Is Our Economy Teetering? Five Telling Facts We Should All Know
Amidst the roller coaster ride we’ve been on the last two years with the pandemic, concerns about our economic recovery are surfacing. Is the reality good, bad or we just can’t tell?
As a business owner, I am particularly vested in the economic outlook. Are we moving forward, or backward? In the immortal words of John Belushi, am I pleased — or frightened?
So I did some research. Here’s what I found:
- The economic rebound in 2021, the first year of Biden’s presidency, was at an all-time, a 37 year high — with the gross domestic product (the total output of goods and services) — expanding 5.7 percent. We have to go back to 1984, after a recession, to see this rate of growth. Our domestic growth even outpaced China’s economic growth for the first time in decades. This contrasts with the previous administrations claims of significant economic health; under Trump’s presidency, GDP growth in Trump’s first three years — before the pandemic — failed to reach even 3 percent.
- The stock market is outstripping its performance under the previous administration by a significant margin. Since Biden’s election, the S&P 500 has risen 14.3% and NASDAQ has risen 6.5% from their performance under the previous administration, according to Forbes. Since Biden’s election, the S&P 500 has risen 40% in a year, the largest gain in a year following a presidential election since the 1940’s, according to CFRA Research, and the Dow has seen record-setting pace in its growth. In fact, the New York Times reports that the stock market’s performance under the early months of Biden’s administration ranks third among all presidents for that period, and ahead of Trump who ranked fourth for results for his entire term.
- Retail sales exploded beyond their pre-COVID path, likely indicating pent-up demand.
- Bloomberg reported payroll increases were growing ahead of expectations. Job growth numbers were also revised upwards, showing a higher-than-predicted growth in jobs, to the tune of 235,000 more than initially counted.
- Unemployment dropped from 6.3% to 4.6%, according to Reuters — two full years ahead of the schedule predicted by the Congressional Budget Office.
And there’s more good news, especially for the average American. Back in March, the administration passed the American Rescue Plan, an extensive legislative effort to boost the country’s economic strength. The bill extended unemployment benefits as the pandemic continued, provided stimulus payments and small business grants, gave additional money for schools, housing, and healthcare, and increased food stamp benefits. So far, the support seems to be working, as the childhood poverty rate has been cut in half, reflecting a quality-of-life improvement for five million American children. It must be doing something right somewhere — despite not a single Republican representative voting for the plan, some who voted against it are now trying to claim credit for themselves for its successes.
There are some bumps in the road. Restaurants and other public-facing sectors lag behind, in part because of the pandemic and the challenge of hiring workers. Inflation reached a high of 6.8%, a result of a combination of supply chain issues, labor shortages and a sudden burst of spending after lockdowns during the pandemic. Some economists are concerned that overheating the economy through attempts to fight the pandemic’s effect may continue to fuel inflation, if spending isn’t curtailed and interest rates aren’t raised. The Federal Reserve is the entity that can institute measures to counter inflation, and it has taken some steps.
Overall, the first year of Biden’s administration has been very good for the economy, despite the wild card of the pandemic. Job growth, employment, retail sales and the performance of financial markets are all very positive, exceeding the record of the previous administration.