About That Strong Economy?

By at 7 March, 2024, 12:17 pm

Small Business Economic Insider

by Raymond J. Keating –

It’s amazing what political talk and diminished expectations can achieve. For example, I keep hearing about our strong economy, but then I look at the data and assorted key reports, and I think, “Really?”

First, let’s get some perspective on economic growth. Yes, the second half of 2023 experienced strong growth, with real annualized GDP growth registering 4.9 percent in the third quarter and 3.2 percent in the fourth quarter. That was welcome news.

However, for all of 2023, the economy grew at only 2.5 percent in real terms. In fact, over the past 17 years, real GDP growth averaged a woeful 1.8 percent, which was half the average rate of 3.6 percent that prevailed from 1950 to 2006. And over these past 17 years, the top real annual rate of growth was 3.0 percent in 2018 (the only year to touch 3 percent).

So, here is the source of diminished expectations, along with presidential administrations and Members of Congress over this period playing politics and claiming that the economy is growing rapidly when it aligned with their interests to do so. But the U.S. is not destined for under-performing growth. Instead, slow growth effectively has been a choice made by policymakers who have imposed policies that raise costs, and diminish entrepreneurship and investment.

Early Data Points to a Poor Start for 2024

Second, the latest reports that we’ve received in terms of what’s going on in the economy have pointed to a poor start for 2024, as SBE Council noted in analyses on manufacturing, personal income, durable goods, industrial production and retail sales.

Third, the latest Fed Beige Book didn’t exactly point in a positive direction on growth. In fact, it opened: “Economic activity increased slightly, on balance, since early January, with eight Districts reporting slight to modest growth in activity, three others reporting no change, and one District noting a slight softening.”

Indeed, my concerns were not relieved by much of what was said in the rest of the report.

For example, manufacturing was “largely unchanged.” Consumer spending “inched down.” As for jobs, “Employment rose at a slight to modest pace in most Districts,” and businesses apparently confronted persisting price pressures.

My hope lies in the hopes expressed by those surveyed by the Fed:

“The outlook for future economic growth remained generally positive, with contacts noting expectations for stronger demand and less restrictive financial conditions over the next 6 to 12 months.”

Hey, I’ll take “generally positive” at this point – especially with this being a bizarre election year, and a clear pro-growth agenda of significant tax and regulatory relief, free trade, and reining in government spending seemingly being absent from the policy debate.

Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council. His latest books on the economy are The Weekly Economist: 52 Quick Reads to Help You Think Like an Economist, The Weekly Economist II: 52 More Quick Reads to Help You Think Like an Economist and The Weekly Economist III: Another 52 Quick Reads to Help You Think Like an Economist.


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