The state of the facts on U.S. economy, jobs, taxes and more

/ MoneyWatch

Previewing Trump's State of the Union address

President Donald Trump's State of the Union address on Tuesday night is sure to make the U.S. economy a centerpiece of his remarks. While his administration has often been mired in controversy on other issues, the country's economic gains last year give the White House something to crow about — and campaign on heading into next year's presidential election.

At the same time, Mr. Trump has also taken economic policy in unorthodox — and sometimes unpredictable — directions, as he has in challenging China and even longstanding American allies on trade. As Americans prepare to hear the president speak, here are some key measures of the economy's performance in 2018 to remember.

The economy grew at its fastest rate in 13 years

While the government is still finalizing estimates for economic growth last year, most economists, as well as the Federal Reserve, project it at roughly 3 percent — that would be the fastest rate since 2005. Most experts also think that economic growth peaked in late 2018 and is now slowing to a moderate, though still respectable, pace.

GDP is an important gauge of economic growth, but for individuals it tends to matter a lot less than whether they can find gainful employment. So how is the labor market doing?

Job creation has been strong by nearly any metric

The last time unemployment was below 4 percent, as it is now, was in 2000. Still, the labor market isn't perfect: Nearly 40 percent of the adult population isn't working–that's much higher than it's been in previous expansions.

The reasons for that don't only fall into Mr. Trump's lap. Inequality in the U.S. has been growing for the past four decades, and moving up the income ladder has become harder. Many Americans who exited the labor force during the last recession have yet to return. While the share of people with a job has been creeping up, the last time it was this low, not counting the Great Recession, was in 1986.

On a happier note, the lowest unemployment in decades means workers are finally getting a boost where it counts — their paychecks.

Wage growth is picking up

That represents the fastest rate of wage growth in nearly a decade, and is a sign that the economic expansion is finally reaching lower-paid and lower-skilled workers. But it's far lower than the pay growth seen in prior economic recoveries. At the peak of the previous two economic expansions, in 2000 and 2007, average workers' wages grew between 4 and 4.5 percent annually.

Another key pocketbook issue is taxes. And on that score President Trump delivered on his campaign-trail promises to lower federal income-tax rates. That comes with a major caveat: We won't know until later this year whether most Americans will benefit from the tax reset or if critics are right in saying that most of the gains will go the rich.

The 2018 tax cuts were big, though not the biggest ever

Ronald Reagan's 1981 tax overhaul is considered the largest cut because it amounted to 2.9 percent of GDP, according to the Tax Policy Center, while Mr. Trump's cuts amount to 2.6 percent of GDP. In terms of a drop in tax rates, the biggest cut in U.S. history happened under Warren Harding, who slashed the top rate from 73 percent to 43.5 percent. The 2017 Tax Cuts and Jobs Act lowered the individual rate for high income-earners from 39.6 percent to 37 percent.

Although economists agree Mr. Trump's tax cuts boosted growth last year, most businesses say they had no effect on their hiring plans. If lower taxes haven't done much to drive job growth, one group has taken the resulting jump in corporate profits to the bank–investors.

Trump prepares for State of the Union

Stocks are up nearly 20 percent since Mr. Trump's inauguration

Despite the turmoil in stocks in the last months of 2018, the current bull market is the second-longest on record. Since Jan. 20, 2017, The S&P 500 is up 19 percent and the Dow is up 27 percent. Still, the stock market isn't a proxy for the economy–only half of Americans own any stock, and those with significant holdings are overwhelmingly concentrated among the wealthy, according to the Federal Reserve.

Also looming over investors is another threat that could destabilize global markets — the Trump administration's simmering fights with China, and even longstanding allies, on the rules for global trade.

U.S. trade deficit with China surges

To put pressure on Beijing to make concession on trade, the U.S. has so far imposed tariffs on over $250 billion worth of Chinese goods, and has until March 1 to reach a trade deal before more tariffs kick in. In October, the total U.S. deficit with the rest of the world was also at a 10-year high, according to Census Bureau data.

America's total debt keeps climbing

The surge in federal debt since the recession stems from a sharp increase in federal spending and shrinking tax revenue. At the end of 2018, the U.S. had collected just 72 percent of the tax from corporations that it had the previous year. Tax revenue from individuals was down 0.5 percent from 2017, according to the District Economic Group.

The country's rising debt and falling tax revenue could hinder another of President Trump's priorities–repairing America's aging infrastructure.

Infrastructure spending: Think trillions, not billions, experts say

Mr. Trump last year proposed investing $200 billion in federal money on infrastructure as a way to attract $1.5 trillion in private funding. That amount is a drop in the bucket given the country's aging roads, bridges, rail lines, dams, airports and other critical infrastructure, and both partisan politics and budget deficits could continue to impede progress on this front.

Prescription drug prices continue rising above rate of inflation

Among industrialized nations, the U.S. spends the most on prescription drugs on a per-person basis, according to the OECD.

— With reporting by Rachel Layne, Sarah Min, Irina Ivanova, Alain Sherter, Megan Cerullo and Aimee Picchi

First published on February 5, 2019

© 2019 CBS Interactive Inc.. All Rights Reserved.

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