JUST IN: The U.S. economy shrank last quarter for the first time since the pandemic recession struck two years ago.
The weak showing does not mean a recession is likely in the coming months. Most economists expect a rebound in the April-June quarter as solid hiring and wage gains sustain growth.
The economy is facing a range of pressures that have heightened worries about its fundamental health and raised concerns about a possible recession next year. Inflation is squeezing households as gas and food prices spike, borrowing costs mount and the global economy is rattled by Russia's invasion of Ukraine and China's COVID-19 lockdowns.
Still, the U.S. job market — the most important pillar of the economy — remains robust. The number of people receiving unemployment benefits, a proxy for layoffs, fell to the lowest level since 1970. And in the January-March quarter, businesses and consumers increased their spending at a 3.7% annual rate after adjusting for inflation.
Imports surged nearly 20% in the January-March quarter as businesses and consumers bought more goods from abroad while U.S. exports fell nearly 6%. That disparity widened the trade deficit and subtracted 3.2 percentage points from the quarter’s growth.
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