Economy of the United States
The United States has a highly developed diversified market-oriented economy. It is the world's largest economy by nominal GDP and second largest by purchasing power parity. As of 2025, it has the world's ninth-highest nominal GDP per capita and eleventh-highest GDP per capita by PPP. According to the World Bank, the U.S. accounted for 14.8% of the global aggregate GDP in 2024 in purchasing power parity terms and 26.2% in nominal terms. The U.S. dollar is the currency most used in international transactions and the world's foremost reserve currency, backed by a large U.S. treasuries market, its role as the reference standard for the petrodollar system, and its linked eurodollar. Since the end of World War II, the economy has achieved relatively steady growth, low unemployment and inflation, and rapid advances in technology, but now faces challenges such as a very high debt-to-GDP ratio at over 120% of GDP, slower economic growth, and a housing crisis.
The American economy is fueled by high productivity, well-developed transportation infrastructure, and extensive natural resources. Americans have the sixth highest average household and employee income among OECD member states. In 2021, they had the highest median household income among OECD countries, but also one of the world's highest income inequalities among the developed countries. The largest U.S. trading partners are Mexico, Canada, China, Japan, Germany, South Korea, the United Kingdom, Taiwan, India, and Vietnam. The U.S. is the world's largest importer and second-largest exporter. It has free trade agreements with several countries, including Canada and Mexico, Australia, South Korea, Israel, and several others that are in effect or under negotiation. The U.S. has a highly flexible labor market and job security is relatively low. Among OECD nations, the U.S. has a highly efficient social security system; social expenditure stood at roughly 30% of GDP.
The United States is the world's largest producer of petroleum, natural gas, and blood products. In 2024, it was the world's largest trading country, and second-largest manufacturer, with American manufacturing making up a fifth of the global total. The U.S. has the largest internal market for goods, and also dominates the services trade. Total U.S. trade was $7.4trillion in 2023. Of the world's 500 largest companies, 139 are headquartered in the U.S. The U.S. has the world's highest number of billionaires, with total wealth of $5.7trillion. U.S. commercial banks had $22.9trillion in assets in December 2022. U.S. global assets under management had more than $30trillion in assets.
The New York Stock Exchange and Nasdaq are the world's largest stock exchanges by market capitalization and volume of transactions. The U.S. has the world's largest gold reserves. In 2014, the U.S. economy was ranked first in international ranking on venture capital and global research and development funding. As of 2024, the U.S. spends around 3.46% of GDP on cutting-edge research and development across various sectors of the economy. Consumer spending comprised 68% of the U.S. economy in 2022, while its labor share of income was 44% in 2021. The U.S. has the world's largest consumer market. The nation's labor market has attracted immigrants from all over the world and its net migration rate is among the highest in the world. The U.S. is one of the top-performing economies in studies such as the ease of doing business index, the WEF Global Competitiveness Report, and others.
History
Colonial era and 18th century
The economic history of the United States began with British settlements along the Eastern seaboard in the 17th and 18th centuries. After 1700, the United States gained population rapidly, and imports as well as exports grew along with it. Africa, Asia, and most frequently Europe, contributed to the trade of the colonies. These 13 colonies gained independence from the British Empire in the late 18th century and quickly grew from colonial economies towards an economy focused on agriculture.19th century
In 180 years, the United States grew to become a huge, integrated, and industrialized economy, which made up about a fifth of the world economy. In that process, the U.S. GDP per capita rose past that of many other countries, supplanting the British Empire at the top. The economy maintained high wages, attracting immigrants by the millions from all over the world. In the 1820s and 1830s, mass production shifted much of the economy from artisans to factories. New government regulations strengthened patents.Early in the 19th century, more than 80 percent of Americans engaged in farming. Most of the manufacturing centered on the first stages of the transformation of raw materials, with lumber and sawmills, textiles, and boots and shoes leading the way. The rich natural resources contributed to the rapid economic expansion of the nineteenth century. Ample land allowed the number of farmers to keep growing; but activity in manufacturing, services, transportation, and other sectors grew much faster, so that by 1860 the population was only about 50 percent rural, down from over 80 percent.
In the 19th century, recessions frequently coincided with financial crises. The Panic of 1837 was followed by a five-year depression, marked by bank failures and unprecedented unemployment. Because of the great changes in the economy over the centuries, it is difficult to compare the severity of modern recessions to that of early recessions. Recessions after World War II appear to have been less severe than earlier recessions, but the reasons for this are unclear.
