US Economic Growth

With the pandemic raging around the world, America’s economy – like all the others internationally – has gone through a lot.  Now that the world is sort of entering into some kind of ‘new normal’ even with the pandemic, it is important to look at what kind of growth (or lack thereof) there has been with it.

There is actually some good news on this front. In Q2 2021 there was an 6.5 percent growth which has put the economy past the level it was at before the coronavirus hit.  Indeed GDP (according to the latest report from the Commerce Department) expanded in that quarter from its already solid 6.3 percent annual growth rate from Q1 2021.

Still, this was significantly lower than what the economists had hoped for which was over 8 percent but at least there is movement and the fact is, supply chains had been clogged because of the economy’s rapid reopening.

In other good news consumer spending jumped significantly for the second consecutive quarter.  Figures were: spending on goods (11.6 percent increase), spending on services (12 percent increase).  There was a jump in annual rate for the second quarter for businesses for 8 percent which increased the GDP by 1.1 percent.

According to a Wells Fargo senior economist, Sam Bullard:

“Consumers have plenty of income and wealth ammunition to support consumer spending, while business inventories remain lean and restocking efforts are poised to support business investment and overall GDP growth substantially in the second half of the year,”

So really, the economy is in a better state than it was at Q4 2019.

US Economic Growth: Here Today, Gone Tomorrow?

While America’s economy witnessed significant growth in Q2 2021, it seems that this will not be long-lasting. Given that the economy is kind of going back to some kind of post-pandemic “normal,” there could be a drop in economic growth.  According to Moody’s Chief Economist Mark Zandi:

“Growth has peaked, the economy will slow a bit in the second half of this year, then much more noticeably in the first half of 2022 as fiscal support fades. The contours of growth are going to be shaped largely by fiscal policy over the next 18 months. The tailwind just blows less strongly, and may stop altogether by this time next year.”

In 2011 America’s share of worldwide GDP was at a low of 21 percent.  In 2020 this number increased to 25 percent.  In real dollar terms, at the beginning of 2010 average incomes were recorded for Americans at more than 25 percent higher than their European counterparts. By the end of 2020 that figure had jumped to 60 percent.

Confidence in SMEs increased along with the United States’ share of global stock markets (from 42 percent in 2010 to 58 percent in 2020). The dollar gained almost unprecedented dominance, placing America in a leading global position.

However, just over a decade ago America owed the world a total of $2.5tn (the same as 17 percent of US GDP).  By early 2020 this had increased to over 50 percent of GDP at $10tn. That figure currently stands at $14tn and (GDP) 67 per cent, creating cause for concern.

Post-Pandemic Prosperity

America’s economy seems to be coming back from the pandemic, having recorded its  fastest first-quarter GDP growth in nearly four decades.

Consumer spending is up (thanks to tax credits and stimulus checks).  Hiring is also increasing, even in New York where just a few short months ago it seemed like the pandemic would never end. Moody’s Analytics chief economist Mark Zandi said:

 “I’ve never seen an economy that feels as good as this one today. The economy is booming. It’s busting out all over.”

Further, Oxford Economics predicts a growth of American GDP to average out this year at 7.5%, higher than what we’ve seen for nearly 70 years.

However, there is still great cause for concern given unemployment numbers (which indeed is substantially less than a year ago) given that there are an additional 4 million unemployed Americans than there were in February 2020. To counter this, continued China trade will be required in particular in movies (which accounted for 30 percent of China’s box office sales in 2019) and education (exports support more than 3 million people who work in the industry in America).

Economic Indicators: A Time for Optimism?

According to recent data from the US Bureau of Economic Analysis, there was  an increase in GDP for the Third Quarter of 2020.  This number was 33.1 percent but should not be viewed in isolation since the Second Quarter encountered a 31.4 percent decline. This is indicative of a hopeful strong start to the V-shaped economic recovery.

Also in optimistic economic news, the unemployment numbers are dropping.  In fact, the numbers show that they are at the lowest since March, when the coronavirus pandemic began.    With a PMI (Purchasing Managers Index) number of 59.3 (and that being the 6th consecutive number over 50, 50 being deemed an expansive number), things are starting to look up.

There is still much more to be done.  Many believe the stimulus packages are inadequate and that until there is a vaccine against the coronavirus and industries across the board have the capacity to resume business activities, the tragic economic problems will remain. But these figures are encouraging.

