Weekly U.S. jobless claims drop; second-quarter GDP revised upwards

Investing.com - A weekly gauge of first-time jobless claims unexpectedly declined, while the U.S. economy grew by more than previously projected in the second quarter, fueled by an upward revision in consumer spending.

Thursday’s figures come as the Federal Reserve is assessing the trajectory of U.S. interest rates following a 25-basis point cut in borrowing costs last week, with policymakers flagging twin pressures from a cooling employment picture and sticky inflation. But indications of broader economic resilience could give officials some pause as they mull over further rate reductions, which in theory may spur investment and hiring, albeit at the risk of driving up prices.

Rate projections from the Fed last week suggested that most members were anticipating another half-point worth of cuts at the central bank’s final two meetings of the year in October and December.

However, seven of the 19 estimates forecast fewer reductions this year. This means that debate could be fierce heading into the next Fed gatherings, especially as another official -- suspected to be the newly-appointed Fed Governor Stephen Miran -- pencilled in rates falling sharply to a range of 2.75% to 3%.

On Wednesday, Chicago Fed President Austan Goolsbee warned that he was not inclined to embark on a campaign of aggressive policy easing given elevated inflation risks, echoing recent comments from many of his colleagues.

However, earlier this week, Miran, who is on leave from the Trump administration to fill a vacant Fed Governor position, argued that the Fed has set monetary policy at such a restrictive level that it could threaten the labor market.

Against this backdrop, first-time applications for unemployment benefits during the week ended on September 20 came in at 218,000, a decrease of 14,000 from the preceding week. Economists had anticipated that the number would be 233,000.

But continuing claims, a proxy for hiring which measures the amount of people receiving benefits after an initial week of aid, moved down 2,000 to a seasonally-adjusted 1.926 million. This could point to an ongoing elevation in the number of Americans who are experiencing a long period of unemployment.

Meanwhile, U.S. gross domestic product, an indicator of growth in the world’s biggest economy, expanded by 3.8% during the April to June period, according to the third and final estimate from the Commerce Department’s Bureau of Economic Analysis. A prior estimate had suggested that the U.S. economy grew by 3.3% in the second quarter, after contracting by 0.5% in the opening three months of 2025. The initial estimate showed growth of 3.0%.

"The implications are obviously hawkish and given how much Fed easing anticipation has contributed to the equity rally of late, stocks will see pressure off the data," analysts at Vital Knowledge said in a note, adding that Friday’s publication of the August personal consumption expenditures price index -- an inflation gauge closely monitored by the Fed -- will now be a major focus for investors.

U.S. stock futures were lower following the slew of data.

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