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The Morning

What’s going on with the u.s. economy.

The economic picture is simpler than the swirl of economic indicators sometimes suggests.

By David Leonhardt

The economy is probably headed toward a recession. No, it’s actually booming again.

Inflation is plummeting. No, it has started rising again.

If you find the cacophony of economic indicators to be confusing, don’t feel bad. It is confusing. Some numbers point in one direction, while others point in the opposite. Partisans from both political parties have an interest in promoting one type of news and downplaying the other.

Yesterday’s inflation report added to the muddle. Inflation — a major concern for many families and already a 2024 campaign issue — has been falling for the past year and half. Americans’ economic mood has improved slightly as a result . But the numbers released yesterday showed inflation to be higher than forecasters had expected. In response, the S&P 500 index fell 1.4 percent , its second-biggest daily decline this year.

In today’s newsletter, I’ll give you a framework for thinking about the state of the U.S. economy by describing the four main phases of the past several years. I can’t tell you what will happen next, but I do think the picture is simpler than the swirl of economic indicators sometimes suggests.

1. The pre-Covid boom

The American economy has been disappointing for much of the past half-century. Income and wealth growth has been slow for most families, and inequality has soared. Perhaps the starkest sign of the problems: Life expectancy in the U.S. is now lower than in any other high-income country, and it isn’t especially close .

Still, there have been a few brief periods when the economy has boomed. One of them began late in Barack Obama’s presidency and continued during Donald Trump’s term. The country finally emerged from its hangover after the housing crash, as businesses expanded and consumers spent more.

The unemployment rate fell below 5 percent in 2016 and below 4 percent in 2018. The tight labor market — combined with increases in the minimum wage in many states — raised income for all income groups.

Change in median weekly income

Compared with two years earlier, adjusted for inflation

By early 2020, the U.S. economy’s short-term performance was as healthy as it had been since the dot-com boom two decades earlier.

2. The Covid crash

Then the pandemic arrived.

People stayed home and cut back on spending. Businesses laid off workers, and the unemployment rate exceeded 10 percent. Experts understandably worried that the economy could fall into a vicious cycle, in which companies went out of business, families couldn’t make loan payments and banks went under.

Many economists believed that the federal government had been too timid with stimulus after the early-2000s housing crash. During the pandemic, members of Congress vowed not to repeat the mistake and passed huge stimulus bills, which both Trump and President Biden signed.

3. The too-hot recovery

Those stimulus programs worked — a bit too well.

For all the misery that Covid caused, it ended up being less economically destructive than the housing crash. The unemployment surge was temporary. And thanks to the stimulus, the typical American family’s finances improved during the pandemic — a very different situation than the aftermath of the housing crash.

In effect, Washington overlearned the lesson of the previous crisis. It pumped so much money into the economy during the pandemic that families were able to go on a spending spree. Businesses, in response, raised prices.

The pandemic’s supply-chain disruptions played a big role, too. This combination — high demand and low supply — led to sharp price increases.

Year-over-year change in Consumer Price Index

excluding food

in Jan. 2024

4. The healthier recovery

Once inflation rises, it can remain high for years (as it did from the late 1960s to the early 1980s). Workers demand bigger raises, and businesses, facing higher costs, raise prices even more. The dynamic is reinforcing.

When inflation soared in 2021, some economists thought the pattern was repeating. They predicted that only a deep recession would bring a return to normalcy. These dark predictions turned out to be wrong , though. Instead, inflation started falling rapidly in 2022. The end of the stimulus programs, combined with the end of most supply-chain problems, was enough to reduce price increases.

For the past several months, the economy has again looked healthy, with both employment and wages growing nicely. Yesterday’s report doesn’t change that: Annual inflation fell to 3.1 percent in January, from 3.4 percent in December. It’s just that forecasters had expected it to fall more than it did.

Why didn’t it? Maybe last month’s number was just a statistical blip. But maybe it is a sign that the economy has again become too strong for inflation to keep falling.

“Hiring picked up in January, wage growth was solid, and consumers continue to spend,” as my colleague Jeanna Smialek explains. “Some analysts have suggested that in an economy this hot, wrestling inflation the rest of the way to normal will prove more difficult than the progress so far.” Economists generally consider the ideal inflation rate to be around 2 percent.

By almost any measure, the economy is in better shape today than most forecasters predicted even a year ago. Still, it hasn’t fully recovered from the pandemic.

Related: The American economy has seen a burst of productivity recently. Read more about economists’ views on whether it will continue.

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Here are columns by Ross Douthat on inflation and Thomas Edsall on isolationism .

MORNING READS

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Small acts: Times readers shared the little things they do to show affection all year long.

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Modern Love podcast: Hear how a couple navigated getting “un-married” while staying together .

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THE MORNING RECOMMENDS …

Combine just a few ingredients to make a simple, romantic spaghetti carbonara .

Listen to love songs about crushes .

Shop more sustainably .

Clean your blankets .

Here is today’s Spelling Bee . Yesterday’s pangrams were applicable and clippable .

Celebrate Valentine’s Day with this month’s bonus crossword puzzle , which has a rom-com theme.

And here are today’s Mini Crossword , Wordle , Sudoku and Connections .

Thanks for spending part of your morning with The Times. See you tomorrow. — David

Sign up here to get this newsletter in your inbox . Reach our team at [email protected] .

David Leonhardt runs The Morning , The Times’s flagship daily newsletter. Since joining The Times in 1999, he has been an economics columnist, opinion columnist, head of the Washington bureau and founding editor of the Upshot section, among other roles. More about David Leonhardt

Ten facts about COVID-19 and the U.S. economy

Subscribe to the economic studies bulletin, lauren bauer , lauren bauer fellow - economic studies , associate director - the hamilton project @laurenlbauer kristen broady , kristen broady nonresident senior fellow - brookings metro @kebroady wendy edelberg , and wendy edelberg director - the hamilton project , senior fellow - economic studies @wendyedelberg jimmy o’donnell jimmy o’donnell former senior research assistant - the hamilton project @jfodonnell13.

September 17, 2020

• 31 min read

The coronavirus 2019 disease (COVID-19) pandemic has created both a public health crisis and an economic crisis in the United States. The pandemic has disrupted lives, pushed the hospital system to its capacity, and created a global economic slowdown. As of September 15, 2020 there have been more than 6.5 million confirmed COVID-19 cases and more than 195,000 deaths in the United States (Johns Hopkins University n.d.). To put these numbers into context, the pandemic has now claimed more than three times the American lives that were lost in the Vietnam War (Ducharme 2020; authors’ calculations). The economic crisis is unprecedented in its scale: the pandemic has created a demand shock, a supply shock, and a financial shock all at once (Triggs and Kharas 2020).

On the public health front, the spread of the virus has exhibited clear geographic trends, starting in the densely populated urban centers and then spreading to more-rural parts of the country (Desjardins 2020). Figure A shows the weekly number of deaths caused by COVID-19 in each U.S. region from late February to late August 2020. Early on, COVID-19 cases were concentrated in coastal population centers, particularly in the Northeast, with cases in New York, New Jersey, and Massachusetts peaking in April (Desjardins 2020). By April 9 there had been more COVID-19–related deaths in New York and New Jersey than in the rest of the United States combined (New York Times 2020). COVID-19–related deaths then peaked in the New England and Rocky Mountain regions during the third week of April, followed by the Great Lakes region in the fourth week of April, and the Mideast (excluding New York and New Jersey) and the Plains regions during the first week of May. The Southeast, Southwest, and Far West regions all experienced their peaks at the end of July and first week of August.

The COVID-19 crisis has also had differential impacts among various racial and ethnic groups. Inequities in the social determinants of health—income and wealth, health-care access and utilization, education, occupation, discrimination, and housing—are interrelated and put some racial and ethnic minority groups at increased risk of contracting and dying from COVID-19 (Centers for Disease Control and Prevention [CDC] 2020c). Inequities in infectious disease outcomes are the byproduct of decades of government policies that have systematically disadvantaged Black, Hispanic, and Native American communities (Cowger et al. 2020). For example, as a result of policies that have helped to determine the location, quality, and residential density for people of color, Black and Hispanic people are clustered in the same high-density, urban locations that were most affected in the first months of the pandemic (Cowger et al. 2020; Hardy and Logan 2020). In addition, Black people and Native American people disproportionately use public transit, which has been associated with higher COVID-19 contraction rates (McLaren 2020).

Relatedly, those demographic groups came into the crisis with a higher incidence of preexisting comorbidities including hypertension, diabetes, and heart disease, which also increase one’s risk of contracting and dying from COVID-19 (Yancy 2020; Ray 2020). Compared to white, non-Hispanic Americans, Black Americans are 2.6 times more likely to contract COVID-19, 4.7 times more likely to be hospitalized as a result of contracting the virus, and 2.1 times more likely to die from COVID-19–related health issues (CDC 2020b). While non-Hispanic white people are dying in the largest numbers (CDC 2020a), Black and Hispanic people are dying at much higher rates relative to their share of the U.S. population (see figure B1); moreover, this disparity is true for every age group (figure B2).

While voluntary social distancing and lockdowns that took effect in March 2020 worked initially to isolate and drive down infections, those actions precipitated a severe economic downturn. The demand shock resulting from quarantine, unemployment, and business closures dealt a blow to consumer services (Bartik, Bertrand, Cullen, et al. 2020). Lockdown measures and social distancing reduced the economy’s capacity to produce goods and services (Brinca, Duarte, and Faria-e-Castro 2020; Gupta, Simon, and Wing 2020).

