Trends
The overall economy continued to expand and create new jobs in the second quarter of 2005. Real gross domestic product grew at an annualized rate of 3.4 percent - the ninth consecutive quarter of real GDP growth over three percent. The components of GDP, though, showed mixed results from the first to the second quarter of this year. Real personal consumption and real exports were higher, but real gross private fixed investment was slightly lower. Importantly, industrial production and proprietors' income have both continued to grow throughout 2005.
Consumers and small businesses remained upbeat as the second quarter ended. Both the National Federation of Independent Business's Optimism Index and the University of Michigan's Consumer Sentiment Survey were higher in June than in April.
The unemployment rate has dipped to 5.0 percent - its lowest point since September 2001. The U.S. economy has created 1.1 million net new jobs so far this year, with 584,000 of those stemming from the second quarter. The four industries with the largest percentage of small business employment - construction, other services, wholesale trade, and leisure and hospitality - added 210,200 net new jobs during the quarter. Every industry with the exception of manufacturing gained employment between March and June. Both incorporated and unincorporated self-employment has remained relatively flat during the quarter, according to the Current Population Survey.
Interest rates continued to increase, reflecting the Federal Reserve's efforts to stabilize a growing economy. Comparing the second quarters of last year to this year, variable rates for small loans of less than $100,000, for instance, increased from 4.2 to 5.7 percent and from 6.1 to 7.1 percent for short-term loans of less than one month and one month to less than year, respectively. Other rates rose similarly. According to the Senior Loan Officer's Survey, though, small firm lending remains strong. Meanwhile, venture investment deals grow at a consistent pace, $5.8 billion in the second quarter.
The price of West Texas crude reached $56.26 a barrel in June, an increase of nearly $2 from March and significantly higher than the average in previous years. Despite high energy costs, however, consumer and producer prices rose only modestly in the second quarter. In the labor market, private sector wages and salaries have risen 1.2 percent in the first two quarters of this year, whereas private sector benefits have jumped 1.9 percent.
