America’s Economic Exceptionalism Is on Thin Ice

Can America stay exceptional?

Economists and investors are increasingly asking that question as growth forecasts and the stock market slide. The answer, which matters a lot for American businesses and households, is no longer a clear “yes.”

Since the 2008 financial crisis abated, America’s economy has been the envy of the developed world. Annual average real growth in gross domestic product has been twice that of Europe and Britain and more than four times that of Japan.

Strong growth, in turn, has helped make American equity markets more attractive than their peers. A $10,000 nest egg invested in the S&P 500 at the end of 2008 was worth more than $65,000 at the end of 2024, multiples higher than a similar investment made in Europe, Britain or Japan. American households with jobs and investment gains have been able to spend more, which has translated into more corporate revenue. Healthier companies with confidence in their customers have invested and hired more. And so the cycle continues.

Some key structural underpinnings of that economic exceptionalism are now at risk from policies being pursued by President Trump and the responses of our overseas allies and adversaries. The nation no longer being economically exceptional could bring household budget challenges and difficult retirement years ahead for millions of Americans.

Understanding economic exceptionalism starts with looking at the building blocks of growth. Simply put, G.D.P. is a function of labor and productivity — the number of workers in a country and the output created by each unit of labor. In recent decades America has benefited on both fronts, with a large, growing labor force and rising productivity.

Work force growth has increasingly been supported by immigrants. Between 2000 and 2022, workers born overseas represented nearly three-quarters of all growth in the private-sector civilian labor force. The native-born work force has barely grown. An aging population has led more people into retirement, and women have had fewer children.