(NEW YORK) — The U.S. economy grew at a robust pace over three months ending in September, slowing slightly from the previous quarter but continuing to dispel any concern about a possible slowdown. The fresh report marks one of the last major pieces of economic data before the presidential election.
U.S. GDP grew at a 2.8% annualized rate over three months ending in September. That figure fell slightly below economists’ expectations.
Economic growth was fueled by surge in consume spending, an uptick in exports and strong federal government spending, the U.S. Bureau of Economic Analysis said.
The new data arrived weeks after the Federal Reserve cut its benchmark interest rate a half of a percentage point. The landmark decision dialed back a years-long fight against inflation and offered relief for borrowers saddled with high costs.
Inflation has slowed dramatically from a peak of about 9% in 2022, though it remains slightly higher than the Fed’s target of 2%.
Meanwhile, the labor market has proven resilient. Employers hired 254,000 workers in September, far exceeding economist expectations of 150,000 jobs added, U.S. Bureau of Labor Statistics data showed. The unemployment rate ticked down to 4.1%, hovering near a 50-year low.
This is a developing story. Please check back for updates.
Former President of the United States Donald J. Trump and Vice President Harris’s first Presidential Debate is displayed on a TV screen in Foster City, California, United States on September 10, 2024. (Tayfun Coskun/Anadolu via Getty Images)
(PHILADELPHIA) — Vice President Kamala Harris and former President Donald Trump met for the first time Tuesday in their first presidential debate of the 2024 election, hosted by ABC News.
The high-stakes, 90-minute debate was held at Philadelphia’s National Constitution Center, with Trump and Harris arguing their cases for the White House.
As the Democratic and Republican nominees debated the most pressing topics facing the nation, ABC News live fact-checked their statements on the economy for answers that were exaggerated, needed more context or were false.
HARRIS CLAIM: 16 Nobel laureates say Trump’s plan would increase inflation and land us in a recession
FACT-CHECK: Mostly true
Harris correctly describes what the Nobel laureates said about inflation during Trump’s presidency: “There is rightly a worry that Donald Trump will reignite this inflation.” But while the group describes Harris’ agenda as “vastly superior” to Trump’s, their letter doesn’t specifically predict a recession by the middle of 2025. Rather, the group wrote: “We believe that a second Trump term would have a negative impact on the U.S.’s economic standing in the world and a destabilizing effect on the U.S.’s domestic economy.”
The 16 economists are George Akerlof, Angus Deaton, Claudia Goldin, Oliver Hart, Eric S. Maskin, Daniel L. McFadden, Paul R. Milgrom, Roger B. Myerson, Edmund S. Phelps, Paul M. Romer, Alvin E. Roth, William F. Sharp, Robert J. Shiller, Christopher A. Sims, Joseph Stiglitz and Robert B. Wilson.
HARRIS CLAIM: Trump wants a “20% tax on everyday goods” that would cost families “about $4,000 more a year.”
FACT-CHECK: True, but needs context
Trump has proposed a universal “10-20%” tariff on all U.S. imports, from cars and electronics to wine, food products and many other goods. He has also proposed a 60% tariff on imports from China. Vice President Harris called the plan “Trump’s sales tax,” though the former president has not explicitly proposed such a tax. Independent economists, however, say the proposed import tariffs would unquestionably result in higher prices for American consumers across the board.
The precise financial impact on families is hard to predict and estimates vary widely — from additional annual costs per household of $1,700 to nearly $4,000, depending on the study. Trump has not called for any tax hikes for American families.
He has proposed exempting Social Security benefits and tips from taxation, as well as extending individual tax cuts enacted in 2017.
TRUMP CLAIM: Trump said, “We have inflation like very few people have ever seen before. Probably the worst in our nation’s history.”
FACT-CHECK: False, but it was very high
It’s true that early in Joe Biden’s presidency the annual inflation rate peaked at roughly 9% (June of 2022), but that’s not the highest it’s ever been. There are several examples of the inflation rate being much higher than 9% in the U.S, including in the immediate aftermath of World War II and during the oil embargo and shortages of the late ’70s and early 1980s, when the inflation rate peaked at 14.5%.
