The government said on Wednesday that the U.S. economy grew at a 2.9% annual rate from July through September. This rise in the U.S. gross domestic product (GDP), or the economy’s total output of goods and services, follows two straight quarters of contraction, according to the Associated Press.
“Despite higher borrowing costs and prices, household spending — the driver of the economy — appears to be holding, which is a positive development for the near-term outlook,” said Rubeela Farooqi, chief U.S. economist at High Frequency Economics.
This news comes at a time when two straight quarters of contraction had raised fears that the economy might have slipped into a recession at an already volatile time for American consumers.
So is the economy improving —or at least recovering?
Ahead of the November jobs report coming out on Friday, here are some items to consider when weighing the economy:
Gas Prices Are Down
Just a few months ago, the national average for a gallon of gasoline topped $5.
Now, though, AAA is putting the average gas price at around $3.50 — and it could drop even more, according to GasBuddy
NewsNation partner The Hill reports that though that number is still 10 cents above last year’s national average, it is below the record $5.02 average from this past June.
“All the metrics look very positive for motorists as this week is likely to continue seeing falling gasoline prices, with many areas falling to the lowest level since Russia’s invasion of Ukraine in February,” GasBuddy’s head of petroleum analysis Patrick De Haan said. “It’s entirely possible the national average price of gasoline could fall under $3 per gallon by Christmas.”
Rent is Down Slightly
The December 2022 Apartment List National Rent Report shows the national index declined for the third straight month, dropping to 1% in November. This is also the biggest drop in a single month since 2017, per Apartment List data.
“The timing of the recent cooldown in the rental market is consistent with the typical seasonal trend, but its magnitude has been notably sharper than what we’ve seen in the past, suggesting that the recent swing to falling rents is reflective of a broader shift in market conditions beyond seasonality alone,” Apartment List said.
Although rent is still growing faster than it did in pre COVID-19 pandemic years, this growth is shrinking. From January through November 2022, rents went up by a total of 4.7%. That, Apartment List points out, is much closer to the growth rates seen in 2018 and 2019 than it is to the 18% growth seen at this point last year. Bloomberg reports that this is a sign that a “key cost” tracked by the Federal Reserve could be easing up.
Going forward, the Apartment List predicts rents will continue to decrease ahead of a winter slow season for the market.
The number of Americans applying for new jobless claims went down last week to 225,000 for the week ending Nov 26. That’s a decline of 16,000, according to the Labor Department, although the four week-moving average of claims went up to 227,000.
This data indicates that American workers are enjoying good job security at the moment. However, at the same time, recurring applications, for those who have already received unemployment benefits, rose by 57,000 last week, Bloomberg reported — the largest hike in a year. Bloomberg economist Eliza Winger also points out that drop the initial jobless claims report last week is likely more because of “notoriously volatile data around holidays such as Thanksgiving” than job market vigor.
Still, unemployment remains at a historically low level. Since March, it has been in a narrow range of 3.5% to 3.7%, the U.S. Bureau of Labor Statistics said.
Inflation is Easing
Prices rose 6% in October, compared to a year ago. That’s down from the 6.3% increase year-over-year increase reported in September.
Excluding volatile food and energy prices, so-called core inflation over the previous 12 months was 5%, less than the 5.2% annual increase in September.
Bloomberg reports that U.S. stocks surged on Wednesday, and the Dow Jones Industrial Average was more than 20% its September low. This surge, according to Bloomburg, meets what some investors call a “bull market,” which is a term used during a period of time in financial markets when the price of an asset, or security, rises continuously.
Bull markets are “characterized by optimism, investor confidence, and expectations that strong results should continue for an extended period of time,” according to Investopedia, although it is difficult to predict when trends in the market could change.
Because of a slower pace of rate increases, and the “latest batch of corporate earnings,” per Bloomberg, the Dow “has been on a tear” since October, when it had previously been considered in a “bear market.” According to Investopedia, bear markets are sustained periods of downward trending stock prices — and often paired with a recession and high unemployment.
Although there have been a number of positive indicators pointing to an improved economy, there are also factors that are less so.
Layoffs in Tech
ReachOut Technology founder Rick Jordan told NewsNation last month that the tech sector is going through a correction.
“It’s great to see that inflation seems to be curving a little bit right now. But we still have a ways to go, you’ll see more layoffs,” he said.
While in some companies such as Meta and Twitter overextended themselves in spending, Jordan said, Amazon, Stripe and others saw softening demand that led to job losses.
“We’re facing an unusual macro-economic environment, and want to balance our hiring and investments with being thoughtful about this economy,” Beth Galetti, senior vice president of people experience and technology at Amazon, said in a message to employees.
CNBC notes, however, that these high-profile companies aren’t necessarily indicative of the larger economy or labor market.
Mortgages are expected to keep rising in the new year
After the doubling of mortgage rates from a year ago, sales of previously occupied homes have dropped for nine straight months.
Even though this slowdown in home sales transactions lead to a moderation in home price growth, Realtor.com and other analysts don’t expect homebuying costs to come down. In fact, they expect them to keep rising.
Realtor.com is forecasting a 7.4% average for mortgage rates in 2023, and 7.1% for year-end. In comparison, Freddie Mac says the average 30-year fixed rate mortgage is 6.49% as of Dec.1.
Aiming to combat rampant inflation, the Federal Reserve has raised its benchmark interest rate six times since March. More federal rate hikes are expected to increase borrowing costs and slow economic activity.
The Fed’s key rate now stands in a range of 3.75% to 4%, which is the highest it’s been in 15 years. Fed Chair Jerome Powell said Wednesday the central bank would push them even higher than previously expected, and that they would stay there for an extended period until inflation is kept under control. However, he added that the size and pace of these increases could be sloawed down from ones made at the Federal Reserve’s last four meetings.
The Associated Press contributed to this report.