As Trump Takes Credit for Rapid U.S. Recovery, Economists Warn of Trouble Ahead

As the White House lauds the economic bounce back from the pandemic as the "fastest economic recovery in U.S. history," economists are warning of a rocky road ahead.

A statement issued by the White House claims: "After the financial crisis more than a decade ago, it took America over four years to regain 9 million lost jobs. But following the Coronavirus shutdown, it took the Trump Economy only a few months to do just that."

"We had such a strong foundation that we're recovering much faster than anybody anticipated," President Donald Trump said at a news conference on Saturday.

The White House statement goes on to highlight strong jobs growth, a recovery in retail spending, rises in factory outputs, and the bullish stock market as indicators of the veracity of the bounce back.

Economists cite pent up demand as one reason for a retail rebound and increased factory outputs. They also said growth is natural after such a prolonged and wide-ranging shutdown.

"It's true there has been a rebound, but not because of anything the president has done," Eric Winograd, chief U.S. economist at AllianceBernstein, told Newsweek.

"You're going to have a strong third quarter because the economy is reopening and because it isn't locked down as it was in the second quarter.

"But the overall level of growth is still quite weak and it's going to take several quarters of very strong growth just to get back to where we were."

On unemployment, Winograd says the rate of job losses was so much greater this time round that he doesn't think it's productive to compare the pandemic to the financial crisis: "I don't think the administration should or can claim credit for adding those jobs back."

James Knightley, chief international economist at banking group ING, concurs with this view.

"Yes, we have had a very vigorous recovery in employment from May to July, but we have to remember that total employment (as measured by non-farm payrolls) remains 12.9 million lower than it was in February," Knightley told Newsweek.

"That is still far more than the total 8.7 million decline in employment in the Global Financial Crisis between January 2008 and February 2010, so it seems a little early to be declaring victory."

In addition, Knightley cites the fact that many states are having to reverse course on their re-opening plans as an indication of economic gloom to come.

"We are seeing new restrictions that are forcing companies to close their doors and fire workers once again," he said.

"High-frequency indicators, such as the Homebase employment index, suggest a clear stalling in employment since late June and a worrying renewed downward lurch in recent days.

"Furthermore, both ISM reports firmly in contraction territory, signaling lay-offs across a range of industries over the coming months."

Knightley said the first phase of recovery sees people return to work and factories begin to re-open. However, the second phase, based on economic fundamentals, looks to be a bigger challenge, he said.

While economists found it difficult to praise government actions with regards to the economy, Winograd says many of the better moves have been made by policymakers on the Hill.

"Large fiscal stimulus from the Hill, and the Fed, where they've undertaken measures to support the economy, do deserve a lot of credit," Winograd told Newsweek.

"Those measures really have stabilized the situation and allowed for businesses to stay solvent and remain open. From a policy perspective, that's the real story. Fiscal and monetary stimulus have been effective."

Still, millions of Americans remain unemployed, and many more are struggling to pay their rent and meet other financial obligations.

Nearly 30 million Americans told the Census Bureau at the end of July that they did not have enough food.

Meanwhile, extra unemployment benefits that provided $600 extra per week to jobless Americans have dried up, a moratorium on evictions has lapsed, and the $1,200 direct payments sent by the IRS in Spring have been spent.

While parts of the economy are recovering, economists believe that the rate of recovery is much slower, and on a less stable footing than the White House presents.

Donald trump press briefing
U.S. President Donald Trump talks to reporters as he leaves the White House for a trip to Minnesota and Wisconsin August 17, 2020 in Washington, DC. Economists have thrown his statements about the health of the economy into doubt. Chip Somodevilla/Getty Images