STORY: Despite dire recession forecasts, the U.S. economy grew faster than expected in the fourth quarter thanks to a strong labor market and robust consumer spending.
Commerce Department data released Thursday showed the country's gross domestic product – a measure of all goods and services produced – grew at an annual rate of 3.3%. This exceeded the estimate of economists surveyed by Reuters by more than a full percentage point.
Growth for the full year was two and a half percent – also shocking forecasts.
The country's strong economic performance has stunned captains of industry and some economists, who predicted that about 18 months of aggressive interest rate hikes by the Federal Reserve to reduce inflation would plunge the economy into recession.
But so far that hasn't happened. And at the same time, the Fed’s so-called “medicine” seems to be working. Thursday's data also showed that inflation pressures continued to ease in the fourth quarter.
The economy's resilience reflects a resilient labor market that has seen strong wage growth and boosted consumer spending.
US Treasury Secretary Janet Yellen praised the Biden administration's economic responsibility on Thursday.
“The Biden administration has implemented the most comprehensive policies and investments to help the middle class and stimulate the economy. [FLASH] In short: it was the fairest recovery ever. We see this not only in gains for the American middle class, but also across all demographic groups, such as the rapid decline in unemployment rates for black and Hispanic Americans.”
In a separate report Thursday, the Labor Department said initial claims for state jobless benefits last week were just a touch above economists' forecasts.
Many investors had predicted that the Fed would begin cutting interest rates in March. But strong economic performance suggests this may be too early, with May now a more likely target.
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