United States Outlook

Real U.S. GDP growth in the 3rd quarter was solid. Although it has disappointed some, there is nothing intrinsically worrisome about a 2.1% growth rate. In the nine years leading up to the pandemic, the U.S. economy grew at this same pace or slower for 16 out of 36 quarters.

There are 4 million fewer payroll jobs in the United States today than pre-pandemic. But the nation has had over 10 million job openings for the past six months as retirements and quitting has reached record levels. Job opportunities are at an all-time high, and together with the lower number of jobs, this dynamic is a reflection of the current labor force shortage..

The 3-million-person decrease in the U.S. labor force that has occurred over the last 18 months has been driven primarily by retiring baby boomers. The United States has been facing a looming labor shortage for years, driven by basic demographics, but the pandemic and excessive stimulus has hastened the process.

On the wealth front we only need to look at the record highs of the stock market and skyrocketing home prices to know that for a very large portion of the American population things are looking better than they did pre-pandemic. According to the Federal Reserve, aggregate household net worth is up $29 trillion from where it was two years ago—one of the most rapid expansions of wealth ever seen in the United States.

But has this prosperity been widespread? What about the 38% of U.S. households who rent, many of whom are lower income? Even on that front the data indicates a remarkable level of prosperity. Data from the Dallas Federal Reserve Bank shows that checking account balances among the bottom 50% of earners in the nation have more than doubled in the past two years. The number of bankruptcies in the nation has also fallen sharply, as have delinquency rates on credit cards among all age groups. According to data from Opportunity Insights, spending by lower income families is substantially higher now relative to pre-pandemic levels, even exceeding the recovery in spending among high income households.

And despite the fact that there are 4 million fewer payroll jobs in the United States today (2.6% less than pre-pandemic), the unemployment rate is already back down to 4.2% — just 0.7 percentage points higher than the pre-pandemic low, which was itself one of the lowest unemployment rates ever seen in the nation. Moreover, the United States has had over 10 million job openings for the past half year as retirements and job quitting has reached a record high. Compare that to the pre-pandemic high in 2018 of 7.57 million job openings.

The tightness of the labor markets is evident in earnings across the wage spectrum. Data from the Atlanta Federal Reserve’s Wage Tracker shows that earnings growth among workers did not slow during the pandemic as it typically does. Moreover, the pace of earnings among those in the bottom quartile is growing faster than for the rest of the labor market, and faster than it has in almost 20 years. This is not a simple story of the have’s and have not’s—the vast majority of workers are benefitting from today’s labor shortages.