The inflation rate as of July 2024 is at 2.9% annual inflation, the lowest it has been in three years. It should also be noted that President Biden has falsely claimed that he inherited a high rate from his predecessor. In fact, inflation was at 1.4% when he took office.
*Data for this fact check was gathered from Federal Reserve Bank of St. Louis, or St. Louis Fed
HARRIS CLAIM: Harris said, “Trump left us the worst unemployment since the Great Depression.”
FACT-CHECK: Needs context
The unemployment rate peaked at 14.8% in April 2020 when Trump was in office — that was indeed the highest level since the Great Depression, according to the Bureau of Labor Statistics. But unemployment rapidly declined to 6.4% in January 2021 by the time Trump left office, as the economy started to rebalance. And that 6.4% unemployment rate is still better than the 10% peak during the Great Recession in October 2009.
If you eliminate pandemic statistics, the lowest unemployment rate under Trump was just slightly higher than the lowest point under Biden. Both were good: 3.5% under Trump and 3.4% under Biden at their lowest respectively, according to data provided by the Federal Reserve Bank of St. Louis and Bureau of Labor Statistics.
(NEW YORK) — Inflation has loomed over the U.S. economy like a movie villain, haunting grocery store trips and gas runs. While costs remain much higher than they were a few years ago, those rapid price increases have mostly vanished.
Inflation stands at its lowest level in more than three years, hovering right near the Federal Reserve’s target rate of 2%, U.S. Bureau of Labor Statistics data this week showed.
Not long ago, a once-in-a-century pandemic upended the economy, sending millions nationwide into lockdown and snarling the global supply chain. Meanwhile, trillions of dollars in government support helped Americans spend amid the calamity.
A resulting imbalance between supply and demand sent prices soaring. The Russia-Ukraine war exacerbated the problem, causing gas and food shortages. Within a few years, the massive issue has largely been resolved.
“This was the highest inflation over the longest period that we’ve seen in decades. It was serious,” Claudia Sahm, chief economist at New Century Advisors and a former Fed official, told ABC News.
Here’s what to know about how inflation has come back down:
Repaired supply chain
During the pandemic, factories worldwide shut down. Workers stayed home for fear of getting sick. Freight ships waited off the coast of overwhelmed U.S. ports.
The pandemic clogged the global supply chain, imposing shortages for everything from cars to lumber to exercise equipment. Meanwhile, people stuck at home focused their spending on those exact sorts of products, since COVID-19 shutdowns prevented them from going out to eat or taking a vacation.
When too much money chased after too few products, prices climbed.
“The pandemic was the root of all evil in the economy,” Sahm said.
When lockdown rules were lifted, demand for goods slowed and manufacturers revved up production as workers returned. The nation’s ports loosened up the backlog of container ships, cutting freight prices dramatically and lowering costs for retailers.
Economists disagree over the role that elevated corporate profits played in driving inflation, as some say they account for more than half of the increase in prices while others say they have caused little or none of the hikes.
In some cases, the easing of supply chain blockages took months or even years to work their way through the global economy.
Take car prices, for example. When semiconductor production slowed nearly to a halt, carmakers lost out on a part necessary for production. Car prices skyrocketed, sending many consumers to the used car market. In turn, used car prices soared. So did costs for car repairs and, as a result, car insurance.
“Those have all now unwound,” William English, a professor of finance and former economist at the Federal Reserve, told ABC News.
Interest rate hikes
In response to rising inflation, the Fed embarked upon an aggressive series of interest rate hikes. Beginning in 2021, the Fed rapidly hiked interest rates, eventually putting borrowing costs at their highest level in more than two decades.
In contrast with the supply chain fixes, the interest rate hikes aimed to address the other side of the equation driving inflation: excess demand.
In March 2020, then-President Donald Trump signed into law a $2.2 trillion economic stimulus package, including direct payments of $1,200 and expanded unemployment insurance, among other measures. Months later, in December, Trump enacted a second $900 billion round of government support.
The following year, President Joe Biden signed a $1.9 trillion economic stimulus package of his own, including another round of $1,400 direct payments as well as an expansion of the child tax credit.
The government support helped buoy demand, even as the pandemic posed major challenges for the supply chain and decimated the service economy made up of sectors like restaurants and hotels.
