Despite global turmoil and an ongoing energy war, the U.S. economy, referred to by Larry Kudlow as the “great American economy,” is demonstrating significant strength and resilience, according to recent data. Kudlow dismisses negative predictions, noting that economic indicators point away from a recession.
The Atlanta Fed’s GDPNow is forecasting a robust 3.7% annual growth for the second quarter. This optimism is further supported by recent jobs data, which significantly exceeded expectations. Private sector payrolls saw a substantial increase of 123,000, following a strong gain of 190,000 in the previous month. The unemployment rate remains at a near-full employment level of 4.3%.
Kudlow attributes some of this economic performance to a reduction in illegal immigration, suggesting that approximately 3 million individuals have left the U.S. He also points out that while President Trump has reduced the federal workforce, the private sector has compensated with substantial job growth in recent months. Weekly unemployment claims are reportedly at historic lows.
Notably, nonsupervisory production workers have experienced significant gains, with hourly earnings increasing by 3.7% and hours worked up by 1% over the past year. The wage-income proxy, a measure combining earnings and hours worked, shows a 4.7% increase, indicating that blue-collar workers are outperforming white-collar counterparts. This wage growth outpaces the Federal Reserve’s favored inflation rate of around 3% and other inflation metrics.
While acknowledging the impact of the energy shock, Kudlow suggests it may be temporary and a necessary consequence of addressing the Iranian regime. He further highlights the strong performance of the Institute for Supply Management’s services and manufacturing indexes. Non-farm productivity has risen by an impressive 2.9% over the past year, with unit labor costs increasing by only 1.2%, a positive sign for inflation. This has contributed to the best profit performance for American businesses in at least two decades, fueling record-breaking stock markets.
Kudlow concludes that under the current administration’s policies of tax cuts, deregulation, and fair trade, both labor and investment capital are thriving in the American economy.
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