The nation’s economic growth slowed more than expected in the second quarter and inflation remained elevated, in part, because of energy disruption from the Iran war.

The United States’ gross domestic product increased 1.5% in the second quarter, according to the Commerce Department. Economists had been looking for a Q2 growth rate of 1.8%, following the 2.1% increase in the first quarter. But consumer spending — which accounts for about 70% of U.S. economic activity — increased at a 3.2% annual clip, up from 0.5% in the January-March period.

Business investment, excluding housing, rose 8.4%, down from 10.6% from January through March. The strong spending reflected a surge in investment in artificial intelligence. Key areas of the economy continued to show improvement: Personal spending rose 2.1% after a 0.4% gain in the first quarter. And a key indicator of underlying demand, final sales to private domestic purchasers, posted a robust 3.9% increase. Gross private domestic investment rose 0.5% along with exports, which add to GDP. READ MORE >

Job growth has picked up in 2026 with private sector payroll growth averaging 88,000 in the first six months of the year, which is more than three times the pace seen last year and even slightly faster than in 2024, according to the U.S. Bureau of Labor Statistics. The pace of the gains, however, is less than in 2023 and the two years prior to the pandemic.

The number of Americans seeking unemployment benefits for the first time fell in July to the lowest level since 1969. Initial claims for state jobless benefits dropped by 22,000 — the largest decline in three months — to a seasonally adjusted 187,000 for the week ended July 18, the Labor Department said.

Economists noted the drop was partly due to the annual summertime temporary shutdowns of auto plants to retool for production of next year’s models, and new claims could well return soon to their recent trend level in the low 200,000s. “There may be some seasonal noise in the data, given summer months tend to be noisy, but the extremely low level of claims is hard to ignore and the trend in continued claims remains encouraging,” said Matthew Martin, senior economist at Oxford Economics. READ MORE >

The Federal Reserve in late July decided to leave its key federal funds rate unchanged in a range between 3.5% and 3.75%, but the vote was divided, 9-3, with opponents seeking to increase the cost of borrowing to reduce inflation.

Presidents of three Federal Reserve regional banks, Beth Hammack of Cleveland, Neel Kashkari of Minneapolis and Lorie Logan of Dallas, expressed concern that inflation has been above the 2% target rate for five years. They sought to raise the federal funds rate by a quarter percent. Fed watchers noted it was the strongest dissent to policy direction in a decade.

Despite his pledge to cut the rate of inflation, Chairman Kevin Warsh, so far, has not proposed any Feddirected credit tightening. Instead, Warsh has advocated allowing fixed-income and debt markets to wield their unhindered influence while the Fed evaluates underlying dynamics of inflation.

The cost of consumer credit from credit cards to auto loans has been rising. The 30-year mortgage rate hit 6.76%, the highest in a year. Warsh pointed to the rise in market-determined interest rates since the June 17 meeting. It showed that policy had tightened even though the Fed hadn’t acted, he said, adding, “That has provided us some comfort.” READ MORE >