The National Bureau of Economic Research (NBER) determined that a peak in monthly economic activity occurred in the U.S. economy in February 2020, marking the end of the longest recorded U.S. expansion, which began in June 2009 (NBER n.d.). Figure C shows the percent difference in real (inflation-adjusted) gross domestic product (GDP) from the peak of a business cycle through the quarter when GDP returned to the level of the previous business cycle peak for recent recessions. From the most recent peak in the fourth quarter of 2019, the United States experienced two consecutive quarters of declines in GDP; it even recorded its steepest quarterly drop in economic output on record, a decrease of 9.1 percent in the second quarter of 2020 (Bureau of Economic Analysis [BEA] 2020a; authors’ calculations). To put this contraction into historical context, quarterly GDP had never experienced a drop greater than 3 percent (at a quarterly, nonannualized rate) since record keeping began in 1947 (Routley 2020).

Figure D shows the percent change in employment relative to business cycle peaks. COVID-19–related job losses wiped out 113 straight months of job growth, with total nonfarm employment falling by 20.5 million jobs in April (BLS 2020b; authors’ calculations). The COVID-19 pandemic and associated economic shutdown created a crisis for all workers, but the impact was greater for women, non-white workers, lower-wage earners, and those with less education (Stevenson 2020). In December 2019 women held more nonfarm payroll jobs than men for the first time during a period of job growth; by May 2020 that relationship was reversed, in part reflecting job losses in the leisure and hospitality industry, where women account for 53 percent of workers (Stevenson 2020).

The COVID-19 crisis also led to dramatic swings in household spending. Retail sales, which primarily tracks sales of consumer goods, declined 8.7 percent from February to March 2020, the largest month-to-month decrease since the Census Bureau started tracking the data (U.S. Census Bureau 2020a). Although some areas (e.g., grocery stores, pharmacies, and non-store retailers) saw increases in demand as lockdown measures began, others (e.g., clothing stores, furniture and appliances stores, food services and drinking places, sporting and hobby stores, and gasoline stations) saw declines. In early May, as some states lifted social distancing restrictions, sales began to recover in most goods sectors (U.S. Census Bureau 2020a). Overall, U.S. retail sales increased 17.7 percent from April to May, the largest monthly jump on record, recouping 63 percent of March and April’s losses (U.S. Census Bureau 2020a). Growth in retail sales continued through the summer: by August, retail sales were 2.6 percent above their August 2019 level (U.S. Census Bureau 2020a).To help put those swings in such spending into historical context, figure E shows the percent change in real advance retail and food sales from the peak of a business cycle during recessions between 1980 and 2020.

In addition to consumer spending, the COVID-19 crisis has damaged the nation’s industrial production (i.e., output in the manufacturing, mining, and utility sectors). As shown in figure F, U.S. industrial production dropped sharply in March and has since only partially rebounded. This decline poses a host of challenges for the U.S. manufacturing sector, which employs nearly 13 million workers (Federal Reserve Bank of St. Louis [FRED] 2020a), especially those that depend on workers whose jobs cannot be carried out remotely.

The effects of the crisis vary by industry subsector, with the construction machinery subsector having experienced less-severe effects than it faced during the 2007–09 financial crisis due to expected government infrastructure stimuli and an increase in e-commerce, while companies in the machine tools, plastics machinery, and steel production equipment sectors have been more negatively affected (Kronenwett 2020). In addition, the partial rebound in industrial production was boosted by a 107 percent increase in auto production in June 2020 (Board of Governors of the Federal Reserve System 2020, table 1).

Six months into the COVID-19 crisis, we present 10 facts about the state of the U.S. economy. We highlight effects that COVID-19 has had on businesses, the labor market, and households. We conclude by considering how policy has supported businesses and families since March 2020. Taken together, these facts describe a joint economic and public health crisis of a scale and at a speed unprecedented in the history of the United States.

Fact 1: Small business revenue is down 20 percent since January.

The COVID-19 pandemic has been particularly damaging for small businesses, which represent the majority of businesses in the United States and employ nearly half of all private sector workers (Bartik, Bertrand, Cullen, et al. 2020; Small Business Administration 2012). Figure 1 shows how the different small business sectors have been affected by this downturn, highlighting severe declines in revenue among the leisure and hospitality as well as education and health services sectors. Compared to January 2020, average daily revenue as of August 9 was down by 47.5 percent in the leisure and hospitality sector, 16.4 percent in the education and health services sector, and 14.1 percent in the retail and transportation sector; aggregate small business revenue across all industries had fallen by 19.1 percent

Some sectors where employees could not work remotely and where businesses were not deemed essential to be open fared particularly poorly (Papanikolau and Schmidt 2020). Notably, some of these sectors, after partially rebounding, have begun to see revenue declines again starting in August. For example, the percent reduction in revenue fell by more than 5 percentage points in the first 10 days of August in the retail and transportation sector as well as in the leisure and hospitality sector.

In line with these declines in revenue, significant declines in employment at the beginning of the recession were seen in small businesses. Between March and April, employment in firms with fewer than 20 employees fell more than 16 percent; for firms with between 20 and 49 employees, the decline was 22 percent (Wilmoth 2020). Between August 30 and September 5, 50 percent of respondents had not rehired any employees, 5 percent of respondents had rehired at least one employee and 55 percent of respondents had not furloughed or laid off any employees (Small Business Pulse 2020).

There is, of course, substantial uncertainty in these calculations. A major source of uncertainty is the extent of climate change over the next several decades, which depends largely on future policy choices and economic developments—both of which affect the level of total carbon emissions. As noted earlier, this uncertainty justifies more aggressive action to limit emissions and thereby help insure against the worst potential outcomes.

Stabilizing business revenue is crucial—not only to avoid costly layoffs and firm closures, but also because reduced revenue will result in diminished investment, which can compound the future output and income damages of a recession (Boushey et al. 2019); for example, following declines in revenue during the Great Recession, real private nonresidential fixed investment fell 16 percent (FRED 2020c). For a Hamilton Project proposal on how to provide small businesses with relief in this crisis, see Hamilton (2020).

Fact 2: So far, only Chapter 11 bankruptcies have increased relative to last year.

The decline in business revenue has caused many firms to become insolvent. Hamilton (2020) estimates that by July nearly 420,000 small businesses had failed since the start of the pandemic, the number of failures typically seen in an entire year. Nevertheless, Wang et al. (2020) find that total bankruptcies are down 27 percent year-over-year between January and August. Breaking it out by type of filing, figure 2 shows how the filing of bankruptcies has changed since February 2020 from the same month last year. Chapter 11 bankruptcies—in which a plan for reorganization is negotiated—were down in February when the economy was relatively strong. Since March, such bankruptcies have regularly been between 15 percent and 50 percent higher than in the same month last year. Although larger firms benefit from entering into Chapter 11 bankruptcy in order to reorganize their operations, many smaller businesses opt for outright closures. Chapter 7 bankruptcies—in which the assets of the debtor are liquidated and used to pay creditors—decreased sharply from the same time last year in April and May and have remained below their 2019 levels through August. Finally, Chapter 13 bankruptcies—for individuals or sole proprietors who agree to pay a percentage of their income until creditors are paid off—have been down by about 60 percent from the same month in the previous year since April.

Court closures resulting from the virus have had significant effects on bankruptcy filings, with many negotiation meetings cancelled, court proceedings delayed, and lawyers holding off on bringing large cases (Church 2020). 1 In addition to logistical challenges that have likely delayed bankruptcies, many owners of businesses that are closed or suffering large reductions in revenue are likely waiting to file for Chapter 7 bankruptcy. Firms that rely on financial institutions and markets for financing face curtailed access to credit (Federal Reserve Bank 2020). The Federal Reserve Bank of St. Louis finds that firms under those conditions during the Great Recession were more likely to declare bankruptcy. In all, conditions point to a coming wave of bankruptcies (Famiglietti and Leibovici 2020).

Firm closures can sometimes be the result of efficient market reallocation (Barrero, Bloom, and Davis 2020). Indeed, Bartik, Bertrand, Lin, et al. (2020) show that small businesses that were struggling in 2019 were the most likely to close early in the pandemic and the least likely to reopen. Nonetheless, this crisis will no doubt lead to the failure of viable, productive businesses; letting these businesses fail is costly to the economy (Hamilton 2020).

Fact 3: New business formations fell off in the spring, but are on track to outpace recent years.

At the same time that business closures spiked in the spring, business formations lagged behind pre-crisis levels in the early months of the pandemic. More recently, business formations have begun to increase. Figure 3 shows how many new high-propensity businesses (i.e., those new businesses that are most likely to become employers) filed applications in recent years. By early June 2020 cumulative high-propensity business formations were 4.4 percent lower than they were at the same time in 2019; however, by mid-August there were actually 56 percent more new business applications than in mid-August 2019.

Business formations tend to decline during recessions (Boushey et al. 2019); in the current recession, public health conditions worked to depress business formation as well. For example, Sedláček and Sterk (2020) find that states with a larger number of COVID-19 deaths tended to have fewer high-propensity business applications

Since mid-summer, high-propensity business applications have rebounded. The Economic Innovation Group (EIG) offers three potential explanations for this recent increase: (1) there could have been a backlog in the processing of new business applications as a result of the same court closures discussed in fact 2, (2) newly unemployed persons might be starting their own businesses, and (3) some entrepreneurs could be trying to capitalize on potential reallocation or other opportunities occurring in the market (EIG 2020). There is some evidence that business creation has been boosted by demand for new kinds of goods: our analysis shows that many states with heavy manufacturing bases have seen the fastest rebounds (not shown). At the same time, 14 states still trail last year’s pace of business formation (Business Formation Statistics 2020; authors’ calculations).