America’s Economy

America’s Economy is the world’s wealthiest and most powerful.  Even macro-economists find it challenging to picture this as it is just so large.  But the numbers speak for themselves. Since 1871 America has been the world’s largest economy.  Indeed in 2018 it was measured at $20.58 trillion in 2018 in nominal terms.

For comprehension purposes the only way even macro-economists can fathom this enormity is by looking at GDP and labor force numbers as well as trade balances.

So let’s now look at trade balances.  Last year goods and services trade deficit was valued at $616.8 billion; imports – $3.1 trillion and exports – $2.5 trillion – not the best figures.  Adding insult to injury the trade deficit just for goods was $866 billion.

However, there was still a decline in the overall trade deficit for America in 2019 so that is definitely a good sign. Moreover, the US’s goods deficit with China declined too. Still, experts believe that many more stringent policies must be put in place to further reduce the deficit.

2020 Economic Outlook

The outlook for 2020 for the US economy is overall good, according to key indicators including: interest rates, stock market, consumer expectations, inflation, employment and, in particular GDP rate as that is an accurate indicator of America’s production output.  However, others have suggested a reduction from the 2019 2.2 percent figure to 2 percent this year. Indeed since 2017, real GDP growth was actually higher than average with a 2.5 percent figure for each calendar year.  This was mainly attributed to fiscal stimulus.

With Trump’s promise to boost advancements in the economy to 4 percent which is extremely fast, and – some would say – even too fast leading to overconfident consumerism. This could then result into a problematic boom and ultimate bust to the economy.  Indeed, there has been a marked growth spurt in the nation’s economy, especially as compared to other developed economies.

The dollar is also encountering a safety net, similar to the Swiss franc and Japanese yen.  This means that investors will more likely want to put money into US bonds and stocks.  There is an anticipated 3 percent growth within the next two years of the US dollar.

US Economy and Growth

America’s economy has enjoyed a steady solid growth rate for over 10 years.  The question is, where, how and what does the next decade look like?

According to a recent Bloomberg article, most of the wealth that the nation has generated has been from just 1% of counties. A recent report from the Bureau of Economic Analysis  found that a staggering 32.3% of US GDP was generated by 31 US counties.  What is perhaps even more odd about this statistic is that last year those 31 counties had only 26.1% of employed Americans.  

So it seems that the bones of the US economy is becoming further concentrated in larger cities and by the coasts.  Rural counties are dying down which could have implications for labor mobility and infrastructure spending.

But who exactly are these people who are bolstering the economy today?  According to a recent article in Yahoo Finance it is the immigrants who are making this happen: 

“Over the last decade, 42% of the net growth in U.S. population, and 54% of the net growth in the workforce, can be attributed to immigration. During the same period, the birth rate of native-born Americans has decreased, and the death rate has increased, due to aging. Immigrants now comprise roughly 15% of the total U.S. population. And because they tend to be younger than native-born Americans, immigrants now comprise about 17% of the U.S. workforce.”

With unemployment back at to its lowest since 1969 and a 3.1 percent increase in average hourly wages from 2018,  wherever its coming from and whoever’s providing it, the employment situation in America is positive.

US Economy 2019 Predictions

Road ahead for 2019

Despite the country countering perhaps its longest ever government shutdown – resulting in a projected decrease of US GDP by $8bn in Q1 2019 – the Congressional Budget Office has predicted a growth in economy of 2.3 percent this year. 

Still, that is a hit given that 2018 saw a 3.1 percent increase.  Tax cuts and federal spending increase attributed to that growth.  even though currently there are concerns due to the US-China trade tensions and concerns of an international economic slowdown, the fact that the CBO is predicting even 2.3 percent is good news.

In its Budget and Economic Outlook: 2019-2025 Report the CBO stated:

“federal revenues rise from 16.5 percent of GDP in 2019 to 17.4 percent in 2025 and then grow more rapidly, reaching 18.3 percent of GDP near the end of the decade. The projected growth in revenues after 2025 is largely attributable to the scheduled expiration of nearly all of the individual income tax provisions of the 2017 tax act.”

Still, the US economy cannot afford to rest on its laurels.  according to a recent CCN article, America’s place on the world economic throne is likely to be challenged and:

“The United States will fall to a third place in the ranking of the largest economies in the world. China and India will overtake the U.S. by 2030, and it is unlikely that we will ever get the throne back.”