The U.S. economy has shown its strongest growth in two years during the third quarter, based on updated government figures. This performance, largely attributed to solid household consumption, reflects a minor upward correction from the preliminary growth forecasts for the July–September timeframe.
Key growth drivers and spending habits
The Department of Commerce reported that the Gross Domestic Product (GDP)—the total value of all goods and services produced—increased at an annualized rate of 4.4 percent. This growth surpasses the 3.8 percent growth seen in the previous quarter and edges out the preliminary 4.3 percent estimate, marking the strongest economic performance since the third quarter of 2023.
Consumer spending, which is the primary engine of the economy and represents 70 percent of GDP, rose by 3.5 percent. In terms of spending categories, service-related sectors, including healthcare, led the way with a 3.6 percent increase, while spending on physical goods grew by 3 percent. However, spending on durable goods—long-term purchases such as vehicles—saw a more modest rise of 1.6 percent. Additionally, growth was bolstered by rising exports and falling imports. Business investment, excluding residential construction, grew by 3.2 percent, driven in part by significant capital investments in artificial intelligence.
Policy friction and public sentiment
The economy has shown surprising durability despite the unpredictability of President Donald Trump’s trade strategies, specifically the implementation of broad double-digit tariffs on global imports. However, a “growth-sentiment gap” persists. While the macro-level data is strong, many citizens remain frustrated with the economic climate, citing the high cost of living as a primary concern.
Stagnant labor market
Despite the surge in production, the employment landscape tells a different story. The labor market has cooled significantly compared to the post-pandemic recovery period. Since March, job growth has averaged just 28,000 positions per month, which marks a sharp decline from the 400,000-per-month pace observed between 2021 and 2023. Additionally, with the unemployment rate holding steady at 4.4 percent, experts describe a stagnant environment characterized by a “no-hire, no-fire” trend. Companies appear hesitant to expand their payrolls and are equally cautious about layoffs, preferring to retain their current staff amidst the uncertainty.
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