US economic growth for the second quarter was revised downward on Wednesday as declines in business investment outweighed upward revisions to state, local, and consumer spending.
The Bureau of Economic Analysis's revised estimate of second quarter US gross domestic product (GDP) showed the economy grew at an annualized pace of 2.1% during the period, lower than the initial estimate from July of 2.4% growth. Economists surveyed by Bloomberg had expected the second estimate to remain steady from the first reading.
Despite the revision, the pace of second quarter economic growth is still higher than the 2% seen in the first quarter.
"Overall, there were not any major revisions to the underlying GDP components compared to the first estimate of output, and today's data do not materially change our overall view of the economy," Wells Fargo economist Shannon Seery wrote in a note to clients on Wednesday. "Incoming data for Q3 show an economy that has continued to expand, but with signs of some moderation. We continue to expect the economy to gradually slow during the second half of the year."
The GDP revision downward is one of several economic data points indicating slowing growth in the economy since Federal Reserve Chair Jerome Powell warned the central bank was monitoring signs the US economy "may not be cooling as expected" during his speech at the Jackson Hole Economic Symposium on Aug. 25.
Powell added: "Additional evidence of persistently above-trend growth could put further progress on inflation at risk and could warrant further tightening of monetary policy."
Read more: What the latest Fed rate hike plan means for bank accounts, CDs, loans, and credit cards
New data from ADP released Wednesday showed private employers added 177,000 jobs in August, a significant slowdown from the 371,000 jobs added in July. Signs of cooling in the labor market coincide with other recent releases that showed job openings in July fell below 9 million for the first time in more than two years and a consumer confidence survey revealed Americans are feeling more wary about the labor market.
Stocks jumped after both data releases on Tuesday morning as investor bets on the Fed holding rates steady at its September meeting jumped from 78% on Monday to 90% on Wednesday morning.
EY senior economist Lydia Boussour believes Powell's comments from Jackson Hole indicate the second quarter GDP revision downward could be a good sign for those hoping the Federal Reserve is done hiking interest rates.
"The downgrade to Q2 GDP growth will be welcomed by Fed officials and reinforces our expectations for a policy pause in September, but the door will remain open to further tightening," Boussour wrote in a note to clients on Wednesday.
A large indicator on whether the economy is cooling awaits investors later this week. Friday's August jobs report release is expected to show there were 168,000 jobs added to the economy last month, with the unemployment rate forecast to remain flat at 3.5%.
Josh Schafer is a reporter for Yahoo Finance.
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