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U.S. gross domestic product grew 1.6% in the second quarter of the year, the Commerce Department said today, July 29. That’s up from 1.5% growth in the first quarter of 2021. On an annualized basis, second-quarter growth was 6.5 percent. It is, however, well below the 8% to 8.5% projection from the most optimistic economists.

Today’s report brings the economy back to where it ws before the pandemic (adjusted for inflation.) That’s a remarkable quick rebound. After the Great Recession ended in 2009, it took two years for the economy to recover the ground that it has lost.

But the recovery now faces two tougher jobs: replacing all the growth that didn’t happen because of the pandemic and fixing problems like anemic productivity growth and soaring economic inequality that troubled the U.S. economy before the pandemic recession. Economic output is significantly below where it would be had growth continued on its pre-pandemic path. The United States has nearly seven million fewer jobs than before the pandemic. The unemployment rate for Black workers in June was 9.2%. Data from Affinity Solutions, which tracks the credit and debit card transactions of 90 million U.S. consumers, shows that recent increases in spending have been driven by high-income households. Employment among those with a high school diploma or less remains millions of jobs below that pe-pandemic levels.

Consumer spending rose 2.8% in the second quarter with spending on services particularly strong in the quarter. Personal income after taxes fell from the first quarter, when stimulus payments provided a temporary lift, but is still 6.4% above its prepandemic level after adjusting for inflation. And Americans are collectively sitting on trillions more in savings than they had before the pandemic.

What was most interesting to me about the market reaction to this GDP report is not that stock indexes rose on what could have been seen as somewhat disappointing growth, but that investors behaved as if they thought this level of growth took some risk out of stocks. The Standard & Poor’s 500 closed up 0.42% and the Dow Jones Industrial Average was ahead by a similar 0.44%. The biggest mover on the day of the domestic indexes was the mall cap Russell 2000, up 0.68%. The technology heavy NASDAQ Composite and NASDAQ 100 gained just 0.11% and 0.20%, respectively.

The CBOE S&P 500 Volatility Index (VIX) dropped for a second day in a row with today’s 3.33% retreat coming on the heels of a 5.63% drop yesterday. The move took this indicator of market worry and volatility down to 17.70. That unwinds much of the move higher in the “fear index” from the July 9 local low of 16.18 to the July 19 local high of 22.50. Maybe this market isn’t so much looking past the potentially disappointing GPD growth as being comfortable with a level of economic growth that will leave the Federal Reserve, interest rates, and inflation safely on the sidelines.