The nation's economic growth tailed off sharply in the spring and probably isn't faring any better now.
The Commerce Department reported Thursday that gross domestic product — the broadest measure of the economy's health — expanded at a feeble 1.7 percent annual rate in the April-to-June quarter.
Meanwhile, the initial claims for unemployment benefits fell last week.
The new GDP reading is a notch higher than the 1.6 percent growth rate the government estimated a month ago. But it marks a sharp slowdown from a 3.7 percent growth rate logged in the first quarter. And, the new figure doesn't change the big picture: The economy has been losing momentum since the end of last year.
Tracking U.S. Growth
Seasonally adjusted annual rate, in percent
Source: Commerce Department
Credit: NPR
Many think the economy grew at around the same anemic pace, or slightly worse, during the July-to-September quarter. Little improvement is expected in the final quarter of this year. That's why unemployment - now at 9.6 percent — is expected to stay high or even rise in the coming months.
Americans just aren't spending at a robust pace to bulk up companies' sales and make them confident enough to beef up hiring. Consumers and businesses, battered by the worst recession since the 1930s, are clinging to their cautious ways.
Consumers, in particular, are paring down debt, aren't spending as much as they normally do during an economic recovery and they are saving more. Their spending accounts for roughly 70 percent of economic activity, so their frugal behavior explains why the economy is stuck in a slow-growth rut.
In the second quarter, Americans saved 5.9 percent of their disposable income, the most in a year. Before the recession, they saved just 2.1 percent.
Consumers boosted their spending in the second quarter at a 2.2 percent pace. It was a tad better than the government's previous estimate but is still considered lackluster for this point in the recovery by historical standards. Economists think consumers will spend at a slightly slower pace through the rest of this year.
The economy is the No. 1 concern to voters going to the polls on Nov. 2 in the congressional midterm elections. Voter backlash could cause Democrats to lose control of Congress.
GDP measures the value of all goods and services produced in the U.S. It covers everything from machinery to manicures.
The sharp drop off in GDP in the second quarter mainly reflected fallout from a bigger trade deficit. A surge in imported goods swamped growth in U.S. exports to other countries. The bigger trade gap that resulted shaved 3.5 percentage points from second quarter growth, the most since 1947.
Weekly Unemployment Claims Dip
A separate report Thursday showed that applications for jobless benefits dropped last week for the third time in four weeks, a sign that U.S. employers are cutting fewer jobs.
Initial claims for unemployment aid fell by 16,000 to a seasonally adjusted 453,000, the Labor Department said. Wall Street analysts had expected a smaller drop.
The decline returns jobless claims to the same level they were at two weeks ago. Initial claims have fluctuated around 450,000 for most of this year.
The four-week average of claims, a less-volatile measure, dropped for the fifth straight week to 458,000, the lowest level in two months.
Applications for unemployment benefits, while volatile, provide a real-time snapshot of the job market. The weekly claims figures are considered a measure of the pace of layoffs and an indication of companies' willingness to hire.
Initial claims have fallen sharply since June 2009, the month the recession ended. They topped 600,000 at the end of that month. But most of that decline took place last year.
The economy has slowed sharply this year, discouraging many employers from hiring. The economy grew at a 3.7 percent pace in the January-March period, but that fell to 1.7 percent in the second quarter. Most economists expect growth to be similarly weak in the current July-September quarter.
The number of people continuing to receive jobless benefits fell by 83,000 to just below 4.5 million, the department said. But that doesn't include several million people who are receiving unemployment aid under extended programs approved by Congress during the recession.
The extended benefit rolls dropped by about 300,000 to 4.9 million in the week ending Sept. 11, the latest data available. All told, about 8.8 million people received unemployment aid that week.
Some companies are still cutting workers. Last week, pharmaceutical company Bristol-Myers Squibb Co. said it would eliminate about 3 percent of its positions over the next six months. That's about 840 jobs out of 28,000 worldwide.
