Moving along with some updated charts at the end of 2017, let’s take a look at some metrics to gauge the strength of the economy.
US GDP since 1960:
So quite strong and consistent, but that was a substantial drop during the financial crisis. I don’t think people full appreciate what an epic recessionary phase that was and how close we were to an all out depression. People often say this was a slow recovery, but given the magnitude of that crisis (the largest since 1929) I think it’s been pretty decent all things considered.
US Employment rate since 1960:
In my mind the current 4.1% is considered full employment. It’s just not realistic to expect a developed nearly 20 trillion dollar economy to dip much below 4%. Instead of so much focus on creating jobs, perhaps we should be talking about improving the quality of existing jobs, because there’s plenty of jobs.
US non farm job openings:
Job creation has been steady for 8 years, so any discussion should be about quality rather than quantity.
Now this is not a political statement but it has to be said because there was a lot of talk about how US corporations aren’t competitive globally because of high tax rates. This was the main argument for the recent tax cut bill. Remember though, there is a big difference between the listed tax rate (39%) and the effective rate (~22%)
US after tax corporate profit:
After tax corporate profit is actually quite high right now, yet corporate tax revenue as a percentage of GDP has steadily declined from the 1940’s when it was over 7% of GDP to now only about 2%. The 39% listed corporate tax rate is very high but that’s irrelevant. All that matters is the taxes that are actually paid, and those are just about as low as they’ve ever been. Corporations are making more and contributing less as a percentage of GDP. The ones who are contributing more though are workers. Unlike corporations, workers can’t just shirk their tax burden and payroll taxes have not decreased, but that’s for another blog…
Take with a grain of salt because I’m Canadian, but perhaps as a Canadian it’s easier to be objective. As far as I can tell the United States is still by far the strongest and most influential economy in the world and it’s doing well since the financial crisis.
If I went through all these same charts for Europe, China, Japan, Canada, Australia, Russia, and pretty much every other country in the world things would look relatively worse.
In Economics it’s always useful to make relative comparisons rather than nominal ones. Comparing the United States data to itself of the past may give the appearance that it’s not doing as well as it used to. But the size, scale, and composition of the economy today isn’t the same as it was in the past either so it’s not a very meaningful comparison. However comparing the United States to other contemporary developed nations, relatively speaking the gap has widened since the financial crisis.
The economy is strong, and I’ve lived in California, Texas, Arizona, Washington, New York, and they are all great places. I understand the need for catchy campaign slogans but with all due respect President Trump, what part of America isn’t great? If the US economy isn’t great right now, I don’t think I know what that word means.
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