According to the US Treasury Department's economic statement on May 1, 2023, the American economy demonstrated continued resilience in the first quarter of 2023. Real GDP rose 1.1 percent at an annual rate, and employers added 345,000 payroll jobs per month. The overall labor force participation rate (LFPR) improved, and the prime-age (ages 25-54) LFPR matched its pre-pandemic rate. However, inflation continued to slow over the year amidst improved supply chain resiliency, lower energy prices, and tighter monetary policy. Inflation rates still remain above the Federal Reserve's 2 percent inflation target, partially elevated by price growth for rental residences and owner-occupied housing.
The statement, prepared by Eric Van Nostrand, Acting Assistant Secretary for Economic Policy, highlighted the potential risks ahead, including uncertainty related to Russia's war in Ukraine and the significant challenge of raising the debt ceiling on time. Failure to do so could lead to an economic catastrophe, sparking a global downturn of unknown but substantial severity and causing unprecedented harm to the livelihoods of all Americans according to the report.
Real GDP growth in the first quarter was primarily driven by a decrease in private inventory investment and a slowdown in nonresidential fixed investment. Household consumption accelerated, and goods consumption was largely boosted by purchases of motor vehicles.
Labor markets remained tight in the first quarter, with an average of 345,000 payroll job gains per month. The unemployment rate remained near historical lows, and labor force participation rates for all workers, as well as prime-age workers, improved.
Inflation, as measured by the consumer price index (CPI), remained unchanged from the fourth quarter, with an average monthly rate of 0.3 percent. Core inflation (excluding energy and food) was slightly stronger in the first quarter due to stronger demand for goods, particularly automobiles.
Nominal wage growth in the private sector was mixed in the first quarter. Average hourly earnings rose at a 3.2 percent annualized rate, while the Employment Cost Index (ECI) suggests that wage pressures did not moderate in the first quarter according to the report.