GDP Data Shows Economy 'In Good Shape,' Job Market 'Key' For Rest Of 2024: Economists

Thursday’s revised gross domestic product figure was a clear indication the U.S. economy is faring pretty well, according to an economist.

“The GDP revisions show the U.S. economy was in good shape in mid-2024,” Bill Adams, chief economist for Comerica Bank, said Thursday.

“Solid growth of consumer spending propelled the economy forward in the second quarter, and the increase of consumer confidence in July  suggests it will propel growth in the second half of the year as well.”

The U.S. real gross domestic product (GDP) expanded at an annualized rate of 3%, up from an initial estimate of 2.8%, with company profits improving 1.7% in the three-month period, reversing a 2.7% decline in the prior quarter.

The Personal Consumption Expenditure (PCE) Index price index declined from 3.4% in the first quarter to 2.5% in the second quarter.

Excluding food and energy, the core PCE price index fell from 3.7% in the first quarter to 2.8% the second quarter, revised from 2.9%.

Adams said there was concern that July’s jobs report on Aug. 2, which showed unemployment rising to 4.3%, was signaling a recession as the unemployment rate's three-month moving average through July was up a half percentage point from its low over the prior year.

According to research by former Fed economist Claudia Sahm, the U.S. is in a recession when reaches that level, he said.

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“But mid-2024 is likely an exception to the Sahm Rule. Real GDP is growing solidly and layoffs are low, but hiring has slowed after a surge between 2021 and 2023. With the labor force growing as newly-arrived immigrants seek work, the unemployment rate is rising,” Adams said.

“Many rules of thumb for measuring the business cycle have been less reliable in the last few years, since the cause of the 2020 recession and the stimulus-fueled recovery from it were so unlike what came before.”

Initial jobless claims came in at 231,000 for the week ended Aug. 24, falling from the prior week’s total of 233,000 and below a forecasted 232,000 claims.

The four-week moving average of weekly jobless claims ebbed from 236,250 to 231,500, while continuing claims totaled 1.868 million, up from a revised 1.855 million but falling short of an expected increase to 1.870 million.

Hiring will likely pick up in late 2024 and early 2025 as the Fed begins to cut interest rates. Interest rate sensitive sectors like housing are a coiled spring and should bounce back as interest rates fall,” Adams said.

“That should stabilize the unemployment rate and keep the economy growing.”

Downward revisions to inflation accompanying an upward revision to spending builds the case for a soft landing, said Jeffrey Roach, chief economist for LPL Financial.

“The key for the rest of this year will be the job market,” he said Thursday.

“Leading indicators for employment indicate services employment is starting to cool but the savings from lower mortgage debt servicing will continue to support household balance sheets.”

Read Next:

• GDP Growth Upwardly Revised In Q1 But Consumer Spending Weakens, Continuing Jobless Claims Hit Nearly 3-Year Highs: Thursday’s Economic Digest

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