US economy eyes strong finish after Q3 growth beats estimate

Shallower rate-cut path in Fed projection reflects uncertainty over Trump's policies

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The number of Americans filing new applications for jobless benefits fell more than expected last week, almost reversing the prior two weeks' increases and suggesting that a gradual labor market slowdown remained in place.

Other data on Dec 19 showed the economy grew faster than previously estimated in the third quarter, driven by robust consumer spending. The upbeat reports came a day after the Federal Reserve delivered a third consecutive interest rate cut, but projected only two rate reductions in 2025, citing the economy's continued resilience and still-elevated inflation.

Fed chairman Jerome Powell told reporters on Dec 18 that the "downside risks of the labor market do appear to have diminished", adding that "the US economy has just been remarkable, I feel very good about where the economy is".

Mr Oren Klachkin, a financial markets economist at Nationwide, said: "The economy is set to end 2024 on a solid note, which is fortunate since we'll have to contend with heightened policy uncertainty and possibly greater challenges in 2025."

Initial claims for state unemployment benefits dropped 22,000 to a seasonally adjusted 220,000 for the week ended Dec 14, the Labor Department said. Economists polled by Reuters had forecast 230,000 claims for the latest week. They had increased 27,000 in the prior two weeks. Claims have entered a period of volatility, which could see large swings in the data.

A range of indicators, including job openings, suggests conditions are much looser than they were before the Covid-19 pandemic, but the labor market is slowing in an orderly fashion.

A jump in the unemployment rate to 4.3 percent in July from 3.7 percent at the start of the year saw the US central bank launching its policy easing cycle with an unusually large half-percentage-point interest rate cut in September.