Economy grew 2.3 percent in first quarter; wages up

The U.S. economy continued to grow at a moderate pace in the first months of the year — surprising economists who'd predicted a major slowdown.

GDP grew at an estimated 2.3 percent annualized rate, the Commerce Department reported Friday. That's a slight slowdown from the 2.9 percent rate estimated for the prior quarter. 

Drops in consumer spending, exports and spending by state and local governments were behind the lower growth rate, the government said. Consumer spending waned to its weakest performance in five years, following a blowout holiday spending season. 

It's common for economic growth to slow in the first quarter and then accelerate later in the year. Still, the January-March increase was better than expected: Economists had foreseen a 2 percent annualized rate. In the current quarter, economists expect growth to surpass 3 percent.

The Trump administration has set a goal of 3 percent annual GDP growth. The Federal Reserve expects growth of 2.7 percent in 2018. 

Separately, Labor Department data for the quarter showed that private-sector workers received their biggest pay raise in 11 years.

Wages and salaries in the private sector rose 1 percent from the previous quarter. That's the biggest gain since the first quarter of 2007, before the Great Recession began. 

The gain was boosted partly by healthy year-end commissions that are typically paid to sales workers at the beginning of the year. The uptick is a sign that the tight labor market is finally boosting workers' pay. In the past year, private-sector wages rose 2.9 percent, the healthiest increase since the third quarter of 2008. 

The unemployment rate is at a 17-year low of 4.1 percent and employers are hiring at a healthy clip.