American economic growth is the envy of the whole world, except at home

WASHINGTON The latest and most important report on the nation's economic health ahead of next week's election provided more evidence of America's resilient growth. Whether this will make a difference to voters remains an open question.

The Commerce Department said Wednesday that U.S. gross domestic product, the broadest measure of economic output, grew at a robust annual rate of 2.8% in the third quarter. A country's GDP is the sum of the value of all goods and services produced in the country.

The growth represents a slight slowdown from the 3% annualized increase recorded in the second quarter, but U.S. economic activity continues to far outpace that of almost every other developed country. The outlook is the same, with growth that is the envy of the world, said Chris Rupkey, chief economist at Fwdbonds, an economic and market research firm based in New York.

The latest rise in GDP was once again fueled by sustainable consumer spending, as U.S. households benefited from a strong job market, falling inflation and a booming stock market.

It's impressive, phenomenal, said Jeffrey Korzenik, chief economist at Fifth Third Bank, referring to the U.S. economy's exceptional run of strong output and full employment.

The Labor Department is expected to release job creation and unemployment figures for October on Friday, but analysts are discounting the report because the data is expected to be seriously distorted by the temporary effects of two hurricanes and a Boeing workers strike. In September, the U.S. economy added 254,000 jobs and unemployment fell to a historic low of 4.1%.

With the third-quarter results, U.S. GDP is now expected to grow nearly 3% for the year, after posting similarly strong results in 2023 and the second half of 2022. This compares to this year's projected growth of around 1% or less for other leading advanced economies, including Germany, Japan, the United Kingdom and Canada.

U.S. GDP reached about $82,000 per person last year, nearly double the average for rich countries and more than six times that of China, the second-largest economy after the United States, and Russia. 11th in terms of total production, according to World Bank data.

The United States remains the standard among developed markets, said Stephen Juneau, senior U.S. economist at Bank of America.

Juneau believes that some of the same underlying strengths in the latest report will continue to keep the economy on a steady, albeit somewhat slower, growth trajectory in the coming quarters.

The banking sector has been strong, as have corporate profits. Productivity has recovered in recent quarters. And the influx of immigrants, legal and undocumented, has boosted labor supply, helping employers continue growth and contain wage inflation. This is an exceptional phenomenon in the immigration waves of the American economy, Juneau said.

They also helped boost household spending, which accounts for about two-thirds of U.S. economic output. Consumer spending jumped 3.7% in the third quarter as people bought more cars and spent money on health services, travel and restaurants. Although young people and those on low incomes are working harder to meet expenses and repay debt, households overall are doing well.

Most people entered the sharp but brief pandemic recession in 2020 in good financial health. And since then, their finances and spending have been supported by steady layoffs that have remained unusually low, significant government support, including stimulus checks, and asset appreciation. Most homeowners had locked in low mortgage rates before the Federal Reserve began raising interest rates in March 2022 to curb inflation.

Although employment and wage gains are expected to slow, the Fed has begun cutting interest rates now that inflation is nearing its 2% target. This should help businesses and consumers, and provide a boost to the real estate market. In the third quarter, residential investment continued to weigh on GDP, but businesses spent more on equipment, particularly to strengthen their information and transportation capabilities. This bodes well for future growth and productivity, which has also recovered in recent quarters.

The United States imported more goods in the last quarter than it exported, which is negative for GDP. But in places like Southern California, home to the nation's largest warehousing and logistics operations, that means increased activity in the storage and movement of goods. The Port of Los Angeles, the busiest container complex in the United States, said it handled a record 954,706 containers in September, although part of the 27% increase reflected advanced purchases and diversions due to labor tensions in Eastern seaports.

Right now, the American consumer buys anything that isn't defined, Rupkey said. The economy is stronger today than it was before the pandemic, and trying to convince people otherwise is just completely foolhardy. The economy, by almost every measure, is better than it was four years ago.

Although the American economy may be the envy of the world, it is not really at home. Polls have consistently shown that Americans are mired in a sour, gloomy mood about the economy, which could prove to be a significant factor in the election.

Many analysts attribute this disconnect to two key elements: The first is the bad memory of high inflation, particularly in 2022, which means that prices of food and other goods, although now rising much higher modestly, remain overall around 20% higher than before the crisis. pandemic. The second is that people's feelings reflect their political leanings: Many Republicans, disregarding their own personal finances, have a jaundiced view of the economy under Biden's Democratic presidency.

Korzenik, the Fifth Third Bank economist, suggests a third factor may be at play: There has been a general deterioration or decrease in consumer services, whether it's a hotel stay where many no longer clean unless asked, or a lack of services. experienced staff to assist you in retail stores.

I'm getting less for my money, he said, calling it an overall decline in the quality of service.

The American economy also has weak points. Manufacturing activity remains weak. Strong growth in stocks and real estate has been accompanied by rising wealth inequality. And heavy federal spending in response to the pandemic has added to the deficit and bloated public debts, which will crowd out investment and increase government interest costs.

Of more immediate concern, there is much uncertainty about the outcome of the elections, particularly due to Donald Trump's threats to raise tariffs and deport millions of undocumented immigrants, which would affect the labor market. But for now, economists remain optimistic about the outlook.

The U.S. economy is firing on all cylinders right now and, barring a significant external shock or domestic policy mistake, the U.S. economy is poised to close out the year on a strong economic note, Joseph Brusuelas said , chief economist at the tax and consulting firm. RSM US company.

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