Seven reasons why today’s economy is the strongest in history
Seven reasons why today’s economy is the strongest in history
Economic activity appears to be greater in each presidential election year. In 2024, people’s opinions a theirs economic status is high, but their estimate of overall economic performance has been markedly negative. It is often taken as a given that the economy was strong before the pandemic. This view is very wrong.
The economy today is incredibly strong by almost every historical benchmark, including the years leading up to this pandemic. Unhappiness about economic performance is often a symptom of the extreme shock and impact of the pandemic and Russia’s invasion of Ukraine. These shocks have led to the so-called “bull effect” – the economy collapsed in aggregate demand which led to a collapse in unemployment (during the recent Trump administration) and calls for the reversal of supply chains recession that caused inflation to increase (during the first administration of Biden. ).
By the end of 2022, the earthquakes had subsided significantly and their economic impact had diminished rapidly. A critical assessment of how the economy is performing today should look beyond these short-term effects of the bull market, and focus on comparing “normal” before and after the shock.
The table at the bottom of this post compares economic performance along several measures across three time periods: from the end of 2022, the full business cycle before the pandemic (2007-2019), and between 2017- 2019 – the tail end. of the expansion of that business cycle that coincides with the Trump administration first the devastating effects of the plague were felt.
Compared to the other two periods, the second half of the Biden administration has seen published economic power. Each symptom is summarized below:
- Inflation-adjusted wages have reached record highs and grown rapidly.
- For all workers, hourly wages in real dollars (adjusted to September 2024 values) were $35.36 in September 2024, compared to $34.52 at the end of 2019. Since 2022, wages have risen by 1.2 % annually, compared to a rate of 0.8% over the 2007–2019 business cycle and a rate of 0.9% between 2017–2019.
- For non-managerial workers (80% of private sector non-managerial workers), real hourly wages were $30.33 in September 2024, compared to $28.99 at the end of 2019. Wages rose by 1.3% annually from 2022, compared to 0.8% growth over the 2007–2019 business cycle and 1.0% growth between 2017–2019.
- Inflation-adjusted gross domestic product (GDP) growth is rising rapidly.
- Real GDP rose by 2.9% annually from 2022, compared to 1.8% growth between 2007-2019 and 2.5% growth between 2017-2019.
- Per-capita real GDP has grown by 2.4% annually since the end of 2022, compared to 1.1% growth between 2007-2019 and 1.9% growth between 2017-2019.
- The unemployment rate has fallen on average, including almost every group of workers.
- Total unemployment is now 3.8% from 2022, compared to 6.4% between 2007-2019 and 4.0% between 2017-2019.
- For Black workers, unemployment has increased by 5.7% from 2022, compared to 11.1% between 2007-2019 and 6.7% between 2017-2019.
- For Spanish workers, unemployment has increased by 4.8% from 2022, compared to 8.1% between 2007-2019 and 4.7% between 2017-2019.
- Share of young adults (between the ages of 25–54) with work is above average.
- For all workers, the employment to population ratio (EPOP) will be 80.7% from 2022, compared to 77.2% between 2007-2019 and 79.3% between 2017-2019.
- For Black workers, the first-year EPOP is now 77.8% from 2022, compared to 71.4% between 2007-2019 and 75.8% between 2017-2019.
- For Spanish workers, the first-year EPOP is 78.1% from 2022, compared to 74.1% between 2007-2019 and 77.0% between 2017-2019.
- Job growth is fast overall and for the private sector alone.
- Total job growth is now 217,000 per month from 2022, compared to 93,000 jobs between 2007-2019 and 176,000 between 2017-2019.
- Private sector job growth is now 170,000 per month from 2022, compared to 91,000 jobs between 2007-2019 and 164,000 between 2017-2019.
- The rate of business innovation is very high.
- The rate of advanced applications for new businesses is now 144,000 every month from 2022, compared to 102,000 between 2007-2019 and 106,000 between 2017-2019.
- The stock market—adjusted for inflation—is high and has grown very quickly.
- The S&P 500, adjusted for inflation, will be 4,842 from 2022, compared to an average of 2,410 between 2007-2019 and 3,392 between 2017-2019.
- The S&P 500 has grown 19.6% annually since 2022, compared to growth of 6.6% between 2007-2019 and 10.0% between 2017-2019.
The only measure where things look worse than in previous periods is the average level of inflation from the end of 2022. But the period from 2022 has also seen a historic pace deceleration of inflation—much faster than at any time in the past. In short, inflation over the past 20 months is the rapidly fading tail of the shocks of the early 2020s.
Today’s economy is historically strong
| From the end of 2022 | 2007–2019 | 2017–2019 | |
|---|---|---|---|
| Average hourly earnings (AHE), all workers (inflation adjusted) | |||
| End of time value | $35.36 | $34.52 | $34.52 |
| Average annual change (%) | 1.2% | 0.8% | 0.9% |
| AHE, production/non-managerial workers (inflation adjusted) | |||
| End of time value | $30.33 | $28.99 | $28.99 |
| Average annual change (%) | 1.3% | 0.8% | 1.0% |
| Unemployment rate (%) | |||
| In general | 3.8 | 6.4 | 4.0 |
| Black workers | 5.7 | 11.1 | 6.7 |
| Spanish workers | 4.8 | 8.1 | 4.7 |
| Below high school | 5.8 | 9.8 | 5.8 |
| High school level only | 4.0 | 6.6 | 4.1 |
| Another college | 3.2 | 5.5 | 3.4 |
| Employment and population ratio (%), ages 25-54 | |||
| In general | 80.7 | 77.2 | 79.3 |
| Black workers | 77.8 | 71.4 | 75.8 |
| Spanish workers | 78.1 | 74.1 | 77.0 |
| Average monthly job growth | |||
| In general | 217,000 | 93,000 | 176,000 |
| Private sector | 170,000 | 91,000 | 164,000 |
| Real GDP growth (average annual % change) | |||
| In general | 2.9% | 1.8% | 2.5% |
| In person | 2.4% | 1.1% | 1.9% |
| Applications for new businesses | |||
| Total monthly claims | 144,206 | 102,157 | 105,580 |
| Average annual turnover | 2.4% | -1.0% | 2.3% |
| Adjusted stock prices (S&P composite) | |||
| At the end of time | 4841.6 | 2410.3 | 3391.9 |
| Average annual change (%) | 19.6% | 6.6% | 10.0% |
| CPI inflation | |||
| Average rate | 3.7% | 1.8% | 2.1% |
| Average monthly turnover (ppt) | -0.20% | -0.01% | -0.01% |
Source: Details on the average hourly wage for all labor and production workers and monthly job growth from the Current Employment Statistics (CES) Bureau of Labor Statistics (BLS) program. Dunemployment and pre-employment status (EPOP) data from the Current Population Survey (CPS) program at BLS.. Dspread from the CConsumer Price Index (CPI) from the price index in the BLS. Data on real national product (GDP) from the National Income and Product Accounts (NIPA) at the Bureau of Economic Analysis..
Information on new business applications from A weekly program of Commercial Buildings at Census Bureau. Data on real prices from Robert Shiller’s online data resides in: http://www.econ.yale.edu/~shiller/data.htm. Hourly wages are calculated by the CPI-U from the BLS. Average hourly earnings for all workers not available before 2006.
Because they are not available in a seasonally adjusted format, historical EPOPs by race compare data from the previous 12 months and 24 months before the end of 2019 to the full period 2007-2019.
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