.

The soon-to-be Trump economy is facing down a trio of weak spots that could start to rear their heads pretty soon after Inauguration Day.

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