US GDP rose 2 percent in the third quarter of the year — slower than expected — as the supercharged recovery from the depths of the COVID-19 pandemic cooled down amid rampant inflation and supply-chain bottlenecks, the feds announced Thursday.
America’s gross domestic product — the value of all goods and services produced here — grew by 2 percent from July to September compared with the same period a year ago, the feds said Thursday.
That’s a significant slowdown from the 6.7 percent spike in GDP growth seen last quarter, as the economy powered forward thanks to rapid vaccinations and pent-up demand to spend from Americans across the country.
Economists polled by Dow Jones and the Wall Street Journal expected an annualized growth rate of 2.8 percent in the third quarter.
It’s the third consecutive quarter that the US GDP growth number has missed expectations under President Joe Biden. The lackluster economic growth came as businesses across the country faced various operational challenges — from labor shortages to a snarled global supply chain — that have likely held back sales.
The surge of COVID-19 cases at the end of the summer, driven by the emergence of the Delta variant of the coronavirus, also likely hurt the numbers, economists said.
Chris Zaccarelli, chief investment officer for Independent Advisor Alliance, called the reading “very disappointing.”
“It was to be expected that growth would slow down, as the US economy can’t sustain 6 percent or higher growth for long, but to drop all the way back to 2 percent is disappointing and should reignite the growth slowdown debate in the midst of inflation continuing to run much higher than average,” he added.
Zaccarelli said he remains optimistic heading into the end of the year and the first half of 2022, so long as COVID-19 cases continue to fall and Americans keep on spending, but the second half of next year could prove challenging.
Mark Hamrick, senior economic analyst at Bankrate, said the disappointing GDP numbers are “likely only a fairly temporary speed bump caused by the global traffic jam of goods with which we’ve become all too familiar.”
“A consistent theme in the economy is the fact that demand is not the key issue. That’s true for workers as well as for goods,” he said, adding that supply chain issues will hopefully ease in the next few months.
Republican politicians seized on the GDP reading and decried it as an example of Biden’s failure to address issues like the labor shortage and supply chain crunch that are holding back economic growth.
“This is more proof that President Biden is bungling the recovery, and now faces serious questions about his competency to heal our economy,” Rep. Kevin Brady, the Republican leader of the House Ways and Means Committee, said.
“Economic growth has already peaked for President Biden’s presidency, and now he’s nearly a million jobs short of his promises. He’s making an alarming labor shortage worse for Main Street businesses, and is demanding more government stimulus that will drive prices up higher and longer,” he added.
Declining auto sales due to microchip shortage took a major toll on the GDP readout, Dawit Kebede, senior economist at the Credit Union National Association, noted, as did the surge in COVID-19 cases.
“As Delta cases continue to subside, there may be more growth in the fourth-quarter as consumers will be more willing to spend on services involving in-person interactions,” he said. “The supply chain challenges, however, will likely continue until next year making it difficult to satisfy increased consumer demand.”
The feds on Thursday also released a separate report that showed new jobless claims, seen as a proxy for layoffs, fell to 281,000 last week, down 10,000 from the prior week’s revised level of 291,000.
Economists surveyed by Dow Jones expected initial claims for unemployment last week to remain unchanged at exactly 290,000.
Weekly new claims have fallen substantially from the 2020 peak of about 6.1 million new claims in a single week.
The week-over-week numbers have inched closer to historical averages over the past month. The US was booking about 200,000 new claims per week before the pandemic gutted the economy.
Continuing claims fell by 237,000 from the prior week’s revised level, according to the new data. That figure stood at more than 7 million at the same time last year, in the thick of the pandemic.
More than 2.4 million Americans remained on traditional state unemployment benefits as of Thursday, the feds added.
The weekly report comes after the September jobs report came in way lower than economists expected, adding just 194,000 jobs for the month.
September’s numbers fell far short of economists’ expectations of 500,000 jobs added, and come after the country added a disappointing 366,000 jobs in August.
The pair of consecutive disappointing reports indicated that the labor recovery will likely take longer and be bumpier than expected, economists said.
Labor Secretary Marty Walsh acknowledged that it was “not the best number” but blamed the poor state of the economy solely on the pandemic, saying that the flare-up in cases drove people back home.
“There’s no question that we have work to do. Number one, we’re still living with a pandemic, it’s a worldwide pandemic,” Walsh said on “Axios on HBO” Sunday evening.
“Also, people concerned about the Delta variant, people concerned about their personal health. We have folks that are vaccinated, folks that aren’t vaccinated, people who are vaccinated worried about the people that aren’t vaccinated,” he continued.