The U.S. economy has demonstrated remarkable resilience over the past several years. Despite the COVID-19 pandemic, historic inflation, supply chain snarls that have taken years to untangle, and conflicts around the globe, we’ve seen ongoing expansion. In fact, jobs have been added at a significant pace, and employment is now about 4.5 million higher than it was before the pandemic.
Although many analysts were calling for a major recession during 2023, it has not materialized. Our analysis consistently indicated that the worst downturn fears were overblown, but the degree of resilience in the economy has nonetheless been impressive. Looking ahead over the next 30 years, I think we’ll continue to see an upward trend.
One factor influencing long-term growth is underlying demographic patterns. Population gains are likely to be much slower in the decades to come, with immigration accounting for most of the expansion. All of the baby boom generation will have reached retirement age by the end of this decade, and their children (the millennials) will begin to reach that milestone in the late 2040s. The expanding older population has substantial implications for healthcare and social services, with Medicare and Social Security also affected.
Another concern is that the U.S. national debt has now reached well over $33 trillion (and rising). Although the United States has carried debt since its inception (literally since 1789), the amount has escalated rapidly over the past few years. A large component of expenditures is not discretionary (such as Medicare, Social Security, and interest). It would be impossible to alter spending and revenue patterns sufficiently to “balance the budget” in the short term without creating massive dislocations which would endanger public safety and health on the spending side and sustainability on the taxation side. Even so, it is imperative that we address the fiscal situation and practice a measure of discipline going forward.
A third key element to long-term performance is innovation. From developing new technologies to commercializing research discoveries, the U.S. has long led the pace. In fact, an ability to do “the next big thing” is the single biggest contributor to the relatively consistent expansion enjoyed since World War II. Going forward, it will be crucial to maintain an environment which supports and nurtures emerging technologies and industries.
Our latest long-term projections indicate that total U.S. employment is likely to increase by nearly 79.1 million from 2022 to 2050, while real gross domestic product expands at a 2.70% annual pace. Inflation is expected to moderate, though variations are inevitable. Business cycles, headwinds, and all manner of unexpected events will no doubt characterize the coming decades, but resilience will prevail and the overall outlook for the U.S. economy is decidedly positive. Stay safe!
