America’s extraordinary economy keeps defying the pessimists

You have to marvel at America’s economy. Not long ago it was widely thought to be on the brink of recession. Instead it ended 2023 nearly 3% larger than 12 months earlier, having enjoyed one of the boomier years of the century so far. And it continues to defy expectations. At the start of this year, economists had been forecasting annualised growth in the first quarter of 1%; that prediction has since doubled. The labour market is in rude health, too. The unemployment rate has been below 4% for 25 consecutive months, the longest such spell in over 50 years. No wonder Uncle Sam is putting the rest of the world to shame. Since the end of 2019 the economy has grown by nearly 8% in real terms, more than twice as fast as the euro zone’s and ten times as quickly as Japan’s. Britain’s has barely grown at all.

America’s expansion is all the more striking when you consider the many things that could have killed it. As the Federal Reserve has fought inflation the economy has endured the sharpest rise in interest rates since Jimmy Carter was in the White House. The covid-19 pandemic, an intensifying trade war with China and the fight against climate change have together reshaped supply chains, labour markets and consumer preferences. Wars in Ukraine and Gaza have aggravated geopolitical tensions and worsened the strains on the global trading system.