GDP revised up to 2% growth rate in first quarter
Zachary Halaschak
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The Bureau of Economic Analysis on Thursday announced that first-quarter GDP growth clocked in at a 2% annual rate.
The gross domestic product numbers, which are adjusted for inflation, were revised up from the previous estimate of 1.3%. Thursday’s report, which is the third and final GDP estimate for this year’s first quarter, indicates that the economy was able to stay above water despite rising interest rates and other economic headwinds.
Still, first-quarter GDP growth was lower than the preceding quarter’s 2.6% clip, showing a slowdown attributable in part to the Federal Reserve’s campaign to tighten monetary policy and drive down inflation.
After more than a year of successive rate hikes — some by very aggressive margins — this month the Fed opted to hold rates steady at 5% to 5.25%, a pause that the Fed itself has indicated might be merely temporary.
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Declining GDP is the biggest indicator of a potential economic downturn or recession. Typically, two back-to-back quarters of negative GDP growth are indicative of a recession. So the fact that GDP was positive in the first quarter is welcome news to economists, many of whom just months ago were predicting the country might be in a recession by now.
The economy has faced some upheaval this year as the Fed has hiked rates, adding to a list of factors that could determine whether the U.S. faces a recession.
The banking system is still feeling the aftershocks of the sudden failure of Silicon Valley Bank, which led to the subsequent collapse of Signature Bank and, more recently, First Republic Bank. The failures have caused investors to dial back expectations for just how high rates will rise this year.
But despite the historic rate hikes, many elements of the economy have remained surprisingly resilient — the most notable of which is the country’s red-hot labor market.
While there have been some cracks showing (seasonally adjusted initial jobless claims have been gradually trending up, for instance), other indicators show that work is still plentiful.
For example, the economy crushed expectations in May and added 339,000 jobs while the unemployment rate crept up slightly to a still-low 3.7%. Job openings also unexpectedly increased in April, rising to above 10 million for the first time since January, showing that employers are still looking for workers to hire.
The bright spots in the economy have been a political boon to President Joe Biden. Despite families and businesses across the country still feeling the sting of high inflation, the Biden administration has touted the labor market and has even rolled out the use of the term “Bidenomics” over the past week or so to highlight the economy.
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The GOP has also highlighted surveys that show Americans don’t view the economy as favorably as Democrats would portray it as.
Half of voters consider the current state of the U.S. economy to be “poor,” according to polling conducted by data analytics company Premise. A mere 12% say that the economy is in “good” or “excellent” shape right now.