In the United States, the story of the economy is a good news, bad news affair. Jobs are coming back, but millions are reluctantly accepting part-time work. Investors are accumulating wealth, but income levels are hardly growing.
But globally, the trajectory of America’s economy is spurring a different reaction: envy. On the heels of a steady six-month jobs expansion, the United States has reemerged as the star of — and perhaps the locomotive for — an otherwise slumping global economy.
In the latest reminder of how America is outpacing much of the developed world, the government said Thursday that the nation's gross domestic product -- the size of its economy -- grew at an annualized rate of 3.5 percent between July and September. That figure came amid growing fears that Europe is sliding into its third recession since 2008. And while the United Kingdom is faring well, too, economists predict that by 2015 the United States will be the rich world's standout economy.
“GDP growth of 3.5 percent?” said Jay Bryson, a global economist at Wells Fargo. “If you said that to a European right now, they’d start to cry tears of joy.”
The notion of the United States as a global engine is a reminder of what may now seem like an ancient era. In the aftermath of the Great Recession, emerging economies like Brazil and China took the lead role, but growth in those countries slowed as well.
Economists caution that the U.S. economy, this time around, remains fragile. And it's unclear if the United States can lift up other struggling economies -- or will be pulled down by them. The United States accounts for about 16 percent of global economic output, compared with about 23 percent in 1995.
The optimists say the United States can persist as an island of growth, in large part because of healthy homegrown consumer demand. The goods bought by Americans comprise nearly 70 percent of economic activity, compared with about 13 percent comprised by exports.
Consumer confidence is at its highest level since 2007, according to The Conference Board, a non-profit research group that tracks sentiment. If consumer confidence remains high, the country can weather global shocks — as it did during the Asian Financial Crisis in the late-1990s. Strong consumer demand at home can even give a boost to other export-driven nations.
“The U.S. is pretty well insulated, mostly because exports play a fairly small role,” said Nariman Behravesh, a chief economist at IHS. “By far consumers are the most important factor, and the good news is, U.S. consumers are in pretty good shape,” with gas prices down, home values on the rise, and increasingly healthy debt-to-income ratios.
Others, though, say the United States is still vulnerable to unexpected global fluctuations — say, a larger-than-expected slowdown in China.
Already, the stock market this month has shown jitters over the spread of Ebola in West Africa and a wave of glum news from the euro zone. In the latest quarter, trade actually accounted for a boost; exports were up and imports were down. But few economists expect that trend to last, and say that declining demand everywhere from France to Japan will trim U.S. economic growth in the coming quarters.
“You can’t insulate yourself in the modern world,” said Alan MacEachin, an economist at the Navy Federal Credit Union.
So far, the Federal Reserve has signaled that it is confident in the direction of the recovery, voting on Wednesday to end a long-running stimulus campaign that involved buying trillions of dollars of bonds to lower interest rate. The unemployment rate is at 5.9 percent, the lowest level since the financial crisis, and hiring has topped the crucial 200,000-jobs-a-month benchmark for nearly the entire year.
The U.S. economy has been carried coming out of the recession by reliable consumer spending. But Thursday’s data also came with an unexpected boost: The government, a negative drag in recent years, is again lending a hand.
In the latest quarter, it was a spike in defense spending that provided the greatest lift. But more important, state and local governments — after a long period of austerity — are now injecting significantly more money into the economy. State and local government expenditures and investment rose 1.3 percent, building on 3.4 percent growth from the previous quarter.
The coming months will influence the Fed’s next major decision — when and whether to raise interest rates. The Fed has kept its target for short-term interest rates at zero for the past six years, and officials said they will calibrate the timing of the first rate increase to the health of the economy. A stronger recovery could push them to move more quickly, while slower growth could delay any move.
Some economists also said that American awareness of their strengthening economy will also pick up in coming months.
"There is often a lag about public perceptions," Behravesh said. "For the last four or five years we’ve been bombarded with headlines about how awful we are. But life is not awful. I think our awareness is starting to change."