What’s going on with the US economy?
Image: UPenn Wharton
In recent weeks, economists and federal agencies have published a flurry of data indicating the US economy is experiencing strong economic growth, a solid labor market, and relatively low inflation – but at the same time, the mood of the US consumer is souring.
A rundown
GDP: US gross domestic product grew at an inflation-adjusted rate of 2.5% in 2024, per federal data published late last month. That’s down from 3.2% GDP growth in 2023, but far higher than the 1.0% growth forecast by economists at the start of 2024.
Jobs: The US unemployment rate ticked down to 4.0% in January, from 4.1% in December, despite a slowdown in job growth, per the latest federal jobs report published Friday. Average hourly wages rose by 4.1% year-over-year in January – down from recent highs seen in 2022 (+6.7%/year), but above pre-pandemic averages.
Inflation: The Consumer Price Index (CPI) rose by 2.9% in December, up from a recent low of 2.4% in September. Core inflation, which excludes often-volatile food and energy prices, rose 3.1%, tied for its lowest figure since March 2021.
Stocks: After closing out a blockbuster 2024, all three major US indexes have turned in a positive start year-to-date (S&P: +2.7%; Dow: +4.5%; Nasdaq: +1.3%).
Consumer confidence: Consumer sentiment fell ~5% in the University of Michigan’s February survey of consumers, reaching its lowest reading since July. US consumers’ expectations of inflation over the next 12 months rose from 3.3% in January to 4.3% this month, marking the highest reading since November 2023.
Looking ahead…We’ll get more clarity into America’s economic situation this week, when federal agencies publish the CPI for January, monthly retail sales data, and quarterly US household debt/credit balances.
📊 Flash poll: To all working professionals: would you consider the growth outlook in your industry/sector of the economy to be positive or negative over the next 12 months?
See a 360° view of what pundits are saying →
Sprinkles from the Left
- Some commentators argue that now represents a weird time for the US economy, with numbers on the surface implying that things are humming – but a closer look shows many Americans are struggling with employment, housing, and general finances.
- Others contend that Democrats can improve their prospects in coming elections against Republicans by hammering home the point that Trump is breaking his promise to address US inflation in his first days after taking office.
- “In the ‘Great Stay’ economy, Americans feel stuck” –Heather Long, WaPo
- “How Democrats can crush Republicans on the economy and win the midterms” –Andrew Bates, Fox News
- “It’s tough to be optimistic about Trump’s economic plans so far” –Orlando Sentinel Editorial Board
Sprinkles from the Right
- Some commentators argue that slower job growth in January represents a warning to President Trump to tread carefully on his tariff agenda, though recent job growth still looks decent overall.
- Others contend that America’s once-thriving middle class is feeling the squeeze – but they can be restored to their former glory via a bold economic strategy of large scale tariffs that incentivize businesses to manufacture and innovate here at home.
- “Making Sense of Jumbled Jobs Data” –WSJ Editorial Board
- “Reviving America’s white-collar job market with higher tariffs” –Isaiah Hankel, Washington Times
- “Trump inherits bleak economic landscape” –Tiana Lowe Doescher, Washington Examiner
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