The U.S. economy grew at a robust annual rate last quarter, slightly faster than previously estimated, the government said Thursday in a report that pointed to a sustained consumer-led rebound from the pandemic recession.
The dwindling number of first-time jobless claims has coincided with the widespread administering of vaccines, which has led businesses to reopen or expand their hours and drawn consumers back to shops, restaurants, airports and entertainment venues.
The Federal Reserve is edging toward an announcement that it will begin paring the pace of its Treasury and mortgage bond buying, which now amounts to $120 billion a month.
Federal Reserve Chairman Jerome Powell said Tuesday that the U.S. economy has been permanently changed by the COVID pandemic and it is important that the central bank adapt to those changes.
Economists think Americans are also shifting their spending from goods to services, things like haircuts or vacations, which are not included in Tuesday’s report. And rising prices for everything from food to washing machines might have checked spending.
Overall, industrial production—which includes manufacturing, utilities and mining—posted a 0.9% increase, the best performance since a 2.8% surge in March.
Prices at the wholesale level over the past 12 months are up a record 7.8%, the largest increase in that span of time in a series going back to 2010.
Rising inflation has emerged as the Achilles’ heel of the economic recovery, erasing much of the benefit to workers from higher pay and heightening pressure on the Federal Reserve’s policymakers under Chair Jerome Powell, who face a mandate to maintain stable prices.
Wages have been rising rapidly as the economy reopens and businesses struggle to hire enough workers. Some of the biggest gains have gone to workers in some of the lowest-paying industries.
Unemployment claims remain high by historic levels: Before the pandemic slammed the United States in March 2020, they were coming in at around 220,000 a week.
Congress approved $10 billion in federal assistance to help homeowners pay off debt, but the program is moving so slowly that protections are expiring before states have figured out how to distribute the money.
In the year ending in June, wages and salaries jumped 3.5% for workers in the private sector, the largest increase in more than 14 years. That increase was driven by sharp rise in pay for restaurant and hotel workers of more than 6%.
For all of 2021, the economy is expected to expand perhaps as much as 7%. If so, that would be the strongest calendar-year growth since 1984.
But the 190-country lending agency has downgraded its forecast for poorer countries, most of which are struggling to vaccinate.
Economists characterized last week’s increase as most likely a blip caused by some one-time factors and partly a result of the inevitable bumpiness in the week-to-week data.
Inventories of used cars remain tight, but a decline in customer traffic in recent weeks has prompted some dealers to trim prices.
Nine of 13 retail categories posted increases in June sales, including solid gains at electronics and appliance outlets, clothing stores and restaurants.
Last month, employers added a hefty 850,000 jobs, and hourly pay rose a solid 3.6% compared with a year ago—faster than the pre-pandemic annual pace and evidence that companies are being compelled to pay more to attract and keep workers.
The Federal Reserve said Wednesday that seven of its 12 regional bank districts reported strong price increases with some businesses expressing concerns that the supply chain disruptions would push prices even higher.
Federal Reserve Chairman Powell reiterated his long-held view that high inflation readings over the past several months have been driven largely by temporary factors.
