The economy of the United States experienced its most rapid growth in almost two years during the third quarter, driven by increased wages resulting from a competitive job market. This once again disproves predictions of a recession that have been present since 2022.

According to the Bureau of Economic Analysis of the Commerce Department, the gross domestic product grew by 4.9% in the last quarter, marking the highest rate since the fourth quarter of 2021. This was reported in the advance estimate of third-quarter GDP growth. A poll conducted by Reuters had predicted a 4.3% increase in GDP.

Estimates ranged from as low as a 2.5% rate to as high as a 6.0% pace, a wide margin reflecting that some of the input data, including September durable goods orders, goods trade deficit, wholesale and retail inventory numbers were published at the same time as the GDP report.

The GDP increased by 2.1% in the second quarter of April to June and is currently growing above the non-inflationary rate of 1.8%, which is considered favorable by the Federal Reserve.

Although the strong pace of growth in the previous quarter may not be able to continue, it serves as proof of the economy’s resilience despite the Federal Reserve’s aggressive increases in interest rates. The growth rate may decrease in the fourth quarter due to strikes by the United Auto Workers and the restart of student loan repayments for millions of Americans.

The majority of economists have adjusted their predictions and currently think that the Fed has the ability to achieve a gradual economic slowdown, citing improvements in worker productivity and a slowdown in the growth of unit labor costs during the second quarter, which they anticipate will continue into the July-September timeframe.

The main contributor to the United States’ economic activity was consumer spending, which makes up over two-thirds of it.

The current job market is bolstering spending. Despite a decrease in wage growth, it is still outpacing inflation, increasing the buying power of individuals and families.

The Labor Department released a report on Thursday showing that the labor market showed resilience. The report stated that the number of individuals filing for state unemployment benefits increased to 210,000, seasonally adjusted, during the week of October 21st. This was up from 200,000 in the previous week.

The current rise in U.S. Treasury yields and stock market decline have likely resulted in tightened financial conditions, making it unlikely for the GDP data to affect short-term monetary policy.

According to CME Group’s FedWatch, financial markets are anticipating that the Federal Reserve will maintain its current interest rates at its upcoming policy meeting on October 31-November 1. The U.S. central bank has increased its benchmark overnight interest rate by 525 basis points since March, resulting in the current range of 5.25% to 5.50%.