The Great Normalization: Post-Pandemic Economic Trends in the United States

With the backdrop of U.S. Federal Reserve (Fed) headlines in addition to the shifting narratives of the election season, we have been focusing on what we are calling the Great Normalization as overall economic trends in the U.S. are getting back to normal. More than three years after the last pandemic related stimulus package, the U.S. continues to emerge from the unprecedented economic disruptions caused by the COVID-19 pandemic and the accompanying government interventions.

The Great Normalization encompasses the gradual return to pre-pandemic economic norms despite significant structural changes and new challenges to navigate. As we move forward, we expect a more measured economic environment with key indicators, such as GDP growth, jobs creation, and inflation, trending towards historical averages.

We can see economic growth trending towards a more normal rate through both the Federal Reserve Bank of Atlanta’s GDPNow, which attempts to measure economic growth in real time, as well as the official GDP numbers that are published with a lag. As the graph below shows, following the steep drop and dramatic recovery, measures of broad economic activity have been stabilizing around a healthy rate of growth.

exhibit 1In addition to analyzing monthly employment reports, we track monthly jobs creation on a rolling 6-month average to smooth out the volatility around the monthly figures. The following graph shows jobs creation slowing recently and getting back to the approximately 166,000 new jobs per month average of the previous business cycle from July 2009 through February 2020.

exhibit 2