US GDP grows 2.1% and increases unemployment benefit applications

The American economy maintained a fairly strong pace of growth in the second quarter, the Government confirmed on Thursday, and appears to have gained momentum in the current quarter amid a working market resistant.

The Gross Domestic Product (GDP) increased at an unrevised annualized rate of 2.1% last quarter, the Commerce Department reported Thursday in its third estimate of GDP for the April-June period. Economists polled by Reuters expected second-quarter GDP would not be revised.

Growth for the first quarter was revised upward to a rate of 2.2% from the previously reported 2.0% pace.

The Government also reviewed GDP data since 2017 to incorporate new sources of information and introduced some statistical improvements, such as the treatment of regulated investment companies and real estate investment funds.

GDP was revised downward in each of the first quarters of 2020, 2021 and 2022 due primarily to declines in consumer spending growth.

But the Bureau of Economic Analysis (BEA), the agency that produces the GDP report, said there was no evidence that residual seasonality, which plagued GDP data several years ago, was a problem.

The government also introduced new price measures, the price index of personal consumption expenditures (PCE) excluding food, energy and housing, and services PCE excluding energy and housing, or so-called super core inflation.

Federal Reserve officials are focusing on the measure of underlying super prices as they try to gauge progress in their fight against inflation. Since March 2022, the US central bank has raised its benchmark overnight interest rate by 525 basis points, to the current range of 5.25%-5.50%.

The economy is relying on a resilient labor market, which is driving strong wage increases. Growth estimates for the July-September quarter currently reach a rate of 4.9%.

However, the looming government shutdown amid bitter infighting over spending among House Republicans could sap momentum from the fourth quarter.

Hundreds of thousands of federal workers will be furloughed and a wide range of services, from financial oversight to medical research, will be suspended if Congress does not provide funding for the new fiscal year that begins Oct. 1.

Also clouding the economy is the strike by the United Auto Workers union against General Motors, Stellantis and Ford Motor, which is expected to reduce automobile production and increase car prices. The strike, which began almost two weeks ago, is already having ripple effects across supply chains.

The labor market has continued to resist until now. The Labor Department released a second report Thursday showing initial claims for state unemployment benefits rose by 2,000 to a seasonally adjusted 204,000 in the week ending Sept. 23. Economists had forecast 215,000 applications.

This year, applications have been at the lower end of the range between 194,000 to 265,000. The number of people receiving benefits after an initial week of aid, a proxy for hiring, rose by 12,000 to 1.67 million during the week ending Sept. 16, according to the claims report.

The so-called continuing claims covered the period during which the government surveyed households to find out the September unemployment rate. Continuing claims barely changed between the August and September survey weeks. The unemployment rate increased from 3.5% in July to 3.8% in August.

Source: Reuters