Continuity in business formation is critical for long-term growth. Sedláček (2020) finds that the “lost generation” of firms during the Great Recession led to significant output loss: if firm entry had remained constant instead of falling, the economy would have recovered four to six years earlier and the unemployment rate would have been 0.5 percentage point lower even 10 years after the trough. Long term, a 1 standard deviation shock to the number of start-ups (resulting in an initial decrease in start-ups of about 10 percent) results in a 1–1.5 percent drop in real GDP that can last 10 years or longer (Guorio, Messer, and Siemer 2016). For more on the significance of entrepreneurship and innovation in the U.S. economy, see prior Hamilton Project work (e.g., Shambaugh et al. 2018).

Fact 4: Layoffs and shutdowns—and not reduced average hours—are driving in total hours worked.

The labor market devastation caused by this pandemic has been the quickest and most severe in recent U.S. history. Many firms reacted to the COVID-19 pandemic by reducing their operations. Figure 4a shows the decline in total hours worked using data from Homebase, a firm that provides scheduling and time clock software to service-sector clients (e.g., food services, retail). 2 Figure 4a shows the daily change in total hours worked from February through July, relative to a base period (January 19–February 1). The total number of hours worked fell by about 60 percent in March. While the number of daily hours began to rise again in mid-April, they leveled off at around 25 percent below baseline in June. Since then, aggregate hours have remained at between 25 and 30 percent of their baseline level.

Figure 4b shows Bartik, Bertrand, Lin, et al.’s (2020) decomposition of the reduction in total hours from figure 4a into (1) average hours worked by a worker, (2) layoffs, and (3) establishment or firm shutdowns. Their analysis shows that, beginning in late March, the reduction in total hours was primarily driven by layoffs and establishment shutdowns. That is, the observed reduction in hours has not been driven by cutting hours among workers, but by reduced employment and temporary furloughs. Relatedly, worker recall is where much of the gain in hours has come since the April nadir. Cajner et al. (2020) find that the reopening businesses, especially small firms like those observed in the Homebase data, were major contributors to post-April employment gains.

Fact 5: The number of labor force participants not at work quadrupled from January to April.

During economic contractions, the share of the population that is employed declines. Figure 5 shows the number of workers in selected labor force statuses from January to July. From March to April, the number of prime-age people participating in the labor force but not working (i.e., either unemployed or employed but not at work) rose from 7.9 million to 19.6 million. That increase was largely driven by a 10.3 percentage point rise in the unemployment rate (FRED 2020d).

As shown in figure 5, an unusual phenomenon in April and May was the surge in labor force participants that were counted as employed but not at work. These workers were either absent from work for a reason (e.g., vacation, child care) or absent from work for “other” reasons; recent research has suggested that this latter group largely misclassified themselves as being employed, suggesting an even higher share of the population was out of work (Bauer et al. 2020).

Early in the recession, the majority of those who were not at work—either those who were unemployed or those employed but not at work—described their circumstances as temporary. Temporary layoffs are less damaging then permanent layoffs because they represent a much higher chance of reemployment since the employer–employee relationship is maintained (Fujita and Moscarini 2017; Nunn and Parsons 2020). In April, 10.1 million were unemployed on temporary layoff, 4.8 million were potentially misclassified as employed but absent from work for “other” reason, and 2.0 million were employed and absent from work for a specific reason. Altogether, these people represented 86.3 percent of prime-age labor force participants not at work in April.

In May, June, and July, these three categories accounted for a smaller share of labor force participants who were not at work. Instead, a rising number of people not at work have classified themselves as being on permanent layoff. In April, the number who were unemployed due to a permanent job loss was 1.6 million, up only modestly from the number prior to the recession and representing 6.5 percent of those unemployed or employed but not at work. In July, 2.3 million were unemployed due to permanent layoff, which was 11.8 percent of those either unemployed or employed and not at work.

More permanent layoffs suggest more people being unemployed for longer periods. Chodorow-Reich and Coglianese (2020) project that, by February 2021, 4.5 million individuals will have been unemployed for more than 26 weeks, and almost 2 million individuals will have been unemployed for more than 46 weeks. Long-term unemployment can lead to lower future earnings and reduced rates of homeownership (Cooper 2013).

Fact 6: The number of people not in the labor force who want a job spiked by 4.5 million in April and has remained elevated.

While many of the millions of people who are no longer employed are counted as unemployed (as highlighted in fact 5), a significant portion have dropped out of the labor force altogether. Figure 6 shows the number of persons not in the labor force but who say they want a job. The size of that group grew by 4.5 million in April, as the group includes those who lost their jobs in March and did not look for work in April (and thus were classified as not in the labor force). Within the group of people out of the labor force but who want a job, 6.0 percent reported being discouraged by their labor market prospects and 16.7 percent reported having another reason for not looking for work. The increase between March and April in those not in the labor force but who want a job was particularly large among adults of prime working age (25-54): 2.5 million (BLS 2020a; authors’ calculations). These numbers have remained elevated since April. To put this into context, the unemployment rate in August was 8.4 percent; however, using an alternative measure of unemployment that also includes people not in the labor force who want a job and are available to work—both discouraged and not discouraged workers (i.e., U-5)—the rate was 9.6 percent in August.

Many of those reporting being out of the labor force but wanting a job have not been looking for work because of reasons that include child-care responsibilities, issues with transportation, or illness. The size of that group has risen steadily, from 867,000 in March to 1.8 million in June, but then fell slightly to 1.5 million in August. As highlighted in Stevenson (2020), disruptions in child care have led many working parents to drop out the labor force, a development that (without significant policy intervention) could have long-lasting negative effects on labor market outcomes for years to come.

As was true before the pandemic, the majority of those not in the labor force do not want a job; not shown in figure 6 are the roughly 90 million Americans who said they did not want a job (BLS 2020a). This group, which consists largely of students, family caretakers, retirees, and people with illnesses, became larger in April and May, with some evidence suggesting that the pandemic pushed workers over the age of 54 into retirement. For example, among people who were employed in January but out of the labor force in April, 28 percent who offered a reason why they had left the labor force said they were retired (Coiboin, Gorodnichenko, Weber 2020).

Fact 7: In April 2020 the U.S. personal savings rate reached its highest recorded level.

One of the immediate effects of the COVID-19 pandemic was a sharp decline in aggregate spending and a sharp increase in savings. Figure 7 shows the personal saving rate, which is the ratio of personal saving to disposable personal income. The personal saving rate peaked at 34 percent in April, its highest level in recorded history. It has decreased since then but remains significantly elevated. That increase has been the result of both lower spending and greater federal transfer payments.

Just as it did across the world (Andersen et al. 2020; Bounie, Camara, and Galbraith 2020; Carvalho et al. 2020), spending in the United States dropped following COVID-19–related shutdowns (Coiboin, Gorodnichenko, Weber 2020). Spending on many types of goods and services fell immediately as the pandemic emerged. Nevertheless, some categories of goods spending saw initial increases and most categories of goods spending have rebounded since March; for example, spending on groceries was strong early in the pandemic, with women, households with children, and older households stockpiling more supplies (Baker al. 2020). Although goods spending has recovered to pre-pandemic levels, spending on services remains sharply down through July (BEA 2020c).

Through July, the saving rate was also boosted by stimulus payments to households, including unemployment insurance benefits and other federal transfers to households. As a result of those payments, even as millions of workers have lost their jobs, disposable personal income from March to July exceeded pre-pandemic levels (FRED 2020b). Although evidence suggests that many low-income households spent their stimulus checks immediately, other income groups said they planned to save the money (Baker et al. 2020; Chetty et al. 2020;), and low-income households were more likely to save their overall monthly income relative to prior periods (Bachas et al. 2020; Coibion, Gorodnichenko, and Weber 2020). Furthermore, Bachas et al. (2020) find evidence of sizeable growth in liquid asset balances for many households whom the federal support reached, suggesting the importance of the initial stimulus and insurance programs in limiting the effects of labor market disruptions on households’ financial positions. For low-income households whom the federal support has not reached, financial circumstances have been dire.

Fact 8: Low-income families with children were most likely to experience an income shock.

During the COVID-19 recession, job loss and labor income loss have not been experienced equally. Since March, low3-income households, non-white households, and households with children were most likely to experience an income shock (Monte 2020). Figures 8a and 8b shows these patterns in late July.

About half of Black and Hispanic households experienced an income shock recently (see figure 8a). Hispanic families with and without children are most likely to experience an income shock. Lopez, Rainie, and Budimen (2020) found that 61 percent of Hispanic adults said in April that they or someone in their house had experienced a job or wage loss. Ganong et al. (2020) examine the racial gaps in consumption smoothing following an income shock, and find that the welfare cost of income volatility (i.e., how much a household cuts consumption following an income shock) is 50 percent higher for Black households and 20 percent higher for Hispanic households than it is for white households.

More than three out of five low-income households with children reported that they had experienced an income shock due to COVID-19 (figure 8b; authors’ calculations). Income losses related to COVID-19 are associated with a host of material hardships, including food insecurity and difficulty paying bills (Despard et al. 2020). Families with children are also vulnerable to falling behind on obligations: each additional child in a household increases the likelihood of a serious delinquency (being at least two months behind on a current loan obligation) by 17 percent (Ricketts and Boshara 2020).

