By Sophie Mitra*
The Bureau of Economic Analysis released the latest U.S. gross domestic product data on April 30. In the first three months of 2025, it said, GDP contracted by 0.3%. The GDP growth rate captures the pace at which the total value of goods and services grows or shrinks. Together with unemployment and inflation, it usually receives a lot of attention as an indicator of economic performance.
Some economists and analysts said the economy might not be as bad as this rate’s decline might suggest. While this is the first time in three years that GDP has shrunk instead of growing, it is a relatively small decline.
This raises a critical question: Does a relatively small GDP contraction mean the economy is in trouble? I have spent much of my working life studying economic well-being at the level of individuals or families.
What I’ve learned can offer a different lens on the economy than you’d get from just focusing on the most popular indicators, such as the GDP growth rate.
Get details about how the U.S. economy performed in the first quarter of 2025:https://t.co/qHGf5n47pp pic.twitter.com/figOjv6N86
— BEA News (@BEA_News) April 30, 2025
GDP problems
The GDP growth rate has many limitations as an economic indicator. It captures only a very narrow slice of economic activity: goods and services. It pays no attention to what is produced, how it is produced or how people assess their economic lives.
GDP gets a lot of attention, in part, because of the misconception that economics only has to do with market transactions, money and wealth. But economics is also about people and their livelihoods.
Many economists would agree that economics treats wealth or the production of goods and services as means to improve human lives.
Since the 1990s, a number of international commissions and research projects have come up with ways to go beyond GDP. In 2008, the French government asked two Nobel Prize winners, Joseph Stiglitz and Amartya Sen, as well as the late economist Jean-Paul Fitoussi, to put together an international commission of experts to come up with new ways to measure economic performance and progress. In their 2010 report, they argued that there is a need to “shift emphasis from measuring economic production to measuring people’s well-being.”
Considering complementary metrics
One approach is to use a composite index that combines data on a variety of aspects of a country’s well-being into a single statistic. That one number could unfold into a detailed picture of the situation of a country if you zoom into each underlying indicator, by demographic group or region.
The production of such composite indices has flourished. For example, the Human Development Index of the United Nations, started in 1990, covers income per capita, life expectancy at birth and education. This index shows how focusing on GDP alone can mislead the public about a country’s economic performance.
In 2024, the U.S. ranked fifth in the world in terms of GDP per capita, but was in 20th place on the Human Development Index due to relatively lower life expectancy and years of schooling compared to other countries at the top of the list, like Switzerland and Norway.
Monitoring other indicators
Another approach is to rely on a larger number of indicators that are frequently updated. These other data points reflect a variety of perspectives about the economy, including subjective ones that convey personal perceptions and experiences.
For instance, in addition to inflation rates, there is data on stress due to inflation as well as inflation expectations. Both offer insights into people’s perceptions, perspectives and experiences about inflation.
During the COVID-19 pandemic, the annual U.S. inflation rate increased from 1% in July 2020 to 8.5% in July 2022. My research partners and I found, using U.S. Census data, that more than 3 in 4 adults in the U.S. were experiencing moderate or high levels of stress due to inflation at that time and continued to do so even after inflation went down in 2023.
More recently, the Trump administration’s sporadic tariff changes have made future prices more uncertain, which exposes people to risks. That, in turn, makes people adjust their expectations and feel worse off.
The share of consumers expecting higher inflation rates has climbed sharply in 2025, while consumer confidence has declined abruptly. About 1 in 3 consumers expect that there will be fewer jobs created in the next six months, which is almost as low as during the Great Recession of 2007-2009.
Consumers also have negative expectations about their own future income and worry about their own economic status.
At this moment, the U.S. economy has not officially entered a recession – which requires a longer period of GDP contraction than just one quarter. Although unemployment and inflation rates remain relatively low, the broad picture of the economy that takes into account people’s expectations and perceptions is troubling. To be clear, I’m not saying that just because of what the GDP data may indicate.
*Sophie Mitra, Professor of Economics, Fordham University.
This article is republished from The Conversation under a Creative Commons license. Read the original article.
16 Comments
It is interesting that U.S. businesses have hugely increased investment and purchases of machinery during the last quarter. There is no downturn there.
That is exactly the kind of mismatch she is talking about.
They are burning through a one-off stock of energy and partially attempting to re-shore production. And taking on debt to do so.
Is that actually growth?
And is it sustainable?
And are the workers, pushed in the direction of competing with slave wages, better off?
No they aren't, which is why they voted Trump.. Which tell us GDP is a flawed metric.
Yes Power. Further to this, but straying from your narrative somewhat, countries such as Japan that have an infrastructure 'surplus' are arguably better off than their Anglosphere counterparts.
