at Calculated Risk on 1/21/2025 01:07:00 PM
Presidents receive too much credit and blame for the economy!
But it is worth looking at the current state of the economy. From economist Ernie Tedeschi: Benchmarking the US economy that President Donald Trump is set to inherit
• While the US economy still has challenges, especially lingering inflation and poor consumer sentiment, many important economic metrics are outperforming the 2008 cycle (the most recent nonpandemic business cycle and the cycle in which the first Trump administration began), and some are even at historical highs.
• Some measures have already met goals set by the incoming administration, even before Inauguration Day. Real Gross Domestic Product growth, for example, has averaged 3 percent over the past two years.
• Expectations are for output growth to moderate to trend next year, inflation to take roughly two years to fully return to the Federal Reserve’s 2 percent target, and the unemployment rate to remain roughly at current levels.
• Economic forecasts even one year or two years out are highly uncertain.
…Broadly speaking, the data indicate that the US economy in the later part of 2024 was in a strong position. Growth in output, measured by real GDP, and nonfarm productivity were above estimates of trend, employment levels were at near-historic highs, and real wage and income growth was positive. Although inflation was not yet fully back to the Federal Reserve’s inflation target of 2 percent, it was generally thought to be in the “last mile,” or the phase when inflation declines tend to slow as inflation approaches 2 percent. The risk of inflation reaccelerating, however, remains a concern. And some measures of labor market momentum, such as quits and hires, softened in recent quarters off of their prior strong readings.
Table 1 below summarizes recent US economic data and contrasts it with the performance over the 2008–2019 business cycle, which includes the Great Recession of 2007–2009 and the subsequent recovery prior to the onset of the COVID-19 recession in 2020. Numbers in blue are metrics that outperformed the average over the entire previous business cycle, while numbers in purple indicate metrics that outperformed the second half of the previous cycle, from 2014 to 2019, when the Great Recession recovery accelerated. (See Table 1.)
Click on graph for larger image.
NOTE: I broke the table in two to make it more readable.
As a caveat, economic aggregates are, by their nature, summary statistics that do not represent all lived experiences. Indeed, by definition, half of people are above and below the median. No one economic measure or set of measures perfectly encapsulates all the positives and negatives of the US economy. With that said, were one to compare US outcomes in 2025 and 2026 to those coming out of 2024, Table 1 gives a sense of what the most prominent metrics look like at the end of President Biden’s term in office.
