Recent press reports and opinion poll results declare the U.S. economy is in worse shape than it was in 2021 through 2024. This impression prevails despite very high gross domestic product growth and falling inflation in the second and third quarters of last year, in the wake of slower growth and steady inflation numbers in the fourth quarter.
An accurate gauge of the overall health of the economy is critically important considering the federal government’s assumption of authority and control over the nation’s economic well-being. A false diagnosis will lend credence to bad policy choices.
Overall, the U.S. economy is not yet where it should be, though the doom talk today is overstated and politically motivated.
What is most damaging about the mismatch between today’s economic myth and reality is the false conclusions about economic policy its advocates send.
The midterm elections are the obvious context for the doomsaying about the economy. The wrong diagnosis could have long-term policy implications. The important question is what the current state of the economy indicates about economic principles and what policy course the United States should pursue in the future.
The two broad alternatives are more government intervention and economic management, or greater economic freedom. Let’s look at the numbers with that in mind.
Inflation has come down far from its mid-2022 peak of 9.1 percent (as measured by the Consumer Price Index, or CPI) to 2.4 percent. January’s headline inflation rate was the lowest since May of last year. Inflation of core consumer prices, which excludes volatile food and fuel costs, was 2.5 percent over the past 12 months, the lowest since March 2021. Reported inflation remains above the Fed’s goal of 2 percent per year.
Through January, the unemployment rate was middle-of-the-road, neither alarmingly high nor encouragingly low, though continuing a reversal of the pre-lockdown trend that has now lasted three years.
Critics are characterizing this normal but very slowly rising unemployment rate as a bad sign. “The U.S. labor market is facing another year of sluggish hiring and a further increase in the unemployment rate, a leading economist has warned,” Newsweek reported in January.
The widely predicted increase in unemployment has been scaring the public, as it should if it is true. Those prophecies proved wrong in January, however, as total nonfarm employment rose by 130,000 and the unemployment rate “changed little,” at 4.3 percent, the Bureau of Labor Statistics reported. Federal government employment decreased by 34,000, which means a transfer of workers to the productive private sector. That is a very good trend.
Federal Reserve Gov. Christopher Waller called the job report “a surprise to the upside” which “suggests that the labor market may be turning a corner.”
Employment continued to rise in February, economist Robert Genetski reported in his newsletter: “ADP’s job data show employment continues to improve. The four weeks ending February 13 reported total employment increased by 51,000 jobs. This is up from an increase of 22,000 ADP jobs for the month of January.”
Unemployment remains nearly a percentage point above the recent low of 3.4 percent in early 2023, which was the lowest in 55 years. It rose to 4.1 percent in December 2024, about where it is now.
The important question is whether the current unemployment rate indicates weakness in the U.S. economy. The short and correct answer is that it does not.
Unemployment is a lagging indicator of economic conditions. It tends to be the last thing to rise when the government and central bank inflict economic damage, and it is usually among the last things to return to normal after those agents of misfortune relent on the policies that caused the trouble. The unemployment rate is a bad predictor of where the economy is headed.
The economic trends and reversals of the past five years make sense when we view unemployment as a lagging indicator of economic health. The federal deficit expansion in 2021 and 2022 created sharp inflation almost instantly. Higher business costs caused by inflation and the harsh tightening of regulation from 2021 to 2024 began pushing up the unemployment rate in 2023, BLS data show.
Unemployment has yet to move down much since then. Meanwhile, inflation has receded, private sector employment is rising, and GDP has been growing. Inflation-adjusted wages for U.S. private sector workers rose by almost $1,400 in 2025, after having fallen by $3,000 in the prior four years, which was compounded by the 21.5 percent rise in prices during that period. The last two numbers concisely identify the cause of the affordability crisis.
Now the “average American’s weekly paycheck buys ~2% more than it did 1 year ago when Trump was inaugurated, after falling ~4% during the Biden years,” wrote Heritage Foundation economist E.J. Antoni.
Hence, the stagnation of the unemployment rate does not contradict the fact that the U.S. economy has improved in the past year. CNN Business Executive Editor David Goldman reported that the economy is doing well overall: “The US economy grew 2.2% in 2025, very much in line with the last three years of robust economic growth. The economy slowed down more than expected at the end of the year, but the longest-ever government shutdown stymied growth that should be made back this quarter.”
The Atlanta Fed now estimates first quarter 2026 economic growth will be a solid 3 percent. The U.S. economy is not yet as healthy as it should be, and affordability remains a problem for most Americans. Misguided government policies from 2021 to 2024 did an enormous amount of damage. Thus, a full recovery will take some time.
Meanwhile, public pressure for monetary and fiscal stimulus (greater government spending with higher tax rates and more debt) has intensified. Those measures would bring on the same consequences as the 2021-2022 stimulus created: inflation and stagnation.
So, which is it — doom and gloom, or the approach of a glorious summer? Much depends on whether you recognize that the reported unemployment rate is not always a trustworthy economic indicator. The future of the nation’s economy depends on that choice.
The views expressed in this opinion article are those of their author and are not necessarily either shared or endorsed by the owners of this website. If you are interested in contributing an Op-Ed to The Western Journal, you can learn about our submission guidelines and process here.
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