Economic Performance Analysis and its Alignment with Sustainable Development Goals

Reconciling Economic Indicators for Sustainable Growth (SDG 8)

An assessment of the United States economy reveals a significant divergence between two key metrics: Gross Domestic Product (GDP) and Gross Domestic Income (GDI). This discrepancy is critical for accurately evaluating progress toward Sustainable Development Goal 8 (Decent Work and Economic Growth), which calls for promoting sustained, inclusive, and sustainable economic growth.

• In the first quarter of 2022, real GDP contracted by 1.6 percent.
• Conversely, real GDI increased by 1.8 percent during the same period.
• This divergence suggests that a singular focus on GDP may provide a misleading perspective on economic health, while a broader analysis including GDI points to underlying strength consistent with the objectives of SDG 8.

Labor Market Strength and Productivity: A Focus on Decent Work (SDG 8 & SDG 1)

The resilience of the labor market provides strong evidence of progress toward achieving targets within the Sustainable Development Goals, particularly those related to employment and poverty reduction.

1. Full and Productive Employment (SDG 8.5): The economy added 1.7 million jobs in Q1 2022 and another 1.3 million in Q2 2022 (payroll survey). This persistent job creation is a primary indicator of progress towards full and productive employment for all.
2. Decent Work and Income Growth (SDG 8 & SDG 1): The growth in real GDI was substantially driven by a surge in labor income. Rising wages support the “decent work” component of SDG 8 and are fundamental to efforts aimed at SDG 1 (No Poverty).
3. Economic Productivity (SDG 8.2): The combination of rising labor income, high non-financial corporate profits, and expanding industrial production contradicts the notion of a sharp decline in labor productivity. This indicates a move towards higher levels of economic productivity, a key target of SDG 8.

Industrial Output and Economic Resilience (SDG 9)

Analysis of gross output offers further insight into the economy’s performance, particularly in relation to SDG 9 (Industry, Innovation, and Infrastructure), which seeks to build resilient infrastructure and promote inclusive and sustainable industrialization.

• Real gross output, which measures both final and intermediate goods, grew by 2.0 percent in Q1 2022. This demonstrates that overall industrial activity and production remained robust.
• The data indicates a shift towards producing more intermediate goods. This suggests an investment in supply chains and future production capacity, which is essential for building a resilient and sustainable industrial base as envisioned by SDG 9.

Alternative Growth Metrics and Q2 2022 Outlook

To gain a more accurate understanding of true economic performance, alternative and composite measures of growth are considered. The outlook for the second quarter of 2022, based on available income data, suggests a continuation of economic expansion in line with SDG targets.

1. Gross Domestic Output (GDO): The average of GDP and GDI, this metric provides a balanced view, showing slight growth of 0.1 percent in Q1.
2. GDPplus: A statistically adjusted model from the Federal Reserve Bank of Philadelphia, designed to filter out measurement error, indicated robust growth of 2.7 percent in Q1, strongly supporting the narrative of sustained economic growth (SDG 8).
3. Q2 2022 Outlook: Preliminary data for the second quarter indicates continued strength.
   • Nominal labor income is projected to have risen by approximately 1.8 percent.
   • Corporate tax receipts, a proxy for profits, were significantly higher than in previous years, suggesting continued strength in business income.
   • These trends indicate that the economic expansion, which underpins progress on multiple SDGs, likely continued through the second quarter.

Conclusion: A Data-Driven Path Toward Sustainable Development

A comprehensive review of economic data, extending beyond headline GDP, indicates that the U.S. economy is not in recession and demonstrates underlying strength. The positive trends in income, employment, and production align closely with the objectives of the Sustainable Development Goals. The continued expansion of GDI, driven by strong labor income and resilient industrial output, confirms that the economy is on a path that supports SDG 8 (Decent Work and Economic Growth), contributes to SDG 1 (No Poverty), and reflects the industrial resilience promoted by SDG 9 (Industry, Innovation, and Infrastructure).

