US Economy Poised for Major Rebound in 2nd Quarter: Atlanta Fed

The May jobs report could confirm if the U.S. economy is holding steady amid widespread uncertainty.

People shop at a clothing store in Washington on May 29, 2024. Madalina Vasiliu/The Epoch Times

Following an import-driven contraction to start 2025, the U.S. GDP growth rate is poised for a significant rebound in the second quarter.

A June 2 update to the Atlanta Federal Reserve’s widely watched GDPNow Model suggests the U.S. economy will expand 4.6 percent in the April–June period. This is up from the May 30 estimate of 3.8 percent.

The Atlanta Fed’s GDPNow Model is a running real-time estimate of quarterly growth, mirroring the methods used by the Bureau of Economic Analysis to forecast the GDP. Atlanta Fed economists rely on various data points, such as retail sales, factory output, and inflation measures.

According to the regional central bank, the current quarter’s robust economic performance is expected to be driven by strong consumer spending and substantial net exports.

The New York Fed Staff Nowcast, an alternative model for GDP expectations, suggests a 2.4 percent expansion in the second quarter.

While the headline first-quarter GDP report might have signaled distress in the economy, scratching underneath the surface revealed a spike in imports as businesses attempted to front-run President Donald Trump’s tariffs. The data also revealed a tepid decline in government spending.

However, the subcomponent of the GDP that economists monitor is the private domestic final purchases, which strips inventory investment, government spending, and net exports. This gauge presents a snapshot of the economy’s fundamental strength and grew by 3 percent in the first quarter.

Mixed Expectations

Despite the Fed models indicating that a sizable bounce back is expected in the current quarter, other economic observers have not been as bullish about near-term growth prospects.

The Organisation for Economic Co-operation and Development (OECD) released its updated growth outlook for the United States and global economy in 2025.

Citing tariffs and policy uncertainty, it projected the U.S. growth outlook to be 1.6 percent this year, down from 2.2 percent in March. By comparison, global growth was adjusted lower from 3.1 percent to 2.9 percent.

“The global outlook is becoming increasingly challenging,” the report said. “Substantial increases in barriers to trade, tighter financial conditions, weaker business and consumer confidence, and heightened policy uncertainty will all have marked adverse effects on growth prospects if they persist.”

Goldman Sachs and BNP Paribas forecast that U.S. GDP will expand 1.5 percent this year.

“This weakening from the effect of uncertainty and tariff shocks on demand and the general macroenvironment prompted a return of the recession risk,” BNP economists said in a June 2 note.

Siebert Financial CIO Mark Malek believes that, whatever happens on the data front in the coming months, the short-term numbers are “masking long-term structural challenges.”

“The economy is somewhat of a living organism. It does not sit still. It adjusts; it reacts… it changes over time,” Malek said in a note emailed to The Epoch Times.

“Unfortunately, we are all hoping for a short-term solution to a long-term challenge. Whipping global trade into shape is complex and it takes time.”

Consumer Sentiment and Spending

Uncertainty has been the key theme since the beginning of the year, resulting from the president’s sweeping tariff agenda. This has led to various surveys spotlighting deteriorating consumer sentiment and business outlooks.

The latest report to highlight companies’ ongoing concerns was the Fed’s Beige Book, a survey published eight times a year that provides a snapshot of economic conditions across the 12 central bank districts of the United States.

Over the past several weeks, business activity has stalled, with employers postponing their hiring plans and companies adopting the Fed’s wait-and-see approach.

However, according to Chris Zaccarelli, the CIO for Northlight Asset Management, the recent Beige Book “was a little bit of a glass half full report.” Although it emphasized growing inflation concerns and possible hits to profits, the report also stated “that consumer spending has continued to hold up.”

People shop at a grocery store in New York City on March 12, 2025. Samira Bouaou/The Epoch Times

“Likewise, it noted that layoffs weren’t widespread, but that there was less demand for labor, hiring freezes, and generally less hours worked,” Zaccarelli said in a note emailed to The Epoch Times.

The next major economic report, which will help determine the health of the economy, is the May non-farm payroll data.

Economists are penciling in 130,000 new jobs and an unemployment rate of 4.2 percent. The Bureau of Labor Statistics will release the employment numbers on June 6.

But while jobs will be critical, trade will continue to be top of mind, says Joe Mazzola, a strategist at Charles Schwab.

“While jobs remain center stage, so does trade after President Trump posted that China’s President Xi is difficult to make a trade deal with. There’s still no verification that the two will talk this week, and Trump officially doubled U.S. tariffs on steel and aluminum to 50 percent,” Mazzola said in a note.

The 50 percent tariffs on steel and aluminum imports went into effect on June 4.