The Data Is In — and the Narrative Is Wrong

It would appear that most mainstream economists and legacy journalists either don’t believe the “numbers” or don’t like what they reveal about the Trump economy.

Of course, there are analysts who do not do their work through the lens of politics.

The U.S. economy, says Goldman Sachs Research, is poised for stronger performance this year than many economists are projecting.

On a full-year basis, the economy is forecast to grow 2.8 percent. The probability of a recession in the next 12 months has fallen from 30 percent to 20 percent.

While most economists estimate that the economy will grow only 2.0 percent in the coming year, this forecast increasingly appears counterintuitive to solid economics. (RELATED: Trump’s First 12 Months: The Economy, Venezuela, and the American Electorate)

Americans continued to spend in November — a reflection of rising incomes, mild inflation, and employment that remains steady. Moreover — and this is both important and often misunderstood — they drew down savings, further indicating confidence in maintaining robust consumption.

The US Consumer

Consumer spending, adjusted for inflation, rose 0.3 percent for the second month, the Bureau of Economic Analysis (BEA) said last Thursday. (The agency released both October and November figures after a lengthy delay caused by the federal government shutdown.)

The report indicates Americans are spending with confidence despite some complaints of elevated prices — wage growth and payroll expansion continue to outpace what’s needed to maintain labor market stability. Real consumption growth of 0.3 percent in both months represents genuine increases in the volume of goods and services purchased, generating economic expansion in Q4.

Personal spending was supported by the strongest advance in outlays for goods since July, including motor vehicles, gasoline/energy goods, and apparel. Services expenditures remained robust, led by health care and financial services. Particularly significant — discretionary spending in sectors like recreation services, recreational goods, and dining advanced robustly, reinforcing an important message — consumers feel secure enough to spend on leisure.

In addition, the BEA revised its Q3 GDP figure upwards from 4.3 to 4.4 percent — the most in two years. With personal consumption growing at the fastest pace of the year, the Atlanta Fed’s “GDPNow” (which estimates what current data implies for economic growth) has Q4 growth at 5.4 percent.

Confident Consumers Reduce Savings Rate

Personal saving contributions fell to 3.5 percent in November from 3.7 percent, the lowest since October 2022, as Americans chose to maintain consumption rather than fund precautionary savings.

While some analysts see this as a sign of financial distress, this drawdown in savings is a classic indicator of consumer confidence. When Americans feel secure about their employment prospects and incomes, they are comfortable spending rather than hoarding cash. This suggests Americans expect the economic expansion to continue.

A point of reference is that wages and salaries rose a solid 0.4 percent in November, continuing to support household purchasing power. While mainstream analysts have expressed caution about labor market weakness, the underlying fundamentals tell a different story.

A combination of strong real spending growth and declining savings rates indicates consumers feel confident about their financial situation. When Americans become apprehensive about job security or the economy, they typically cut spending and build savings as a buffer. The current encouraging data reflect the converse.

Labor Market — Stronger Than Expected

Major financial institutions, including the Dallas Federal Reserve and RBC Economics, dramatically adjusted downward estimates of “break-even employment” — the monthly job creation needed to maintain stable unemployment.

Due to demographic variables from Baby Boomer retirements to reduced immigration numbers, break-even employment is now significantly less — down from previous estimates of 100,000-plus jobs per month to just 30,000-40,000 per month.

Job creation averaged roughly 49,000 per month last year. While some have viewed this number as weak compared to the torrid rates of 2022-2023, it more accurately represents a healthy labor market given the new demographic realities. Initial jobless claims remain at historically low levels around 200,000, and the unemployment rate of 4.4 percent is well below post-war averages ranging from 4 percent to 10 percent.

Dallas Federal Reserve data released in October noted that modest payroll gains, which might have seemed concerning in 2023, are now indicative of a stable and balanced market given the dramatically lower break-even rate driven by altered demographics.

This helps explain current consumer attitudes and behavior. Rather than spending despite a “reported” weak labor market, the Dallas Fed writes, “This recalibration suggests that today’s more modest payroll gains don’t signal weakness but are consistent with a balanced labor market.”

Consumers are spending confidently because the labor market remains fundamentally sound, recalibrated for the new demographic realities.

Inflation Approaching the 2.0 Percent Fed Target

The personal consumption expenditure price index (PCE) — the Fed’s benchmark for inflation — increased 0.2 percent in both October and November. Excluding food and energy, the core PCE price index also increased only 0.2 percent in both months.

On a three-month annualized basis, total PCE inflation dropped from 2.8 percent in September to 2.5 percent in November. Three-month annualized core inflation fell from 2.7 percent in September to 2.3 percent in November.

(Note of caution: The recent government shutdown precluded the Bureau of Labor Statistics from collecting October 2025 consumer price index data. The October price indices were derived from the geometric mean of September and November CPIs, which may affect data comparability.)

Price pressures have come down considerably — approaching the Fed’s target. The Dallas Fed’s measure of underlying inflation rose at a one-month annualized pace of 1.5 percent in October and November, the lowest since 2020. The six-month annualized figure was 2.3 percent in both October and November.

The bottom line: we’re approaching the Fed’s 2.0 percent target.

The combination of solid wage growth, low inflation, a confident consumer, and a labor market that remains fundamentally healthy — despite requiring fewer monthly job additions due to demographic shifts — suggests the economic expansion should continue at a healthy pace in 2026. And this is without factoring in the stimulus coming in the first half of 2026 from the Trump tax cuts, continued tariff revenue, and two likely additional interest rate cuts from the Fed this year.

This assessment suggests that the consensus economic growth estimate of 2.1 percent for 2026 could be — as has been the case in the past — somewhat politically driven. Forecasts of growth projections closer to 3.0 percent are more likely to reflect economic reality.

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