{"id":12881,"date":"2026-01-04T17:03:21","date_gmt":"2026-01-04T17:03:21","guid":{"rendered":"https:\/\/readtrends.com\/en\/odd-economy-2025-2026\/"},"modified":"2026-01-04T17:03:21","modified_gmt":"2026-01-04T17:03:21","slug":"odd-economy-2025-2026","status":"publish","type":"post","link":"https:\/\/readtrends.com\/en\/odd-economy-2025-2026\/","title":{"rendered":"Last year\u2019s odd economy in five charts, and what to watch for in 2026 &#8211; AP News"},"content":{"rendered":"<article>\n<p>Lead: In 2025 the U.S. economy produced a string of contradictions: growth accelerated even as hiring softened, inflation stayed above target and unemployment rose, leaving policymakers and markets with mixed signals about momentum going into 2026. A six-week federal government shutdown last fall disrupted data collection and clouded the picture for economists and the Federal Reserve. Some forecasters point to large tax refunds tied to President Donald Trump\u2019s tax legislation as a potential early boost this year, while others raise the prospect of a \u201cjobless expansion\u201d if automation and artificial intelligence lift output without proportionate hiring. The central question for 2026 is whether stronger GDP will translate into broader labor-market gains or whether the 2025 pattern persists.<\/p>\n<h2>Key Takeaways<\/h2>\n<ul>\n<li>GDP growth rebounded to a 4.3% annualized pace in the July\u2013September quarter, the largest gain in two years, driven primarily by consumer spending.<\/li>\n<li>Hiring weakened through 2025: the unemployment rate rose from 4.0% in January to 4.6% in November; December data were scheduled for release on Jan. 9, 2026.<\/li>\n<li>Inflation (PCE, the Fed\u2019s preferred measure) ticked up to 2.8% in September from 2.7% in December 2024, showing little improvement last year.<\/li>\n<li>October\u2019s payroll data showed a reduction of 105,000 jobs largely tied to a federal workforce purge, but private-sector three-month job gains averaged about 75,000 through November versus 13,000 in the prior three months.<\/li>\n<li>Treasury tariffs and an early-year import surge depressed output during two quarters; economists estimate the six-week government shutdown shaved roughly one percentage point off late-year growth.<\/li>\n<li>Hiring gains were concentrated in health care, restaurants and hotels, and (outside October) government, while many large private industries shed jobs.<\/li>\n<li>Rising inequality \u2014 wealthier households accounting for a bigger share of spending \u2014 means headline growth can mask stress among lower-income families (a \u201cK-shaped\u201d pattern).<\/li>\n<\/ul>\n<h2>Background<\/h2>\n<p>The economy began 2025 with uneven momentum. Early-year tariff announcements encouraged a wave of imports as firms and buyers accelerated purchases ahead of planned duties, which temporarily distorted trade balances and subtracted from measured GDP in the first quarter. After that disruption, consumer spending\u2014disproportionately supported by higher-income households\u2014helped growth accelerate into the summer months. Policymakers and markets therefore faced a sequence of sharp swings tied to policy shocks rather than consistent demand trends.<\/p>\n<p>Two policy forces shaped the year\u2019s data and the outlook. First, the Trump administration\u2019s tariff actions and subsequent partial rollbacks and delays created uncertainty that discouraged some hiring and investment. Second, large tax changes that produce sizable refunds for many taxpayers are expected to lift incomes early in 2026 and may spur activity. Meanwhile, a drawn-out six-week government shutdown in the fall interrupted routine statistical collection, complicating real-time readings of employment, prices and output.<\/p>\n<h2>Main Event<\/h2>\n<p>After a weak start, GDP growth surged in the July\u2013September quarter to a 4.3% annualized rate, the strongest two-year performance driven mainly by robust consumer outlays. That gain followed the first-quarter contraction tied to an import surge as businesses front-loaded purchases before tariffs took effect. Economists forecast that fourth-quarter growth was positive but trimmed by the shutdown\u2019s disruption, which likely reduced measured output by roughly one percentage point.<\/p>\n<p>Despite stronger output, hiring slackened across much of 2025. Employers reported job losses in June, August and October, and overall monthly payrolls were lower than in prior years. The unemployment rate rose from 4.0% in January to 4.6% in November, the highest in four years, with December figures set for release on Jan. 9, 2026. Firms cited tariff uncertainty and the need to evaluate new technologies\u2014especially AI\u2014as reasons for holding back on hiring.