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Trade Wars And The Shutdown: Where Does The Economy Stand?

DAVID GREENE, HOST:

President Trump tweeted over the weekend, quote, "we have one of the best economies in the history of our country - big GDP, lowest unemployment, companies coming back to the U.S. in big numbers, great new trade deals happening," end quote. There have certainly been positive economic indicators over the past two years, but the economy is also facing some challenges. The Trump administration's trade policy has led to tensions and tariffs with U.S. trade partners, and the record-long partial government shutdown is also complicating the economic outlook now.

We're joined by David Wessel. He's director of the Hutchins Center at the Brookings Institution, a contributor to The Wall Street Journal and also a frequent guest on our program. Good morning, David.

DAVID WESSEL: Good morning, David.

GREENE: So let me just start with the basics. Are we enjoying one of the best economies in the history of the United States?

WESSEL: Yeah. Actually, the president has a point. Unemployment is nearly at a 50-year low. Inflation is roughly at the Fed's target of 2 percent. Wages are starting to climb. The Federal Reserve said last week that factory production ended the year pretty strong. In fact, if the economy keeps growing through July, this will be the longest we've gone without a recession since we started keeping track in the mid-1800s. But you know, that's not the whole story, as you said. The housing market's looking shaky. The federal budget deficit is soaring. Consumer confidence has fallen to the lowest levels of the Trump presidency.

GREENE: And I guess the partial government shutdown - we're talking about 800,000 or so workers it's affecting. I mean, does that shutdown really affect the overall economic data for the country?

WESSEL: Absolutely. I mean, first of all, it depresses the economic growth in the first quarter. The president didn't mention that. And it's kind of ironic that he's talking about the GDP numbers, the gross domestic product, because unless the shutdown ends soon, the Commerce Department, which isn't funded, isn't going to be able to put out those new numbers.

GREENE: Which is an interesting side effect of having a government shutdown. You mentioned the housing market looking shaky, the deficit soaring. Like, is there a way to understand, if we put all those pieces together, what the outlook actually is for the coming months and years?

WESSEL: Yeah. It's kind of an interesting tension. On one hand, the president is right. The incoming data has looked very strong. But there are all sorts of signals and warnings that the near future isn't going to look as good as the recent past. In fact, that's why the Federal Reserve has backed off its plans to raise interest rates in the next few months. You know, Duke University's business school does a survey of chief financial officers. And last month, they found half of them believe we're going to have a recession before the end of this year, and more than 80 percent think we'll have a recession before the end of next year.

GREENE: Soon.

WESSEL: Today we learned that the Chinese growth is slower than people thought. That's going to hurt our economy. And so there's a lot more talk about recession. I don't think it's necessarily baked in the cake. But the outlook is looking much worse than the recent past.

GREENE: Let me ask you about one other thing the president said in that tweet. He refers to great new trade deals. And you know, he said something he often says, that companies are coming back to the United States in big numbers. Is that a fair assessment?

WESSEL: Yeah. I kind of enjoyed that. He's signed two trade agreements so far, one with South Korea and the relatively modest changes to the deal we have with Canada and Mexico. He has not cut a deal with Europe yet, and he certainly hasn't cut a deal with China. In fact, the fear is that he's going to - every time there's good news out of the China talks, the stock market goes up. Jobs coming back? Yes, there is what the president of the Alliance for American Manufacturing calls a trickle of jobs coming back from companies that might've produced overseas. But the bottom line, probably some of that - it's called onshoring - but not a lot relative to the size of the workforce in our country.

GREENE: All right. David, thanks as always. We appreciate it.

WESSEL: You're welcome.

GREENE: David Wessel is director of the Hutchins Center at the Brookings Institution, a contributor to The Wall Street Journal, and you hear him here on our program.

(SOUNDBITE OF KIASMOS' "LOOPED") Transcript provided by NPR, Copyright NPR.