Strong growth, fewer layoffs—but a divided economy: What the latest US data shows

After the US economy recorded its highest growth rate of 4.3 per cent in the third quarter—far above estimates of 3.3 per cent and even higher than the 3.8 per cent growth registered in the second quarter—fresh labour market data has added to signs of economic resilience. Initial jobless claims in the US fell by 10,000 to 214,000 for the week ending December 20.

Jobless claims and applications for unemployment aid are considered a proxy for layoffs and a key metric to gauge the health of the broader labour market. Economists and experts have described the current labour market as being locked in a “no-hire, no-fire” mode.

A report by the US Department of Labor also showed that the number of people receiving ongoing unemployment assistance rose by 38,000 to 1.923 million in the week ended December 13.

More from World

US Q3 GDP likely at 3.5% as economy shows resilience after longest government shutdown China wants another Hong Kong — but on mainland: It turns Belgium-sized Hainan into free-trade zone

The jobless claims data is significant not only for its decline but also for its timing. The fall comes at a point when the US unemployment rate stood at 4.6 per cent in November, the highest level in the past two years. While the rate remains elevated, part of the increase has been attributed to technical factors, including the 43-day-long US government shutdown.

The labour market is being closely watched by the US Federal Reserve (Fed) as it decides the trajectory of benchmark interest rates and the scale of any future rate cuts at Federal Open Market Committee (FOMC) meetings. At its latest meeting, the Fed cut interest rates by 25 basis points to a range of 3.50–3.75 per cent.

Quick Reads

View All

2025: A year China struggled on all fronts—economy, politics and regional pushback

‘I have a plan’: Back in Bangladesh, Tarique Rahman casts self in Martin Luther King Jr’s mould

However, Fed signalling suggested that borrowing costs are unlikely to come down sharply in the near term, with policymakers keeping a close watch on both labour market conditions and inflation.

US GDP growth

Another dataset that gave Americans reason to cheer was the robust GDP growth recorded in the third quarter. At 4.3 per cent, growth breached all forecasts, which had ranged between 3.3 per cent and 3.5 per cent. The data was released by the Commerce Department on Tuesday.

The strong expansion in Q3 was driven largely by a surge in consumer spending, the highest in a year.

Increased expenditure on recreational goods, vehicles and international travel contributed significantly to growth. However, some economists described the recovery as showing a K-shaped pattern.

The K-shaped pattern highlights a widening divide between high-income earners and lower-income groups.

Economists are increasingly drawing parallels between this pattern and the current state of the US economy, where high-income households and large corporations are doing the heavy lifting, while others struggle.

This uneven growth pattern, economists argue, has been exacerbated by President Donald Trump’s tariffs, which have made imports more expensive. Companies, in turn, have passed on the impact of higher tariffs to consumers, pushing up broader price levels across the economy.

President Trump, however, hailed the strong GDP numbers. “The TARIFFS are responsible for the GREAT USA Economic Numbers JUST ANNOUNCED,” Trump wrote on his Truth Social platform. “AND THEY WILL ONLY GET BETTER! Also, NO INFLATION & GREAT NATIONAL SECURITY.”

Many economists, however, believe that Trump’s import tariffs have contributed to an affordability crisis, particularly for lower-income groups.