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The Biden economy: Better than we thought. Worse than we hoped

America’s economy grew at a slightly faster rate than previously reported in the second quarter thanks to increased consumer spending, exports and inventory investment, the Bureau of Economic Analysis reported Thursday.
It was the second time the pace of growth in the quarter was revised higher.
Gross domestic product, the broadest measure of economic activity, expanded at a rate of 6.7% between April and June, rather than the 6.6% and 6.5% reported in earlier estimates.

Yet even with the new upward revision, that growth still undershot expectations, noted Mike Englund, chief economist at Action Economics.

The limited growth is in large part due to “supply chain disruptions, which actually become more severe in Q3,” Englund added in a note to clients.

Americans did, however, spend big on services in the spring and early summer — particularly on going out to eat and traveling — as vaccination rates increased. They also spent on pharmaceutical products and clothing and footwear. Hotels and restaurants contributed the biggest boost to the GDP growth rate in the industry comparison.

The price index that tracks consumer spending, the so-called PCE price index that is the Federal Reserve’s preferred measure of inflation, was unchanged from prior estimates at 6.5%. That’s the highest level since the early 1980s.

The report also included a tally of corporate profits: America’s banks and financial businesses saw profits soar by a stunning $52.8 billion in the second quarter, compared with a measly $1.3 billion increase in the first quarter.

Profits for all other corporations rose by $221.3 billion, compared $133.2 billion in the first three months of the year.

Jobless claims at seven week high

In other economic data, weekly claims for unemployment benefits rose to 362,000 last week including adjustments for seasonal swings, according to the Labor Department. Without the seasonal adjustments, claims ticked down slightly.
It was the highest level for claims since early August — as well as the first time since the start of the pandemic that claims rose for three weeks in a row.

“However, this is a very different situation now than then, so I’d be very careful in making that comparison” to the start of the pandemic, PNC chief economist Gus Faucher said in a note to clients, adding that “the level of initial claims now is just only about 6% of what it was then.”

Continued jobless claims, which count workers who filed for benefits for at least two straight weeks, were little changed in the week ended September 18.

In the week ending September 11, five million American workers received benefits under the various government programs, down from more than 11 million the week before — showing the end to the government’s pandemic era unemployment programs is becoming reflected in the weekly data.

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