The U.S. economy boomed in Q2 2023. It grew at an astounding annualized rate of 3.8% from April to June. That figure dwarfs earlier estimates, showing that the economy recovered more quickly than economists first expected this spring. On a year-over-year basis, consumer spending was up 2.5% for the year ending in June. This added a big boost, going well beyond the original estimate’s big boost, overestimating growth by 1.6% in an impressive fashion.
Gross domestic product (GDP), the broadest measure of goods and services produced, is similarly indicative of this dangerous growth trend. The Commerce Department noted that the increase in consumer spending was supported by a decrease in imports, which negatively impacts GDP calculations.
Even with all these positive economic signs, the unemployment rate increased a bit from 4.2% to 4.3%. As a result, employers only added 22,000 jobs in August—well below what was needed and even below economists’ expectations. Initial claims for unemployment insurance have returned to their lowest rate since July. This upward trend is a promising indicator that the job market has begun to stabilize.
Retail sales were another indicator of resilience, increasing 0.6% month-over-month in August. This increase is further evidence that American consumers are doing their part to drive the economy forward. Even confronted with tariffs and economic unknowns, they’re still spending with confidence.
That economic momentum hasn’t faltered, even as we’ve faced one policy hurdle after another during the first half of the year. In reality, this second-quarter growth represents the fastest pace of growth we’ve seen in almost two years.
“The latest economic data are considerably more upbeat than the droopy August jobs report,” – Bill Adams
Other economists are more wary about the boom’s staying power. Lydia Boussour remarked that while current indicators are positive, “with the impact of tariffs and policy uncertainty becoming increasingly visible, slower US growth and higher inflation are still on the horizon.”
“The latest GDP and jobless claims data should ease the bout of anxiety kicked off by the weak August jobs report.” – Bill Adams