The US economy's record swings: 4 essential reads

The U.S. economy rebounded from its unprecedented coronavirus plunge in the spring with a record surge over the summer, giving the president some good news just days before Election Day.

Gross domestic product climbed 33% in the third quarter, from July through September, according to the Commerce Department’s initial Oct. 29 estimate, as companies and individuals returned to work following the spring lockdown. Still, U.S. GDP remains 3.5% below its pre-COVID-19 level.

But why do we care about GDP in the first place? We plumbed our archive to provide a bit of context for a piece of data that is already a bit old.

1. What is GDP?

GDP, dubbed one of the greatest inventions of the 20th century, is followed very closely by policymakers, businesses and financial markets to make critical decisions about hiring, spending, investment and economic policy, writes Dan Sichel, an economist at Wellesley College.

But what is it really?

Sichel takes a dive inside the economic indicator to show what goes into it (products and services) – and what’s left out (well-being).

2. Before the coronavirus

Just a few months before the pandemic hit and forced lockdowns across the country – and world – the U.S. economy had just entered its longest expansion in history, lasting over a decade.

With the economy now in recession, it’s worth asking who benefited or didn’t from all those gains. In other words, who was best and least prepared for the economic catastrophe Americans are now experiencing?

It’s exactly who you’d expect, writes Colorado State University economist Steven Pressman, who points to three charts that show who gained the most from America’s record economy.

3. That old yarn about GDP

President Donald Trump is wasting no time in claiming credit for “the great American comeback” as a reason he deserves re-election. Whether he deserves it or not, ultimately he’s just telling a story about the numbers, presumably one that paints him in the best light possible. His rival, former Vice President Joe Biden, will have his own version of the story.

And that’s really all economists themselves are doing: telling stories about the data, argues Carolin Benack, a literary scholar who researches economics and its history at Duke University. The next time you hear an economist – or a politician – tell you what the numbers supposedly mean, remember they’re just storytellers, not scientists, she says.

4. GDP and well-being

Investors, policymakers and politicians follow changes in GDP very closely, whether it’s to help them decide how to invest money, adjust policies or keep score for the electorate.

“While it is convenient to focus on one number, it turns out GDP alone is inadequate to measure the economic performance of a country,” writes Sophie Mitra, a professor of economics at Fordham University. She explains the problems with GDP and points to better ways to measure economic well-being of a country’s citizens.

Editor’s note: This story is a roundup of articles from The Conversation’s archives.