By Kevin Thompson

If the unemployment rate really was under 5%, Donald Trump would never have been elected, says economist Gary Shilling. Shilling puts the effective unemployment rate at 13% after considering disenfranchised workers who have left the workforce.

Trump rode to an unlikely victory largely on the backs of middle-aged Midwesterners whose earning and purchasing powers have eroded in an age of globalization and technological advances.

The economy drove the election, not racism or misogyny as Democrat post-mortems claim. After years of tepid growth under heavy Obama regulation, voters had simply had enough.

As markets, businesses and taxpayers now look to see what Trump campaign bluster passes governing muster, four categories are worth watching:

Spending – Twenty trillion dollars in existing federal debt haven’t stopped Trump from calling for a trillion dollars of infrastructure spending. Why would it? The man has spent a career building huge projects with other people’s money.

Markets have responded to Trump’s plan. The prospect of stimulus spending on border walls, roads, bridges and defense has pushed up construction-related and other stocks.

Despite the wishes of fiscal conservatives who supported him, President Trump will not likely shrink the federal government or its massive debt.  He may push through fiscal stimulus with Democrat support and tax cuts with Republican support.

Taxes – Trump’s tax plan calls for slashing both personal and corporate tax rates. But don’t look for a windfall in every mailbox. Trump’s pick for treasury secretary, Steven Mnuchin, says only middle class taxpayers will benefit after deduction rules change. Upper income earners will see a wash.

Mnuchin’s view acknowledges there may not be enough savings from closing deduction loopholes — or enough new revenues through economic growth — to keep from deepening the deficit. According to Tax Policy Center, the top 1% of taxpayers account for almost 30% of tax revenues. That’s a big nut to crack.

Trade – Trump’s fightin’ words on trade will likely turn out to be more tweet than bite. He has backed away from tariffs on Mexican and Asian goods. Instead, he may use the promise of future tax cuts and the threat of lost government contracts to retain industrial jobs, as he did with Carrier air conditioners in December. That negotiation saved about a thousand jobs.

By contrast, goods exported to Mexico under the North American Free Trade Agreement help support a million jobs, according to the U.S. Department of Commerce. Economist Ray Perryman estimates the four U.S. states that border Mexico and the six Mexican states that border the U.S. equal the world’s fifth largest economy. NAFTA is critical to our region.

Trump still wants to forego the Trans-Pacific Partnership, a pending Asian free trade agreement. But his protectionist rhetoric will likely subside as the benefits of globalization and technology continue to outweigh their drawbacks.

Regulations – Obamacare, the Dodd-Frank financial reform legislation and environmental orders have stifled business expansion and job growth.

For example, some companies, dubbed “forty-niners,” have purposely stayed below fifty employees to avoid additional requirements of Obamacare. Local banks are subject to the same labor intensive portfolio stress testing as their too-big-to-fail counterparts. Between Trump executive orders and swift actions by a Republican Congress, regulatory burdens should ease.

As for other macroeconomic signals, banking consultant Ed Krei predicts rates will remain relatively low for an extended time despite likely Federal Reserve short-term rate increases in 2017. He believes we will face a mild recession in 2018 as China and Europe drag down growth.

By then, we would be almost ten years into the present recovery; long after pent-up consumer demand for big ticket items has run its course. On the other hand, Krei notes that housing starts, which have flattened this year in Kendall County, are only half their national high water mark from 2006.

Dr. Perryman believes we will likely see market volatility. He notes the swings after the populist-driven Brexit vote last summer and expects wider swings here since our economy is eight times the size of Britain’s.

Given the volatile nature of the man in the White House, Perryman is probably onto something. If so, hang on for the ride.

Kevin Thompson is a graduate of the McCombs School of Business at The University of Texas at Austin and currently serves as Senior Vice President of Centennial Bank in Boerne.