The Bureau of Economic Analysis released the latest U.S. GDP data on April 30. In the first three months of 2025, GDP was signed by 0.3%. GDP growth rate captures the pace of growth or contraction of the total value of goods and services. Coupled with unemployment and inflation, it often attracts a lot of attention to indicators of economic performance.

Some economists and analysts say the economy may not be as bad as this rate drop may suggest. While this is the first time GDP has shrunk rather than grown in three years, its decline is relatively small.

This raises a key question: Does a relatively small contraction in GDP mean the economy is in trouble? I spent a lot of time studying economic well-being at the personal or family level.

What I learned is that you can provide a different lens for the economy than focusing only on the most popular metrics, such as GDP growth rate.

GDP issues

As an economic indicator, GDP growth rate has many limitations. It captures only very narrow economic activity: goods and services. It does not focus on the products produced, how they are produced or how people evaluate their economic life.

GDP has attracted a lot of attention to some extent because misunderstanding economics is only related to market transactions, money and wealth. But economics is also related to people and their livelihoods.

Many economists would agree that economics sees the production of wealth or goods and services as a means to improve human life.

Since the 1990s, many international committees and research projects have proposed ways to transcend GDP. In 2008, the French government asked two Nobel Prize winners, Joseph Stiglitz and Amartya Sen, and the late economist Jean-Paul Fitoussi to form an international committee of experts to propose new ways to measure economic performance and progress. In their 2010 report, they felt it was necessary to “change the focus from measuring economic production to measuring people’s well-being.”

Consider complementary indicators

One approach is to use a comprehensive index that combines data on various aspects of a country's well-being into a single statistics. If you amplify each base metric through a demographic group or region, you can present a number as a detailed picture of a country’s status.

The production of this composite index is booming. For example, the United Nations’ Human Development Index began in 1990 and covers per capita income, life expectancy at birth and education. The index shows that focusing solely on how GDP can mislead the public about a country's economic performance.

In 2024, the United States ranked fifth in the world in GDP per capita, but ranked 20th in the Human Development Index due to its relatively low life expectancy, relatively low life expectancy and education time compared to other countries on the list, such as Switzerland and Norway.

Monitor other indicators

Another approach is to rely on a large number of metrics that are frequently updated. These other data points reflect various perspectives about the economy, including subjective views that convey personal views and experiences.

For example, in addition to inflation rates, there are data on pressure due to inflation and inflation expectations. Both provide insights into people’s perceptions, opinions and experiences about inflation.

During the Covid-19 pandemic, the U.S. annual inflation rate increased from 1% in July 2020 to 8.5% in July 2022. My research partners and I found that using our census data, in the United States, more than 4 of the four adults in the United States were under the inflation rate and high levels of pressure at that time, and even in 20233.

Recently, sporadic tariff changes in the Trump administration have made future prices more uncertain, putting people at risk. This in turn makes people adjust their expectations and feel worse.

Consumer share with higher inflation is expected to rise sharply in 2025, while consumer confidence suddenly declines. About one-third of consumers expect less work to be created in the next six months, almost as low as during the 2007-2009 Great Recession.

Consumers also have negative expectations for their future income and are worried about their financial situation.

At present, the US economy has not officially entered a recession, which requires a longer GDP contraction time. Although unemployment and inflation are still relatively low, it is disturbing to see a wide understanding of the economy given people’s expectations and perceptions. To be clear, I'm not saying it's just because of what the GDP data might suggest.

This article includes material from an article originally published on August 7, 2018.