At a Glance
- 2025 Q3 growth hit 4.3% while hiring slowed and unemployment rose to 4.6%
- Inflation hovered near 3% with CPI at 2.7% in Dec 2024
- A six-week shutdown and tariff swings left data clouded
- Why it matters: Mixed signals leave policymakers and businesses uncertain about 2026.
The 2025 U.S. economy delivered a surprisingly healthy growth rate, yet job gains lagged and inflation stayed stubbornly high. A government shutdown and shifting tariff policy added complexity to the data, making it hard to gauge the economy’s true trajectory.
Growth and Consumer Spending
Consumer spending, largely driven by higher-income households, lifted the economy to a 4.3% annual pace in the July-September quarter, the strongest increase in two years. The surge followed two quarters of tariff-distorted activity and a sharp import uptick in early 2025 that temporarily shrank output.
Growth likely continued into the final quarter, but the shutdown is expected to have cut output by about one percentage point.
- Tariff-related import spikes
- Consumer spending surge
- Shutdown impact on Q4 output
Hiring and Labor Market
Despite the growth, hiring remained weak after President Trump’s April tariff announcement. The economy shed jobs in June, August, and October, and unemployment climbed from 4.0% in January to 4.6% in November, the highest in four years.
Low hiring is compounded by AI adoption and tariff uncertainty, with many firms holding off on new hires.
- AI integration slows hiring
- Tariff uncertainty stalls recruitment
- Low-hire, low-fire environment
| Metric | January | November |
|---|---|---|
| Unemployment % | 4.0 | 4.6 |
| GDP growth Q3 | 4.3% | – |
Stephen Stanley said:
> “2026 begins at a time when it is hard to say how 2025 ended,”
Christopher Waller said:
> “This year could turn out to be a better year.”
Christopher Waller said:
> “AI, AI, AI, AI – that is all I have heard since this summer.”
Inflation and Tariffs
Annual inflation ticked up to 2.8% in September from 2.7% in December 2024, while the CPI cooled in November but may be distorted by the shutdown.
Political battles over affordability have made inflation a key issue in recent elections.
Some economists fear a rise in early 2026 as companies pass on tariff costs, though most expect a gradual decline toward the Fed’s 2% target.
Looking Ahead
Economists like Stephen Stanley of Santander remain cautiously optimistic, expecting hiring to rebound as tax refunds and reduced tariff uncertainty lift demand. Federal Reserve Governor Christopher Waller also hopes a stronger 2026 economy will pull the labor market along.
Key Takeaways
- 2025 growth strong at 4.3% but job gains lagged
- Inflation near 3% and CPI at 2.7% in Dec 2024
- Unemployment climbed to 4.6% in November, highest in four years
The mixed signals from 2025 leave the 2026 outlook uncertain, but a rebound in hiring could improve the labor market.
