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The U.S. economy is doing even better than the government thought
Shrugging off higher interest rates, America’s consumers spent enough to help drive the economy to a brisk 5.2% annual pace from July through September, the Bureau of Economic Analysis reported Wednesday in an upgrade from its previous estimate.
The government had previously estimated that the economy grew at a 4.9% annual rate last quarter.
Wednesday’s second estimate of growth for the July-September quarter confirmed that the economy sharply accelerated from its 2.1% rate from April through June. It showed that the U.S. gross domestic product — the total output of goods and services — grew at its fastest quarterly rate in nearly two years.
The increase in the third quarter primarily reflected increases in consumer spending and inventory investment.
Consumer spending, the lifeblood of the economy, rose at a 3.6% annual rate from July through September — still healthy but a downgrade from the previous estimate of 4%. Private investment surged at a 10.5% annual pace, including a 6.2% increase in housing investment, which defied higher mortgage rates.
The economy also received a lift from companies building inventories in anticipation of future sales, which added 1.4 percentage points to quarterly growth. Also driving the third quarter growth was an uptick in spending and investment by governments at all levels — federal, state and local.
The U.S. economy, the world’s largest, has proved resilient even as the Federal Reserve has raised its benchmark interest rate 11 times since March 2022 to fight the worst bout of inflation in four decades. Those higher interest rates have significantly increased consumer and business borrowing costs. But they have also helped ease inflationary pressures: Consumer prices rose 3.2% last month from 12 months earlier, a marked improvement from the 9.1% year-over-year inflation recorded in June 2022.
“Given the positive economic backdrop, we believe the market will rally until the end of the year and we should have a good start to 2024 – the exact opposite of what many believed as recently as this summer,” Chris Zaccarelli, Chief Investment Officer for Independent Advisor Alliance, said in an email.
Possible soft landing, mild recession
The U.S. job market is cooling from the red-hot levels of the past two years. But it’s still healthy by historical standards: Employers are adding an average of 239,000 jobs a month this year. And the unemployment rate has come in below 4% for 21 straight months, the longest such streak since the 1960s.
The combination of easing inflation and resilient hiring has raised hopes the Fed can manage a so-called soft landing — raising rates just enough to cool the economy and tame price increases without tipping the economy into recession.
“We continue to forecast ongoing expansion in economic activity, but the pace should slow quite significantly in Q4,” said Rubeela Farooqi, chief U.S. economist at High Frequency Economics. “We anticipate a deceleration in household spending, not only on payback for an unusually strong third quarter but also from the cumulative effects of monetary policy tightening.”
Gus Faucher, chief economist at PNC, goes a step further to predict a brief recession in the coming year.
“PNC expects a recession starting in mid-2024 as the drag from tight monetary policy continues to increase. But the recession should be short and mild, thanks to strong consumer balance sheets and a tight labor market that will discourage layoffs,” he said.
Legislation to expand Social Security benefits to millions of Americans passed the U.S. Senate early Saturday and is now headed to the desk of President Joe Biden, who is expected to sign the measure into law.
Senators voted 76-20 for the Social Security Fairness Act, which would eliminate two federal policies that prevent nearly 3 million people, including police officers, firefighters, postal workers, teachers and others with a public pension, from collecting their full Social Security benefits. The legislation has been decades in the making, as the Senate held its first hearings into the policies in 2003.
“The Senate finally corrects a 50-year mistake,” proclaimed Senate Majority Leader Chuck Schumer, a Democrat from New York, after senators approved the legislation at 12:15 a.m. Saturday.
The bill’s passage is “a monumental victory for millions of public service workers who have been denied the full benefits they’ve rightfully earned,” said Shannon Benton, executive director for the Senior Citizens League, which advocates for retirees and which has long pushed for the expansion of Social Security benefits. “This legislation finally restores fairness to the system and ensures the hard work of teachers, first responders and countless public employees is truly recognized.”
The vote came down to the wire, as the Senate looked to wrap up its current session. Senators rejected four amendments and a budgetary point of order late Friday night that would have derailed the measure, given the small window of time left to pass it.
Vice President-elect JD Vance of Ohio was among the 24 Republican senators to join 49 Democrats to advance the measure in an initial procedural vote that took place Wednesday.
“Social Security is a bedrock of our middle class. You pay into it for 40 quarters, you earned it, it should be there when you retire,” Ohio Senator Sherrod Brown, a Democrat who lost his seat in the November election, told the chamber ahead of Wednesday’s vote. “All these workers are asking for is for what they earned.”
