The resilience of the U.S. economy coming out of the pandemic has surpassed expectations. Many economic forecasters expected a significant slowdown heading into 2023 given that historically taming outsized inflation required a softening labor market to slow wage growth. Instead, the economy has not just defied expectations but posted some of the strongest growth in recent memory:

• Real GDP growth in 2023/24 averaged 2.8 percent annually—the highest two-year period since the mid-2000s.
• Inflation-adjusted retail sales growth averaged 2.4 percent annually between December 2019 and December 2024, nearly double the 1.3 percent annual growth from 2000-2019, according to the American Immigration Council. (Non-inflation adjusted retail sales growth figures are 6.7 percent and 3.5 percent, respectively.)
• Employment growth has averaged 0.9 percent annually, peak-to-peak, since February 2020, outpacing the average growth rate of 0.7 percent over the previous two cycles (see Exhibit 1), despite a dramatic slowdown in domestic population growth.