To be sure, the economy is projected to settle back into a more moderate growth pace through the end of the year. A resurgence in coronavirus cases and the extended deadlock over fresh stimulus threaten to limit further gains, while the timing and effectiveness of Covid-19 vaccines remains uncertain.
Even so, some measures help explain just how much analysts have underestimated the economy’s progress. Surprise indexes from Citigroup Inc. and Bloomberg -- which measure the degree to which analysts under- or over-estimate trends -- have been consistently positive since early June.
“Retail sales, industrial production, the PMIs, earnings, employment have all performed better than we had expected. So it’s a pretty broad-based gain,” said Stan Shipley, an economist with Evercore ISI. Shipley added that plenty of the economy’s outperformance has roots in government stimulus.
The biggest surprise of all came earlier in the pandemic. The May jobs report in early June showed employers added 2.5 million workers to payrolls, compared with a median projection for a loss of 7.5 million. Economists were wrongfooted by jobless-claims numbers that showed millions of Americans losing their jobs; they missed the greater number who were being hired or rehired.
Since then, the unemployment rate has also declined faster than forecast, though September’s payrolls gain of 661,000 trailed projections. Jobless claims remain above their pre-pandemic levels -- worse than expectations for a steeper decline by now -- and the number of people who are permanently out of work is at a seven-year high.
At the same time, the latest retail sales data were surprisingly solid: Purchases increased 1.9% in September, the most in three months and exceeding all but three of the 75 estimates in the Bloomberg survey.
“People just got too pessimistic on the economy,” Joseph Lavorgna, special assistant to President Donald Trump and chief economist at the National Economic Council, said in an interview last week. Government policies “are very successful, growth has come roaring back” and virus treatments will boost the economy further, he said.
Democratic challenger Joe Biden, for his part, said during Thursday’s debate with Trump that to help the economy, he would seek to limit virus transmission through targeted shutdowns and distancing measures. Biden also highlighted getting money to schools to help them reopen.
Whoever wins the presidential election will have more work to do on the economic recovery even if the data continue to surprise on the upside.