5 Key Economic Indicators Ahead of the State of the Union

In October 2022, Bloomberg Economics forecasted the probability of a recession within a year at 100 percent. By mid-2023, Deutsche Bank also put the risk of a recession at 100 percent. Yet 2023 was a year in which the U.S. economy defied expectations, not just avoiding a recession but also proving its resilience and strength through strong job growth, cooling inflation, and continued expansion, outperforming peer nations. This economic landscape was not random but in part the result of decisive Biden administration action dating back to the American Rescue Plan and built up by industrial strategy.

Ahead of the State of the Union this week, this column highlights five key indicators that illustrate the United States’ strong economic foundation: economic growth, nonfarm employment, the unemployment rate, manufacturing construction spending, and the number of new business applications.

The United States has had the strongest economic recovery in the G7

In 2023, real gross domestic product (GDP) grew 3.1 percent, beating expectations amid persistent global economic uncertainties. Most notably, last year, U.S. GDP grew faster than that of every country in the Group of Seven (G7), which includes seven of the world’s advanced economies. Notably, the United Kingdom and Japan ended 2023 in a technical recession, while the United States continued to experience the G7’s strongest economic recovery from the COVID-19-induced recession. (see Figure 1) Policy choices may be proving to be the difference. As the Center for American Progress previously explained, the United States is benefiting from a stronger fiscal response and different labor market policies than those of peer nations: For example, policies pursued in the American Rescue Plan boosted and expanded unemployment insurance and enhanced refundable tax credits, while policies in some other G7 countries focused on maintaining attachments to existing employers. These policies have helped create a tight U.S. labor market in which employers are competing for employees, as well as enabled workers to shift from low-wage jobs and industries into higher-wage ones, contributing to improvements in productivity.

In addition, the United States ended 2023 with headline inflation and core inflation at 3.4 percent and 3.9 percent, respectively. On a comparable basis, these are among the lowest rates in the G7. Looking ahead to 2024, the International Monetary Fund projects that the U.S. economy will continue to grow and outperform every other G7 economy.

The United States has experienced its fastest jobs recovery among recent recessions

Workers have powered the strong economic recovery. The labor market has continued to go from strength to strength, with all industries—including leisure and hospitality and retail trade, which experienced some of the most severe job losses during the recession—back to their pre-pandemic employment levels by January 2024. By June 2022, the labor market had regained the nearly 22 million jobs it lost in spring 2020, and by January 2024—the latest month for which data are available—the economy had added more than 5 million additional jobs. In total, the number of jobs in the current economy exceeds the Congressional Budget Office’s pre-pandemic projections by 2.7 million. In fact, the recovery of jobs lost during the COVID-19 recession has been the fastest among the most recent U.S. recessions. (see Figure 2)

Significantly, an economic recovery that has delivered job gains for workers has also delivered for them in terms of wages, with wage growth outpacing inflation for most workers. This economic recovery has seen the strongest real wage growth among the most recent economic recoveries.

The U.S. is experiencing its longest stretch in more than 50 years during which the unemployment rate is below 4 percent

Alongside the jobs being created at a strong pace, people actively seeking work are having an easier time securing employment. The recovery of the unemployment rate following the COVID-19 recession has been faster than in other recent economic recoveries, with broad-based and equitable improvements; the gap between the Black and white unemployment rates reached a record low in early 2023, and disabled workers are experiencing, on average, record low unemployment. Further, the unemployment rate has continued to beat projections, staying at or below 4 percent since December 2021. (see Figure 3) In fact, currently, the United States is experiencing one of the longest stretches in its history in which the unemployment rate has remained below 4 percent, benefiting current and potential workers.

U.S. manufacturing is seeing a boom in construction spending

In addition to strong labor market recovery and GDP growth, the United States has seen the domestic manufacturing sector recover after the recession. Since the passage of the Infrastructure Investment and Jobs Act in November 2021 and the CHIPS and Science Act and Inflation Reduction Act in August 2022, spending on private manufacturing construction has sharply increased, a marked change from the recovery following the Great Recession. (see Figure 4)

During the Great Recession, in February 2009, spending on private manufacturing construction hit a peak of $114 billion. It did not reach that level again for nearly five years, in line with the overall slow pace of the economic recovery. In the wake of the COVID-19 recession, however, spending not only quickly recovered to pre-pandemic levels, but it also surged as high as $214 billion in November 2023—more than doubling the average monthly rate for the 2010s. This performance is historic: In the fourth quarter of 2023, real private investment in manufacturing structures was the highest on record, and it has contributed the most to real year-on-year GDP growth since data began to be collected in 1958.

The United States has seen record-breaking numbers of new business applications

The number of new employer business applications has surged during this economic recovery, with 5.2 million new business applications filed since January 2021. This likely has led to job creation that will continue into the future. (see Figure 5) In large part, this is due to the American Rescue Plan Act, which prioritized worker-focused policies over austerity measures, causing unemployment to drop and remain low while consumer spending continues to grow. This, in turn, has created favorable conditions for business growth.

Additionally, the American Rescue Plan Act made targeted investments to bolster small-business growth, including $10 billion to expand capital access programs for 100,000 firms as well as new navigator programs and incubators to support the development of minority-owned businesses. As a result, small-business growth has been inclusive, with the share of Black households owning a business more than doubling, from 4.8 percent in 2019 to 11 percent in 2022, and loan counts for women-owned small businesses increasing by 70 percent since 2020.

Conclusion

Not only has the U.S. economy recovered from the devastation of the COVID-19 pandemic at a historically fast pace, but on many fronts, it also has improved upon the pre-pandemic status quo. The indicators considered in this column provide more evidence that bold public investments in workers and families, such as those contained in the American Rescue Plan and the Biden administration’s industrial strategy, have poised the U.S. economy to capitalize on a strong foundation throughout 2024.