Fact 9: In 26 states, more than one in five households was behind on rent in July.

Although the increase in federal payments to households and unemployed workers has been relatively generous, it has not been able to cover all expenses for struggling households. Focusing on renters surveyed in late July, figure 9 shows that in 26 states more than one-fifth of renting households had not yet paid their rent for June, and that in five of those states (including New York) one-third of households had not yet paid their rent.

According to a survey by Apartment List, missed payments were concentrated among young and low-income households as well as residents of densely populated urban areas. With late fees added on, households who miss a rent payment in a given month may be more likely to be unable to afford their next housing payment, creating a vicious circle of delinquency and putting households at risk for eviction (Adamcyk 2020). In addition, renters (as compared to home owners) are less likely to receive federal support for housing costs (Amherst Market Commentary 2020).

For many households, unemployment coincided with having less than two month’s income in liquid assets and having high debt-to-income ratios (Kolomatsky 2020). In an April 2020 survey conducted by the Pew Research Center, 73 percent of Black adults and 70 percent of Hispanic adults indicated that they did not have emergency funds to cover three months of expenses, compared to 47 percent of white adults (Lopez, Rainie, and Budimen 2020). Furthermore, Black and Hispanic respondents also said they would not be able to cover these expenses by borrowing money, using savings, or selling assets (Lopez, Rainie, and Budimen 2020).

Fact 10: From 2018 to mid-2020, the rate of food insecurity doubled for households with children.

During the COVID-19 pandemic, rates of food insecurity and of very low food security among households with children have increased (see figure 10). Food insecurity occurs when a household does not have sufficient food for its members to maintain healthy and active lives and lacks the resources to obtain more food. Very low food security is akin to hunger and captures whether there is a significant or consistent disruption in food consumption. Notably, the current levels of food insecurity are above their Great Recession peaks.

Food insecurity is particularly high among households with children. In fact, it has doubled since before the pandemic, growing from roughly 14 percent in 2018 to about 32 percent of households in July 2020 (see figure 10). These rates are even higher for Black and Hispanic households (Schanzenbach and Pitts 2020), and Black and Hispanic households with children (Bauer 2020).

Typically, families experiencing food insecurity are able to nonetheless maintain food security for their children; but this does not seem to be the case today (Coleman-Jenson et al. 2020). In June and July, rates of very low food security among children worsened, increasing from 16.4 percent in the first week in June to 19.0 percent by the third week of July.

Several policy responses to the COVID-19 pandemic have supported households’ food security. Pandemic EBT, a disaster response program that provided the value of lost school meals to eligible households as a grocery voucher, reduced very low food security among children by 30 percent (Bauer et al. 2020). Unemployment Insurance receipt and SNAP emergency allotments also reduced food insecurity (Bitler, Hoynes, and Schanzenbach 2020; Raifman, Bor, and Venkataramani 2020).

We conclude this set of economic facts with a discussion of the federal policy response to COVID-19. The fiscal policy response to the pandemic has taken two primary tacks: (1) aid to business, and (2) aid to households and unemployed workers. A series of laws—notably The Families First Act and The Coronavirus Aid, Relief, and Economic Security Act (CARES) Act—authorized hundreds of billions of dollars in direct support to firms and to families.

The major program in the CARES Act providing relief to small businesses is the Paycheck Protection Program (PPP). According to the Small Business Pulse Survey, 73.5 percent of small businesses surveyed requested financial assistance from the PPP; 25.6 percent requested economic injury disaster loans; and 13 percent requested small business administration loan forgiveness between March 13 and September 5. As described in Hamilton (2020), the PPP was initially allocated $349 billion to offer loans to small businesses, with such loans being forgiven if businesses retained workers and maintained payroll. The program was significantly oversubscribed at first, and larger businesses—who requested larger loans—disproportionately received funding. In particular, although loans for over $1 million only represented 4 percent of all loans processed in the first round of PPP, they represented 45 percent of all dollars disbursed (figure G). As a result, an additional $310 billion was allocated to the PPP, nearly half of which had been disbursed by early August; this second round resulted in a greater number of smaller loans to smaller businesses: as shown in figure G, in the second round of PPP loans under $150,000 accounted for 94 percent of all loans processed and 49 percent of all dollars disbursed.

Empirical evidence on the effect of the PPP in maintaining employment has been mixed, although the range of results generally show a positive effect. For example, about 50 percent of recipients reported retaining between one and five jobs as a result of the program, whereas about 10 percent reported retaining no jobs (SBA 2020; authors’ calculations). One study examining a broad range of firms estimated that the PPP led to 2.3 million jobs being maintained through early June, or for about eight weeks (Autor et al. 2020). Another study examining firms with relatively low wages found no employment effect (Chetty et al. 2020), and attributed the lack of effect to the fact that firms that offer professional, scientific, and technical services received a greater share of loans than firms providing food services.

PPP loans increased business’s expected survival probability by between 14 and 30 percentage points (Bartik, Bertrand, Cullen, et al. 2020). While administering the loans via private banks allowed for rapid disbursement of funds, it meant that businesses with pre-existing connections with banks were more likely to benefit from the program (Bartik, Bertrand, Cullen, et al. 2020). Humphries, Neilson, and Ulyssea (2020) found that of businesses that applied for the PPP, smaller businesses applied later, faced longer processing times, and were less likely to have their applications approved. Relatedly, Granja et al. (2020) found that PPP funds went disproportionately to areas less affected by the pandemic: 15 percent of establishments in the most-affected areas received loans while 30 percent of those in the least-affected areas received them. These issues together with PPP’s “firstcome, first-served” design disadvantaged small businesses.

As Hamilton (2020) makes clear, while the PPP supported many small businesses in the spring and early summer, the support was temporary. It was not sufficient to keep small businesses viable through the pandemic. Small businesses are now in dire straits and in need of further assistance.

Initially, there was an unprecedented level of federal resources provided to households, largely through one-time stimulus payments and expanded unemployment insurance (UI) payments. As a result of those payments, disposable personal income was nearly 10 percent higher in the second quarter of 2020 relative to the first quarter, even though employee compensation fell almost 7 percent (BEA 2020b).

The Families First Act and CARES Act included stimulus payments for households based on income, expanded UI eligibility, an increase of $600 in UI payments to recipients, increases in SNAP benefits to those households not receiving the maximum benefit, and direct payments to families with children eligible for free or reduced-price school meals to make up for missed school meals.

Figure H highlights the increase in new federal outlays from these three sets of disbursements to households by month from March to August by subtracting 2019 outlays for these categories from 2020. As shown in figure H, there was an increase in tax refunds and other IRS payments to households of more than $140 billion in April, with additional increases in later months for households whose stimulus payments were delayed. (It is also likely that the increase in July reflects the delay in the tax filing date.) In addition, UI payments totaled nearly $46 billion in April, and then averaged $104 billion from May through July. In August, UI payments fell sharply, to $52 billion, as the additional $600 weekly payment to recipients expired. The combination of higher SNAP participation, SNAP emergency allotments, and PandemicEBT resulted in total spending on food assistance averaging around $3.4 billion per month. Other temporary measures in the CARES Act that supported households included student loan forbearance and prohibitions on most foreclosures and evictions.

Mounting empirical evidence shows that the extraordinary support for households and unemployed people supported spending and economic growth in recent months (Casado et al. 2020). According to an economic analysis by the Washington Center for Equitable Growth, for every dollar of stimulus, households increased spending by 25–35 cents (Robbins 2020).

Going forward, the expiration of the $600 weekly payment to UI recipients will be a drag on consumer spending (even as some recipients became eligible for a temporary increase in payments of $300 a week). In addition, recent evidence suggests the generous UI benefits through July did not constrain the supply of labor and so the expiration of those benefits did not provide a boost to labor supply and employment (Altonji et al. 2020; Marinescu, Skandalis, and Zhao 2020). With wages and salaries down 5 percent from February to July, households continue to need substantial federal support (Bitler, Hoynes, and Schanzenbach 2020).

Indeed, the abrupt lapse in support for firms, households, the unemployed, and families with children threatens a nascent and fragile economic recovery and stands to do long-term and permanent damage. The greater the economic damage during the pandemic, the more protracted the recovery will be once the pandemic is over. Given the cost to life and livelihood of a weak economy and labor market, policymakers must continue to use the fiscal, monetary, and public health tools at their disposal to end the COVID-19 pandemic and hasten a self-sustaining economic recovery.

Fiscal support to firms and families flowed promptly, with notable exceptions. Black applicants faced significant delays in receiving UI, and the smallest businesses without preexisting relationships with banks struggled to receive PPP (Schanzenbach et al. 2016; Grooms, Ortega, and Rubalcaba 2020). And while existing automatic stabilizers have sprung into action given the speed of the economic collapse, much more could be done to extend augmented countercyclical fiscal policy forward in time to help sustain the recovery (Boushey, Nunn, and Shambaugh 2019). The federal government’s failure to act since March—to suppress the spread of COVID-19, to improve automatic stabilizers, to extend fiscal relief—is to our collective detriment. The Hamilton Project’s mission is to provide evidence and policy proposals based on the judgment that long-term prosperity is best achieved by fostering economic growth and broad participation in that growth. Federal fiscal policy can and should do more—urgently—to support those goals.

