As featured in the Charlotte Business Journal.
Whenever I make public speeches, I like to start things off with an old, tired joke. I tell the audience that the conference organizers asked me “to say a few good things about the U.S. economy.” So I straighten up, pause, and say, “that concludes my prepared remarks.”
This is as corny as it gets, but folks tend to laugh. Perhaps they aren’t expecting even a lame attempt at humor during a presentation on the economy. Admittedly, these sorts of things can be pretty dry.
Recently, laughter from the audience feels a little more nervous than usual. Given the headlines, why wouldn’t it be? We don’t seem to be firing on all cylinders, do we? Further, a lot of the official data seems to be out of whack with what our eyes, ears and personal experiences are telling us.
To that end, I have told more than a few people that I have so many anecdotes about the economy that they can’t possibly all be anecdotal.
Here is the drill: the economy was not as weak during the 1st quarter of 2025 as the reported Gross Domestic Product (GDP) rate of (0.50%) suggested. Similarly, but also conversely, it was not as strong in Q2 of 2025 as the Bureau of Economic Analysis’ (BEA’s) 3.3% figure implied.
I will spare you the details — but suffice to say it largely had to do with wild swings in our trade deficit due to the administration’s tariff policy.
When push came to shove, the U.S. economy grew at about a 1.5% annual rate during the first half of the year — about the same as the BEA’s measure of “final sales to domestic purchasers” for both quarters.
Intuitively, that isn’t terribly robust. Conversely, it is better than the worst-case scenario, which is economic ruin. In truth, most things are better than economic ruin.
But what does a 1.5% economy look like and where do we go from here? This is where your eyes and ears come into play.
Ask yourself:
On hiring:
- Does your business have the same aggressive hiring plans as it did a few years ago?
- Are you hiring a bunch of new college graduates?
- On the flipside of the coin, have you dramatically reduced your headcount —or planning to do so by, say, the end of the year but just haven’t started yet?
On earnings:
- Are they where you want them to be?
- Are they growing at the same rate as they were in 2021, when the government was flooding the financial system with cash?
- How was the 2nd quarter, and what kind of guidance are you giving investors or your board?
On consumer demand:
- Is it easier or harder to get reservations at your favorite restaurant?
- Are they as full as they seemed to be not so long ago?
- Are the lines as long at the drive-thru?
Now, with your answers in mind, consider: what is the likelihood the economy suddenly accelerates between now and the end of the year? That your firm decides to hire a whole bunch of new people at above-market wages? That consumer demand surges and earnings explode? That you won’t be able to get into your favorite place next month?
You see, despite the Fed’s recent rate cut, the U.S. economy doesn’t stop and start on a dime. I often refer to it as an aircraft carrier in the middle of the Pacific Ocean. Absent being hit by a missile or bomb, it doesn’t just suddenly stop cold. Even if you turn the engines off, it can take miles for it to come to a halt.
There is just too much mass and momentum.
So, if U.S. GDP was around 1.5% during both the 1st and 2nd quarters of 2025, the chances are the economy should continue to grow, absent something extraneous happening. Given recent economic data — assuming it is accurate — it is possible the BEA could report a slightly higher growth rate during the 3rd quarter.
However, given the continued uncertainty surrounding a host of different pressure points, such as tariffs, geopolitical turmoil, inflation and the veracity of U.S. economic data, it would be difficult to forecast an “overheated” economy any time soon.
That is a fancy way of saying if you like what you see in the economy and your business, get ready for some more of it.
And that concludes my prepared remarks, for today at least.
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