While the national conversation remains largely centered on the burden of gasoline and diesel prices, a broader set of economic indicators suggests the United States is currently experiencing a period of growth that mirrors the expansionary highs of the 1980s. Recent data on consumer behavior, industrial investment, and labor participation indicates an economy that is performing with significantly more resilience than inflationary headlines might suggest.
Consumer spending, often the primary engine of the American economy, has shown consistent strength throughout the year. After adjusting for inflation, spending increased by 3.4% annually in the first quarter and 3.8% in the second quarter. Projections for the third quarter, scheduled for official release later this week, suggest a continued growth rate of approximately 3.5%. This trend is further supported by same-store chain sales, which have risen by nearly 10% over the past 12 months, signaling that household demand remains high despite price volatility in the energy sector.
Beneath the surface of retail activity, business-to-business (B2B) spending and capital expenditures are reaching levels not seen in four decades. Business investment in machinery, equipment, and manufacturing facilities grew by 15% in the first half of the year. Third-quarter estimates place capital expenditure growth at 16.5%, a figure that draws direct comparisons to the high-growth era of the Reagan administration. This level of investment is frequently viewed by economists as the ‘seed corn’ for future productivity gains and long-term wage increases.
The labor market continues to provide a foundation for this expansion. Unemployment claims have reached nearly 60-year lows, and the national unemployment rate remains just above 4%. In a notable shift, more than one million people have re-entered the labor force over the last several months. Total job creation has exceeded one million in less than two years, with 72,000 new manufacturing positions added since the beginning of the year. These goods-producing roles in manufacturing and construction are characterized as high-wage positions that are currently outpacing inflation.
While fuel remains a cost concern, other consumer categories have seen price relief. Prescription drug prices have declined by approximately 4.5% over the past year, and egg prices have fallen by an estimated 90% from previous peaks. Additionally, nonfinancial corporate productivity has risen by more than 3% annually over the last two years, providing a buffer that allows for profit growth and stock market strength. Corporate profits are reportedly growing at a pace of 15% to 20% in most sectors, supporting a bullish stock market where an estimated 150 million Americans are invested through 401(k) plans and pension funds.
On the global stage, the U.S. economy is widening its lead over international competitors. While the American and European GDPs were nearly identical 20 years ago, the U.S. economy is now $10 trillion larger. Currently, 13 of the top 15 trillion-dollar companies in the world are American. This dominance is attributed in part to a combination of light regulation and domestic energy production, which continues to attract foreign capital in a competitive global race for investment. While international markets, particularly in China, have seen double-digit declines, the U.S. continues to report the strongest economic performance in the developed world.
