The news: The US economy grew 3.8% YoY in Q2, the fastest pace in nearly two years, according to the Commerce Department’s latest estimate—well above the earlier 3.3% reading. A major factor was a sharp upward revision in consumer spending, to 2.5% from 1.6%.

• The stronger revisions coincided with a better-than-expected jobless claims report that showed filings dropped to 218,000, about 14,000 fewer than the previous week, per the Labor Department.
• Taken together, the data paints a mixed picture. Warning signs remain—including tepid seasonal retail hiring and weak consumer sentiment—but a sizable share of consumers are still spending, a trend that carried through July and August. That resilience underpins the Atlanta Fed’s GDPNow projection of 3.3% growth in Q3 as of September 17.

Looking ahead: Many economists expect growth to slow in Q4.

• Hiring is softening and some companies are cutting jobs. Starbucks will close 1% of its stores in the US and Canada while cutting 900 jobs, and Best Buy is laying off staff in its customer care and in-home field teams.
• A potential government shutdown could add more layoffs. The Office of Management and Budget has told agencies to prepare to permanently cut workers in programs not aligned with President Donald Trump’s priorities if funding lapses.
• Meanwhile, labor market strains are uneven. Unemployment rates for young (4.3%) and Black Americans (7.5%) are above the overall 4.3% rate, pushing many to rein in spending.

These labor challenges, combined with tariff-driven price increases, could force the economy to tap the brakes and cause consumers to think twice before opening their wallets.