US economy expands at rate of 3.5 percent

The economy grew at a solid 3.5 percent pace from July to September, fueled by a rise in government spending and an improvement in the trade deficit.

The expansion in the third quarter follows a 4.6 percent rebound in the April-June period, the Commerce Department said Thursday.

With just a few days to go until the midterm elections, the economy continues to chug along, with many indicators, including jobs growth and consumer confidence, signaling better days ahead for the economy.

"There's nothing in these GDP numbers to change the narrative that the recovery kept motoring along in Q3," economist Justin Wolfers said on Twitter. 

Jason FurmanJason FurmanTrump signals jobs data before report's release, breaking with protocol Overnight Finance: Unemployment rate lowest since 2000 | Trump asks China to slash trade deficit 0B by 2020 | NJ gov signs bill to skirt GOP tax law provision Economy adds 164K jobs in April, unemployment lowest since 2000 MORE, chairman of the Council of Economic Advisers, said Thursday that economic growth was strong and is "consistent with a broad range of other indicators showing improvement in the labor market, rising consumer sentiment, increasing domestic energy security and continued low health cost growth.”

"Nevertheless, more must still be done to boost growth both in the United States and around the world by investing in infrastructure, manufacturing, and innovation,” Furman said.

The report is the first of three estimates the government will work up for the quarter. The next one is due out Nov. 25.

The economy has picked up steam in the past six months after contracting 2.1 percent in the January-March quarter because of severe winter weather.

The report shows that federal government spending increased 10 percent in the third quarter after dropping 0.9 percent in the second.

Defense spending surged to a 16 percent rate.

Meanwhile, exports outpaced imports with growth of 7.8 percent — slower than the 11.1 percent increase in the second quarter — as imports fell 1.7 percent following an 11.3 percent increase from April-June.

Wolfers, a senior fellow at the Peterson Institute for Economics, said the weakest spot in growth report is that net exports contributed 1.3 of the 3.5 percent growth "and strong net exports this quarter doesn't repeat next."

Government spending and exports helped bolster growth amid a dip in consumer spending, which is closely watched as an indicator of the economy's health. 

Spending, which accounts for about 70 percent of economic activity, increased 1.8 percent in the July-September period compared with a 2.5 percent gain in the second quarter.

Meanwhile, a separate report on Thursday showed that the monthly average for jobless claims fell to 281,000, the lowest level since May 2000. 

The labor market's improvement over the past six months put a brighter spin on Wednesday's report from the Federal Reserve. 

Jobs growth is averaging more than 200,000 positions a month. The next report is due out next Friday. 

The central bank is ending its six-year bond buying program this month on better economic news, especially the labor market's growth.

"Labor market conditions improved somewhat further, with solid job gains and a lower unemployment rate,” the Fed said.

The Fed also suggested that while the labor market has plenty of room to grow, the pervasive slack is beginning to fade.

"A range of labor market indicators suggests that underutilization of labor resources is gradually diminishing," the central bank said.