20th century
At the beginning of the century, new innovations and improvements in existing innovations opened the door for improvements in the standard of living among American consumers. Many firms grew large by taking advantage of economies of scale and better communication to run nationwide operations. Concentration in these industries raised fears of monopolies that would drive prices higher and output lower, but many of these firms were cutting costs so fast that trends were towards lower prices and more output in these industries. Many workers shared the success of these large firms, which typically offered the highest wages in the world.The United States has been the world's largest national economy in terms of GDP since around 1890. For many years following the Great Depression of the 1930s, when the danger of recession appeared most serious, the government strengthened the economy by spending heavily itself or cutting taxes so that consumers would spend more and by fostering rapid growth in the money supply, which also encouraged more spending. Ideas about the best tools for stabilizing the economy changed substantially between the 1930s and the 1980s. From the New Deal era that began in 1933 to the Great Society initiatives of the 1960s, national policymakers relied principally on fiscal policy to influence the economy.
During the world wars of the twentieth century, the United States fared better than the rest of the combatants because none of the First World War and relatively little of the Second World War were fought on American territory. Yet, even in the United States, the wars meant sacrifice. During the peak of Second World War activity, nearly 40 percent of U.S. GDP was devoted to war production. Decisions about large swaths of the economy were largely made for military purposes, and nearly all relevant inputs were allocated to the war effort. Many goods were rationed, prices and wages controlled, and many durable consumer goods were no longer produced. Large segments of the workforce were inducted into the military and paid half their wages; roughly half of those were sent into harm's way.
The approach, advanced by British economist John Maynard Keynes, gave elected officials a leading role in directing the economy since spending and taxes are controlled by the U.S. president and Congress. The "Baby Boom" saw a dramatic increase in fertility in the period 1942–1957; it was caused by delayed marriages and childbearing during the depression years, a surge in prosperity, a demand for suburban single-family homes, and new optimism about the future. The boom peaked around 1957 and then began to fade. A period of high inflation, interest rates, and unemployment after 1973 weakened confidence in fiscal policy as a tool for regulating the overall pace of economic activity.
The U.S. economy grew by an average of 3.8% from 1946 to 1973, while real median household income surged by 74%.
Since the 1970s, several emerging countries have begun to close the economic gap with the United States. In most cases, this has been due to moving the manufacture of goods formerly made in the U.S. to countries where they could be made for sufficiently less money to cover the cost of shipping plus a higher profit. In other cases, some countries have gradually learned to produce the same products and services that previously only the U.S. and a few other countries could produce. Real income growth in the U.S. has slowed. In the 1970s and 1980s, it was popular in the U.S. to believe that Japan's economy would surpass that of the U.S., but this did not occur.
21st century
The United States economy experienced a recession in 2001 with an unusually slow jobs recovery, with the number of jobs not regaining the February 2001 level until January 2005. This "jobless recovery" overlapped with the building of a housing bubble and arguably a wider debt bubble, as the ratio of household debt to GDP rose from a record level of 70% in Q1 2001 to 99% in Q1 2008. Homeowners were borrowing against their bubble-priced homes to fuel consumption, driving up their debt levels while providing an unsustainable boost to GDP. When housing prices began falling in 2006, the value of securities backed by mortgages fell dramatically, causing the equivalent of a bank run in the essentially unregulated non-depository banking system, which had outgrown the traditional, regulated depository banking system. Many mortgage companies and other non-depository banks faced a worsening crisis in 2007–2008, with the banking crisis peaking in September 2008, with the bankruptcy of Lehman Brothers and bailouts of several other financial institutions.The Bush administration and Obama administrations applied banking bailout programs and Keynesian stimulus via high government deficits, while the Federal Reserve maintained near-zero interest rates. These measures helped the economy recover, as households paid down debts in 2009–2012, the only years since 1947 where this occurred, presenting a significant barrier to recovery. Real GDP regained its pre-crisis peak by 2011, household net worth by Q2 2012, non-farm payroll jobs by May 2014, and the unemployment rate by September 2015. Each of these variables continued into post-recession record territory following those dates, with the U.S. recovery becoming the second longest on record in April 2018.
The Great Recession occurred during the 2008 financial crisis, when GDP fell by 5.0% from the spring of 2008 to the spring of 2009. Other significant recessions took place in 1957–1958, when GDP fell 3.7% following the 1973 oil crisis, with a 3.1% fall from late 1973 to early 1975, and in the 1981–1982 recession, when GDP dropped by 2.9%. Recent, mild recessions have included the 1990–1991 downturn, when output fell by 1.3%, and the 2001 recession, in which GDP slid by 0.3%; the 2001 downturn lasted just eight months. The most vigorous, sustained periods of growth, on the other hand, took place from early 1961 to mid-1969, with an expansion of 53%, from mid-1991 to late 2000, at 43%, and from late 1982 to mid-1990, at 37%.
Debt held by the public, a measure of national debt, has risen throughout the 21st century. Rising from 31% in 2000 to 52% in 2009, reaching 77% of GDP in 2017, and exceeding 120% in 2024, the U.S. ranked 43rd highest in debt out of 207 countries.