New data finds sharper rebound from pandemic

ECONOMY

Report says GDP grew faster than previously thought

Howitzer shells are shown in production at the Scranton Army Ammunition Plant in Scranton, Pa., on Aug. 27. The Commerce Department said GDP improved from 2021 to early 2023 at a faster pace than previously reported. TED SHAFFREY — THE ASSOCIATED PRESS

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By Ben Casselman

The New York Times

The U.S. economy emerged from the pandemic even more quickly than previously reported, revised data from the federal government shows.

The Commerce Department on Thursday released updated estimates of gross domestic product over the past five years, part of a long-standing annual process to incorporate data that isn’t available in time for the agency’s quarterly releases.

The new estimates show that GDP, adjusted for inflation, grew faster in 2021, 2022 and early 2023 than initially believed. The revisions are relatively small in most quarters, but they suggest that the rebound from the pandemic — already among the fastest recoveries on record — was stronger and more consistent than earlier data showed.

Perhaps most notably, the government now says GDP grew slightly in the second quarter of 2022, rather than contracting as previously believed. As a result, government statistics no longer show the U.S. economy as experiencing two consecutive quarters of declining GDP in early 2022 — a common definition of a recession, though not the one used in the United States. (The revised data still shows that GDP declined in the first quarter of 2022, but more modestly than previously reported.)

The official arbiter of recession in the United States is the National Bureau of Economic Research, a nonprofit research organization made up of academic economists. The group defines a recession as “a significant decline in economic activity that is spread across the economy and lasts more than a few months,” and it bases its decisions on a variety of indicators including employment, income and spending.

Few economists in 2022 believed that the U.S. economy met the requirements for a recession. But many feared it was headed for one because of the Federal Reserve’s aggressive efforts to bring down inflation with high interest rates. Instead, growth quickly resumed and has remained surprisingly resilient.

More recently, however, slowing job growth and rising unemployment have led some forecasters, including at the Fed, to worry that resilience might be fading. The revisions on Thursday showed that growth was somewhat weaker in late 2023 than had initially been reported, but was slightly stronger early this year.

The government’s estimate of the growth rate of GDP in the second quarter of 2024 was unchanged at 3%. Consumer spending grew slightly more slowly than previously reported, but business investment was revised upward.

The reliability of U.S. economic data has been under increasing scrutiny recently, particularly after an unusually large downward revision last month to estimates of job growth in 2023 and early 2024.

The GDP updates, however, were not large by historical standards, and were in the opposite direction from the jobs revisions. And the new figures more closely align with other data from the period that suggested the economy was on firm footing.

The new data also help resolve what had been a bit of an economic mystery. Gross domestic income — an alternative measure of growth based on income rather than spending — had appeared to be significantly weaker than gross domestic product in recent quarters. That was perplexing because the two measures should, in theory, be identical.

The revisions Thursday narrowed the gap, though they didn’t eliminate it. The government now says gross domestic income increased 2.9% from the end of 2022 to the end of 2023, compared with 3.2% growth in GDP during the same period. (Both figures are adjusted for inflation.)