What is the Social Security Fairness Act?
The Social Security Fairness Act would repeal two federal policies — the Windfall Elimination Provision (WEP) and the Government Pension Offset (GPO) — that reduce Social Security payments to nearly 3 million retirees.
That includes those who also collect pensions from state and federal jobs that aren’t covered by Social Security, including teachers, police officers and U.S. postal workers. The bill would also end a second provision that reduces Social Security benefits for those workers’ surviving spouses and family members. The WEP impacts about 2 million Social Security beneficiaries and the GPO nearly 800,000 retirees.
The measure, which passed the House in November, had 62 cosponsors when it was introduced in the Senate last year. Yet the bill’s bipartisan support eroded in recent days, with some Republican lawmakers voicing doubts due to its cost. According to the Congressional Budget Office, the proposed legislation would add a projected $195 billion to federal deficits over a decade.
Without Senate approval, the bill’s fate would have ended with the current session of Congress and would have needed to be re-introduced in the next Congress.
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Saturday is the winter solstice and 2024’s shortest day. Here’s what to know about the official start of winter.
The 2024 winter solstice, the shortest day of the year, happens on Saturday, Dec. 21, in the Northern Hemisphere. The celestial event signifies the first day of winter, astronomically.
What is the winter solstice?
The winter solstice is the day each year that has the shortest period of daylight between sunrise and sunset, and therefore the longest night. It happens when the sun is directly above the Tropic of Capricorn, a line of latitude that circles the globe south of the equator, the National Weather Service explains.
The farther north you are, the shorter the day will be, and in the Arctic Circle, the sun won’t rise at all.
How is the day of the winter solstice determined?
The winter solstice occurs because of the Earth’s tilt as it rotates around the sun.
When the Northern Hemisphere tilts away from the sun, the nights last longer. The longest night happens on the solstice because the hemisphere is in its furthest position from the sun. That occurs each year on Dec. 21 or 22.
This year, it falls on Dec. 21 at 4:21 a.m ET, to be precise.
On the summer solstice, when the northern tilt is closest to the sun, we have the longest day, usually June 20 or 21.
National Weather Service
The solstices are not always exactly on the 21st every year because the earth’s rotation around the sun is 365.25 days, instead of 365 even.
Will days start getting longer after the winter solstice?
Yes. Each day after the solstice, we get one minute more of sunlight. It doesn’t sound like much, but after just two months, or around 60 days, we’ll be seeing about an hour more of sunlight.
When will winter officially be over in 2025?
The meteorological winter ends on March 20, 2025. Then, spring will last until June 20, when the summer solstice arrives.
How is the winter solstice celebrated around the world?
Nations and cultures around the world have celebrated the solstice since ancient times with varying rituals and traditions. The influence of those solstice traditions can still be seen in our celebrations of holidays like Christmas and Hanukkah, Britannica notes.
The ancient Roman Saturnalia festival celebrated the end of the planting season and has close ties with modern-day Christmas. It honored Saturn, the god of harvest and farming. The multiple-day affair had lots of food, games and celebrations. Presents were given to children and the poor, and slaves were allowed to stop working.
Gatherings are held every year at Stonehenge, a monumental circle of massive stones in England that dates back about 5,000 years. The origins of Stonehenge are shrouded in mystery, but it was built to align with the sun on solstice days.
Andrew Matthews/PA Images via Getty Images
The Hopi, a Native American tribe in the northern Arizona area, celebrate the winter solstice with dancing, purification and sometimes gift-giving. A sacred ritual known as the Soyal Ceremony marks the annual milestone.
In Peru, people honor the return of the sun god on the winter solstice. The ancient tradition would be to hold sacrificial ceremonies, but today, people hold mock sacrifices to celebrate. Because Peru is in the Southern Hemisphere, their winter solstice happens in June, when the Northern Hemisphere is marking its summer solstice.
Scandinavia celebrates St. Lucia’s Day, a festival of lights.
The “arrival of winter,” or Dong Zhi, is a Chinese festival where family gathers to celebrate the year so far. Traditional foods include tang yuan, sweet rice balls with a black sesame filling. It’s believed to have its origins in post-harvest celebrations.
Researchers stationed in in Antarctica even have their own traditions, which may include an icy plunge into the polar waters. They celebrate “midwinter” with festive meals, movies and sometimes homemade gifts.