Just a few months ago, the US economy was booming with astounding growth as seen in the second quarter of 2023. From April through June, it grew at a blistering annualized rate of 3.8%. The adjusted rate of growth surpassed previous projections. It uncovered a big surge in consumer spending that was up 2.5% year-over-year, an improvement from the original estimate of 1.6%.
The growth in gross domestic product (GDP) indicates a strong production of goods and services, reflecting a resilient economy despite ongoing challenges. That second quarter was the most rapid rate of growth in almost two years. This is good news for a raging wave of economic energy in the face of negative policy currents.
Despite this positive outlook the unemployment rate nudged up a bit from 4.2% to 4.3%. Put succinctly, employers only added 22,000 jobs in August, well below what was expected, leading to questions on how strong the labor market truly is. In addition, initial claims for unemployment insurance fell last week, reaching their lowest level since July, suggesting some stability in job security.
Retail sales were surprisingly strong, with August retail sales increasing 0.6% from the previous month, far above what analysts were forecasting. This increase in retail performance could be a sign of consumers’ continued ability and desire to spend amid a precarious economic forecast.
“The latest economic data are considerably more upbeat than the droopy August jobs report,” – Bill Adams
2023 got off to a rough start, with the economy contracting at an annualized pace of 0.6%. Businesses scrambled to bring in products before the battery of tariffs that President Donald Trump levied on imports. This rush to expand played a key role in the contraction. The strong bounce back in the second quarter has injected some positive return scenario expectations.
Economic analysts cautioned that though the most recent data is positive, stormy seas still lie ahead.
“With the impact of tariffs and policy uncertainty becoming increasingly visible, slower US growth and higher inflation are still on the horizon,” – Lydia Boussour
The late breaking news from the Commerce Department included a big drop in imports, which is bad for the economy by definition in GDP accounting. Meanwhile, consumer spending has skyrocketed.
“The latest GDP and jobless claims data should ease the bout of anxiety kicked off by the weak August jobs report,” – Bill Adams