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After Quickly Expanding, The Economy Is Expected To Slow

ARI SHAPIRO, HOST:

Today's discouraging news about the pandemic comes after a spring when the U.S. economy reawakened. Vaccines were widely available, people went out to eat, and they started traveling again. In April, May and June, the U.S. economy grew by a healthy 6.5%. NPR's David Gura joins us with more. Hi, David.

DAVID GURA, BYLINE: Hey, Ari.

SHAPIRO: So what does this 6.5% number actually tell us?

GURA: Well, it tells us the size of the economy is larger than it was before the pandemic, if you adjust for inflation. And that's good news. That means the economy is now expanding. I talked to James Sweeney. He's the chief economist at Credit Suisse. And I asked him how he interprets today's numbers. Sweeney says it wasn't as big as he expected it would be, but he's still happy with it.

JAMES SWEENEY: The economy's growing strongly, and we've got more growth ahead. This is the kind of negative miss (ph) that shouldn't panic anybody.

GURA: And I'll note here, it didn't seem to panic investors on Wall Street. In fact, today the stock market once again hit some new records, Ari.

SHAPIRO: Yeah, what is driving the stock market growth over these last few months?

GURA: Yeah, the growth in the stock market and the economy - it's been consumer spending, which is a huge part of the economy. The other day, I did some anecdotal research, anecdotal reporting - stopped by maybe a dozen small businesses near me just to see how they're doing. And Melissa Ocampo (ph) is the manager of a toy store in Brooklyn. She told me things have gotten much better.

MELISSA OCAMPO: People seem to be back and running around and shopping for the kids and birthday parties and balloons.

GURA: Business has been steady, Ocampo (ph) told me, but she hopes it picks up even more. In the second quarter of this year, this transition happened, Ari. People who had been buying stuff - TVs, computers, yes, toys as well - started spending money at restaurants and on trips as vaccines became more widely available. And today's GDP data reflect that big uptick in spending, which was larger than economists expected.

SHAPIRO: And yet this week there has been such a shift, largely driven by the delta variant - new mask mandates, vaccine mandates. What does the rest of the year look like?

GURA: Yeah, economists I talked to say they expect this growth to continue, but they are seeing potential risks to the recovery. So were small businesses. What worries Melissa Ocampo at my local toy store is the pandemic and the delta variant more specifically. She is afraid of what could happen to the store and to her if sales were to slow down again or if there were another shutdown. After the store closed temporarily last spring, Ari, Ocampo managed to find another job at a supermarket.

OCAMPO: I'm like, am I going to, like - am I not going to be with, like, a job towards the end of the year, or are we in, like, what's just - it's just uncertain and scary for sure.

GURA: Now, economists don't think we'll see the kind of shutdowns we saw at the beginning of the pandemic. For one thing, almost half the population now in the U.S. is fully vaccinated.

SHAPIRO: What else is keeping small-business owners up at night?

GURA: Well, inflation for one, how prices have gone up, problems with supply chains as well - that's another issue. It's gotten harder to get the products people want because of demand, and manufacturers are having trouble getting new materials. The supply chain issues show up in today's GDP data. It was a big drag on growth in the second quarter. And one other worry among small-business owners is the jobs market.

SHAPIRO: Yeah, tell us more about that specifically.

GURA: Well, employers say it's gotten harder for them to find workers. Some of them are worried about getting sick. Then there's the lack of reliable child care. That's a big issue. Ralph Elia owns a frame shop called KC Arts. He's been in the business for about four decades. And he told me he's had trouble hiring workers, which is something he blames on expanded unemployment benefits.

RALPH ELIA: I agree with it in the beginning, if you really needed it. But at some point, they should have slowed it down or cut it off, I'm sorry to say, because we need to hire people. People need to get out and work.

GURA: And that argument is what led about two dozen states to end those expanded benefits early, Ari. They'll expire for all the remaining states in just a couple months.

SHAPIRO: NPR's David Gura, thanks for the update.

GURA: Thank you. Transcript provided by NPR, Copyright NPR.