The economy gave mixed signals as the jobless claims dipped and national indicators continued to constrict, according to federal government data released Thursday.
Real Gross Domestic Product (GDP), which serves as a measure of the relative economic strength of the nation, decreased at an annualized rate of 0.6% in the second quarter of 2022, according to the Bureau of Economic Analysis.
Last month, economists estimated that GDP would decline by 0.9% in Q2, following the higher-than-expected decrease of 1.6% in the first quarter. While the economy actually shrank less than expected, Q2 marked the second consecutive drop and meets the threshold for what many economists define as a technical recession.
However, a panel of National Bureau of Economic Research economists has the final say-so on whether the U.S. has officially entered a recession.
“Thursday’s GDP figures confirm that the economy has been slowing and may have even entered into a recession, although this economic weakness has been already priced into markets, which are forward-looking,” said Robert Schein, the chief investment officer at Blanke Schein Wealth Management.
While the broader economy has started to contract, the labor market is still showing signs of strength.
Jobless claims dipped below 250,000 for the first time in three weeks, according to the U.S. Department of Labor. The agency reported 243,000 initial claims, a decrease of 2,000 from the previous week.
Initial jobless claims in Texas, not seasonally adjusted, for the week ending August 20 numbered 14,020 filed applications, a decrease of 203 from the week before.
Texas had the second highest number of initial claims behind California (37,939) and slightly ahead of New York (13,823).
“Initial jobless claims will gradually rise as economic growth slows and businesses focus on trimming inefficiencies in a shakier fundamental backdrop,” said Oren Klachkin, lead U.S. economist at Oxford Economics. “However, persistently scant labor supply will prevent a spike in jobless claims as employers will be concerned about how long it might take to fill open positions.”
Federal Reserve Chairman Jerome Powell is set to comment on the status of the economy at the upcoming Jackson Hole Economic Symposium on Friday.
Citigroup economist Andrew Hollenhorst said he expects Powell to lean against loosening financial conditions. Still, Jackson Hole should give economists an idea of how aggressive the Fed will be with rate hikes at its next FOMC meeting in September.