USA (Washington Insider Magazine) – The US economy continues to defy expectations in 2024, showing strong performance despite uncertainties linked to the upcoming presidential election. Some Key elements contribute to this economic strength like early and substantial policy interventions during the pandemic and a unique approach to maintaining a high-pressure economy.
Early and Aggressive Policy Support
US authorities decided to “go big, go early” with economic support in the early stages of the pandemic. The wish to prevent the sluggish recovery that followed the 2008 financial crisis informed this audacious choice.
High-Pressure Economy Concept
According to Ft, US Treasury Secretary Janet Yellen suggested in 2016 that a “high-pressure economy” could boost labor force participation, business investment, and overall economic dynamism. The pandemic provided an opportunity to test this hypothesis.
Evidence of Economic Resilience
The results of this approach are promising. Initially, generous policy support led to global inflation and restrictive monetary policies. However, as inflation cooled, the US economy and labor market showed remarkable resilience.
Investment and Productivity Gains
Research by the St. Louis Fed indicates that the tight post-pandemic labor market spurred significant investment and productivity gains. Since 2021, the labor market’s tightness has driven an additional $55 billion in investment, about 6 percent of total fixed investment between 2021 and 2023.
Rapid Jobs Recovery
The US saw its fastest jobs recovery from the pandemic-induced downturn, with record levels of job switching and high job satisfaction. Employers offered better scheduling, hybrid work arrangements, higher pay, and benefits to attract workers.
Economic Experiment in Expanding Opportunities
The US has long been an experiment in expanding economic opportunities to broader segments of the population. This effort is balanced by a tension between limited support and a push to expand avenues to prosperity, especially relevant in the current election year.
Fiscal Challenges and Opportunities
Despite positive trends, bond markets remain cautious due to projected budget deficits of 6 percent of GDP. Historical comparisons suggest that fiscal sustainability depends on the overall economic model’s viability and resilience.
Path to Long-Term Prosperit
The “go big, go early” approach has positioned the US economy favorably. Maintaining the current soft landing while stimulating technological advances could ensure long-term productivity growth, fiscal sustainability, and prosperity.
