United States: Economic and political overview

Economic Overview

For the latest updates on the key economic responses from governments to address the economic impact of the COVID-19 pandemic, please consult the IMF's policy tracking platform Policy Responses to COVID-19.

The United States is the world's largest economy, ahead of China. After a decade of growth, the country’s GDP growth rate turned negative in the aftermath of the COVID-19 pandemic, exacerbated by rising inequalities and obsolete infrastructure. However, the economy recovered promptly, GDP growth rebouncing to an estimated 5.7% in 2021, driven by strong private consumption and investment and supported by highly accommodative monetary and fiscal policies. As tighter financial conditions negatively impacted demand, GDP growth slowed down to 1.6% in 2022, and is expected to further reduce to 1% in 2023 and 1.2% in 2024 (IMF).

Concerning public finances, the fiscal measures implemented to contain the effects of the COVID-19-induced crisis weighed heavily on the government budget, resulting in a deficit of -9.5% of GDP in 2021 (IMF). Despite some additional spending planned in the new infrastructure bill, the deficit decreased to -4% GDP in 2022, thanks to the phasing out of pandemic-related measures and resumed economic activity. The tightening of monetary policy is expected to contain the growth of general government fiscal deficit to -5.3% GDP in 2023 and -6% GDP in 2024 (IMF). The government’s debt-to-GDP ratio, already on an upward trend in recent years, increased consistently to finance spending conceded to support households and businesses, reaching 134.5% in 2020 (IMF). Fiscal tightening helped decreasing the debt burden to 122.1% GDP in 2022, and the IMF forecasts it to pick up to 122.9% GDP in 2023 and 126% GDP in 2024. The U.S., however, enjoys unmatched financing flexibility, being the issuer of the US dollar, the world's main reserve currency. Inflation rose sharply to reach 8.1% in 2022, amid high energy prices, persistent supply-chain disruptions, and labor shortages (IMF). The war in Ukraine exacerbated price increases for energy and food. The IMF forecasts inflation to move back towards the FED target of 2% (3.5% in 2023 and 2.2% in 2024), amid the relaxation of supply chain constraints and an adjustment in global energy prices. The 2023 budget focuses on deficit reduction, health, manufacturing, includes climate initiatives and allocates USD 44.9 billion for aid to Ukraine.

The first impact of the COVID-19 crisis was incredibly heavy on the U.S. labour market, with the unemployment rate skyrocketing to 8.1% in 2020 (IMF). The labour market, however, recovered quickly with unemployment falling to 3.7% in 2022 (IMF). However, due to the slowing economy, the IMF sees an increase in unemployment, with a forecast rate of 4.6% in 2023 and 5.4% in 2024. American citizens enjoy one of the highest GDP (PPP) per capita in the world, estimated at more than USD 75,000 in 2022 by the IMF. Nevertheless, inequalities are still significant, as they tend to be worsened by current public health policies (with rising numbers of people without health insurance). In 2021, the povery rate was 11.6%, with 37.9 million people in poverty, a level similar to 2020 (U.S. Census – latest data available).

Main Sectors of Industry

The United States is a highly industrialised country with high levels of productivity and the use of modern technologies. Key sectors include agriculture (corn, soy, beef, and cotton); manufacturing of machinery, chemical products, food, and automobiles; and a booming tertiary market focused on finance, new technologies, insurance, real estate, rentals, and leases. The American agricultural sector is without doubt one of the world's largest, with California alone producing more than one-third of the country's vegetables and two-thirds of its fruits and nuts. Nevertheless, agriculture only accounts for 1% of GDP and employs 1% of the workforce (World Bank, latest data available). According to the latest data from the U.S. Department of Agriculture, keeping into consideration also food and related industries, the primary sector contributed USD 1.264 trillion to the U.S. GDP in 2021, a 5.4% share (the output of America’s farms alone contributed USD 164.7 billion). In 2021, 21.1 million full- and part-time jobs were related to the agricultural and food sectors - 10.5% of total U.S. employment. In the most recent survey, there were 2.02 million U.S. farms in 2020, for a total of 897 million acres of land (USDA).

Including a broad range of activities, the industrial sector contributes to 17.9% of GDP and employs 20% of the workforce (World Bank). Besides the industries mentioned above, the country is also the world leader in the aerospace and pharmaceutical industries. Thanks to its abundant natural resources, the United States has become a leader in the production of a number of minerals and has been able to maintain diversified production. The country is the world's largest producer of liquid natural gas, aluminium, electricity and nuclear energy. It is the world's third-largest oil producer and, for several years, has also been developing shale gas extraction on a large scale. The manufacturing sector alone accounts for 12% of the country’s value-added (U.S. Department of Commerce). As per data from the Bureau of Economic Analysis, private goods-producing industries decreased 10.4% in Q2 2022.

The American economy is essentially based on services: the tertiary sector accounts for more than three-fourths of GDP (77.6%) and employs 79% of the country's workforce (World Bank). A large portion of GDP is composed of finance, insurance, real estate, rental, and leasing sector (20.1% in Q3 2022); as well as professional and business services (13.1%). The governmental sector (at federal, state and local levels) accounts for around 11.6% of the country’s GDP; while the share of educational services, healthcare and social assistance reaches 8.4%, ahead of wholesale (6.3%) and retail sales (5.7% - U.S. Bureau of Economic Analysis). The latest figures from the Bureau of Economic Analysis show that U.S. private services-producing industries’ contribution to GDP increased 2% over Q2 2022. Within private services-producing industries, the leading contributors to the increase were health care and social assistance; professional, scientific, and technical services; real estate and rental and leasing; and accommodation and food services. Partly offsetting these increases was a decrease in wholesale trade.