<\/p>\n<p>October\u2019s headline loss of 105,000 jobs reflected a large drop in federal employment connected to an administration-driven personnel purge that largely took effect that month. Excluding government, private employers added an average of about 75,000 jobs per month in the three months ending in November, up sharply from a three-month average of roughly 13,000 ending in August. However, this private-sector hiring was concentrated in a few areas\u2014health care, restaurants and hotels\u2014while many major private industries contracted.<\/p>\n<h2>Analysis &#038; Implications<\/h2>\n<p>One possible interpretation of 2025\u2019s pattern is a temporary divergence: GDP can grow for a spell without commensurate hiring if consumers\u2014especially higher-income households\u2014continue spending. If tax refunds and reduced tariff uncertainty prompt broader demand in early 2026, some firms may respond by increasing payrolls. That outcome underlies more optimistic forecasts from some economists and officials.<\/p>\n<p>A second, less benign possibility is a longer-term change in the linkage between output and employment. Widespread adoption of AI and related automation could enable firms to expand production without proportional labor additions, producing a \u201cjobless expansion.\u201d If true, productivity and output might rise while wage growth and lower-income employment stagnate, reinforcing the K-shaped distributional gap noted by many researchers.<\/p>\n<p>For the Federal Reserve, these dynamics complicate policy. The central bank seeks a balance between easing too soon\u2014risking renewed inflation\u2014and tightening into a labor-market downturn. With PCE inflation still above 2% and data noise from the shutdown, the Fed faces unusually uncertain signals as it considers its 2026 stance. If inflation proves sticky into early 2026, officials may keep policy tighter for longer; if labor-market slack widens, they could pivot.<\/p>\n<h2>Comparison &#038; Data<\/h2>\n<figure>\n<table>\n<thead>\n<tr>\n<th>Series<\/th>\n<th>Key 2025 value<\/th>\n<\/tr>\n<\/thead>\n<tbody>\n<tr>\n<td>GDP (Q3 annualized)<\/td>\n<td>4.3%<\/td>\n<\/tr>\n<tr>\n<td>Unemployment (Jan \u2192 Nov)<\/td>\n<td>4.0% \u2192 4.6%<\/td>\n<\/tr>\n<tr>\n<td>PCE inflation (Sep)<\/td>\n<td>2.8%<\/td>\n<\/tr>\n<tr>\n<td>Payroll change (Oct)<\/td>\n<td>-105,000 (federal purge)<\/td>\n<\/tr>\n<tr>\n<td>Private 3\u2011month avg (ended Nov)<\/td>\n<td>~75,000\/month<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<\/figure>\n<p>The table highlights how headline growth and labor metrics diverged in 2025. GDP\u2019s midyear rebound contrasts with soft payroll gains and a rising unemployment rate. The October drop in jobs is an important outlier driven by federal staffing changes rather than broad private-sector layoffs; excluding government, private hiring showed modest improvement into the autumn months but remained uneven across industries.<\/p>\n<h2>Reactions &#038; Quotes<\/h2>\n<p>Economists offered cautious optimism that better growth could translate into stronger hiring in 2026, while stressing the uncertainty introduced by data gaps and structural change. Stephen Stanley of Santander noted the difficulty of drawing firm conclusions until data fully normalize after the shutdown.<\/p>\n<blockquote>\n<p>&#8220;2026 begins at a time when it is hard to say how 2025 ended.&#8221;<\/p>\n<p><cite>Stephen Stanley, Santander (investment bank)<\/cite><\/p><\/blockquote>\n<p>Federal Reserve officials emphasized the same ambiguity. Several Fed speakers said they hope growth will pull the labor market along, but they warned that the path depends on how firms respond to tariffs, tax-driven refunds and new technologies. One governor summarized business feedback about automation and hiring caution.<\/p>\n<blockquote>\n<p>&#8220;AI, AI, AI, AI \u2014 that is all I have heard since this summer.&#8221;<\/p>\n<p><cite>Christopher Waller, Federal Reserve governor<\/cite><\/p><\/blockquote>\n<p>Business groups and worker advocates offered differing takes: employers cite uncertainty and technology choices for slower hiring, while labor advocates point to persistent affordability pressures and concentrated sector gains as signs that many workers remain vulnerable.<\/p>\n<h2>\n<aside>\n<details>\n<summary>Explainer: What is a &#8220;jobless expansion&#8221; and why PCE matters<\/summary>\n<p>A &#8220;jobless expansion&#8221; describes a scenario where output grows but employment does not rise proportionately, often because productivity improvements or automation allow firms to produce more with the same or fewer workers. The Fed watches the Personal Consumption Expenditures (PCE) price index rather than the Consumer Price Index (CPI) because PCE better captures changing consumption patterns and services prices. Data collection interruptions, such as the recent six-week government shutdown, can bias both price and employment series by limiting coverage and delaying surveys, making short-term readings noisier than usual.