What’s Going on with the U.S. Economy?

The economic picture is simpler than the swirl of economic indicators sometimes suggests.

The economy is probably headed toward a recession. No, it’s actually booming again.

Inflation is plummeting. No, it has started rising again.

If you find the cacophony of economic indicators to be confusing, don’t feel bad. It is confusing. Some numbers point in one direction, while others point in the opposite. Partisans from both political parties have an interest in promoting one type of news and downplaying the other.

Yesterday’s inflation report added to the muddle. Inflation — a major concern for many families and already a 2024 campaign issue — has been falling for the past year and half. Americans’ economic mood has improved slightly as a result. But the numbers released yesterday showed inflation to be higher than forecasters had expected. In response, the S&P 500 index fell 1.4 percent, its second-biggest daily decline this year.

In today’s newsletter, I’ll give you a framework for thinking about the state of the U.S. economy by describing the four main phases of the past several years. I can’t tell you what will happen next, but I do think the picture is simpler than the swirl of economic indicators sometimes suggests.


“Hiring picked up in January, wage growth was solid, and consumers continue to spend,” as my colleague Jeanna Smialek explains. “Some analysts have suggested that in an economy this hot, wrestling inflation the rest of the way to normal will prove more difficult than the progress so far.” Economists generally consider the ideal inflation rate to be around 2 percent.

By almost any measure, the economy is in better shape today than most forecasters predicted even a year ago. Still, it hasn’t fully recovered from the pandemic.