The V-shaped recovery is here
In the third quarter, U.S. gross domestic product (GDP) grew by an all-time record high of 33.1 percent, according to the advance estimate released on October 29 by the Bureau of Economic Analysis (BEA).
For sake of comparison, the previous record occurred in the fourth quarter of 1950, when GDP grew by 13.4 percent. The most recent quarter's phenomenal growth rate more than doubled the aforementioned record, which is a testament to the robust recovery underway.
The unprecedented third-quarter GDP growth follows the second-quarter nosedive of negative 32.8 percent. As the BEA report notes, "[c]urrent‑dollar GDP increased 38.0 percent, or $1.64 trillion, in the third quarter to a level of $21.16 trillion. In the second quarter, GDP decreased 32.8 percent, or $2.04 trillion."
Apart from the historic third-quarter growth rate, BEA reports that many other significant economic measures are trending toward a vigorous recovery as well. "The increase in third quarter GDP reflected continued efforts to reopen businesses and resume activities that were postponed or restricted due to COVID-19," the report notes.
For example, "[t]he increase in real GDP reflected increases in personal consumption expenditures (PCE), private inventory investment, exports, nonresidential fixed investment, and residential fixed investment[.] ... Imports, which are a subtraction in the calculation of GDP, increased."
The good news keeps coming. "The increase in PCE reflected increases in services (led by health care as well as food services and accommodations) and goods (led by motor vehicles and parts as well as clothing and footwear). The increase in private inventory investment primarily reflected an increase in retail trade (led by motor vehicle dealers). The increase in exports primarily reflected an increase in goods (led by automotive vehicles, engines, and parts as well as capital goods). The increase in nonresidential fixed investment primarily reflected an increase in equipment (led by transportation equipment). The increase in residential fixed investment primarily reflected an increase in brokers' commissions and other ownership transfer costs."
In other words, after the COVID-19 lockdowns drove the U.S. economy into the abyss during the late first quarter and throughout the second quarter, the "V-shaped recovery" has arrived.
In terms of personal income, the recovery is also right on track. According to a White House statement, "[t]otal personal income rose above, and still remains above, pre-pandemic levels[.] ... Having added back 11.4 million jobs since April with more than 5 in 10 jobs lost in the pandemic recovered, total wages and salaries increased 5 percent in the third quarter and are now just 1.4 percent below pre-pandemic level."
That is particularly important, because consumer spending accounts for close to 70 percent of U.S. economic activity. When Americans' wages increase, as occurred during the strong third quarter, the entire economy benefits.
Even more eye-opening is how the strong U.S. recovery compares to the anemic recoveries occurring throughout the rest of the world. According to Deloitte Insights, the United States is on track to eclipse all other G-7 nations in a variety of economic benchmarks since the pandemic devastated the global economy in early 2020.
This can primarily be attributed, as BEA notes, to the fact that the United States has rolled back the economy-crushing lockdowns that were instituted across the nation during the early weeks of the pandemic.
On several occasions, President Trump has said, "We're coming back, and we're coming back strong." As the data show, this is true.
However, the White House statement also paid tribute to hardworking American families, who have weathered the economic storm with typical tenacity.
"Our nation's economy is poised for continued expansion in the fourth quarter, and the strength of the recovery thus far is a testament to the fortitude and resilience of America's workers and families," the statement said.
This is the moral of the story, and it should make every American proud about what we've accomplished to date, and hopeful that the best is yet to come.
Chris Talgo (email@example.com) is an editor at The Heartland Institute.