<\/p>\n<\/details>\n<\/aside>\n<\/h2>\n<h2>Unconfirmed<\/h2>\n<ul>\n<li>Whether AI adoption will produce a sustained jobless expansion across the whole economy remains uncertain and depends on firm-level investment and worker retraining, not yet fully measurable.<\/li>\n<li>The precise magnitude of the shutdown\u2019s effect on fourth-quarter GDP (estimated around one percentage point) is an economist estimate and may be revised as delayed data are published.<\/li>\n<li>The extent to which tax refunds tied to 2025 legislation will boost consumer spending in early 2026 is a projection contingent on household saving and spending behavior.<\/li>\n<\/ul>\n<h2>Bottom Line<\/h2>\n<p>The central takeaway is that 2025 exposed an economy that can register solid headline growth while masking weakness in job creation and distributional outcomes. Key near-term variables to watch in 2026 are payrolls excluding government, the unemployment rate trends, and early-year consumer spending after tax refunds clear households&#8217; accounts. Observers should also track monthly PCE inflation for evidence of persistent price pressures that could alter Fed decisions.<\/p>\n<p>Longer term, policymakers and businesses will need to confront structural questions about how AI and other technologies change the relationship between output and employment, and whether fiscal and training policies can channel growth into broader job gains. For now, the interplay of tariffs, tax policy, data lags from the shutdown and technological change makes 2026 a year for careful monitoring rather than confident prediction.<\/p>\n<h2>Sources<\/h2>\n<ul>\n<li><a href=\"https:\/\/apnews.com\/article\/inflation-economy-trump-jobs-71f3d52f0fd63b34f4a8c59c60ffbe20\" target=\"_blank\" rel=\"noopener\">AP News (news report)<\/a><\/li>\n<li><a href=\"https:\/\/www.bls.gov\/\" target=\"_blank\" rel=\"noopener\">Bureau of Labor Statistics (official employment and payroll data)<\/a><\/li>\n<li><a href=\"https:\/\/www.federalreserve.gov\/\" target=\"_blank\" rel=\"noopener\">Federal Reserve statements and speeches (official\/monetary authority)<\/a><\/li>\n<\/ul>\n<\/article>\n","protected":false},"excerpt":{"rendered":"<p>Lead: In 2025 the U.S. economy produced a string of contradictions: growth accelerated even as hiring softened, inflation stayed above target and unemployment rose, leaving policymakers and markets with mixed signals about momentum going into 2026. A six-week federal government shutdown last fall disrupted data collection and clouded the picture for economists and the Federal &#8230; <a title=\"Last year\u2019s odd economy in five charts, and what to watch for in 2026 &#8211; AP News\" class=\"read-more\" href=\"https:\/\/readtrends.com\/en\/odd-economy-2025-2026\/\" aria-label=\"Read more about Last year\u2019s odd economy in five charts, and what to watch for in 2026 &#8211; AP News\">Read more<\/a><\/p>\n","protected":false},"author":1,"featured_media":12877,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"rank_math_title":"Odd 2025 economy: five charts, 2026 outlook | Insight Brief","rank_math_description":"In 2025 the U.S. posted strong GDP yet weak hiring and elevated inflation. This analysis explains the contradictions, what drove them and the key indicators to watch in 2026.","rank_math_focus_keyword":"economy, 2025, jobs, inflation, AI","footnotes":""},"categories":[2],"tags":[],"class_list":["post-12881","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-top-stories"],"_links":{"self":[{"href":"https:\/\/readtrends.com\/en\/wp-json\/wp\/v2\/posts\/12881","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/readtrends.com\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/readtrends.com\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/readtrends.com\/en\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/readtrends.com\/en\/wp-json\/wp\/v2\/comments?post=12881"}],"version-history":[{"count":0,"href":"https:\/\/readtrends.com\/en\/wp-json\/wp\/v2\/posts\/12881\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/readtrends.com\/en\/wp-json\/wp\/v2\/media\/12877"}],"wp:attachment":[{"href":"https:\/\/readtrends.com\/en\/wp-json\/wp\/v2\/media?parent=12881"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/readtrends.com\/en\/wp-json\/wp\/v2\/categories?post=12881"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/readtrends.com\/en\/wp-json\/wp\/v2\/tags?post=12881"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}