The election's economic effect

Our economy is getting its groove back. The dark shadow of the Great Recession that hit more than eight years ago is finally fading. Whether the good economic trends continue depends on who is the next president.

Exhibit One is the Census Bureau's recent report that after-inflation median household income posted its strongest gain on record last year. This is arguably the best measure of the typical American family's standard of living, which had been largely stuck in place since Y2K, and declined during the recession. Even Philadelphia families, who often lag in these statistics, did very well.

The census also reported that the nation's poverty rate plunged and, thanks to Obamacare, the percentage of the population with health insurance rose strongly again. Perhaps most encouraging, the distribution of income, which has skewed to the well-to-do in recent decades, has stabilized. Lower-income households' share of the economic pie is no longer shrinking.

It is unlikely that this year will be as good as last when it comes to incomes and poverty, but Exhibit Two - the strength of the job market - suggests it will be another very good year. We are enjoying the longest consecutive string of monthly job gains in history, extending all the way back to 2010. Since then, the economy has created a stunning 15 million-plus jobs.

Everything points to continued strong job growth. There are a record number of open job positions - just under six million. There are available jobs in every industry save the energy sector, which isn't surprising, given the collapse in oil prices. Layoffs are also about as low as they ever go.

In an even more positive sign, the number of people quitting one job to take another is on the rise. You don't quit your job unless you are confident that you can find another. Millennials, many of whom started looking for work at the worst of economic times during the recession, are now jumping to higher-paying, more rewarding jobs suitable to their skills and education.

Given those job-market conditions, wage growth is picking up. When most people think about their own economy, they do so through the prism of their pay. Was my pay increase this year bigger than last year's, and was it bigger than the increase in my cost of living? Until recently the answers to those questions were no and no. That's changing. Pay increases for most workers were bigger this year than last, and they were much bigger than the increase in their living costs.

Stronger wage gains signal that the economy is fast approaching full employment, a key milestone that most other nations are far from achieving. By early next year, just about everyone who wants a job will have one, and part-timers who want more hours will get them. The last time the nation enjoyed full employment was nearly a decade ago.

Exhibit Three: the revival in entrepreneurship. Once everyone is working as much as he or she wants to, improved productivity is vital for achieving stronger income gains. That is, we produce more without having to work more. This happens, in large part, through innovation, and innovation often takes place in new businesses.

Business formation - very depressed in the wake of the recession - is surging back to life. About 275,000 new establishments were formed over the last year, the biggest increase since the late 1990s, the middle of the dot-com wave. Like then, lots of technology companies are forming today. But there are also plenty of start-ups in the health-care, professional services, transportation, construction, and financial-

services industries.

To be sure, significant economic challenges remain. Many Americans were crushed by the tough economic times, and even though many have jobs again and wages are improving, it will take a long time to get back what was lost. Some who used to work in industries buffeted by rapid technological changes, such as bricks-and-mortar retailing, print media, and coal, are having an especially tough time of it.

The way forward, however, is not to try to resurrect these industries. That's not going to happen. The answer is to invest in the retraining and education of those who have been dislocated. To rebuild our infrastructure, particularly in distressed areas. To lower business costs and support new businesses. To allow the best and brightest who come to our universities from all over the world to stay after graduation and create the next big thing. To remain open to the global economy so our businesses have a bigger market.

It's all but impossible in this election season not to think about all this through the prism of your vote for the next president. For me, Hillary Clinton has the clear advantage on these critical issues. But you can make up your own mind listening to the candidates in their first debate Monday night.

Mark Zandi is chief economist at Moody's Analytics help@moodys.com