1. While many courts reopened in May, they began to cancel jury trials and in-person proceedings again in June as cases surged (United States Courts 2020). 2. Bartik, Bertrand, Lin, et al. (2020), who also rely on Homebase data, show that, despite Homebase’s concentrated clientele, the data are broadly representative of the sectors most acutely affected by the pandemic (i.e., industries that rely on in-person interaction and cannot easily transition to remote work).

Economic Studies

The Hamilton Project

Michael J. Ahn

May 13, 2024

Jenny Schuetz, Gary Geiler, Adrianna Pita

Brookings Institution, Washington DC

9:00 am - 1:15 pm EDT

The History of the American Economy: From Zero to One of the Largest Economies in the World Essay

Introduction, current economic situation, republicans, works cited.

Economy is defined as the activities surrounding the production and distribution of goods and services in a given geographical area. The Gross Domestic Product (GDP) is the measuring index for economies. Under this measure, the United States of America is the single largest country economy and is about a quarter of the world’s economy according to the CIA World Fact book. Although the democrats and the republican are differently opinionated over decisions on the economy, they both ultimately aim to improve it and the differences are just politics.

Right from the formation the first federal government of the George Washington in the late 1700s, divisions on how to best run the economy emerged. Prominent differences were between the then Secretary of treasury Alexander Hamilton, a republican federalist, and Secretary of state Thomas Jefferson a democratic federalist.

Hamilton made several proposals to Congress to curtail the financial strain and to boost the struggling economy. Although these were passed, they were opposed by the Jefferson’s group. To begin with, all debts from issuing of bonds to both foreign and domestic holders were paid off. The federal government then assumed individual state debts. In so doing, creditors were now required to deal with the national government. This move was intended to increase the individual state’s obligations to the federal government. Hamilton further proposed to Congress that the Bank of the United States be created. This is what is today referred to as the Federal Reserve (Oates et al. 109). During that period, Congress had no constitutional authority to ratify a charter for the establishment of a bank. It however had authority to do anything “necessary and proper” to carry out its delegated duties (Berkin et al. 218). The constitution therefore implied Congress could establish a bank (Billington, 94). Jefferson opposed this on the grounds that it was unconstitutional and therefore illegal with support from James Madison, a prominent democrat. The banks’ purpose was to handle repository of national assets, issue paper money based on assets and source investment capital (Hofstadter 56).

The current controversy over the U.S economy within the political cycles is the U.S budget. Issues around it include the bail out packages that were handed out in the midst of the financial meltdown, and the proposed taxation methods. Differences also emerge in the priority of expenditure. The democrats and the republicans, like on many other issues such as health and foreign policies, have taken different stands on the economy. It all started with the crash of the housing markets. Like the great depression, over speculation by financial institutions on high risk loans after decades of relative stability finally collapsed. These loans were invested mainly in real estate and in the stock market due to the high returns. When no one bought stocks and the houses anymore, the banks simply had no money to lend out or give the customers who had deposited it. The customers lost, businesses were affected and the entire economy went down. Several measures to improve the situation have been differed on by the democrats and republicans, but either way implemented by the current government. As it stands the economic situation is at odds with historical conventional suppositions of recession and boom. The stock market still shakily fluctuates from the recent crushes it has faced. Consumer confidence is low although unemployment figures are beginning to skew positively. Retirement funds are jeopardized although the economy does not seem to be shrinking. The government is facing large budgetary deficits yet it must allocate huge amounts for both the Iraq and Afghanistan wars. A wish to lower income taxes by Americans is a welcome to stimulate the economy, but the overwhelming deficit should be reduced in order to have a healthier economy.

It is worth mentioning that, the government is currently run by the democrats and the republicans are in opposition. Also that, the current economic crisis started when the republicans were in the government and the democrats in opposition. Now, the two groups take different views on how the economic situation should be handled.

As outlined by the Republican National Committee (2008, Economic section, para. 2-15) in the party’s official website, the republicans take on the economy in a nutshell is to save every government penny available. It is on the basis of saving all you have to improve economically. They have discuss a number of measures to achieve this.

The republicans propose lowering of taxes paid by everyone so that people can keep more of the salary they earn. These include taxes on internet access and on new cell phones. They also propose scrapping off of the federal death tax while supporting tax credits on healthcare and medical expenses. In addition, republicans seek to do away with the Alternative Minimum Tax which is argued to be a burden on large families. All this is perceived by republicans to enhance individual savings improving their economy and the nation’s economy as a whole.

The republican do propose increase of small businesses through out the nation. This they hope to achieve by reducing the energy costs through better delivery structures and improved efficiency in the energy sector operations. The tax reduction aforementioned increases savings and hence availability of capital for starting the small businesses. They also propose increased marketing of American products to foreign markets enhancing growth of the small scale businesses. The republicans want improved regulation of small businesses. Instituting legal reforms that protect small businesses from frivolous law suits is another strategy of improving this.

Other ways the republicans suggest for improving the economy include: improving technology and innovation, developing a flexible and innovative workforce. This they view will keep America ahead and attract professional expertise. Protecting union workers and reforming the civil justice system is another of the ways enhancing economic performance.

The democrats’ view of solving the economic problem is to spend what they have in order to make the situation better now while embarking on the long term improvements. In the Democratic Party website by the Democratic National Committee (2010, Economic section, para. 1-14), they propose several measures under economic stewardship aimed at attaining a healthy U.S economy. The key component in this roadmap is the economic stimulus package. It is an effort by the government to inject money into the economy and encourage consumers to spend so that growth can be achieved.

As discussed in the New York Times (2010, Business section, para. 2-5), the $787 billion stimulus package approved by Congress on February 11, 2009 has so far been spent on several institutions in different sectors of the economy. No republican voted for the bill in the house and only three did in the Senate. The money bailed out: Lehman brothers and Bear Stearns, Merrill Lynch and Freddie Mac, AIG, GM, Chevrolet and Ford Motors among other financial and industrial institutions. The reason behind the expenditure by democrats is that, the economic repercussions of such institutions failing are more severe. While by November of last year several people agreed that the stimulus package was working, unemployment rates continued to increase. A further $15 billion bill of payroll tax exemption was passed to help reduce this figure. This kind of spending by the democrats has gone on in different sectors of the U.S economy in an attempt to revive it.

Other areas through which the democrats hope to improve the economy include increasing tax on people with higher income but not those with low income. Investing in alternative energy that is cheap and environmentally friendly is another means of attaining this. The democrats propose reforms on health care that they believe will make it less costly. In so doing they ease the average citizens’ economic burden and thus improve their economic standard. The bill is still in the house. There are long term plans to lower the cost of college education to have a more skilled workforce. There are also plans of increasing international trade to benefit U.S firms and focusing on innovation and technology.

Both the democrats and the republicans focus on the same subjects in the quest for strategies of improving the economy. These include taxes, energy, spending strategies, international trade among others. In both cases the strategies would work each with its pros and cons and culminates into an improved economy. The current economic situation the United States is facing is a glimpse to the scarcity of resources it possesses like any other country and the fact that no decision occurs without a component cost. Politics therefore creates the differences on which way to take in improving the economy. Had the republicans or the independents been elected to power, the economy would have still improved as it is doing now.

Billington, Ray A. American History Before 1877 . Maryland: Littlefields, 1965. Print.

Berkin, Carol, et al. Making of America. Boston: Houghton Mifflin, 1995. Print.

Democratic National Committee. ‘’ Economy’’ American Dream. Aug. 2009. Web.

Hofstadter, Richard. The American Political Tradition: and the Men Who Made It. Canada: McClelland, 1948. Print.

Oates, Stephen, et al. Portrait of America. Connecticut: Wadsworth, 2007. Print.

Republican National Committee. ‘’ Economy’’. 2008 Republican Platform . Web.

The New York Times. ‘’ Economic Stimulus’’. Times Topics. 2010. Web.

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IvyPanda. (2021, December 9). The History of the American Economy: From Zero to One of the Largest Economies in the World. https://ivypanda.com/essays/the-history-of-american-economy/

"The History of the American Economy: From Zero to One of the Largest Economies in the World." IvyPanda , 9 Dec. 2021, ivypanda.com/essays/the-history-of-american-economy/.

IvyPanda . (2021) 'The History of the American Economy: From Zero to One of the Largest Economies in the World'. 9 December.

IvyPanda . 2021. "The History of the American Economy: From Zero to One of the Largest Economies in the World." December 9, 2021. https://ivypanda.com/essays/the-history-of-american-economy/.

1. IvyPanda . "The History of the American Economy: From Zero to One of the Largest Economies in the World." December 9, 2021. https://ivypanda.com/essays/the-history-of-american-economy/.

Bibliography

IvyPanda . "The History of the American Economy: From Zero to One of the Largest Economies in the World." December 9, 2021. https://ivypanda.com/essays/the-history-of-american-economy/.

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U.S. Economy at a Glance

Perspective from the bea accounts.

BEA produces some of the most closely watched economic statistics that influence decisions of government officials, business people, and individuals. These statistics provide a comprehensive, up-to-date picture of the U.S. economy. The data on this page are drawn from featured BEA economic accounts.

National Economic Accounts

Gross domestic product, first quarter 2024 (advance estimate).

Real gross domestic product (GDP) increased at an annual rate of 1.6 percent in the first quarter of 2024, according to the “advance” estimate. In the fourth quarter of 2023, real GDP increased 3.4 percent. The increase in the first quarter primarily reflected increases in consumer spending and housing investment that were partly offset by a decrease in inventory investment. Imports, which are a subtraction in the calculation of GDP, increased.

