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Fresh data showed the US economy grew at a 2% annualized pace in the first quarter while core inflation rose 3.2% year-over-year in March, pointing to a resilient, if uneven, recovery.
The Commerce Department reported a 2% annualized expansion in the first quarter, slightly below the roughly 2.2% to 2.3% pace economists had expected. The softer result was linked to more cautious consumer spending as households contend with higher prices and the lingering effects of earlier interest rate hikes.
At the same time, a spike in energy costs tied to the Iran conflict squeezed purchasing power, taking some momentum out of the economy. Business investment and government spending helped keep growth positive.
With growth moderating but the labor market still showing strength and inflation remaining above the Federal Reserve’s long-run target, policymakers kept interest rates on hold.
Initial jobless claims fell to 189,000 last week, the lowest level since 1969. Continuing claims declined to 1.79 million, reinforcing a picture of employers largely holding onto workers despite ongoing price pressures and slower headline growth.
Layoffs remain subdued even as hiring cools, with economists describing a “low-hire, low-fire” environment: companies are cautious about adding staff but reluctant to cut existing workers. Job openings have drifted lower and labor turnover has slowed, suggesting a market that is stable but no longer booming.
The unemployment rate stood at 4.3% in March, while payrolls increased by 178,000, indicating the labor market continues to expand at a steady pace heading into spring.
Core inflation rose 3.2% year-over-year in March, underscoring persistent price pressures across the US economy.
Wall Street rallied sharply Thursday, with the Dow Jones Industrial Average surging more than 800 points and the S&P 500 rising about 1% as investors bet the economy can keep growing without slipping into a downturn. The move came despite the softer GDP reading and sticky inflation, reflecting confidence that strong corporate earnings and a stable labor market can support the expansion.
Stephanie Alston, CEO of BGG Enterprises, said the decline in new unemployment filings is a positive headline but warned it may not capture the full job-market picture. She noted that the drop does not reflect workers who are underemployed, discouraged, or no longer receiving benefits. Alston also said some candidates—particularly at executive and middle-management levels—are remaining unemployed for “12 to 13 months or longer.”
She added that falling continuing claims can sometimes reflect workers exhausting benefits rather than finding jobs, meaning some underlying weakness may not show up in weekly data.
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