This Halloween has not produced nightmares for consumers and investors. In fact, two new reports issued Wednesday indicate that the U. S. economy is strong and growing.
To be sure, there are concerns in specific areas of the economy – such as high grocery prices and interest rates. However, the Bureau of Economic Analysis (BEA) report on the Gross Domestic Product (GDP) and the ADP report on private sector jobs are cause for confidence in the financial vitality of the nation.
GDP Rises
The GDP measures the value of goods and services produced in the United States. It is the most popular assessment of the overall health of the U. S. economy.
Following the three percent rise in GDP in the second quarter, the latest calculation shows GDP rose 2.8 percent in the third quarter.
A rise in the GDP generally means the economy is performing well.
What Does GDP Mean to You
A positive GDP is not just something economics nerds obsess over. It can have positive effects on you and your family.
A rise in the GDP is an indication that the economy is expanding. That can lead to a number of benefits including an increase in your standard of living. It can also improve the nation’s fiscal health by reducing the government’s deficit
When an economy is growing, incomes tend to rise. That leads to more funds for families to spend and invest. In turn, spending and investing bolsters the GDP.
Spending Fuels Growth in U. S. Economy
Consumer, government, and business spending has fueled the current growth in GDP.
Equipment spending by businesses rose 11 percent in the third quarter.
This year, government spending is projected to account for a little over one-third of GDP. The Biden administration was quick to take partial credit for the performance of the U. S. Economy.
“The robust U.S. fiscal response partially explains why GDP growth and consumer spending were much stronger in the United States than in other advanced economies,” according to a White House statement. “U.S. real GDP growth since 2019Q4 was 11.4%, more than double the next-largest expansion in the G7.”
The International Monetary Fund (IMF) noted America’s economic strength in relation to other developed countries last week. In its World Economic Outlook, the IMF raised its 2024 and 2025 growth projections for the U. S. In fact, the U. S. was the only country forecast to increase growth for both years.
The IMF also said the nation’s economy has achieved the soft landing Federal Reserve Chair Jerome Powell has been aiming for. A soft landing, as defined by Powell, is declining inflation without a rise in unemployment.
Yet, much of the increase in GDP is down to our outlay of cash. Nearly 2.5 percent of overall growth was produced from consumer spending. That category increased from 2.8 percent in the second quarter to 3.7 percent in the third quarter, according to the BEA.
Private Sector Jobs Increase
GDP growth may be helping private job creation.
ADP’s data on private sector jobs showed that 233,000 new workers have been hired in October. That is the highest level since July 2023, according to the payroll firm.
October’s private jobs figure was far ahead of September’s new hire mark of 159,000. Further, it more than doubled Wall Street projections of 113,000 new jobs.
“Even amid hurricane recovery, job growth was strong in October,” said Nela Richardson, chief economist, ADP. “As we round out the year, hiring in the U.S. is proving to be robust and broadly resilient.”
The positive jobs figures are especially strong considering the disruptive events for the U. S. economy in October. Two major hurricanes, Helene and Milton, struck the Southeastern U. S. In addition, labor disruptions at Eastern and Gulf ports and by Boeing workers threatened to wreak havoc on the economy. While Boeing workers were still on strike, International Longshoremen’s Association workers were back to work within three days.
The Boeing strike has taken 33,000 machinists off the job. As a result, manufacturing was the only category in the ADP report that showed a decline in jobs.
In addition to a hiring surge, private jobs saw a wage increase. Wages in October were 4.6 percent higher than the same time last year, according to ADP. For job changers, the figure was 6.2 percent.
The Bureau of Labor Statistics (BLS) is scheduled to report its employment figures Friday. ADP and Labor often report different figures because the government reports figures from the whole labor market – including government employees. Expectations are for employment to be up around 100,000 jobs with unemployment holding steady at 4.1 percent.
All the above will be hot topics at next week’s Fed meeting. The central bank’s November meeting will be held on the sixth and seventh. At the conclusion of that meeting, Powell will announce changes, if any, to the federal funds rate. That is the interest rate banks charge each other to borrow or lend money. That rate in turn impacts the interest rates charged on consumer spending for things such as mortgages and credit cards.
Consumer Confidence Bolstered
A day before the GDP and ADP employment reports were issued, another survey showed optimism that the economy is growing.
The Conference Board reported Tuesday that its consumer confidence index jumped from 99.2 percent in September to 108.7 this month. It was the largest monthly increase since March 2021, according to the research company.
“In October’s reading, all five components of the index improved,” said Dana M. Peterson, chief economist for the firm. “Consumers’ assessments of current business conditions turned positive. Views on the current availability of jobs rebounded after several months of weakness, potentially reflecting better labor market data. Compared to last month, consumers were substantially more optimistic about future business conditions and remained positive about future income.”
People of all age groups and incomes shared the increase in confidence, according to Peterson. The greatest rise in confidence came from 35 to 54-year-olds. Households under 35 and those earning over $100,000 a year remain the most confident.
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