• Current release:  April 25, 2024
• Next release:  May 30, 2024

Gross Domestic Product, First Quarter 2024 (Advance Estimate) CHART - HP

Personal Income and Outlays, March 2024

Personal income increased $122.0 billion (0.5 percent at a monthly rate) in March. Disposable personal income (DPI)—personal income less personal current taxes—increased $104.0 billion (0.5 percent). Personal outlays—the sum of personal consumption expenditures (PCE), personal interest payments, and personal current transfer payments—increased $172.1 billion (0.9 percent) and consumer spending increased $160.9 billion (0.8 percent). Personal saving was $671.0 billion and the personal saving rate—personal saving as a percentage of disposable personal income—was 3.2 percent in March.

• Current release:  April 26, 2024
• Next release:  May 31, 2024

Personal Income and Outlays, March 2024 CHART

Industry Economic Accounts

International economic accounts, u.s. international transactions, 4th quarter and year 2023.

The U.S. current-account deficit narrowed by $1.6 billion, or 0.8 percent, to $194.8 billion in the fourth quarter of 2023, according to statistics released today by the U.S. Bureau of Economic Analysis. The revised third-quarter deficit was $196.4 billion. The fourth-quarter deficit was 2.8 percent of current-dollar gross domestic product, down less than 0.1 percent from the third quarter.

• Current Release:  March 21, 2024
• Next Release:  June 20, 2024

U.S. International Transactions 4th Quarter, '23 Chart 1

U.S. International Investment Position, 4th Quarter and Year 2023

The U.S. net international investment position, the difference between U.S. residents’ foreign financial assets and liabilities, was -$19.77 trillion at the end of the fourth quarter of 2023, according to statistics released today by the U.S. Bureau of Economic Analysis (BEA). Assets totaled $34.54 trillion, and liabilities were $54.31 trillion. At the end of the third quarter, the net investment position was -$18.11 trillion (revised).

• Current Release:  March 27, 2024
• Next Release:  June 26, 2024

U.S. International Investment Position, 4th Quarter and year '23 CHART

U.S. International Trade in Goods and Services, March 2024

The U.S. goods and services trade deficit decreased in March 2024 according to the U.S. Bureau of Economic Analysis and the U.S. Census Bureau. The deficit decreased from $69.5 billion in February (revised) to $69.4 billion in March, as imports decreased more than exports. The goods deficit increased $0.8 billion in March to $92.5 billion. The services surplus increased $0.9 billion in March to $23.1 billion.

• Current Release:  May 2, 2024
• Next release:  June 6, 2024

U.S. International Trade in Goods and Services, March 2024 CHART

New Foreign Direct Investment in the United States, 2022

Expenditures by foreign direct investors to acquire, establish, or expand U.S. businesses totaled $177.5 billion in 2022, down $185.1 billion from $362.6 billion in 2021.

• Current release:  July 10, 2023
• Next release:  July 2024

New Foreign Direct Investment Expenditures by Type, '99-'22 Chart

Regional Economic Accounts

Gross domestic product by state and personal income by state, 4th quarter 2023 and preliminary 2023.

Real gross domestic product (GDP) increased in all 50 states and the District of Columbia in the fourth quarter of 2023, with the percent change ranging from 6.7 percent in Nevada to 0.2 percent in Nebraska

• Current Release:  March 29, 2024
• Next Release:  June 28, 2024

Gross Domestic Product by State and Personal Income by State, 4th Quarter '23 and Preliminary '23 - CHART

Personal Income by County and Metropolitan Area, 2022

In 2022, personal income, in current dollars, increased in 1,964 counties, decreased in 1,107, and was unchanged in 43. Personal income increased 2.1 percent in the metropolitan portion of the United States and 1.3 percent in the nonmetropolitan portion.

• Current Release:  November 16, 2023
• Next Release:  November 14, 2024

Personal Income by County and Metropolitan Area, 2022 CHART

Personal Consumption Expenditures by State, 2022

Nationally, personal consumption expenditures (PCE), in current dollars, increased 9.2 percent in 2022 after increasing 12.9 percent in 2021. PCE increased in all 50 states and the District of Columbia, with the percent change ranging from 11.8 percent in Idaho to 6.4 percent in Louisiana.

• Current Release: October 4, 2023
• Next release: October 3, 2024

Personal Consumption Expenditures by State: Percent Change, '21-'22

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Many Americans Believe the Economy Is Rigged

Guest essay in the new york times.

When asked what drives the economy, many Americans have a simple, single answer that comes to mind immediately: “greed.” They believe the rich and powerful have designed the economy to benefit themselves and have left others with too little or with nothing at all.

We know Americans feel this way because we asked them. Over the past two years, as part of  a project  with the American Academy of Arts and Sciences, we and a team of people conducted over 30 small-group conversations with Americans from almost every corner of the country. While national indicators may suggest that the economy is strong, the Americans we listened to are mostly not thriving. They do not see the economy as nourishing or supporting them. Instead, they tend to see it as an obstacle, a set of external forces out of their control that nonetheless seems to hold sway over their lives.

Take the perceived prevalence of greed. This is hardly a new feeling, but it has been exacerbated recently by inflation and higher housing costs. Americans experience these phenomena not as abstract concepts or political talking points but rather as grocery stores and landlords demanding more money.

Income inequality has been in decline over the last few years. But try explaining that to someone struggling to pay the rent. “I just feel like the underdog can’t get ahead, and it’s all about greed and profit,” one Kentucky participant noted. It is not necessarily the actual distribution of wealth that troubles people. It is the feeling that the economy is rigged against them. . . .

Commission on Reimagining Our Economy

The Commission seeks to reimagine the nation’s political economy, rethink the values that drive economic policy making, and advance recommendations that help individuals, communities, and the nation flourish.

Advancing a People-First Economy

New york times essay features academy work.

Why The American Economy Is Suddenly Exceptional

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The U.S. was known as the “cleanest dirty shirt” during the financial crisis, the one place you could safely put your money if you had to put it somewhere. Now it is being called exceptional.

A funny thing happened on the way to the U.S. recession of 2024: the irrepressible American economy refused to play along.

At the start of the year, investors around the world were looking for as many as six quarter-point interest rate cuts from the Federal Reserve to protect economic growth and fight inflation. But inflation has stayed stubbornly above the central bank’s 2% target and the economy keeps growing despite an overnight interest rate target range of 5.25-5.5%, the most among the Group of Seven industrial countries.

By early February those six rate cuts had become three , and on Wednesday, Fed Chair Jerome Powell gave the world the idea that there might not be any. In the circumspect language of a central banker, he said, “We do not expect that it will be appropriate to reduce the target range for the federal funds rate until we have gained greater confidence that inflation is moving sustainably toward 2%. So far this year, the data have not given us that greater confidence.”

The central bank did throw the market a bone in the form of slowing sales of bonds from its own portfolio more sharply than had been expected, and Powell said he did not think inflation was so strong that the Fed is likely to want to raise rates. Treasury bond prices rose, a sign of relief that the interest-rate news was not worse, and stocks and the dollar held firm.

In the normal course of events, you could expect a tight monetary policy to curb economic growth and put a lid on stock gains. But Wall Street keeps rising and the dollar remains strong and investors keep financing Washington’s budget deficits. At the heart of this apparent conundrum is the idea that there is something special about the United States and its economy, an old idea that has been gaining popularity for more than a decade.

“The exceptional performance of the U.S. economy, both in absolute terms and relative to other countries, reflects the powerful combination of existing attributes and steps taken to invest in the engine of tomorrow’s growth,” says Mohamed El-Erian, chief economic advisor to the Munich-based insurer Allianz as well as president of Queens’ College at Cambridge University.

OPENING UP A LEAD

Five-year dollar-adjusted performances of major stock-market indexes in percent.

I n 2010, just off the depths of the Great Financial Crisis, El-Erian was co-chief executive officer of Pacific Investment Management, a subsidiary of Allianz. In a television interview that year he began referring to the U.S. as the “cleanest dirty shirt” among major economies, and the description was echoed by Bill Gross , his co-CIO at Pimco. At the time, America remained insulated from economic turmoil in Greece that was souring the outlook for its partners in the European Union, its financial markets benefiting from a flight to perceived quality.

People still use the phrase to compare the U.S. to its industrialized peers, but as the dollar and Wall Street have soared in recent months, it has been rebranded as American exceptionalism. That idea, which has been kicking around in politics since before the Revolution , is that the United States is unique among nations, based on factors that include its size, history, culture and geography. More recently, it is being used to explain world-leading results for U.S. stocks and the resilience of the American economy in the years since the financial crisis. The concept that America is more than a bolt-hole during times of stress is gaining notice. Consider these recent headlines:

American exceptionalism is real—in the stock market –Fortune, February 3

Why the US economy is doing so much better than the rest of the world –CNN, January 26

Tech-led U.S. 'exceptionalism' underlined –Reuters, February 15

Since the trough of the financial crisis, U.S. equities handily surpassed major rivals, rising at an annual rate of 16% over the 14 years through 2023, according to research from Goldman Sachs Goldman Sachs . By contrast, stocks in other developed countries were up 10% in that period, emerging markets 8% and China just 6%. Gains have slowed this year, but the Standard & Poor’s 500 index is up 5.2%, better in dollar terms than any other major broad-market gauge except Italy’s MIB, which has gained 7.9%. The U.S. advance came despite issues that include a snowballing budget deficit–it has grown by a daily average of $4.7 billion this year–a divided government, an immigration crisis and instances of social unrest. They raise the question of how much geographic diversity investors really need.

