Thoughts

July 03, 2026 | 15:14

Eight Economic Reasons for Americans to Celebrate

Economist

Senior Economist and Director
Economics

Sal Guatieri is a Senior Economist and Director at BMO Capital Markets, with over two decades experience as a ma... (Read more)

Sal Guatieri

Senior Economist and Director
Economics

Sal Guatieri is a Senior Economist and Director at BMO Capital Markets, with over two decades experience as a ma... (Read more)

As the U.S. celebrates its 250th birthday, here are eight economic reasons to light up the sky.

Sturdy economy: Growing 2.7% in the past year to Q1, U.S. real GDP is not only the strongest since 2024, it is also vastly outperforming its long-run potential and every other G7 nation.
Accelerating productivity: Underpinning both near- and long-term economic growth, labour productivity among nonfarm businesses rose 2.8% in the past year to Q1, the most since 2024 and well above the half-century average of 1.9%.
Surging investment in all things AI: A key productivity driver is business investment, particularly in information technology. U.S. business spending on computer hardware, software and data centres has surged 25% in the past year to Q1 as companies race to build, and benefit from, the AI interstate highway system.
Increased competitiveness: Rising productivity has held unit labour costs to a modest 0.5% advance in the past year, the smallest increase since 2019. A low wage bill will not only enhance the international competitiveness of American businesses but also help contain inflation pressures.
Low unemployment: At 4.2%, the jobless rate is just 0.8 ppts above the 54-year low reached in 2023. True, its decline this year reflects a shrinking labour force rather than increased hiring (in fact, the 2.1 million person contraction is the most on record outside the pandemic). Still, layoffs remain limited outside the technology sector, and less competition will at least improve the odds of finding work.
Improved inflation outlook: Now that oil prices have largely returned to pre-war levels, PCE inflation appears to have peaked at just above 4%. Assuming fuel costs remain contained, inflation could return to the 2% target within one year. That would stay the Fed’s tightening hand and even keep rate cuts on the table next year.
Lighter than usual household debt burdens: At just over 11% in Q1, the share of disposable income devoted to debt payments is more than one percentage point below the long-run average. And that’s not simply because many homeowners have locked in record-low mortgage rates. The debt service burden on consumer loans is also lower than normal.
Record equity markets: The venerable Dow Jones Industrial Average, now 130 years old, is at a record high. Yes, stocks look expensive and AI enthusiasm is running wild, but earnings growth has been stellar this year and could benefit from AI-driven productivity gains in the years ahead.

No one really knows what the second half of the year will bring (after all, few had the Iran war on their bingo card at the start of the year). But for now, Americans have more good than bad economic reasons to celebrate Independence Day.