Economic growth picks up but inflation still pressures the Fed

The growth was the strongest performance since the third quarter of 2023.

Fresh data revealed jobless claims far under expectations — suggesting layoffs remain limited and the labor market is holding firm despite Fed worries.

The U.S. economy closed the second quarter with a final GDP growth rate of 3.8% — its strongest performance since the third quarter of 2023 and above the long-term average pace.

That’s a sharp rebound from the 0.5% contraction in the first quarter, when fears over looming tariffs rattled businesses. Still, the acceleration in growth stands somewhat at odds with the softer labor market data seen over the summer.

Speaking in Rhode Island, Federal Reserve Chair Jerome Powell said that signs of labor market weakness had pushed policymakers to shift their balance of ri