The U.S. economy grew at a rate of 1.6% in the first quarter of 2023, according to gross domestic product (GDP) statistics released by the Bureau of Economic Analysis (BEA) on Thursday.
Slower growth in the first quarter follows above-trend growth in the third and fourth quarters of 2023, which measured 4.9% and 3.4%, respectively, according to the BEA. Economists expected that GDP growth would be around 2.2% in the first quarter, in line with typical U.S. economic growth rates. (RELATED: The Oil And Gas Industry Might Be What’s Keeping Biden’s Economy Humming On Paper Despite ‘Regulatory Assault’)
High rates of growth at the end of 2023 have worried analysts about a possible “no-landing” scenario, where the economy remains hot with an elevated rate of inflation and substantial gains in GDP. Prices increased at a rate of 3.5% year-over-year in March, far faster than the Federal Reserve’s target range of 2%, and have not declined below 3% since peaking at 9% in June 2022.
The Fed has set its federal funds rate to a range of 5.25% and 5.50%, the highest range in 23 years, in an attempt to cool the economy, which would slow growth and bring inflation down. An increase in the federal funds rate has raised the cost of credit throughout the economy, disincentivizing spending and investment.
Next time Powell & Co. try telling you that inflation is going away, remember that the monetary base is almost twice the pre-pandemic level…
…and it’s still trending upward: pic.twitter.com/jiNjE802kj— E.J. Antoni, Ph.D. (@RealEJAntoni) April 24, 2024
The Federal Open Market Committee is scheduled to announce whether it will cut the federal funds rate in May, depending on whether inflation is moving in the right direction, which could positively contribute to economic growth. A majority of investors currently do not expect a rate cut until September, according to CME Group’s FedWatch Tool.
The number of jobs added in recent months has also been running hot, totaling 303,000 nonfarm payroll positions in March and 275,000 added in February. Despite above-trend topline growth, gains in part-time positions have dominated total increases, with the number of people employed in full-time jobs declining by more than 1.3 million in the last year as of March, while part-time employment jumped by nearly 1.9 million.
Job gains have also been fueled by government positions, which totaled 71,000 in March, higher than the monthly average over the last year of 52,000. The federal government has also continued to pile on debt, which currently totals nearly $34.6 trillion and contributes to GDP, according to data from the Treasury Department.
A Gallup poll from March showed that the economy continues to be the most important issue for 30% of voters going into the 2024 presidential election. Nearly 60% of respondents to a recent AP/NORC poll found that President Joe Biden has “hurt” Americans’ cost of living, while only 40% said the same of former President Donald Trump.
The 1.6% figure is an advanced estimate and will be updated as additional data becomes available, according to the BEA.
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