“Now you have money, and nowhere to go and buy things,” said Hernan Moscoso Boedo, an economist at the University of Cincinnati.
By raising interest rates, the Fed made borrowing more expensive for consumers and businesses alike, making it difficult for them to take on loans for big purchases or large investments.
“Over the last few years, we’ve seen less money in the market because of the interest rates,” Boedo said, adding that the reduction of demand has helped ease prices.
Last month, the Fed reversed course, cutting interest rates by half a percentage point and dialing back the fight against inflation. While interest rates remain high relative to recent decades, the landmark shift suggests that the Fed considers the end of the inflation battle to be in sight.
(NEW YORK) — The Federal Reserve cut its benchmark interest rate a half of a percentage point on Wednesday in a landmark decision that dials back its years-long fight against inflation and could deliver relief for borrowers saddled with high costs.
The central bank’s first rate cut since 2020 came after a recent stretch of data had established the key conditions for a rate cut: falling inflation and slowing job gains.
In theory, lower interest rates help stimulate economic activity and boost employment. The Dow Jones Industrial Average surged 200 points in the immediate aftermath of the announcement on Wednesday afternoon.
The S&P 500 and the Nasdaq also climbed following the news.
Speaking at a press conference in Washington D.C. on Wednesday, Fed Chair Jerome Powell described the rate decision as a shift in policy at the central bank.
“This recalibration of our policy stance will help maintain the strength of the economy and the labor market, and enable further progress on inflation,” Powell said.
“The U.S. economy is in good shape,” Powell added. “We want to keep it there.”
The Federal Open Market Committee, a policymaking body at the Fed, on Wednesday forecast further interest rate cuts.
By the end of 2024, interest rates will fall nearly another half of a percentage point from their current level of between 4.75% and 5%, according to FOMC projections. Interest rates will drop another percentage point over the course of 2025, the projections indicated.
Over time, rate cuts ease the burden on borrowers for everything from home mortgages to credit cards to cars, making it cheaper to get a loan or refinance one. The cuts also boost company valuations, potentially helping fuel returns for stockholders.
Earlier this year, mortgage rates reached their highest level in more than two decades; while the average rate for credit card holders topped anything on record at the Fed. Interest rates for car loans have soared to levels last seen at the onset of the 2008 financial crisis, Edmunds found.
Interest rate cuts will bring many of those payments down, delivering gains for borrowers.
However, borrowers should not expect immediate relief from the Fed’s initial rate cut, Elizabeth Renter, senior economist at NerdWallet, told ABC News in a statement prior to the decision.
“This initial rate cut will have little immediate impact,” Renter said. “I anticipate many consumers and business owners will take the beginning of this change in monetary policy as a sign of hope.”
Inflation has slowed dramatically from a peak of about 9% in 2022, though it remains slightly higher than the Fed’s target of 2%.
Meanwhile, the job market has cooled. A weaker-than-expected jobs report in each of the last two months has stoked concern among some economists.
“We will do everything we can to support a strong labor market as we make further progress toward price stability,” Powell said last month.
Prior to the decision, the chances of a rate cut were are all but certain, according to the CME FedWatch Tool, a measure of market sentiment.
Market observers, however, had been divided over whether the Fed will impose its typical cut of a quarter of a percentage point, or opt for a larger half-point cut. The tool estimated the probability of a half-point cut at 65% and the odds of a quarter-point cut at 35%.
A half-point cut risked overstimulating the economy and rekindling elevated inflation, while a quarter-point cut threatened to delay the type of economic jumpstart that may be required to avert a recession, Seema Shah, chief global strategist at Principal Asset Management, told ABC News in a statement.
“Rarely have market expectations been so torn” on the eve of a rate decision, Shah added.
The rate cut on Wednesday went into effect less than 50 days before the November election.
The decision deviated from the policy approach taken by the Fed prior to many recent presidential elections, a Reuters analysis found. Policy rates were left unchanged for six to 12 months before the 2020, 2016, 2012 and 2000 U.S. presidential elections, according to Reuters.
To be sure, the Fed says it bases its decisions on economic conditions and operates as an independent government body.
When asked about the 2024 election at a press conference in Washington, D.C., in December, Powell said, “We don’t think about politics.”
