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Economic Report: U.S. economy shrank in the first half of 2022, updated GDP figures confirm

The numbers: The U.S. shrank in the first six months of the year, revised government figures confirm, and painted a picture of economy buffeted by strong headwinds and tailwinds.

Gross domestic product, the official scorecard of the economy, fell at a 0.6% annual clip in the second quarter, the Bureau of Economic Analysis said Thursday. That’s unchanged from the prior estimate.

The previously reported 1.6% decline in first-quarter GDP, meanwhile, was also unchanged.

The newly revised figures were unveiled as part of the government’s annual process of adjusting the prior five years worth of data based on new information.

Some economists hap speculated the revised numbers could show growth instead of contraction. Instead there was very little change.

Political partisans have sparred over whether the U.S. had slipped into recession ahead of the pivotal fall elections in which control of Congress is at stake. An old but informal rule-of-thumb defines a recession as two consecutive quarters of negative GDP.

Yet while U.S. growth has clearly slowed, the strongest labor market in decades signals the economy is still in expansion mode. Businesses are hiring, layoffs are at a record low and the unemployment rate is near the lowest level since the 1960s.

In any case, the debate might already be moot. The U.S. economy is facing stronger headwinds this fall and another recession might be looming.

Big picture: The updated GDP figures offer a slightly clearer view of what’s happened to the economy since the pandemic, but it tells us nothing about the future. And the future looks dimmer.

While the third quarter is likely to show the economy expanding again, the latest forecasts show, a storm is brewing as 2023 approaches.

The Federal Reserve is quickly raising the cost of borrowing to rein in high inflation, but its aggressive strategy is also expected to slow the economy and boost unemployment. Many economists even predict a second recession in four years.

Market reaction: The Dow Jones Industrial Average
DJIA,
+1.88%

and S&P 500
SPX,
+1.97%

were set to open lower in Thursday trades.

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