The Associated Press reports that “the number of Americans applying for jobless benefits slid last week to its lowest level in five months, further evidence that the US labor market continues to defy the Federal Reserve’s attempts to cool it off.
“US applications for unemployment benefits fell by 7,000 to 221,000 for the week ending July 22, from 228,000 the week before, the Labor Department reported Thursday. That’s the fewest since February.
“The four-week moving average of claims, which smooths out some of the week-to-week volatility, fell by 3,750 to 233,750.”
At the same time, the New York Times reports, “The economic recovery gained momentum in the spring as buoyant consumer spending and resurgent business investment helped, once again, to keep a recession at bay.
“Gross domestic product, adjusted for inflation, rose at a 2.4 percent annual rate in the second quarter, the Commerce Department said Thursday. That was up from a 2 percent growth rate in the first three months of the year and far stronger than forecasters expected a few months ago.
“Consumers led the way, as they have throughout the recovery from the severe but short-lived pandemic recession in 2020. Spending rose at a 1.6 percent rate, slower than in the first quarter but still solid. Much of that growth came from spending on services, as consumers shelled out for vacation travel, restaurant meals and Taylor Swift tickets.
“Consumers didn’t carry all the weight, however. Business investment rebounded in the second quarter after slumping in the first three months of the year, and increased spending by state and local governments contributed to growth.”
KC’s View:
Wow. We’ve now gotten to the point where sectors of the economy are defined as vacations, travel, restaurants, and Taylor Swift.
Most economists agree – the US economy has been resilient beyond most peoples’ expectations. Sure, there are still folks who have been left behind, and it is critical for public policy to find ways to help them. Because everybody counts or nobody counts.
That said, the New York Times sounds a cautionary note this morning, writing about how we’ve been here before – in 1989, 2000 and 2007 – when “analysts were pretty sure growth was going to cool gently and without a painful downturn.”
But, “Within weeks or months of all three declarations, the economy had plunged into recession. Unemployment shot up. Businesses closed. Growth contracted.
“It is a point of historical caution that is relevant today, when soft-landing optimism is, again, surging.
“Inflation has begun to cool meaningfully, but unemployment remains historically low at 3.6 percent and hiring has been robust. Consumers continue to spend at a solid pace and are helping to boost overall growth, based on strong gross domestic product data released on Thursday.”
The Times writes, “But it can be difficult to tell in real time whether the economy is smoothly decelerating or whether it is creeping toward the edge of a cliff.”
Yikes. I will consider my self cautioned. And even a little chastised.
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