I've talked about rising gas prices, but we are also seeing faster economic growth, higher wages, and increasing raw material prices. It seems that nearly everything has been going up. There is a word for that, and the word is inflation. We have gotten used to the Fed printing money and creating artificial inflation whenever the economy slows down, but the natural tendency is for growth to generate higher inflation. We haven't had that sort of economy for over a decade now, so it is definitely worth talking about.
Real GDP growth was 2.3% last year, up from only 1.5% in 2016. Even better, unemployment has fallen to 3.9%, the lowest level since 2000. The Federal Open Market Committee (FOMC) median projection is that unemployment will stay below 4 percent for a sustained period, something that Federal Reserve Chair Jerome Powell noted has not happened since the late 1960s. As unemployment falls, it becomes harder for businesses to attract and retain employees and they must pay higher wages. Wages and benefits went up 2.7% between March 2018 and March 2017, the most substantial increase since 2008. I think it's great that Americans are earning more and our economy is growing faster, but there is another side to growth.
2017 also featured nominal GDP growth of over 4% for the first time since 2014. Nominal GDP growth includes both real growth and inflation, and the FOMC has expressed increased confidence that official inflation numbers will soon be at 2% or higher. Our natural resources are inherently limited. There are about 3.8 million square miles in the United States, and that does not change when our economy grows faster. Instead, the price of land must rise to keep up with our higher incomes. Although we can extract more resources from the land, it takes new equipment and additional workers to obtain those resources. We will have to pay more.
Fortunately, you don't have to buy farmland or a second home to keep up with growth and inflation. The gold supply is also limited. Mining production usually increases the total amount of gold available by between 1.5% to 2% per year. When the economy grows at a nominal rate of 4, 6, or even 8 percent per year, the amount of gold available per dollar falls and the gold price tends to rise.
This is not a purely theoretical argument. Gold went up over 17% and silver rose almost 30% the last time that US nominal GDP growth went over 6% in 2005. In the 1960s, unemployment was often below 4% and nominal GDP growth was frequently over 8%. The US was on the Gold Standard in the 1960s, but the silver price nearly doubled during that decade. What is more, the high growth of the 1960s also paved the way for the high inflation of the 1970s. History often repeats itself, so higher growth could well mean higher inflation.