Source: World Bank, Latest data available.

Indicator of Economic Freedom

Score:

74,8/100

World Rank:

20

Regional Rank:

3

Economic freedom in the world (interactive map)
Source: Index of Economic Freedom, Heritage Foundation

Business environment ranking

Score:

8.30/10

World Rank:

7/82

Source: The Economist Intelligence Unit - Business Environment Rankings 2021-2025

Sources of General Economic Information

Ministries

Department of the Treasury
Department of Commerce
Department of Labor
Department of Agriculture
International Trade Administration

Statistical Office

Census Bureau

Central Bank

The Federal Reserve

Stock Exchange

New York Stock Exchange
NASDAQ
NYSE American Options
NYSE Chicago Stock Exchange
Chicago Mercantile Exchange
Chicago Board Options Exchange
Minneapolis Grain Exchange

Other Useful Resources

Bureau of Economic Analysis
Financial Times
The Economist - US
The Wall Street Journal

Main Online Newspapers

New York Times
Washington Post
USA Today
Los Angeles Times
Chicago Tribune
San Francisco Chronicle
Atlanta Journal Constitution
Boston.com
Miami Herald
Financial Times
Bloomberg

Economic Portals

National Bureau of Economic Research
U.S. Census Bureau
Bureau of Labour Statistics
Bureau of Economic Analysis
White House

Political Outline

Current Political Leaders

President: Joe Biden (assumed office 20 January 2021) - Democratic Party
Vice President: Kamala Harris (assumed office 20 January 2021) - Democratic Party

Next Election Dates

Presidential: 5 November 2024
Senate: 3 November 2024
House of Representatives: 3 November 2024

Current Political Context

The year 2022 was dominated by Russia’s invasion of Ukraine in February and the deadly war that has lasted since then. Despite the polarization of U.S. politics, both Democrats and Republicans supported humanitarian and military aid to Ukraine, a bipartisan approach praised by U.S. President Joe Biden. The United States has coordinated its sanctions against Russia with its western and NATO partners, in line with the Biden administration's effort to return to a multilateral approach and re-engage with traditional partners (Coface). In the end of 2022, following a bilateral meeting between Biden and Ukraine President Volodymyr Zelenskiy, a new USD 1.58 billion aid package was announced. Despite soaring inflation and fears of an upcoming recession, the Democrats retained control of the Senate in the mid-term elections. The Republicans only won a thin majority in the House of Representatives, the worst mid-term performance by a party out of power in 20 years. This underperformance was largely attributed to the negative impact of former U.S. President Donald Trump, who remained on the political scene in 2022. Trump, under multiple investigations, announced that he would run for president again. Tensions with China remained high, particularly on issues related to trade and intellectual property protection, and intensifying human rights violations in Iran further reduced the likelihood of a nuclear deal.

Main Political Parties

Two political parties dominate politics:
- The Democratic Party: socially progressive, favours government intervention to temper the market economy.
- The Republican Party (also known as the Grand Old Party, GOP): socially conservative, supports free-market capitalism and emphasises national defence.
There are other parties such as the Reform Party, the Libertarian Party, the Green Party, the Constitution Party, the Natural Law Party, the Party for Socialism and Liberation, the Working Class Party, and the Working Families Party.

Type of State

The United States are a federal republic, based on representative democracy, with three equally powerful branches of Government; comprised of 50 largely self-governing and semi-sovereign states.

Executive Power

The President is the Chief of State, Commander-in-Chief of the Armed Forces and the Head of Government. The President is elected by an electoral college (whose members are elected directly from each state) to serve a four-year term. These powers are checked by the U.S. Congress. The Cabinet is appointed by the President and subject to approval by the Senate.

Legislative Power

The legislature is bicameral in the United States. The Congress consists of the Senate (the upper house) and the House of Representatives (lower house). The Senate has the power to confirm or reject presidential appointments and to ratify treaties. It is composed of 100 senators. The House of Representatives has the sole right to initiate revenue bills, although they may be amended or rejected by the Senate. It is composed of 435 members. The President has the power to veto the legislation passed by the Congress, but the Congress can override the veto with a two-thirds vote.

Indicator of Freedom of the Press

World Rank:

44/180

Indicator of Political Freedom

Ranking:

Free

Political Freedom:

2/7

Civil Liberties:

2/7

Political freedom in the world (interactive map)
Source: Freedom in the World Report, Freedom House

COVID-19 Country Response

Travel restrictions

Regularly updated travel information for all countries with regards to Covid-19 related entry regulations, flight bans, test and vaccines requirements is available on TravelDoc Infopage.
To find information about the current travel regulations, including health requirements, it is also advised to consult Travel Regulations Map provided and updated on a daily basis by IATA.

Import & export restrictions

A general overview of trade restrictions which were adopted by different countries during the COVID-19 pandemic is available on the International Trade Centre's COVID-19 Temporary Trade Measures webpage.

Economic recovery plan

For information on the economic recovery scheme put in place by the U.S. government to address the impact of the COVID-19 pandemic on the U.S. economy, please visit the website of the U.S. Department of the Treasury. For a general overview of the key economic policy responses to the COVID-19 outbreak (fiscal, monetary and macroeconomic) undertaken by the U.S. government, please consult the section dedicated to the United States in the IMF’s Policy Tracker platform.

Support plan for businesses

For an evaluation of impact of the Covid pandemic on SMEs and an inventory of country responses to foster SME resilience, refer to the OECD's SME Covid-19 Policy Responses document.
You can also consult the World Bank's Map of SME-Support Measures in Response to COVID-19.