The Bureau of Economic Analysis released the latest U.S. gross domestic product data on April 30. In the first three months of 2025, it said, GDP contracted by 0.3%. The GDP growth rate captures the pace at which the total value of goods and services grows or shrinks. Together with unemployment and inflation, it usually receives a lot of attention as an indicator of economic performance. Some economists and analysts said the economy might not be as bad as this rate's decline might suggest. While this is the first time in three years that GDP has shrunk instead of growing, it is a relatively small decline. This raises a critical question: Does a relatively small GDP contraction mean the economy is in trouble' I have spent much of my working life studying economic well-being at the level of individuals or families. The GDP growth rate has many limitations as an economic indicator. It captures only a very narrow slice of economic activity: goods and services. It pays no attention to...
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