There’s no other way to describe the U.S. economy today than roaring. Growth is gaining steam, with last week’s upward revision of third quarter gross domestic product to an annual rate of 3.1%.
Unemployment remains below its long-term average, disposable income after inflation is rising, and the stock market made over 50 new records in 2024. The performance is so robust that some economists have dubbed it the greatest economy ever.
Yet despite indisputable evidence, many Americans are not buying it. Polling conducted before the election found that 6 in 10 voters incorrectly believed that the U.S. was in a recession, and their votes largely reflected that belief. So why the disconnect?
In a word, inflation. While the rate of price increases has receded and is nearing the Fed’s target, the cost of shoes and bread are 25% higher on average than they were three years ago, and the memory is still fresh.
The strength of the current expansion was not the base case for most analysts a couple of years ago. Supply chain disruptions as well as fiscal and monetary stimulus provided much needed assistance to many families who were impacted by the pandemic, but also triggered a bout of inflation that reached 9.1% in 2022, a 40-year high.