Which SDGs are addressed or connected to the issues highlighted in the article?

• SDG 8: Decent Work and Economic Growth

  The entire article is a detailed analysis of economic growth in the United States. It focuses on measuring the health and growth of the economy through various metrics like Gross Domestic Product (GDP), Gross Domestic Income (GDI), and employment figures. The core discussion revolves around whether the U.S. economy is in a recession, which is central to the theme of sustained economic growth. The article also extensively discusses employment levels and labor income, which are key components of the “Decent Work” aspect of SDG 8.

What specific targets under those SDGs can be identified based on the article’s content?

1. Target 8.1: Sustain per capita economic growth in accordance with national circumstances…

   The article is fundamentally about measuring and sustaining economic growth. It analyzes the “1.6 percent decline in U.S. gross domestic product (GDP) last quarter” and contrasts it with other measures like the “strong 1.8 percent growth in real GDI” to understand the true pace of economic activity. The discussion of various growth metrics (GDP, GDI, GDO, GDPplus) directly relates to this target of sustaining growth.

2. Target 8.2: Achieve higher levels of economic productivity…

   The article explicitly addresses economic productivity. It raises the question of whether the data “suggests a sharp decline in labor productivity” by pointing out that GDP fell despite the addition of 1.7 million jobs. It then analyzes components like corporate profits, wages, and industrial production to argue that “The combination of rising wages, rising industrial production, and high non-financial corporate profits are not suggestive of a sharp decline in productivity.”

3. Target 8.5: By 2030, achieve full and productive employment and decent work for all…

   The article repeatedly uses employment data as a key indicator of economic health, which aligns with the goal of achieving “full and productive employment.” It points to the “persistent strength in the labor market,” the addition of “1.7 million jobs” in Q1, and “1.3 million jobs in 2022Q2” as evidence against a recession. It also discusses labor income, noting that it “surged over 11 percent (annualized rate)” in Q1, connecting employment to income, a component of decent work.

Are there any indicators mentioned or implied in the article that can be used to measure progress towards the identified targets?

1. Indicators for Target 8.1 (Sustain economic growth):

   The article is rich with indicators used to measure economic growth. These include:

   • Annual growth rate of real GDP: Mentioned as having a “1.6 percent decline” in the last quarter.
   • Real Gross Domestic Income (GDI): Used as a contrasting measure, showing a “strong 1.8 percent growth.”
   • Gross Domestic Output (GDO): Mentioned as the average of GDP and GDI, which “grew at just 0.1 percent.”
   • GDPplus: A sophisticated measure from the Federal Reserve Bank of Philadelphia, which “grew at 2.7 percent in the first quarter.”
   • Real gross output: A broader measure including intermediate goods, which saw an “increase of 2.0 percent (annualized rate).”

2. Indicators for Target 8.2 (Achieve higher economic productivity):

   The article implies the use of ‘real GDP per employed person’ by analyzing GDP and employment figures together. Specific indicators used to infer productivity trends include:

   • Labor Productivity: Discussed directly as a concept derived from comparing output (GDP) with labor input (jobs added).
   • Corporate Profits: Analyzed to gauge business health, noting that “non-financial corporate profits remained flat.”
   • Industrial Production: Mentioned as “expanding” and “rising,” suggesting productive activity.
   • Wages and Labor Income: Used as a sign of worker compensation, with “labor income surged over 11 percent.”

3. Indicators for Target 8.5 (Full and productive employment):

   The article provides several indicators related to employment and earnings:

   • Employment Growth: Measured by the number of jobs added, such as “1.7 million jobs” in Q1 and “1.3 million jobs in 2022Q2.”
   • Labor Income / Compensation: Measured through “aggregate weekly payrolls for private sector employs,” which “rose 1.7 percent,” and “compensation to employees,” which rose in April and May.
   • Real Labor Income: Mentioned specifically as being “roughly flat in second quarter” after adjusting for inflation.

SDGs, Targets and Indicators

Source: home.treasury.gov