Gross Domestic Product (GDP) data released in the United States just before the elections indicate that the economy continues to grow, despite widespread pessimism.
GDP rose by 2.8% year-over-year in the July-September period, following 3% growth in the second quarter. A crucial measure of demand, which excludes volatile categories such as trade and inventories that provide limited insights into the economy’s health, also showed strength. Inflation-adjusted final sales to domestic purchasers increased to 3.5% from 2.8% in the previous quarter.
Consumer spending was a significant driver of this activity. Personal consumption expenditure grew 3.7% year-over-year, up from 2.8% in the second quarter, contributing nearly 2.5% to overall growth. Strong employment and wage growth appear to have supported this increase. Additional gains in exports and government defense spending also boosted GDP, while business spending on equipment saw a robust 11% increase.
White House response to economic data
On the other hand, continued deterioration in the housing sector, due to a slowdown in construction, negatively impacted the economy. Imports also showed a declining trend—typically, rising imports indicate strong consumer demand, but in this case, they negatively affected GDP calculations.
The Biden administration noted that this is the final quarter for GDP data releases before the next administration takes office, with fourth-quarter data scheduled for late January, post-inauguration. “Consumer spending and savings are both increasing, thanks to good job opportunities, rising real wages, and renewed optimism,” White House senior economic adviser Lael Brainard told reporters.
Economic indicators beyond GDP
Encouraging economic data extends beyond GDP. Payroll processor ADP reported a surprising acceleration in private sector job growth in October, with 233,000 jobs added, up from 159,000 in September, despite major hurricanes in the Southeast. This marked the strongest job growth in 15 months.
Simultaneously, the U.Sç stock market is on an upward trend, and the dollar is strengthening in currency markets.
Public rerception of the economy remains low
Despite positive official data, many Americans remain unconvinced. A recent Wall Street Journal (WSJ) poll revealed that 62% of respondents rated the economy as “not very good” or “bad.” Similarly, 56% of Americans believe the US.. is in a recession, and 72% think inflation is rising.
A new YouGov poll indicates that nearly half of Americans expect a “total economic collapse” in the next decade. 44% of respondents considered it likely, while 15% said it was “very likely” and 29% said it was “somewhat likely.” Conversely, 39% found it unlikely.
Income inequality reaches new heights
According to economist Michael Roberts, disposable personal income has decreased since Biden took office, while inflation has risen 21% from January 2020 levels. Mortgage rates are at their highest in 20 years, and house prices have reached record levels. Roberts also highlighted the surge in car and health insurance premiums.
Income and wealth inequality in the US is among the highest globally and continues to worsen. The top 1% of Americans receive 21% of all personal income, more than twice the share of the bottom 50%. Furthermore, 35% of all wealth is held by the top 1%, while the bottom 50% hold only 1%.
A deeper analysis of real GDP figures reveals why most Americans see limited benefits. Health care costs drive GDP growth, reflecting increased health insurance costs rather than improved care.
The manufacturing sector shows signs of contraction
Rising inventories of unsold goods point to potential weaknesses in the economy. According to the U.S. Manufacturing Purchasing Managers’ Index (PMI), manufacturing contracted for four consecutive months leading up to the November election.
Roberts noted that while the White House and mainstream economists emphasize low unemployment, most net job gains have been in part-time roles or government services rather than higher-paying full-time jobs in productive sectors. “If a worker must take a second job to maintain their standard of living, they may not feel as optimistic about the economy,” Roberts observed. Indeed, second-job rates have surged.
The irony of immigration policy
The ongoing presidential campaign has highlighted immigration policy as an economic issue. Roberts noted that much of the U.S.’s economic “outperformance” results from a significant increase in net migration—double the rate in the eurozone and triple that in Japan. The Congressional Budget Office projects a 5.2 million increase in the labor force by 2033 due to net migration, potentially adding $7 trillion in economic growth over the next decade.
Roberts called it “ironic” that immigration is a hotly debated issue. Although many Americans blame low real income growth on immigration, data suggests the opposite. Should immigration slow, or if a new administration restricts it further, US economic growth and living standards could suffer.
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