The US economy exhibited continued strength in Q1 2023, with real GDP increasing 1.1% at an annual rate and employers adding an average of 345,000 payroll jobs per month, according to the US Treasury Department. The labor force participation rate (LFPR) saw improvements, with the prime-age (ages 25-54) LFPR reaching pre-pandemic levels. Inflation slowed over the year but remained above the Federal Reserve’s 2% target, partially driven by price growth for rental residences and owner-occupied housing.
The Q1 GDP growth was primarily driven by a decrease in private inventory investment and a slowdown in nonresidential fixed investment. Household consumption accelerated, with motor vehicle purchases contributing significantly to goods consumption. Labor markets remained tight, with an average of 345,000 payroll job gains per month, and unemployment rates near historical lows. The labor force participation rates for all workers and prime-age workers improved.
Consumer Price Index (CPI) inflation remained unchanged from Q4 2022, averaging a monthly rate of 0.3%. Core inflation (excluding energy and food) was slightly stronger in Q1 2023 due to increased demand for goods, particularly automobiles. Wage growth in the private sector was mixed, with average hourly earnings rising at a 3.2% annualized rate.
