(NEW YORK) — The U.S. economy expanded more than economists expected over a recent three-month period, recording robust growth despite concerns about sluggish hiring and cash-strappped shoppers, federal government data on Tuesday showed.
The U.S. economy grew at an annualized rate of 4.3% in the third quarter in the government’s initial estimate, marking an acceleration from 3.8% growth recorded in the previous quarter.
A boost in consumer spending helped propel the economic surge in gross domestic product (GDP) over three months ending in September, the U.S. Commerce Department said. Consumer spending, which accounts for about two-thirds of U.S. economic activity, is a key bellwether for the outlook of the nation’s economy.
The GDP reading stemmed in part from a rise in exports and a drop-off in imports, which may have resulted from tariffs issued earlier this year by President Donald Trump.
The government’s GDP formula subtracts imports in an effort to exclude foreign production from the calculation of total goods and services.
The strong economic growth in the third quarter appeared to defy fears about the sluggish labor market, which some observers have viewed as a warning sign for the wider economy.
Hiring slowed sharply in recent months. The unemployment rate ticked up to 4.6% in November from 4.4% in September. Unemployment remains low by historical standards but has inched up to its highest level since 2021.
Meanwhile, inflation has hovered nearly a percentage point higher than the Federal Reserve’s target rate of 2%.
Those conditions have put the Fed in a bind, since the central bank must balance a dual mandate to keep inflation under control and maximize employment. To address pressure on both of its goals, the Fed primarily holds a single tool: interest rates.
Earlier this month, the Fed cut its benchmark interest rate a quarter of a percentage point in an effort to boost hiring. The move amounted to the third rate cut this year, bringing the Fed’s benchmark rate to a level between 3.5% and 3.75%.
Interest rates have dropped significantly from a recent peak attained in 2023, but borrowing costs remain well above a 0% rate established at the outset of the COVID-19 pandemic.
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