The US economy strengthens amid tensions

Thursday's revised U.S. gross domestic product estimates for the second quarter of 2013 show that amid significant international financial economic turmoil and even on the eve of a potential strike on Syrian targets, the U.S. economy is doing better than expected, given the host of other uninspiring economic indicators. Europe continues to stagnate, and profound structural adjustments are underway in China, but U.S. economic strength will continue supporting the United States' status as a global power. However, the nature of U.S. economic growth raises profound questions at home even as the United States remains a powerful military and political force abroad.

The U.S. gross domestic product grew at an annualized rate of 2.5 percent in the second quarter of 2013, according to revised estimates from the U.S. Department of Commerce Bureau of Economic Analysis. The revised estimate draws from a more complete set of data than the preliminary estimate, which had put U.S. gross domestic product growth for the quarter at 1.7 percent. A 2.5 annualized rate is slightly higher than the average growth rate in the past 16 quarters, making Thursday’s revision notable but not wildly beyond the norm. In a positive sign, particularly for the real estate market, the biggest contributors to growth were private fixed residential investment and private non-residential building growth.

What is notable about that growth rate is how it compares to the stagnation in Europe and slowing growth in China, the other two pillars of the post-Cold War international system. Although positive signs have been reported in recent weeks in Europe, they represent marginal shifts. In fact, at current growth rates, the U.S. economy will likely overtake the European Union's by the end of 2013. Europe's demographic decline, and the complexity of applying structural reforms, will make it very difficult for the bloc to emerge from this stasis, even if the immediate problems of weak banks, sovereign debt and consumer credit are resolved.

China is a different story. Although China claims that it will grow 7.5 percent in 2013, those estimates are highly uncertain in the face of consistent government interventions in the domestic economy and depressed international demand for manufactured goods. In the years ahead, China's growth will almost certainly slow as wages rise on the coast and the government focuses on efforts to develop the interior. Assuming that China averages 4.5 percent growth for the foreseeable future, it will take China's economy until about 2045 to catch up to the U.S. economy at current growth rates.

These dynamics emphasize the advantages pertaining to the United States, which -- despite heated domestic political debates and a deadlocked legislature -- retains a significant advantage over any potential rivals. Not only is the U.S. demographic outlook much more stable than Europe's, but the rapid uptick in hydrocarbon production in the United States has significantly lowered energy costs in North America.

Though the debate about whether or not this will be significant enough for the United States to attract manufacturing that left for cheaper labor markets is far from settled, there are some indications that U.S. manufacturers could be better positioned to compete in this environment. For example, Wal-Mart announced earlier this year that it will be increasing its purchases of manufactured goods from the United States to the tune of $50 billion over the next 10 years and has launched a public relations campaign to this effect. Petrochemical companies, too, are betting on U.S .energy resources. Dow Performance Plastics confirmed Tuesday that it will expand two petrochemical facilities in Freeport, Texas and Plaquemine, Louisiana., alongside other U.S. investments.

Meanwhile, although the United States still maintains a significant trade deficit, U.S. exports are 15 percent higher by value than they were in 2008, before the financial crisis. Refined liquid petroleum products made possible by the boom in energy production alone constituted more than $100 billion in exports in 2012. Major forthcoming investments in liquefaction facilities will allow the United States to enter the global natural gas market as well.

Yet despite relatively stable growth, profound social and economic divisions are deepening. Beyond the headline unemployment numbers, wage growth overall has stagnated, and the middle class in the United States is having to readjust expectations about the nature of economic opportunity. Wage and employment data show that job recovery has been uneven in recent years, with the largest employment recovery present in the lowest- and highest-earning jobs. At the same time, hiring for middle-income jobs has stagnated. These dynamics point to a deepening class split that will drive profound social and political questions even as U.S. international strength consolidates.