With the economy still expanding, the Fed can afford to concentrate on its fight against inflation. Consumer prices are rising at an annual rate of more than 3% and almost 4% when volatile food and energy prices are stripped out. The Fed’s favored inflation metric, based on personal consumption expenditures, is closer to the central bank’s 2% target—2.7% overall and 2.8% on a core basis—but the recent data can be misleading because the index surged by 16.6% from the end of 2019 through 2023.

Many investors seemed to have been looking past those sharp price hikes at the start of this year, when they believed U.S. central bankers would cut their overnight interest rate target to a range of 3.75-4%.

One clear advantage that the United States has is that its workers are more productive than those of any other major economy. At an estimated $85,373 of output per person, according to the International Monetary Fund , the U.S. is only surpassed by five countries: four offshore finance centers and oil-producing Norway. The next member of the Group of Seven industrialized nations on the list is Canada, at $54,866. Additionally, America has by far the largest economy (more than $28 trillion of annual gross domestic product) and stock and bond markets (worth about $90 trillion combined).

Those gargantuan numbers translate to the ability to finance research and development in cutting-edge technologies like artificial intelligence (AI) and an ability to overcome disasters, while extensive natural resources limit reliance on overseas suppliers.

El-Erian counts “the intrinsic agility of the economy, its entrepreneurial underpinning and vast resources” as existing strong points that have been joined by “legislative steps taken to support and unleash innovations being pursued by U.S. companies in key areas such as generative AI, life sciences and green energy.”

W ashington’s approach to managing its domestic economy can differ markedly from those of other major industrial countries. In a recent research report, a team of Barclays fixed-income analysts led by Themistoklis Fiotakis in London identified a series of iconoclastic policies that are behind the U.S. outperformance:

• Limiting exposure to international trade and thus avoiding a deceleration of worldwide economic growth. Other countries have counted on globalization to stimulate demand.

• Maintaining high returns on invested capital, in part because of efficiency arising from technological advances enabled by American companies but also via tax policies that encourage reinvestment in the U.S.

• Stimulating growth by increasing government spending in times of economic weakness, a counter-cyclical approach not taken by other developed countries.

• Energy policies that encouraged fracking and other methods to expand production, allowing the country to become a petroleum exporter. Besides supporting the trade balance, there is a secondary benefit: oil and gas are priced in dollars, adding to relative strength in the greenback instead of sapping it when energy prices rise.

These trends are not guaranteed to last forever, and the United States is not without its problems. The country has lost triple-A ratings at Standard & Poor’s and Fitch and is being considered for a downgrade at Moody’s because of issues like polarized politics and the national debt load, which reflects years of deficit spending.

“There may be a time when the U.S. overstimulates its economy,” the Barclays analysts wrote, broadening the country’s trade deficit to a harmful degree. Europe could begin to adopt some U.S. policies and close a gap that economists polled by Bloomberg expect to keep American output growing significantly faster than that of the Eurozone through at least 2026. In addition, China may recover from what the Barclays analysts consider a cyclical low.

“But for now,” they added, “there is a sense that reinvesting in the U.S. domestic market has been a winning strategy–to the degree that it has benefited the dollar and U.S. asset returns.”

T he resilient American economy lends strength to the dollar, which in turn allows the United States to borrow in its own currency even as it has been racking up debt. While this may be one reason why the perceived inflation hedges gold and bitcoin have touched record highs this year, it has not dented the greenback against other currencies. The Intercontinental Exchange’s ICE U.S. Dollar Index is at about 106, a smidgen above the level at which it opened the century, data from YCharts shows.

The strengthening U.S. economic outlook has, by contrast, put special pressure on the yen. Japan uses borrowed money to invest in stocks and foreign bonds and its currency has fallen to a three-decade low against the greenback as the outlook for Fed interest-rate cuts recedes.

LEADER OF THE PACK

Despite a wall of domestic and political worries the U.S. economy still reigns supreme among large developed nations.

“The exceptionalism story protects the dollar from the downside,” says Kit Juckes , chief foreign-exchange strategist at Societe Generale. That helps keep it in favor with central banks of other countries for use in international transactions and also is why many commodities are priced in dollars.

“One of the things about being the world’s reserve currency is you have more room to maneuver,” says Juckes. “The U.S. has privileges granted to it.”

In practical terms this means that investors will finance American budget deficits for the foreseeable future, with little to fear from depreciation in the foreign-exchange market. The U.S. pays more to borrow money than other industrialized nations, but the premium is not outrageous: 10-year Treasuries yield about 4.6%, above the German level of 2.6% but similar to Britain’s 4.4%.

The U.S. debt burden has grown in the last decade, to more than $34 trillion from less than $18 trillion 10 years ago, but so has the economy. The International Monetary Fund estimates the ratio of gross U.S. debt to gross domestic product will be 127% this year. That’s third-highest in the Group of Seven industrial countries, behind Japan at 255% and Italy at 139%, while Canada, France and the U.K. all have gross debt loads that are about equal to their annual economic output. Germany is substantially less profligate at 64%. Still, the U.S. ratio is not entirely unreasonable, and the expenditures that are boosting the debt have had positive ramifications, especially since the Covid-19 outbreak.

“There is economic growth being achieved through this spending,” says Juckes. “The U.S. has succeeded in getting genuine growth during this period, whereas the rest of us haven’t.”

T he phrase “cleanest dirty shirt “ echoes the lyrics of the song “Sunday Mornin’ Comin’ Down,” a 1970 hit for Johnny Cash that recounts a protagonist’s hangover:

Well, I woke up Sunday morning

With no way to hold my head that didn't hurt

And the beer I had for breakfast wasn't bad

So I had one more for dessert

Then I fumbled through my closet for my clothes

And found my cleanest dirty shirt

And I shaved my face and combed my hair

And stumbled down the stairs to meet the day

When El-Erian rolled it out in reference to the United States during a Bloomberg television interview in April 2010, he credited the saying to his colleague Paul McCulley , then Pimco’s chief economist. McCulley tells Forbes by email that he devised it “in response to Bill Gross’ constant questioning (badgering) about whether America’s putative fiscal irresponsibility threatened the dollar’s reserve currency status.

“And yes, I was fully aware that I was ‘borrowing’ the phrase from Kris Kristofferson, who penned that Johnny Cash hit,” says McCulley. “I’m a huge fan of Kristofferson, as well as Jackson Browne, two of the finest poets of our generation. “

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“The problem with the ongoing discussion is that it’s largely one-sided.” Image:  REUTERS/Mike Blake

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Stay up to date:, united states.

• A debate rages on in the U.S. over whether immigrants 'steal' jobs and lower national wages, or expand the economy through hard work and innovation.
• A new study finds that while immigrants make up roughly 15% of workers, they are 80% more likely to become entrepreneurs.
• Immigrant entrepreneurs have a more profound impact on overall labor demand by starting companies that hire new workers, creating a positive ripple-effect on the economy, says Wharton's J. Daniel Kim.

In the United States, the economic impact of immigration is a lightning-rod topic that sparks strong feelings on both sides. Opponents have long held that immigrants take away jobs from American citizens and lower wage standards. Proponents dismiss that idea, saying immigrants expand the economy through their hard work and determination. The truth is somewhere in the middle, according to new research from Wharton’s J. Daniel Kim .

To be sure, immigrant workers ramp up competition for jobs, creating a surplus in labor supply for some sectors. But immigrant entrepreneurs have a more profound impact on overall labor demand by starting companies that hire new workers, creating a positive ripple-effect on the economy.

“The problem with the ongoing discussion is that it’s largely one-sided,” Kim said in a recent interview with the Wharton Business Daily radio show on SiriusXM. (Listen to the podcast at the top of this page.) “To be fair, both forces here simultaneously exist. In order for us to have a systematic understanding of the role of immigration on job creation, you need to take both accounts together. And this is what we do in the study.”

Have you read?

How many people in the us are immigrants - and where do they come from, the share of immigrant workers in high-skill jobs is rising in the u.s., 'embrace the immigrant' says female chef tackling racism and sexism with food.

Kim is co-author of “ Immigration and Entrepreneurship in the United States ,” along with Pierre Azoulay , professor at MIT’s Sloan School of Management and associate with National Bureau of Economic Research (NBER); Benjamin F. Jones , professor at the Kellogg School of Management at Northwestern University and an associate with NBER; and Javier Miranda , economist with the U.S. Census Bureau. In their research, the scholars use comprehensive administrative data from 2005 to 2010 on all new firms in the U.S., the U.S. Census Bureau’s 2012 Survey of Business Owners, and data on firms listed in the 2017 edition of the Fortune 500 ranking to paint a more accurate picture of the economic impact of immigrants in America.

“The problem with the ongoing discussion is that it’s largely one-sided.”

“This paper works to fill in the picture through the lens of entrepreneurship,” the authors wrote. “By looking in a more comprehensive manner at the U.S. economy, the analysis helps balance the ledger in assessing immigrants’ economic roles.”

Dispelling Myths

Immigrants make up roughly 15% of workers in the U.S., yet they are 80% more likely than native workers to become entrepreneurs, according to the study. By those numbers, the assumption that immigrants leach jobs away from Americans isn’t incorrect, but it is incomplete. First- and second-generation immigrants are launching businesses across the spectrum, from small sandwich shops with one or two employees to major tech firms with thousands of workers. For example, when South Africa native Elon Musk built his Telsa plant in California, he spawned more than 50,000 jobs and injected $4.1 billion into that state’s economy in 2017.

