New GDP figures show strong growth at the end of last year

The U.S. economy grew by a bustling 3.1 percent in 2023, shaking off recession fears and offering an upbeat picture of consumers and businesses ahead of a pivotal election year.

GDP grew even faster than many had anticipated in the last three months of the year — by an annual rate of 3.3 percent, according to the Bureau of Economic Analysis, offering fresh evidence that federal policymakers have managed to bring down inflation and secure a “soft landing” without major repercussions for workers or the economy.

“The doom and gloom that prevailed last year has been swept aside,” said Philipp Carlsson-Szlezak, global chief economist at Boston Consulting Group. “The pessimism has been punted out, quarter after quarter.”

A strong job market and rising wages have made it possible for many households to keep shelling out — particularly on services such as entertainment, travel and dining out — even at a time of elevated inflation.

That spending by everyday Americans accounted for most of the economy’s growth in the fourth quarter. Increased government spending, at the state, local and federal levels, as well as higher exports and more private and residential investments also lifted the latest GDP reading, which sums up the goods and services produced in the U.S. economy. Meanwhile, a rise in imports dragged down the latest reading.

The economic growth figures are a political boost for President Biden, as every year of his term has seen GDP growth, despite some struggling quarters. Last year’s 3.3 percent expansion tops GDP growth in every year of President Donald Trump’s term, including 2019, when the economy grew by 2.95 percent.

“Whichever way you slice it, this report caps a year of stellar economic growth performance,” Olu Sonola, head of U.S. regional economics at Fitch Ratings, wrote in an analyst note Thursday. “The momentum of economic growth going into 2024 is looking very good.”

Strong economic growth has distinguished the United States from its peers. Europe and Britain are on the verge of recession, and China — the world’s second-largest economy — is on slippery footing. Overall, economic growth in advanced economies is expected to slow this year, to 1.4 percent, according to the International Monetary Fund.

Government policy played an important role in supporting the economy last year. The Biden administration’s efforts to fund new infrastructure and clean energy projects have created new jobs and spurred $640 billion in private investments around the country.

Despite the economy’s strong rebound from the pandemic-inflicted recession, Biden has struggled to convince voters that his policies are making their lives better. Higher prices, particularly on essentials such as food, housing and utilities, have clouded Americans’ views on the economy, with inflation routinely topping the list of voters’ biggest concerns.

The economy is widely expected to continue slowing in 2024, after two years of torrid post-pandemic expansion. (GDP grew by 5.95 percent in 2021 and 2.06 percent in 2022.) Although some economists still expect a mild recession this year, many appear optimistic that the economy can stabilize without major job losses or a protracted downturn.

“We are coming down to more sustainable levels, both in the economy and in the job market,” said Satyam Panday, chief U.S. economist at S&P Global Ratings. “We expect a controlled, steady slowdown, not a recession.”

The economy today is vastly different than it was in 2017, when Trump took office. But the data shows just how each administration has left its mark: Biden, by adding 14 million jobs in less than three years, bringing the Black unemployment rate to a record low and reducing student loan debt by billions. Trump, meanwhile, presided over a period of low inflation, low interest rates and low gas prices.

Here are 12 charts showing the state of the economy now vs. under Trump.

1. Job gains

The astoundingly strong labor market is arguably the White House’s biggest victory. In some ways, the bump was inevitable — Biden took office at a time when millions were still out of work because of the pandemic. Even so, the rapid job gains in recent years have blown past economists’ expectations and have fueled the economy’s blockbuster growth.

Even more remarkable is that the labor market has remained strong, despite the Federal Reserve’s aggressive efforts to slow the economy. As long as Americans are employed, they’ve been able to withstand inflation and keep spending, allowing the economy to grow.

Employers have created more than 14 million jobs during the Biden administration, with a monthly average of more than 400,000 positions. Recently, though, the pace of job creation has slowed, with 216,000 new jobs in December.

By contrast, the economy added an average 176,000 jobs a month during Trump’s first three years, before coronavirus-related closures and layoffs resulted in the sudden loss of more than 20 million jobs.

