Executive Strategy

Strengths and Weaknesses of the Current US Economy

Understanding the economic factors influencing your business’s trajectory is key in this cycle. Learn about the strengths and weaknesses of the US economy.


As we move through the second half of 2024, many businesses are feeling the strain of a slowing economy. Some sectors are contracting; other segments are growing. With the economy currently slowing down, these are some of the key strengths and weaknesses of the current US economy.

Overview of Recent GDP Data

The latest US Real GDP figures show growth, as second-quarter GDP came in 3.1% above the year-ago level. While the media has highlighted this as a strong performance, a closer look reveals that the growth is not quite as robust as it might seem. Specifically, spending in non-discretionary categories aided the growth figure, as did rising inventories.

Despite overall GDP growth, certain sectors – particularly those that are discretionary or interest-rate sensitive – are showing underlying weaknesses that are pressuring businesses. Recent volatility in the stock market has added to concerns. Rise in our system of leading indicators, however, signals that the economic softness we are going through will be temporary, and businesses that move closely with the overall economy should prepare for economic growth in 2025–26.

The Negative – Challenges in the Industrial Sector

The industrial sector is struggling compared to the service sector, with US Industrial Production trending relatively flat. This weakness is expected to persist through the end of 2024. While manufacturers and distributors may continue to face difficulties, there is a light at the end of the tunnel.

It is easy to be discouraged by current challenges, but we anticipate growth in the industrial sector for 2025 and 2026. Now is the time to strategize for future opportunities, particularly with lower interest rates coming.

The Positive – Strengths in the Service Sector

Businesses in the service sector, especially those closely tied to consumer spending, are currently performing well. Consumer spending makes up more than two-thirds of GDP, and rising inflation-adjusted incomes indicate that consumers are in a relatively strong position.

Takeaways From the July 2024 Jobs Report

The July jobs report showed that, on a seasonally adjusted basis (we prefer the raw data), only 114,000 jobs were created, with the education and health sectors seeing the largest gains. Both of these categories are less correlated to the overall macro cycle than, for example, retail or manufacturing jobs. The unemployment rate rose to 4.3% on a seasonally adjusted basis from 4.1% in June (4.5% from 4.3% in the not-seasonally-adjusted data).

Some have wondered whether the data from this report might indicate that the Fed has delayed its rate cut, anticipated for September, for too long. However, our analysis of the overall labor market – which focuses on the raw, unadjusted data – reveals that employment growth is slowing in line with our expectations for some economic weakness, but this is not a capitulation. Most businesses should plan for that softening but not overreact to it, recognizing that the labor market is on fundamentally sound footing.

In Summary – Know Your Market

Although some sectors, particularly the industrial sector, are facing challenges, they represent only a portion of the overall economy. The positives in consumer spending and income growth highlight a relatively strong consumer. Many key sectors of the economy are expected to experience growth in 2025 and 2026. Understanding the economic factors influencing your business’s trajectory is key in this cycle especially; reach out to us if you need help navigating those waves.

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