December jobs have America looking pretty great: Trump's challenge

Morial: Give Obama administration some credit

What if this is the greatest America is going to get, at least for a while?

That's the challenge to President-elect Donald Trump following a December jobs report that showed employment gains slowing to 156,000 and the jobless rate ticking up to 4.7 percent. Economists now expect the gains to slow down even more in the first half of the year as the economy reaches full employment and companies compete for a dwindling supply of qualified workers.

That means that at least the first few months of Trump's presidency are not likely to show the kind of job gains he promised. And he will face a challenge throughout his presidency of driving the unemployment rate much lower than where it is right now, especially with the Federal Reserve planning two or three rate hikes this year and possibly more if wages and inflation pick up speed.

Trump can take some solace in the fact that wages are now rising at the fastest pace since the end of the recession in 2009 and will probably continue jumping this year even in the face of resistance from the Fed. That will make Americans feel better about the economy and give the new president something to brag about every month.

Conservatives also hope Trump will focus on measurements other than unemployment to measure success in the economy. Trump on the campaign trail repeatedly slammed the smaller size of the labor force, which increased to a still low 62.7 percent in December. If optimism over his plans to slash regulations and taxes encourage companies to expand, especially in the manufacturing sector, and create more low-skilled jobs, he could draw discouraged workers back into the labor force.

Volkan Furuncu | Anadolu Agency | Getty Images

And a bigger workforce, even if it means a slightly higher jobless rate, could turn into a major positive talking point for Trump.

But many economists are skeptical that a large percentage of those who left the labor force following the recession will return. And some suggest that bigger job gains from now on will require a less restrictive immigration policy, the exact opposite of what Trump has proposed.

And Trump's big promises of a doubling in economic growth to over 4 percent and the creation of 25 million new jobs in 10 years rely on plans to slash regulations and taxes that could take years to make their way through Congress and regulatory agencies.

Even if Trump can push through a big corporate tax rewrite it may take until late this year to do it. And the impact likely would not be felt until the second half of 2018 at the earliest.

In the meantime, Trump will rely on stirring up the economy's "animal spirits" as well as slashing as many regulations as he can in his first 100 days in office. This could have significant impact in the energy industry but probably just enough to slow the pace of coal industry job cuts rather than create a big increase in employment in the sector. Trump's plans to slash financial and health-care regulation could take much longer and require congressional action.

These potential delays are part of the reason the Trump rally in the stock market has lost steam in recent weeks and the Dow has had such a hard time breaching the psychologically important 20,000 mark. The Dow turned in its best year since 2013 last year.

The question for Trump, who has bragged about both the stock market increase and consumer confidence soaring since his election, is whether markets can keep rocketing higher even if it becomes clear that the president-elect's policies will take a long time to have any major impact.

Trump in many ways created the political problem he now faces. He regularly trashed the economy on the campaign trail, arguing that there were no good jobs. He described China, Mexico and other countries as crushing the United States economy and said he alone could restore the nation to greatness.

Now he actually has to do it. And he may quickly learn that America is actually pretty great right now and that it's not going to get a whole lot greater for years to come.

—Ben White is Politico's chief economic correspondent and a CNBC contributor. He also authors the daily tip sheet Politico Morning Money [politico.com/morningmoney]. Follow him on Twitter @morningmoneyben.

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