Is our economy booming or just recovering?

Written by: Audrey Lehnen 

Is our economy booming or just recovering? If you have been keeping up with economic news, you might have heard that the economy has grown the most since 1984 according to NPR. I argue that the economy was simply recovering its losses due to COVID-19, and only improved a marginal percentage.

 People assume that the economy boomed because everyone started going shopping and to restaurants again, and traveling became a bigger thing than during COVID, when people were not spending as much money. Of course the economy looked like it was booming and growing at the fastest pace since 1984. Looking at the graph below, in quarter 2 of 2020 the economy was at negative 31.2% because people weren’t contributing to the economy, and in quarter 3 of 2021 it's at positive 33.8%. If you subtract the two, it's only a 2.6% increase, from what was already made up. 

Putting this in context, the United States economy is dependent on consumer spending. Whether that be travel, groceries, restaurants, it all contributes to the overall economy. With over a fiscal year to recover the economy, it's simply regaining its “former glory”, and really only increasing a small percentage. Again, people weren’t spending money, and then they suddenly did again, proving the point that it's simply recovering and then increasing a small percentage. 

Also taking into account inflation, higher wages and costs, can make the economy look like it's doing better than it is. Estimating a smaller increase on top of a recovery is more probable than a huge increase, because we weren’t doing anything new. It's like rediscovering an old song, plus one new song from the radio. You already had the old songs, so that doesn’t count, but the new song from the radio does. The economic growth is the same way. 

Optimists can argue that even the recovery is a huge economic boost and should be taken into account during the analysis of the graph. However, the super increase is due to domestic spending. Domestic spending has recovered even faster than GDP because so much of the demand has been for imported goods; the trade deficit has been growing as import growth has been buoyant and exports have been contracting. Meaning that as an economy, we rely on foreign goods, and the demand for said goods went up because of a supply problem, so demand increased, and when those products were available again, people jumped to buy them. 

So ask yourself, is the economy recovering, just like rediscovering old songs, or is it a completely new playlist because we are spending money on domestic products again? 

Horsley, Scott. “Believe It or Not, the Economy Grew Last Year at the Fastest Pace since 1984.” NPR, NPR, 27 Jan. 2022, www.npr.org/2022/01/27/1075782151/economy-gdp-pandemic-omicron-delta-inflation-labor-shortages-supply-chain.

Milesi-Ferretti, Gian Maria. “A Most Unusual Recovery: How the US Rebound from COVID Differs from Rest of G7.” Brookings, Brookings, 8 Dec. 2021, www.brookings.edu/blog/up-front/2021/12/08/a-most-unusual-recovery-how-the-us-rebound-from-covid-differs-from-rest-of-g7/#:~:text=U.S. growth has remained strong,(fourth quarter of 2019).