“What we find, with overwhelming evidence, is that immigrants act more as job creators than they act as job takers in the United States,” Kim said during his interview with Wharton Business Daily.

The study builds on previous research that dispels myths about immigrant workers and quantifies the facts, including that immigrant entrepreneurs account for close to 25% of patents and are more likely to hold STEM degrees. Using tax records, the researchers debunked another popular theory that immigration suppresses wages. They found wages were the same or slightly higher for immigrant-founded firms versus firms with native founders.

The authors encourage more research along the same dimensions, saying more information can help shape economic policy around immigration and help remove politics from a debate that’s often short on truths.

“That’s the main takeaway here, that immigrants in the U.S. create a lot more jobs than they take, primarily because many are prone to starting businesses that go on to create a lot of jobs,” Kim said. “While I will not comment on the policy implications of these results, I believe that the broader discussion on the role of entrepreneurship and immigration on economic growth needs to account for both sides – because leaning on one would provide an incomplete picture.”

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The Colonial American Economy

Major Professor

Committee member, journal title, journal issn, volume title, research projects, organizational units.

The Department of Economic Science was founded in 1898 to teach economic theory as a truth of industrial life, and was very much concerned with applying economics to business and industry, particularly agriculture. Between 1910 and 1967 it showed the growing influence of other social studies, such as sociology, history, and political science. Today it encompasses the majors of Agricultural Business (preparing for agricultural finance and management), Business Economics, and Economics (for advanced studies in business or economics or for careers in financing, management, insurance, etc).

History The Department of Economic Science was founded in 1898 under the Division of Industrial Science (later College of Liberal Arts and Sciences); it became co-directed by the Division of Agriculture in 1919. In 1910 it became the Department of Economics and Political Science. In 1913 it became the Department of Applied Economics and Social Science; in 1924 it became the Department of Economics, History, and Sociology; in 1931 it became the Department of Economics and Sociology. In 1967 it became the Department of Economics, and in 2007 it became co-directed by the Colleges of Agriculture and Life Sciences, Liberal Arts and Sciences, and Business.

Dates of Existence 1898–present

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• Department of Economics and Political Science (1910-1913)
• Department of Applied Economics and Social Science (1913–1924)
• Department of Economics, History and Sociology (1924–1931)
• Department of Economics and Sociology (1931–1967)

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The first permanent British settlement in what became the United States was established in 1607, nearly 170 years prior to the American declaration of independence. This chapter examines the economic development of the British North American colonies that became the United States. As it describes, abundant natural resources and scarce labor and capital contributed to the remarkable growth in the size of the colonial economy, and allowed the free white colonial population to enjoy a relatively high standard of living. There was not, however, much improvement over time in living standards. Patterns of factor abundance also played an important role in shaping colonial institutions, encouraging reliance on indentured and enslaved labor as well as the development of representative government. For most of the colonial era, the colonists happily accepted their relationship to Britain. After 1763, however, changes in British policies following the end of the Seven Years War created growing tensions with the colonists and ultimately led to the colonies to declare their independence.

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Gibbons V. Ogden: Personal Rivalries that Redefined American Economic Policy

This essay about the Supreme Court case Gibbons v. Ogden examines the landmark 1824 decision through the lens of the personal rivalry between Thomas Gibbons and Aaron Ogden. It highlights how their conflict over steamboat operating rights on the waters between New York and New Jersey escalated to a significant constitutional debate about state versus federal control of interstate commerce. Represented by prominent lawyer Daniel Webster, Gibbons challenged the state-granted monopoly Ogden held, arguing that federal law should prevail. Chief Justice John Marshall’s ruling favored Gibbons, establishing a precedent for federal authority over interstate commerce and impacting the development of American economic policies. The essay illustrates how individual disputes can influence broader legal and economic landscapes, shaping national policy and law through the U.S. legal system.

How it works

In the storied history of the U.S. Supreme Court, the 1824 decision in Gibbons v. Ogden stands out not just for its legal significance but also for the riveting personal dynamics between its main protagonists, Thomas Gibbons and Aaron Ogden. This case, pivotal in defining federal versus state powers over commerce, also tells a tale of individual rivalry shaping the broad trajectories of American economic and legal frameworks.

Aaron Ogden, a distinguished former governor of New Jersey, enjoyed exclusive rights to operate steamboats between New York and New Jersey.

These rights were underpinned by a state-granted monopoly that initially benefited Robert Livingston and Robert Fulton, the pioneers of commercial steamboat technology. Ogden leveraged this monopoly to control steamboat operations along these lucrative routes.

On the other hand, Thomas Gibbons, an enterprising businessman from Georgia, sought to challenge Ogden’s dominance. Operating under a federal coasting license, Gibbons argued that his right to navigate the same waters was sanctioned by federal law, which he claimed superseded any state-specific monopoly agreements.

The ensuing legal battle attracted some of the era’s finest legal minds. Gibbons was represented by Daniel Webster, a celebrated lawyer and statesman, who argued compellingly that the regulation of interstate commerce fell squarely under federal jurisdiction. This argument tested the boundaries of state powers in the face of growing federal authority.

Chief Justice John Marshall, known for his articulate and precedent-setting opinions, delivered a ruling that fundamentally altered the balance of power between the state and federal governments. Marshall sided with Gibbons, ruling that the federal government held exclusive rights to regulate interstate commerce, as outlined in the Commerce Clause of the Constitution. This decision nullified New York’s monopoly grant to Ogden, thereby championing free trade across state lines and reinforcing federal supremacy.

The verdict in Gibbons v. Ogden marked a crucial point in American history, where personal business disputes escalated into national debates over constitutional interpretation. The ruling not only ended Ogden’s monopoly but also established a precedent for the federal government’s expansive role in regulating interstate commerce. This case has had enduring implications for American business, influencing everything from transportation to broader economic policies.

More than a mere legal dispute, the confrontation between Gibbons and Ogden encapsulates the profound impact that individual ambitions and rivalries can have on shaping public policy and law. It is a testament to how personal interests, when projected onto the national stage, can redefine the boundaries of power and governance in the United States.

Through Gibbons v. Ogden, we see how the American legal system navigates complex interactions between law, personal ambition, and national economic interests. The case serves not only as a foundational study in constitutional law but also as a narrative of how deeply intertwined personal and public motives can drive significant shifts in policy that affect generations.

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Immigration's Effect on US Wages and Employment Redux

In this article we revive, extend and improve the approach used in a series of influential papers written in the 2000s to estimate how changes in the supply of immigrant workers affected natives' wages in the US. We begin by extending the analysis to include the more recent years 2000-2022. Additionally, we introduce three important improvements. First, we introduce an IV that uses a new skill-based shift-share for immigrants and the demographic evolution for natives, which we show passes validity tests and has reasonably strong power. Second, we provide estimates of the impact of immigration on the employment-population ratio of natives to test for crowding out at the national level. Third, we analyze occupational upgrading of natives in response to immigrants. Using these estimates, we calculate that immigration, thanks to native-immigrant complementarity and college skill content of immigrants, had a positive and significant effect between +1.7 to +2.6\% on wages of less educated native workers, over the period 2000-2019 and no significant wage effect on college educated natives. We also calculate a positive employment rate effect for most native workers. Even simulations for the most recent 2019-2022 period suggest small positive effects on wages of non-college natives and no significant crowding out effects on employment.

We are grateful for Rebecca Brough for her research assistance and suggestions. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.

MARC RIS BibTeΧ

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Developing the american economy.

Developing the American Economy includes the stories about the ways Americans have worked, including slavery, servitude, and non-wage as well as paid labor. It also includes extraction, agriculture, production, distribution, and consumption of goods and services.

Stories of the diverse working experiences of the Asian American and Pacific Islanders touch on the activities of farmers, workers, entrepreneurs, and managers, as well as the technology around them. They also reveal the historical "layering" of economic society, including class formation and changing standards of living in diverse sectors of the nation.

From stories of allyship and solidarity in the workplace to labor unions, learn how Asian American and Pacific Islanders helped develop the American economy by exploring the featured stories below.

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Immigrant Identity Formation, A Transnational Approach: Italian Americans in New York City, 1880-1930

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Amelia J. Vena , Grant High School Follow

5-3-2024 12:30 PM

5-3-2024 1:45 PM

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Italian Americans, Repatriation, Transnationalism, Ethnicity, Identity (Philosophical concepts) -- Social aspects, Immigrants -- 19th century, Immigrants -- 20th century

Of the Italian immigrants arriving in America during the Great Migration (1880-1924), few understood themselves as “Italians.” On paper, Italian unification took place in 1861, but the creation of Italy as a unit of politics was not the creation of Italians as a unit of nation. Even decades later, immigrants landing in New York City understood themselves in regional terms—as Calabrians, Sicilians, and Neapolitans. “Italian national identity” remained an idea confined to the imaginations of wealthy and educated Italian nationalists. In the years that followed the Great Migration, immigrants reshaped Italian-American identity as they grappled with American ideas of race and national belonging. Here, a transnational analytical framework is applied to the study of Italian-American identity formation to understand how the social and economic connections migrants forged between their hometown villages and overseas enclaves transformed experiences of identity. From the strictly regional affiliations immigrants arrived with, Italian ethnic identity was redefined by transnational experiences of nation into something truly novel, an immigrant identity that produced vivid experiences of feeling Italian-American.

Part of the panel: Exploring Global Cultural Identities Moderator: Professor Bright Alozie

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