The U.S. economy grew at an annualized rate of 2.3% in the second quarter, a far cry from the 2% growth the Federal Reserve has long trumpeted.
And while the economy may not be doing quite as well as economists had hoped, it’s not going anywhere soon.
Here’s what you need read More broadly, the second-quarter GDP growth of 1.7% was well above the 3% expansion in the first quarter.
But economists still don’t know how quickly the recovery is going to get going, or whether the economy will actually recover fully.
“The economy is still fragile,” said Paul Ashworth, an economist at the Federal Deposit Insurance Corporation.
“We haven’t seen a lot of signs of a recovery yet.”
The Fed has been expecting an expansion of 2% for a while now, but that forecast was never met.
That’s partly because of the sluggish economy, and partly because the Fed is worried about a surge in joblessness, which it sees as a possible sign that the recovery might not be robust enough.
In the short term, the economy is expected to add a further 1.2 million jobs in the next two months.
But that will depend on the pace of job creation in the months ahead.
At the same time, the pace at which the economy starts growing again could depend on how much the Fed increases its bond purchases to stimulate the economy.
Fed Chair Janet Yellen said Tuesday that she expects inflation to accelerate from its current rate of 1% to about 2% in coming months, although that will be influenced by how quickly inflation picks up.
Even if the economy begins to pick up, inflation will probably be below the Fed’s 2% goal in the coming months.
The Fed also is likely to continue its bond-buying program, which aims to stimulate demand by buying $85 billion in new debt over the next six months.
There are some bright spots in the recovery, including a strong hiring outlook, but the outlook is bleak for many sectors of the economy, including construction, consumer spending, retail, health care, and transportation.
And the economy might not fully recover before the end of the year, as it did in the 1990s, the last time there was such a sustained recovery, the CBO predicts.
This is a developing story.
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