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I’m not going to lie: it totally slipped my mind that I needed to write my annual update on the economy until last week. I didn’t even think about it until the day after the election.
So as I do every year, I’m going to review four of the most important macro-statistics for the economy—GDP, employment, inflation/wage growth, and the stock market—and then share my three biggest worries about the future. Why does this matter to people in the entertainment industry? Because you need to know the landscape that you’re competing in! Hence why I give myself one article per year on this subject. (I’d write about the economy more often, but the monthly data is very noisy, so it’s better to take a long term look.)
It’s safe to say that many, many people are worried and have been worried about a potential, looming recession for years now, and it still hasn’t arrived. Heck, last year I titled this article, “Waiting for Recession” but will the bubble pop this year? Also, I’ll cover one ongoing economic trend that should worry Hollywood, and another threat to the economy that people just started talking about (again).
Final note: this is my second economy update since the passing of Kevin Drum, the legendary blogger, whose data charts were just invaluable. The punditry world is worse off without him. So I’m dedicating this article to him.
No One Can Predict the Future
Before we get into everything, I need to make a quick point:
No one can predict the future.
For example, my immediate thought, after I realized that I needed to write this yearly economy update—I collect links all year for it for months, which is why this article today has over twenty images from a ton of different sources—was, “Gosh, I sure hope the stock market doesn’t crash in the meantime.” Cue this headline:
But as I’ve been explaining for years, no one can predict a crash. Sure enough, by the next day, things had stabilized:
Of course, two days before all of this, the day after the election, the stock market was booming:
Those headlines were from just three days! We went from an amazing day at the stock market, then a correction, then stabilization.
A lot of people are worried about a potential stock market bubble—I know I am!—but good luck predicting when it pops, if it pops at all. It might not pop at all! As Nate Silver noted in his book The Signal and Noise, even economists are very poor at predicting the actual course of the economy, and they study this for a living.
Again, predicting the future is really hard.
Sure, you could nitpick this statement. Everyone can predict that the sun will rise tomorrow with 100% certainty or, conversely, successfully predict that the sun won’t turn the color purple tomorrow with 100% certainty as well. To be even more precise, humans are getting better at predicting the future, if by “predicting the future” you mean quantifying uncertainty, but that only proves my point: if we know that there’s a 25% chance of a recession, well, only three in four coin tosses will result in a recession! Once you start stacking those error rates, things become very, very uncertain. Hence why, a year ago if not a few months ago, almost no one predicted last Tuesday’s election results.
Seriously, read my four previous articles on the economy each year…in 2022 and 2023, I fended off worries about a coming recession (which definitely didn’t happen), then touted a very, very strong economy in 2024, and I still touted that economy last year (while starting to worry about inflation, inequality and an AI bubble).
America’s 2026 Economy Snapshot
Okay, let’s start with the biggie, GDP:
The economy has been growing over 2% for three straight quarters and grew at 3.4% last quarter, which is excellent.
I will note that Trump has messed around with the people who collect economic data, so if you’re more skeptical about these numbers than before, I don’t blame you. But the serious, professional pundits who I trust to analyze these things—people like Paul Krugman, Megan McArdle and Matthew Yglesias—haven’t yet expressed concern about the official statistics, so I still trust this data. That said, there is one explanation for booming GDP, and it’s not great, which I’ll explain below.
Okay, next up, employment:
Again, really great numbers there! Job openings were up in September, layoffs were at an 18-month low, and the unemployment rate is at a 1-year low. And the unemployment rate stayed below 5% for the second-longest time since this stat has been collected.
Economist Paul Krugman prefers the prime-age employment-population ratio, and it looks great too!
Okay, so that’s the good news! Time for the bad news: inflation:
Not great! In fact, inflation has been above 2% for the longest stretch since 1997, the third-longest stretch all time.
Sure enough, inflation is outpacing wage growth:
If you’re trying to figure out why the Democrats did so well in the midterms, this is the big economic indicator showing why. People hate this ongoing inflation problem.
Finally, the stock market:
Amazing, right? And yet, I was almost worried that the stock market was crashing just last week, so let’s get into my concerns for the US (and by extension, global) economy.
Economic Worry #1: AI and a Potential Stock Market Bubble
We’re just getting started with this issue, but the rest is for paid subscribers of the Entertainment Strategy Guy, so if you’d like to find out…
- …why I (and a lot of other people) are so worried about a recession…
- …what ongoing economic problem could hurt Hollywood…
- …what new potential crisis everyone is going to be paying attention to shortly…
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If you want an idea of just how much content you’d get in a full issue, check out this older issue.
