I constantly have people tell me what
terrible condition the American economy is in.
I am sympathetic. No newspaper or magazine even makes an attempt to explain the economy to its readers.
I will give my readers the two key references and the necessary explanation that goes with them. I will also write a blog on the two largest pieces of ignorance I have to confront weekly: the national debt and the balance of payments.
The first treasure....
First the main measure of the American
economy is the GDP (Gross Domestic Product). This is a total measure
of what Americans buy and earn. The data is collected and published
by the government. The chart on this measurement goes back to 1929.
The measurements actually began in 1937. There are two columns. One
is current dollars, meaning it is calculated on the value of the
dollar in the year the total GDP was calculated. The other column
removes inflation from the number. So use the column with inflation
removed titled “2000 dollars.” You can see that the U.S.
produced $9.6956 trillion dollars worth of goods and services when
George Bush was elected president. Now the U.S produces and
Americans earn $11.088 trillion a year. An increase of 14% in five
years excluding the effects of inflation. You can also see that the
GDP has increased nearly every quarter of every year since Bush was
elected.
The economy is growing at a healthy pace and it has been growing at a rate higher than the average of the past 100 years.
The second main measure of the American
economy is done by the National Bureau of Economic Research, a 65
year-old non-profit. This measure is the state of the business
cycle. There have been 32 business cycles since the first
measurements back to 1854.
A business cycle is an aggregate measure of production, employment, wages and finance. The NBER calls the peaks and troughs of the business cycle. The last peak was in March 2001, two months after G. W. Bush took office. The business cycle downward segment was modest and short, reaching a trough eight months later in November 2001. The economy has been expanding ever since then, 57 months.
The average expansion of business since
the beginning of record is 38 months and we are well beyond that
number. The average expansion since WWII has been 57 months and we
are at exactly that point now. There have been ten business cycles
since WWII and three have been longer that the current expansion ---
so far.
When you are looking for a measure of how business is doing in the U.S. these are the two tables to look at. Everything else, unemployment, personal income, the stock market and inflation are secondary --- they are only components of the business cycle.