The U.S. economy expanded at a 4.4% annual pace in the third quarter, the fastest growth rate in two years, the Commerce Department said Thursday. Consumer spending, which accounts for 70% of U.S. GDP, grew 3.5%, with services spending rising 3.6% and goods spending up 3%. The third-quarter growth was faster than the government’s initial estimate of 4.3%.
The strong growth numbers mask a more complicated economic picture. While overall expansion continues, many Americans report dissatisfaction with their economic situation, particularly the high cost of living. The gap reflects what economists call a K-shaped economy, in which wealthier Americans spend more while lower-income households face stagnant pay and elevated prices.
Spending and Investment Drive Growth
Spending on services such as healthcare and financial services rose at a 3.6% pace in the quarter, while spending on goods increased 3%. Durable goods—items like cars meant to last at least three years—rose just 1.6%. A surge in exports and a drop in imports also contributed to the strong third-quarter growth.
Business investment, excluding homebuilding, rose at a 3.2% clip, partly reflecting corporate investments in artificial intelligence technology.
A Labor Market in Flux
Yet the strong GDP growth masks weakness in hiring. Since March, employers have added an average of 28,000 jobs a month, a sharp decline from the 2021-2023 hiring boom following the COVID-19 pandemic, when companies were adding roughly 400,000 jobs monthly. The unemployment rate stood at 4.4%, suggesting what some economists describe as a no-hire, no-fire labor market where companies are hesitant to bring on new employees but reluctant to let go of those they have.
“The United States is experiencing a jobless boom where strong growth is powered by AI investments and consumption by wealthier families, but there is almost no hiring,” said Heather Long, chief economist at Navy Federal Credit Union. “It’s an uneasy situation for many middle-class families. One of the big questions for 2026 is whether the middle class will start to feel the uplift from the boom.”
Economy Resilient Amid Policy Uncertainty
The strong growth emerged despite uncertainty caused by President Donald Trump’s economic policies, particularly his double-digit tariffs on imports from nearly every country. The economy’s resilience in the face of trade barriers surprised some analysts, though questions remain about whether tariffs’ full effects have yet been felt by consumers and businesses.