What the latest GDP report says about the strength of the U.S. economy

Amna Nawaz:

The newest data suggests the U.S. economy is slowing down. Consumers are still spending, and companies are still hiring and investing, but not at the same pace as last year.

At the same time, the economy continues to defy predictions of an imminent recession.

Economics correspondent Paul Solman has our report on what the numbers tell us, and how that squares with how Americans feel about it all.

Paul Solman:

The latest GDP estimate of economic growth out this morning, lower than many had expected.

Economist Justin Wolfers:

Justin Wolfers, University of Michigan: GDP grew at a rate of 1.1 percent. It's a measure either of how much we all produced, how much more this quarter than last, or how much we all spent, or how much we all earned. It's all three things.

Paul Solman:

One-point-one percent is lower than it has been. Do your colleagues all agree that this is bad news or good news?

Justin Wolfers:

Well, on the one hand it is a little lower than it has been recently and a little lower than many expected. On the other, all those people who are talking about recessions are starting to feel pretty disappointed, because this economy keeps motoring along.

Paul Solman:

Ah, the answer President Harry Truman supposedly responded to way back in 1949 with: "Can't somebody bring me a one-handed economist?"

So you're looking on the bright side?

Justin Wolfers:

I think there's a lot to like here. This has been an economy dominated by people talking about recession and doom-and-glooming their way forward.

But every time you look at the actual numbers, people are spending, people are producing, the economy keeps growing. As much as people say they're worried about the economy, if you look at what they do, people are out there spending money as if they believe things are OK. GDP is back where the CBO thought it would be four years ago. Unemployment is nearly at a 50-year low.

Wages are growing. Inflation is higher than it has been in quite some time, but it's on the way back down and starting to look like it's at more manageable levels.

Paul Solman:

The biggest problem has been inflation, of course, but Wolfers is borne out by prices in sectors we have been showing you, inflation, the souffle-like rise in egg prices, now dropping, lumber up fourfold during COVID, back down near its level before the pandemic, containers shipping up five times just two years ago, with prices back down to where they were in 2019.

"The Economist" magazine had the most positive take of oil in a recent cover story, pointing out that America's GDP represents about 25 percent of the world total, almost the same share as it had in 1990, and that $100 invested in the S&P 500, a stock index of America's biggest companies, in 1990 would have grown to about $2,300 today, invested in an index of the biggest rich world stocks, which excluded American equities, about $500.

But if the economy is so good, how come so many Americans don't believe it or feel it?

Rakeen Mabud, The Groundwork Collaborative:

When people are saying that they are concerned about the health of our economy, I believe them.

Paul Solman:

Economist Rakeen Mabud has seen the latest consumer confidence numbers, which hit a nine-month low this week. And the Pew poll found that 58 percent of Americans think the economy is worse than it was 50 years ago.

Rakeen Mabud:

We are in a precarious situation. We have nine consecutive rate hikes thus far this — over the course of the last many months and probably another to come. Those rate hikes, as Chair Powell himself has admitted, have not yet fully hit the system.

And so there's a real chance that things will go south as we continue to see the effects of these rate hikes play out.

Paul Solman:

And, for many, given inflation, things have already gone south.

Moreover, says Mabud:

Rakeen Mabud:

We have a cost of living crisis in this country that long predates the current bout of inflation. The cost of essentials like childcare and health care have been putting burdens on family budgets for decades.

Paul Solman:

But wages at the bottom has been rising.

Rakeen Mabud:

Wages at the bottom have been doing well. But wages as a whole have not been keeping pace with inflation.

And I think, at the end of the day, people are feeling that, right? People are feeling the cost of goods going up, the cost of essentials going up, and they're struggling.

Paul Solman:

OK, so which economy does today's GDP number suggest?

Douglas Holtz-Eakin, Former Congressional Budget Office Director:

If you look our performance compared to our competitor developed countries, it's really good. So…

Paul Solman:

The answer depends on context, says economist Douglas Holtz-Eakin.

Douglas Holtz-Eakin:

Yes, we have got problems, but we don't have the problems other people have.

Paul Solman:

So, years ago, you said that the United States was the best horse in the glue factory. What did you mean, and is it still true?

Douglas Holtz-Eakin:

We think of the glue factory as the place where horses who don't have some other great function end up, and so we worry that somehow the U.S. has passed its prime, that, somehow, we're not about the economy that we once were and.

I just don't think that's literally true.

Paul Solman:

But the metaphor is that the American economy is going to be ground up into glue.

Douglas Holtz-Eakin:

It is perhaps not the rosiest assessment of the United States as an economy or a nation. But I'm an economist. I'm not a rosy guy, right?

And I just want to remind people, at the end of that conversation, that, yes, those problems are there, but we're doing pretty well.

Paul Solman:

For a horse in the global glue factory, that is.

For the "PBS NewsHour," Paul Solman.