And interesting to note, Japan, despite its much smaller size, has poured an extraordinary amount of concrete-comparable to, or even exceeding, the total volume poured in the U.S, especially when considered on a per-area or per-capita basis. The phenomenon is well documented, driven by decades of infrastructure spending, political incentives, and a culture of public works projects.
Japan's use of concrete is so intense that the amount of concrete laid per square metre in Japan is 30x times the amount in America, and the total volume is almost exactly the same as the U.S. In absolute terms, Japan has poured as much concrete as the U.S., a country roughly 25x its size.
So on that basis, what is inherently good about using excessive amounts of concrete? Other than you used a lot of it.
For instance, you can't see the ocean in much of Japan for 12 meter walls of concrete. Likewise much of it's river systems are lined with concrete, hillsides, etc. Is Japan better off than the United States for this?
Haha, random anecdote. My wife and I were watching a soppy Japanese romance series on Netflix last night and there was a scene where a couple walked to the top of a hill and looked at the view. It was one of those moments where I think they were intending the audience to think "Aw, that's nice", but frankly, the view was sh$t - concrete jungle in the valley below as the sun set. Well, woopdee doo. My brain just did an instant jump to what an equivalent 'oh look at that view' moment in NZ would be like. No comparison.
Hah, I watched a doco last year about their sea walls. Villages up and down the country, where the fishermen can't see the sea from houses situated on the coastline. Just high concrete walls.
Cold grey monuments of success.
So on that basis, what is inherently good about using excessive amounts of concrete?
Put it like this P. Japan is highly prone to natural disasters, including earthquakes, typhoons, floods, tsunamis, and landslides. Concrete is favored for its durability and strength, particularly in earthquake-resistant construction and coastal defense. But Japanese researchers are developing new types of concrete that absorb carbon dioxide or use recycled materials, aiming to mitigate emissions and improve sustainability. And concrete infrastructure also acts as a long-term carbon sink.
And back to the pertinent point:
Low, zero, negative real GDP growth per capita + infrastructure deficit in 2025 -- Dire
Positive real GDP growth per capita + infrastructure surplus among the best on the planet -- Far better
Put it like this P. Japan is highly prone to natural disasters, including earthquakes, typhoons, floods, tsunamis, and landslides. Concrete is favored for its durability and strength, particularly in earthquake-resistant construction and coastal defense.
Sounds like a good copy paste. But good to see you went and researched something behind an arid metric you produced earlier.
So to summarize, using "volume of concrete" to compare one country that needs it just to exist, with one that doesn't, tells us nothing about whether is better than the other in any meaningful way.
Likewise with China, they have used an enormous amount of concrete in a short period of time. How did they use it? A mixture of things, factories, excessive high speed train networks, and 10s of millions of apartments nobody lives in.
Positive real GDP growth per capita
If your income is $200,000 a year and static, and mine is $50,000 a year and going up a couple of percent a year, would you prefer your situation, or mine?
+ infrastructure surplus among the best on the planet
If you overbuilt your infrastructure and have a shrinking population, is the infrastructure an asset, or a liability?
Sounds like a good copy paste.
Not from Dogs and Demons by Alex Kerr who was one of the first to write about Japan's fascination with concrete.
Yeah, so again, it's more information to make a concrete comparison rather moot.
Here's one which might be useful:
There's 60,000 Americans living in Japan
And 1.5 million Japanese living in America
It would seem there's a preference for people to leave one over the other, independent of the reasons you've suggested.
Which tell us GDP is a flawed metric.
Most of the metrics are flawed, because numbers are arid in isolation (refer above in reference to volume of concrete).
But, unfortunately necessary, especially when trying to appraise or measure such large systems.
Is there a better way? Hard to say.
Yes there is.
And the Wellbeing framework, while not perfect, was well on the way.
Ultimately it's the qualia of life we should be elevating. Hard to do that using units of measure like dollars or life expectancy.
While not the most relevant article to post this link, Max Rashbrooke has written a piece on a book called "Abundance" in The Post this morning:
https://www.thepost.co.nz/nz-news/360674773/best-selling-book-abundance…
PDK might like share his thoughts.
Thank you for the link.
Rashbrooke is getting closer to the truth (he was further away a while back); close enough that I don't need to challenge him:)
For the record, I DID challenge Daniel McLachlan who columns in the Listener. He promptly did a review of 'Abundance' - which I contemplated challenging too. Looks like Max decided it needed to be done. And it did.
McLachlan needs to be educated, or dumped.
The writer of this article is of course, correct. GDP has many shortcomings, but this is not news. for example, i have a book in front of me called The Growth Delusion by David Pilling published in 2018 all about its shortcomings and it wasn't news then. Simon Kuznets who came up with the idea of measuring the GDP of the US back in the 1930s, fully recognised what it failed to measure and i can't see what this article adds to our knowledge, other than as a reminder.
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