WASHINGTON — Driven by consumer expenditures, the U.S. economy seems to have maintained its growth momentum at a strong rate from July through September, despite enduring the effects of persistently elevated interest rates.
On Wednesday, the Commerce Department is anticipated to announce that the gross domestic product (GDP)—which reflects the economy’s overall production of goods and services—expanded at an annual rate of 2.6% in the last quarter. This figure comes from a survey of analysts conducted by the data analytics company FactSet, indicating a decrease from the 3% annual rate observed during the April to June timeframe. Nevertheless, this growth rate remains robust as Americans consider the economic context leading up to the closing stages of the presidential campaign.
The forthcoming report will be the first of three assessments provided by the government regarding GDP growth for the third quarter of the year. As the largest economy in the world, the U.S. has displayed remarkable resilience in the face of the higher borrowing costs imposed by the Federal Reserve in its ongoing efforts to tame inflation, which accelerated in 2022 and into 2023. Despite a general consensus that recession would be inevitable, the economy has continued to expand, with job openings remaining robust and consumer spending persisting.
A recent survey by the Conference Board revealed a positive outlook, as its consumer confidence index observed the most significant rise since March 2021, suggesting that households—which are central to economic activity—are likely to keep spending. Additionally, the percentage of consumers anticipating a recession within the next year has plummeted to the lowest level since this question was first introduced in July 2022.
Conversely, the once-booming job market is exhibiting signs of a slowdown. On Tuesday, the government shared that job openings fell in September to the lowest number since January 2021. This year, employers have been adding an average of 200,000 jobs monthly—a respectable figure yet a decline from the monumental 604,000 jobs added monthly in 2021 as the economy recovered from the pandemic’s downturn. The monthly job additions dropped to 377,000 in 2022 and further to 251,000 in 2023.
Anticipation builds for the Labor Department’s report due Friday, which is expected to indicate the addition of around 120,000 jobs in October. However, this number may have been significantly impacted by the aftermath of Hurricanes Helene and Milton, alongside a strike at the aerospace company Boeing, which collectively removed thousands of workers from the employment rolls temporarily.
During its latest meeting last month, the Federal Reserve expressed contentment with its advancements in battling inflation, yet acknowledged the cooling job market, prompting them to implement a substantial half-percentage-point cut to its benchmark interest rate—the most extensive reduction in over four years. As they convene next week, another rate cut is widely anticipated, albeit a more conventional quarter-point adjustment.
Fed policymakers have hinted at additional rate cuts during their last two sessions of the year, scheduled for November and December. Furthermore, they foresee four more reductions in 2025 and two in 2026. This series of rate cuts is likely to lead to lower borrowing costs for both consumers and businesses over time.
Despite a notable decline in inflation—from a four-decade high of 9.1% in June 2022 to its current level of 2.4%, slightly above the Federal Reserve’s target of 2%—average prices continue to surpass pre-pandemic figures, resulting in financial strain for many Americans. This situation poses challenges for Vice President Kamala Harris as she navigates her presidential campaign against former President Donald Trump. Economists generally contend that Trump’s policy suggestions would further exacerbate inflation, contrasting with Harris’ proposals.