2. Unemployment rate

Aside from a covid-fueled surge in much of 2020 and 2021, the national unemployment rate has remained low through both Trump’s and Biden’s presidencies.

Joblessness fell during the Trump years to a half-century low of 3.5 percent in early 2020, just before the pandemic. During Biden’s presidency, the unemployment rate has inched down even further, to 3.4 percent earlier last year. It now stands at 3.7 percent.

The years-long pickup in hiring has been particularly good for workers who are typically underrepresented in the labor force. Unemployment rates for Hispanic workers, Black women and people with disabilities have all hit record lows under Biden’s watch.

The Black unemployment rate, which Trump liked to take credit for improving during his presidency, fell during both administrations, but reached an all-time low during the Biden era last year.

3. Economic growth

For the most part, the U.S. economy has expanded at a steady pace under both Trump and Biden. Gross domestic product, a measure of all of the goods and services produced in the country, has grown about 22 percent since Biden took office. That’s compared with a 14 percent uptick during Trump’s presidency, when the pandemic forced the economy into a steep and sudden recession. Even so, the economy rebounded quickly — thanks in part to trillions in stimulus money — and was growing again by the time Trump left office.

Now, under Biden, the economy has notched five straight quarters of growth following a six-month slump last year. The latest expansion has been powered by heavy consumer spending, which makes up about 70 percent of the economy, and new infrastructure and green-energy projects spearheaded by the Biden administration. But economists note that the current rate of economic growth — an annualized rate of 4.9 percent, as of September — is unsustainable, and many expect growth to cool next year.

4. Gas prices

Presidents have very little control over gas prices. But this is one area where the Trump era was better for Americans — and could help explain some of the gloom Americans are feeling now.

Pandemic-related hiccups, the war in Ukraine and spikes in demand have all sent gas prices on a dizzying roller-coaster ride since 2020. Gas prices more than doubled between April 2020 and April 2022, from $1.84 a gallon to $4.11. They peaked at an all-time high of nearly $5 a gallon in June 2022 but have come down since. Analysts say gas prices could fall below $3 per gallon in the coming weeks, thanks to a combination of increased production and slowing demand.

Gas prices have a direct effect on how Americans view the economy, and higher prices at the pump have translated to lingering pessimism for much of Biden’s presidency.

5. Home prices

Homeownership is one of the biggest ways Americans create wealth, and the recent run-up in prices has been a double-edged sword: Many first-time home buyers been shut out of the market, but people who already own homes have benefited from soaring property values.

On the whole, though, homeownership has become far less accessible during the Biden administration. Home prices surged during the pandemic, rising an eye-popping 49 percent between spring 2020 and fall 2022. Those higher costs have driven housing affordability to all-time lows, according to Goldman Sachs. Homes are selling for a median price of $431,000 — less than the $480,000 they were commanding last year, but still well over pre-pandemic norms.

Mortgage rates have more than doubled in the past two years — from about 3.1 percent to about 7 percent — making it that much pricier to purchase a home and putting a chill on the market. Prices, though, remain high because demand for homes continues to outpace supply.

6. Inflation

Inflation has been a persistent challenge for the Biden administration. A rapid run-up in prices after the pandemic resulted in the highest inflation in more than 40 years. Americans have been pinched by higher costs for just about everything, including groceries, gas, cars and health care.

Although inflation has recently come down from last summer’s peaks, prices are still about 3 percent higher than they were a year ago. Many Americans say higher costs have tainted their views of the economy, with voters consistently citing inflation as their top economic concern.

7. Interest rates

The president has very little power over interest rates. While the Federal Reserve’s chair and governors are appointed by the president and confirmed by Congress, the central bank operates independently.

But the Fed’s actions have a far-reaching impact on the economy. During Biden’s presidency, the central bank has raised interest rates 11 times as part of its effort to rein in inflation. The bank controls the federal funds target range — the interest rate banks use to lend money to each other overnight — which, at 5.25 to 5.5 percent, is at its highest level in 22 years.

Each time the Fed raises that rate, or even hints that it might, there are ripple effects across the economy, resulting in higher borrowing costs for loans of all types, including mortgages (currently about 7 percent), personal loans (12 percent, according to Bankrate) and credit cards (above 20 percent).

