GDP Growth Soars, Jobless Claims Drop: US Economy Strengthens

US GDP Growth Revised Higher

The third-quarter gross domestic product (GDP) was revised higher Thursday following a substantially stronger projection for U.S. economic performance released Wednesday by the Federal Reserve. GDP growth was marked up to an annualized rate of 3.1 percent in the third quarter from a previous estimate of 2.8 percent, driven by strong consumer spending and exports, the Commerce Department reported Thursday.

Jobless Claims Demonstrate Labor Market Strength

U.S. weekly unemployment benefits claims decreased last week, reflecting continued strength in hiring conditions amid a broader slowdown over the past two years. Claims fell by 22,000 last week compared to the week prior, hitting 220,000 overall. Continuing claims fell by 5,000 to 1.87 million.

“Downside risks to the labor market do appear to have diminished,” Fed Chair Jerome Powell said Wednesday, after lowering interest rates by a quarter percent. “The labor market is clearly still cooling further, but in a gradual and orderly way.” The numbers come in the wake of across-the-board upward projections from the Fed regarding topline U.S. economic performance.

Fed's Revised Economic Outlook

• 2024 GDP expectations raised to 2.5 percent from 2.0 percent
• Inflation increased to 2.4 percent from 2.3 percent
• Unemployment lowered to 4.2 percent from 4.4 percent

Similar upward adjustments were made for 2025 as well, notably for inflation in the personal consumption expenditures (PCE) price index, which was raised to 2.5 percent from 2.1 percent.

Unexpected strength in topline metrics likely means fewer interest rate cuts next year than markets were anticipating. The Fed is now expecting just two quarter-point cuts next year instead of the four predicted in September.

Market Reaction

The Dow Jones Industrial Average fell by more than 1,000 points on Wednesday’s news as investors adjusted to expectations of stronger underlying performance and relatively tighter monetary conditions. Market analysts noted that “everything else leaned in a more hawkish direction than expected.”

Profits for financial companies increased by $3 billion in the third quarter, marking an upward revision, while those of nonfinancial companies were revised downward by $5.9 billion, the Commerce Department reported.