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The State of the U.S. Economy (April 2024)

Hwikook Choe, Ph.D. Candidate in Economics

© International Foundation for World Freedom

1.     GDP

The Gross Domestic Product (GDP) serves as a vital measure indicating the general economic well-being and functioning of a nation. It encompasses the total value of goods and services produced for market consumption, incorporating both market transactions and certain nonmarket activities like governmental provision of defense or educational services. In the United States, GDP is assessed on a quarterly basis, offering valuable insights into the country's economic vitality and performance.

In the fourth quarter of 2023, real Gross Domestic Product (GDP) saw a growth rate of 3.4 percent, according to the latest estimate from the Bureau of Economic Analysis. This marks a slight decrease from the previous quarter's growth rate of 4.9 percent. The latest estimate benefits from more comprehensive data sources than the previous one, leading to revisions in various sectors. While consumer spending, state and local government spending, exports, nonresidential fixed investment, federal government spending, and residential fixed investment contributed positively to GDP growth, private inventory investment saw a decrease. Additionally, imports, which are subtracted from GDP calculations, increased during this period.

The slight deceleration in real GDP growth in the fourth quarter, compared to the third quarter of 2023, can be attributed to downturns in private inventory investment and slowdowns in federal government spending and residential fixed investment. Imports also experienced a slowdown during this period. Despite these fluctuations, GDP growth remains a crucial indicator of overall economic health and performance, offering insights into the nation's economic activity and trajectory.


2.     Unemployment Rate

The unemployment rate serves as a vital gauge of economic health, offering insights into the state of the labor market and indicating the overall economic welfare of a country. It measures the proportion of unemployed individuals relative to the total labor force. This statistic is regularly disclosed by the US Bureau of Labor Statistics (BLS) on a monthly basis.

In March, the United States experienced minimal changes in its unemployment rate and the number of unemployed individuals, maintaining a steady rate of 3.8 percent with 6.4 million people unemployed. This figure has remained relatively consistent since August 2023, fluctuating within a narrow range of 3.7 to 3.9 percent. While unemployment rates for Blacks increased slightly, rates for Asians and Hispanics decreased, with other demographic groups showing little or no change in unemployment rates.

Long-term unemployment, defined as joblessness lasting 27 weeks or more, saw minimal changes in March, with 1.2 million individuals classified as long-term unemployed, representing 19.5 percent of all unemployed persons. Similarly, measures such as the labor force participation rate (62.7 percent) and the employment-population ratio (60.3 percent) remained stable, showing little variation over the year.

Part-time employment for economic reasons saw little change in March, with 4.3 million individuals preferring full-time employment but working part-time due to reduced hours or inability to secure full-time positions. Additionally, the number of individuals not in the labor force but desiring employment remained largely unchanged at 5.4 million in March.

Despite the overall stability in unemployment rates, total nonfarm payroll employment increased by 303,000 jobs in March, surpassing the average monthly gain of 231,000 over the previous year. Key sectors experiencing notable job growth include healthcare, government, and construction, with significant increases in employment observed in these industries. Other sectors, such as leisure and hospitality, social assistance, and other services, also saw moderate job gains. However, employment in retail trade showed little change, with some gains offset by losses in specific subsectors. Additionally, average hourly earnings for all employees on private nonfarm payrolls increased slightly in March, reflecting a 4.1 percent increase over the past year.


3.     Inflation Rate

Inflation, which denotes the pace at which the overall prices of goods and services escalate, stands as a significant economic gauge shaping consumer actions, corporate strategies, and policymaking. The inflation rate is determined through The Consumer Price Index (CPI), serving as a metric for gauging the average fluctuations over time in the costs incurred by urban consumers for a selection of consumer goods and services.

In February, the Consumer Price Index for All Urban Consumers (CPI-U) saw a 0.4 percent increase, following a 0.3 percent rise in January, as reported by the U.S. Bureau of Labor Statistics. Over the past 12 months, the all items index increased by 3.2 percent before seasonal adjustment. The rise in February was primarily driven by increases in the shelter index and the gasoline index, with the energy index as a whole increasing by 2.3 percent. However, the food index remained unchanged, with the food away from home index showing a slight increase of 0.1 percent.

The index for all items less food and energy also rose by 0.4 percent in February, mirroring the increase observed in January. Notable increases were seen in indexes such as shelter, airline fares, motor vehicle insurance, apparel, and recreation, while indexes for personal care and household furnishings and operations decreased during the month.

Over the 12-month period ending in February, the all items index rose by 3.2 percent, slightly higher than the 3.1 percent increase reported for the previous 12 months. The energy index decreased by 1.9 percent over the year, while the food index increased by 2.2 percent. However, the food index remained unchanged in February, as did the food at home index, although several grocery store food group indexes experienced decreases.

The energy index saw a monthly increase of 2.3 percent in February, driven by rises in the gasoline index and the natural gas index, while the fuel oil index increased by 1.1 percent. Despite the monthly increase, the energy index fell by 1.9 percent over the past 12 months, primarily due to declines in the gasoline and natural gas indexes. Conversely, the index for all items less food and energy, which rose by 0.4 percent in February, saw notable increases in the shelter index, airline fares, motor vehicle insurance, and other categories.


4.     Interest Rate

FOMC Meeting Date

Rate Change (bps)

Federal Funds Rate



5.25% - 5.50%



5.00% - 5.25%



4.75% - 5.00%



4.50% - 4.75%



4.25% - 4.50%



3.75% - 4.00%



3.00% - 3.25%



2.25% - 2.50%



1.50% - 1.75%



0.75% - 1.00%



0.25% - 0.50%


Interest rates play a crucial role in the toolkit of a central bank, impacting the expenses associated with borrowing, investment choices, and the broader economic landscape. The Federal Reserve (Fed), as the central banking authority in the United States, crafts monetary policies aimed at fulfilling its dual objectives of promoting maximum employment and maintaining stable prices. Among the primary instruments used in monetary policy is the conduct of open market operations, which revolves around influencing the federal funds rate. The Federal Open Market Committee (FOMC) is responsible for determining the course of these open market operations.

Recent economic indicators point to a robust expansion in economic activity, characterized by sustained job gains and a low unemployment rate, although inflation remains somewhat elevated despite a recent easing. The Federal Open Market Committee (FOMC) aims to achieve maximum employment and stabilize inflation at around 2 percent over the long term. The committee perceives that risks to achieving these goals are gradually becoming more balanced, although the economic outlook remains uncertain. Given this backdrop, the FOMC has decided to maintain the target range for the federal funds rate at 5-1/4 to 5-1/2 percent, acknowledging the need for continued vigilance in assessing incoming data, economic developments, and potential risks.

In alignment with its objectives, the FOMC intends to carefully evaluate incoming information to determine the appropriate course of monetary policy. While the committee remains committed to gradually reducing its holdings of Treasury securities and agency debt and mortgage-backed securities, it does not foresee adjusting the federal funds rate target range until it gains greater confidence in the sustainability of inflation's movement toward the 2 percent objective. Additionally, the FOMC underscores its dedication to returning inflation to the 2 percent target. The committee pledges to remain attentive to evolving economic conditions, labor market dynamics, inflation trends, and international factors, signaling its readiness to adjust monetary policy as needed to support its dual mandate of maximum employment and stable prices.

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