US Emerges as Strong Performer in Global Economy

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Published: 4 hours ago

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While countries around the world have struggled to recover from the economic setbacks brought on by the pandemic, one has emerged particularly strong. With a fast-growing economy, a strong labor market, and falling inflation, the United States has outpaced its counterparts in Europe and elsewhere.

In terms of GDP, the US posted a 3.3% gain in the fourth quarter of 2023, far exceeding economists’ expectations of 2%. This puts the US at 2.5% growth over the course of the year, outpacing all other advanced economies and on track to do so again in 2024.

“The US is holding up much better than other countries,” said Ryan Sweet, Chief US Economist at Oxford Economics. “It seems like the engine of the US economy continues to hum along where it’s sputtering in other nations.”

1. Pouring trillions into the economy

When the Covid-19 pandemic slowed in-person work and social life to a halt, countries had to grapple with how to support their stuck-at-home citizenry – including many who lost their jobs or couldn’t work.

In March 2020, Congress rushed to pass a $2.2tn economic stimulus bill that sent cash into the pockets of American workers, families, and businesses. Two more pieces of legislation followed to keep small businesses afloat and workforces employed. This marked the largest influx of federal money into the US economy in history, with over $5tn being injected into the system.

That stimulus is still being credited with sustaining consumer spending, which accounts for 70% of economic activity. Some of the money put into households’ pockets ended up as excess savings, creating a war chest for Americans to tap into when needed.

Experts believe that the US decision to take bold and forceful fiscal measures has contributed to the country’s economic success, as the problems caused by the pandemic were swiftly and significantly met.

2. A flexible jobs market

Despite the challenge of high inflation, a strong jobs market in the US has provided a boost to disposable income, which is crucial for consumer spending.

With an unemployment rate below 4% since February 2022, real wages have also risen. While the pandemic resulted in temporary layoffs, companies were able to adapt by utilizing flexible labor laws and exploring new technologies to improve productivity.

Julia Pollak, chief economist at ZipRecruiter, highlights the hotel industry’s response to the pandemic as an example. Hotels reduced staff and introduced self-checkouts, mobile check-in technology, and reduced room cleaning frequency. This allowed them to adapt to the changing consumer preferences while maintaining profitability in the long run.

The US also benefits from an ability to resupply its labor market, especially through immigration, which has been crucial as the retirement of the baby boomer generation has slowed population growth.

3. Energy (in)dependence

The US being a net exporter of energy has contributed to the strength of its economy.

When Russia invaded Ukraine in February 2022, Europe absorbed a greater impact than the US. Europe, particularly Germany, heavily relied on Russian natural gas, leading to a decline in productivity. European countries experienced higher energy prices, resulting in inflationary pressures.

Comparatively, the US experienced only a 3-4% increase in gas prices during the same period. The greater ability of US businesses to absorb the increase without passing on the costs to consumers has contributed to a more moderate inflation rate in the US.

In conclusion, the US has emerged as a strong performer in the global economy by adopting bold fiscal measures, maintaining a flexible jobs market, and benefiting from its energy independence. As the US economy continues to outpace other advanced economies, the focus now shifts towards supporting sustainable growth and mitigating the challenges posed by ongoing global uncertainties.

Disclaimer: This article is for informative purposes only and does not constitute financial advice. The views and opinions expressed in this article are those of the author and do not necessarily reflect the official policy or position of the news website.