8. Disposable income

Americans have less spending power than they did at the beginning of Biden’s term. A drop-off in stimulus money, plus rising prices, have caused large swings in household income since 2020. Still, many Americans are starting 2024 better off than they were a year ago, as wage gains outpace inflation.

During the Trump years, by comparison, Americans saw a steady increase in spending power until the start of the pandemic. Overall, real disposable income, or what Americans are left with after taxes and inflation, rose about 10 percent between January 2017 and January 2020.

9. Stock market

The stock market rose rapidly during Trump’s presidency and has continued its ascent under Biden. After a period of slowing last year — in anticipation of higher borrowing costs and increased volatility — stock prices have picked back up on optimism that the Fed is done raising interest rates. The Dow Jones Industrial Average and the Nasdaq hit all-time highs last month, and the Standard & Poor’s 500 is on track to follow suit.

Trump kept a close eye on the stock market’s path during his presidency, often taking to social media to flaunt his successes. He also warned Americans that a Biden presidency would result in a “stock market collapse the likes of which you’ve never had.”

That has not happened — which the president was quick to note. “Good one, Donald,” Biden recently fired back on X.

10. Student loan debt

Outstanding student loan balances have been climbing for nearly two decades — until now.

Biden took office vowing to whittle down the debt burden on student and graduates. And while his most ambitious plans, including a $400 billion forgiveness plan, have been blocked by Republican lawmakers and the Supreme Court, his administration has found ways to offer relief.

To date, the White House has canceled some $132 billion in student loan debt for more than 3.6 million Americans. It has also increased federal Pell Grants to low- and middle-income students, allowing them to take on less debt. As a result, outstanding student loan balances have been falling for six months. Americans owed $1.74 trillion in student loans in October, down from a record $1.77 trillion at the beginning of the year.

11. Consumer sentiment

Despite the economy’s strength, Americans appear downright despondent when it comes to their finances during Biden’s tenure. Consumer sentiment dropped to its lowest level, ever, in June 2022, when gas prices were at a record high. Since then, sentiment has rebounded somewhat but remains lower than it was when Trump was president.

But although they say they feel crummy about the economy, Americans are continuing to spend heavily. That spending — on a variety of goods and services, including cars, travel and dining out — has helped power the economy and keep it growing.

12. Federal deficit

The federal deficit peaked under Trump, though both he and Biden have added trillions to the national debt. The national deficit — or the gap between what the government brings in and what it spends — grew every year of Trump’s presidency. Sweeping tax cuts, followed by the government response to the pandemic, added an unprecedented $7.8 trillion to the country’s debt.

Since then, the deficit narrowed in the first two years of Biden’s presidency. But this year it grew again, by 23 percent, leaving the country with a $1.7 trillion shortfall.

That growing deficit, combined with political dysfunction in Congress, is setting off alarm bells for ratings agencies that track the United States’ financial standing. Fitch Ratings stripped the United States of its top AAA score in August. In November, Moody’s downgraded its outlook on U.S. sovereign debt, warning that “continued political polarization” threatens the country’s fiscal strength.

Still, there are signs that Americans are slowly starting to feel better about the economy as inflation eases. The consumer confidence level picked up in November and December. It is unclear, though, whether that will translate to political points for the White House.

Anthony Reilly, who owns a barber shop in Philadelphia, says business has gradually slowed in recent months as clients rethink their spending. The usual holiday boom, which begins just before Thanksgiving, wasn’t quite as dramatic this time around. January, too, is shaping up to be slower than usual.

“It feels like things are a little more up in the air, like everyone is starting to tighten their purse strings,” he said. “It’s not scary-dead, but also not crazy busy like it used to be.”

Bookings at Flowertown Bed and Breakfast in Summerville, S.C., are up across the board: More guests are staying overnight, and demand for weddings, baby showers and other events is higher than it has been in years.

“I’ve been surprised at just how steady things have been,” owner Carol Grant said. “I’m at the grocery store every other day, and the prices are just atrocious, but people are still spending. There hasn’t been any kind of slowing.”