GOP tax cuts have fueled a massive acceleration in job growth since this time last year. For example:
The GOP cherry-picked states with the largest number of job gains this year to promote its claim that “GOP tax cuts have fueled a massive acceleration in job growth since this time last year.”
There has been a net increase in the number of jobs added in the first six months of 2018 compared to a similar period in 2017. But the nationwide gain isn’t nearly as dramatic as those individual states highlighted by the Republican National Committee, and in 12 states fewer jobs have been created this year. Economists tell us it is premature to assess the impact of the tax cuts on job creation.
President Donald Trump frequently touts the impact of the Tax Cuts and Jobs Act — a Republican-crafted bill that the president signed into law on Dec. 22, 2017. And with the economy humming along, Republicans are quick to point to the bill as a catalyst for job growth.
To make its point, the GOP looked at jobs added in the first six months of this year (December 2017 to June 2018) and compared those gains to jobs added in a similar six-month period in 2017 (December 2016 to June of 2017). As examples, the tweet highlights states with increases between 94.1 percent in North Carolina to 250 percent in Nebraska.
“We did research pieces to show how Democrats in competitive House and Senate races were wrong about their doom and gloom predictions on the effects of the tax cut bill,” Mike Reed, research director and deputy communications director for the RNC, told us. “The research shows that in a lot of states where these candidates are running there has been an uptick in job gains since tax cuts passed, compared to the same timespan before the bill was passed.”
But the GOP is cherry-picking states with the largest percent increases. Nationwide, the number of jobs added in the first half of 2018 was 22.3 percent higher than the number of jobs added in the first six months of 2017, according to data from the Bureau of Labor Statistics.
In fact, there are 12 states where the increase in jobs was greater during the first six months of 2017 than during the first six months of 2018.
For, example, the job gains declined 92 percent in Kentucky in the first half of 2018 compared to the first half of 2017; by 52 percent in California; by 46 percent in Indiana; by 34 percent in Oregon; and by 27 percent in Pennsylvania. In Nevada, where the Senate race is considered a “toss up,” the number of jobs added in 2018 declined by 18 percent compared to the same time in 2017.
(See below for a table showing breakdowns for each state, which is based on Bureau of Labor Statistics data available at the time the GOP published its research).
Economists we spoke to say it’s premature to cite these jobs numbers to support arguments for or against the effect of the tax cuts.
“Job growth in these jurisdictions have certainly accelerated, but I would be very hesitant to say that they are due to the tax bill,” Kyle Pomerleau, an economist and director of the Center for Quantitative Analysis at the Tax Foundation told us. “There are many reasons that employment growth can change. Taxes are one reason and I don’t doubt that the TCJA will have some positive effect, but I think there are other factors contributing to job growth, especially since it’s only been a few months since the passage of the bill.”
In December, the Tax Foundation forecast that the Tax Cuts and Jobs Act would lead to an additional 339,000 full-time equivalent jobs over 10 years.
Richard Prisinzano, senior economist at the Penn Wharton Budget Model at the University of Pennsylvania, said small sample sizes from state data make the results presented by the GOP “noisy.” In Nebraska, for example, there was a swing of just 7,000 jobs to support the claim of a 250 percent increase.
“A number that small doesn’t really tell us anything,” Prisinzano told us.
And while it may make intuitive sense to compare the first half of 2018 to the first half of 2017, the comparison may be a bit misleading. Growth in the first half of 2017 was relatively slow, said Alex Arnon, a senior analyst at the Penn Wharton Budget Model. Compared to, say, 2015 or 2016, he said, the 2018 figures don’t really stand out in a way that would justify the claim that the tax cuts have “fueled a massive acceleration in job growth.”
Prisinzano also cautioned against grading the effects of the tax cuts bill so soon. Many of the economic effects of the tax cuts are expected to unfold over time, he said.
“It is certainly too early to tell,” agreed Marc Goldwein, senior vice president and senior policy director at the Committee for a Responsible Federal Budget.
“I will say this – the combination of deficit financed tax cuts and deficit-financed spending hikes is certainly giving the economy some stimulus,” Goldwein told us via email. “Likely, it is pushing the economy above potential and bringing the unemployment rate down below where it would be in a steady state.
“That’s good news for today’s workers, but it comes at a cost,” Goldwein said. “Over time, the stimulus will erode – because of inflation, higher interest rates, etc – bringing the jobless rate back up. But in the meanwhile, it will worsen the debt which will reduce investment which will slow wage growth. So we may have somewhat more job growth today at the expense of less wage growth over most of the next 20 years.”
Mark Zandi, chief economist at Moody’s Analytics, said there has been some job growth as a result of the tax cuts, on the order of about 20,000 additional jobs per month, but he called that growth “modest,” and warned it comes with a longer-term downside.
“The deficit-financed tax cuts and increases in government spending are juicing-up economic and job growth, and will continue to do so through late next year,” Zandi told us via email. “The GOP analysis is cherry-picking the numbers, but the fiscal stimulus is supporting a modest pick-up in job growth. So far, the stimulus is adding approximately 20,000 jobs per month, which is sticking to the script I had anticipated. It is important to note that once the stimulus fades by 2020, job growth will slow sharply, and of course the nation will be left with a much large budget deficit and heavier debt load.”