The Biden Administration Handed Over a Strong Economy
1. Economic growth surpassed expectations
The path of economic growth in 2024 again defied expectations. In both 2023 and 2024, real gross domestic product (GDP)—the typical measure for the total value of the economy, accounting for inflation—exceeded major public and private forecasts. (see Figure 1)2. Stronger productivity growth returned despite a global slowdown
Productivity growth—producing more with the same or fewer inputs—is key to future prosperity. Productivity helps raise incomes, improve overall economic health, and increase government revenues, providing greater capacity for governments to address pressing challenges such as climate change and an aging society.The acceleration of labor productivity growth—the change in output per hour worked—defied expectations for 2023 and 2024. (see Figure 2) Although productivity growth typically slows over a business cycle, it averaged 2.3 percent from September 2022 to September 2024, compared with an average of 1.4 percent from December 2019 to September 2022.
3. Inflation was tamed without a recession
Inflation has been the dominant feature of post-pandemic economies across the globe, partially stemming from pandemic-related supply-side bottlenecks. This is being brought under control, while simultaneously avoiding the sluggish growth experienced by many other advanced economies. Inflation fell from 7.2 percent in June 2022 to 2.4 percent in November 2024. (see Figure 3)*** Inflation has continued to cool in the past six months, with CAP analysis showing an annualized rate of around 2 percent.4. Workers benefited from the strongest labor market in generations
Several indicators point to the continuing strength of the labor market, which has delivered gains from stable employment and sustained wage growth for working families.The unemployment rate—at 4.1 percent as of December 2024—has been at or below 4.3 percent since November 2021. Moreover, it has been at or below 4 percent for 30 of the past 38 months. This long a period of low unemployment has not been seen since the late 1960s. In 2024, the prime-age employment-to-population (EPOP) ratio—a key measure of employment that accounts for demographic change—pushed beyond pre-pandemic levels, reaching highs not seen since 2001.****