The Bureau of Economic Analysis revised its estimate of first-quarter gross domestic product growth up to an annualized 2.4%, from a preliminary 2.1%, reflecting stronger-than-initially-reported consumer spending and a smaller drag from inventories. The revision keeps the U.S. economy on a moderate growth path even as the labor market cools and the Federal Reserve holds rates at restrictive levels.
Personal consumption expenditures, which account for roughly 68% of GDP, were revised up to 2.9% from 2.5%. Services spending grew 3.4%, led by health care, financial services, and recreation. Goods spending was softer at 1.6%, with durable goods, particularly motor vehicles and household furniture, posting modest declines. The mix continues a multi-year shift back toward services after the goods-heavy pandemic era.
Business fixed investment grew 3.2%, with intellectual property products — a category that captures most software and AI-related capital spending — up 6.1%. Equipment investment was flat, and structures investment fell 1.8% as commercial real estate continues to digest higher interest rates and persistently elevated office vacancy. Residential investment grew 0.7%, a marked slowdown from the 13.7% pace recorded in mid-2024.
Inventories subtracted 0.4 percentage points from headline growth, less than the 0.7-point drag in the preliminary estimate. Net exports added 0.1 point as a small uptick in services exports offset the trade deficit on goods. Government spending grew 1.8%, with state and local outlays accounting for nearly all of the gain; federal nondefense spending was flat.
The GDP price index — the broadest measure of inflation in the report — rose at a 2.4% annualized pace, in line with the preliminary estimate and consistent with the Fed's inflation target. Core PCE inflation, the Fed's preferred gauge, was unrevised at 2.7%.
Looking forward, most forecasters expect Q2 growth to come in around 1.8% to 2.2%, with the Atlanta Fed's GDPNow tracker currently pointing to 2.0%. The drivers will likely shift: consumer spending is expected to slow modestly as savings rates normalize, but business investment should pick up as easing financial conditions support capex plans that were paused last year.
The 2026 growth path matters for the labor market in two ways. First, GDP growth above potential — generally estimated at 1.8% to 2.0% — implies continued positive job creation, though at a slower pace than 2024. Second, the composition matters: services-led growth supports hiring in healthcare, leisure, and professional services, while weak goods demand puts continued pressure on manufacturing payrolls.
For workers thinking about a job change, the GDP report is a reminder that the macro backdrop remains supportive. Recessions almost never start with GDP growth above 2% and consumer spending accelerating. The risks are skewed toward a slower expansion, not a contraction, which historically has meant fewer layoffs but also fewer aggressive hiring pushes.