The economy accelerated in the last quarter, shaking off some of the lingering effects of the pandemic as consumer spending increased, supported by government stimulus and easing restrictions in many parts of the country.
The Commerce Department reported on Thursday that the economy grew 1.6% in the first three months of 2021, up from 1.1% in the last quarter of last year.
On an annualized basis, the growth rate for the first quarter was 6.4%.
“It was a great way to start the year,” said Gregory Daco, chief US economist at Oxford Economics. “We had the perfect mix of improved health conditions, a strong fiscal stimulus and warmer weather.”
“Consumers are now in the driver’s seat of economic activity again, and that’s how we like them,” he added. “A consumer who is confident in the outlook will generally spend more freely.”
Looking ahead, economists said they expected to see even better numbers this quarter.
“This is good news, but the best is yet to come,” said Ian Shepherdson, chief economist at Pantheon Macroeconomics. “There is nothing in this report that makes me think the economy will not grow at a gangbuster rate in the second and third quarters.”
The expansion in the last quarter was spurred by stimulus measures, he said, which quickly translated into purchases of durable goods like cars and household appliances.
“It demonstrates the value of government intervention when the economy is on its knees to Covid,” he added. “But in the quarters to come, the economy will be much less dependent on stimulus measures, as individuals will use up the savings they have accumulated during the pandemic.”
Overall economic activity is expected to return to pre-pandemic levels in the current quarter, Anderson said, while warning that it will take until the end of 2022 for employment to regain the ground it has. lost as a result of the pandemic.
Yet the labor market seems to be catching up. Last month, employers created 916,000 jobs and the unemployment rate fell to 6%, while initial claims for unemployment benefits have fallen sharply in recent weeks.
Tom Gimbel, Managing Director of LaSalle Network, a recruiting and staffing company in Chicago, said, “This is the best job market I have seen in 25 years. We have 50 percent more openings now than we had before Covid. “
Hiring is highest for mid-to-mid-level positions, he said, with high demand for professionals in accounting, finance, marketing and sales, among others. “Companies are strengthening their back-office support and their supply chains,” he said. “I think we’re good for at least 18 months to two years.”
Spending on goods like automobiles led the way in the first quarter, but demand for services like restaurants is expected to pick up in the second quarter, said Rubeela Farooqi, chief U.S. economist at High Frequency Economics. “I think we’ll see an increase in spending on services,” she said.