New reports show strength in the U.S. economy: overall growth in GDP and fewer applications for un employment benefits.
The U.S. economy accelerated unexpectedly to a 2.4% annual growth rate from April through June, showing continued resilience in the face of steadily higher interest rates resulting from the Federal Reserve’s 16-month-long fight against inflation.
Meanwhile, the number of Americans applying for jobless benefits slid last week to its lowest level in five months, further evidence that the U.S. labor market continues to defy the Federal Reserve’s attempts to cool it off.
Thursday’s estimate from the Commerce Department indicated that the gross domestic product — the economy’s total output of goods and services — picked up from the 2% growth rate in the January-March quarter.
Consumer spending slowed to a 1.6% annual rate, from 4.2% in the first quarter of the year, a likely consequence of higher borrowing costs. But business investment and state and local government spending grew faster.
In fighting inflation, which last year hit a four-decade high, the Fed has raised its benchmark rate 11 times since March 2022, most recently on Wednesday. The resulting higher costs for a broad range of loans — from mortgages and credit cards to auto loans and business borrowing — have taken a toll on growth.
Still, they have yet to tip the United States into a widely forecast recession. Optimism has been growing that a recession isn’t coming after all, that the Fed can engineer a so-called “soft-landing” — slowing the economy enough to bring inflation down to its 2% annual target without wrecking an expansion of surprising durability.
On the jobs front
Applications for unemployment benefits fell by 7,000 to 221,000 for the week ending July 22, from 228,000 the week before, the Labor Department reported Thursday. That’s the fewest since February.
The four-week moving average of claims, which smooths out some of the week-to-week volatility, fell y 3,750 to 233,750.
Jobless claim applications are broadly seen as a proxy for the number of layoffs in a given week.
Overall, 1.69 million people were collecting unemployment benefits the week that ended July 15, about 59,000 fewer than the previous week and the fewest since January.