At a Glance
- U.S. economy grew 4.3% annually in the July-September 2025 quarter.
- Unemployment rose to 4.6% by November, the highest in four years.
- Inflation held at 2.8% in September, up from 2.7% in December 2024.
Why it matters: Consumers see strong growth, but job gains lag and prices stay high, affecting household spending power.
The 2025 U.S. economy shows a puzzling mix: solid growth and consumer spending, yet hiring slows, unemployment climbs, and inflation stays stubbornly above the Fed’s target.
Growth Fueled by Consumer Spending
Growth accelerated after a weak start, with consumer spending-mostly from higher-income households-pushing the economy to a 4.3% annual pace in the July-September quarter, the best in two years.
Key drivers:
- Strong consumer spending
- Lower tariffs after early-year duties
- Resilience of manufacturing output
Hiring Stalls While Unemployment Rises
Despite growth, hiring stayed weak. Job gains weakened after President Trump’s tariff announcement, and the economy shed jobs in June, August, and October.
- Unemployment rose from 4.0% in January to 4.6% in November.
- 105,000 jobs were cut in October, mostly from federal workers.
- Excluding government, businesses added an average of 75,000 jobs per month in the last quarter, up from 13,000 in the prior quarter.
Christopher Waller stated:
> “This year could turn out to be a better year. Now whether that pulls the labor market along with it, I certainly hope it does.”
Stephen Stanley noted:
> “2026 begins at a time when it is hard to say how 2025 ended.”
Inflation Holds Steady
The Fed’s preferred inflation measure ticked higher to 2.8% in September from 2.7% in December 2024, while the CPI cooled in November but was distorted by the shutdown.
| Measure | December 2024 | September 2025 |
|---|---|---|
| Fed Preferred | 2.7% | 2.8% |
| CPI (Nov) | 2.6% | 2.5% |
*Data affected by shutdown.
- Inflation remains above the Fed’s 2% target.
- Some economists worry early-2026 price hikes could worsen inflation.
- Most expect a gradual cooling toward the target.
Key Takeaways
- The economy grew strongly but job gains lagged.
- Unemployment climbed to 4.6%, the highest in four years.
- Inflation stayed near 2.8%, above the Fed’s goal.
The 2025 economic picture shows growth but uneven labor and price dynamics, leaving policymakers and workers navigating a complex landscape.
