Data released Thursday reflects the resilience of the U.S. economy, even as concerns about the job market and inflation persist.
U.S. economic growth, or the gross domestic product (GDP), reached 3.8% in the second quarter, according to a fresh revision of the data released Thursday by the Commerce Department. That was higher than the most recent estimate of 3.3% and the strongest reading since the third quarter of 2024.
The revision largely reflected stronger growth in consumer spending, which was also revised upward, from 1.6% to 2.5%. Multiple surveys show the mood among consumers remains glum — but Thursday’s spending data, plus other releases from banks, signals they remain willing to maintain their pace of purchasing.
Meanwhile, new and ongoing claims for unemployment assistance fell over the past week, according to the U.S. Department of Labor. The Federal Reserve said last week it expects the unemployment rate to climb from 4.3% to as much as 4.5% by the end of the year, but the latest data may allay some worries about further deterioration in the job market.
“The mother lode of data just released suggest the economy is still doing just fine, despite the slowdown in employment growth,” wrote Alexandra Brown, North America economist for the market insight company Capital Economics, in a note to clients.
The U.S. economy remains in a relatively precarious position. The latest GDP reading reflects the three months ending June 30, and the growth picture may have changed since then. A slowing labor market combined with President Donald Trump’s combination of aggressive tariffs and immigration enforcement has generated concerns about tepid growth. While consumer spending has remained resilient, there are growing warnings about a two tiered-economy in which lower- and middle-income people are squeezed as upper-income households continue to spend.
Concerns about the job market spurred the Federal Reserve to take action this month, cutting interest rates in a bid to boost economic growth. There was some anticipation it would be the first of many.
But Thursday’s positive economic data complicates the Fed’s situation.
Following the morning’s data releases, investors dialed back the odds of additional cuts by the Federal Reserve this year. The Fed tends to cut when the economy is showing signs of slowing — and the new figures indicate there may be less of a need for lower interest rates to stimulate growth.
“Thursday’s upward GDP revision for [the] second quarter confirmed that the economy grew at a healthy clip, even as tariff uncertainty reached fever pitch during the quarter,” Paul Stanley, chief investment officer of the Granite Bay Wealth Management financial group, said in a statement. “The U.S. economy is resilient and the strong GDP is another indication that we are not at risk of any kind of recession, even with slowing labor market growth.”
But there are also concerns that growth is extremely uneven.
A growing body of evidence suggests tech companies’ spending on artificial intelligence may almost single-handedly be propping up growth, especially as federal spending cuts and uncertainty over tariffs have clouded sentiment elsewhere. Commerce Department data show that in the first half of 2025, investment growth in equipment — a category that includes computers, electronics and power-supply parts — has been near records.
“In the absence of tech-related spending, the US would be close to, or in, recession this year,” wrote George Saravelos, a head of research at the Deutsche Bank financial group.
That’s not necessarily good news, he said: In order for tech to continue driving GDP growth, investments in AI, like building out data centers, needs to remain “parabolic.”
“This is highly unlikely,” Saravelos said, given forecasts that such investment will likely peak this year.
“Other sources of growth will have to take over,” he said.