The 2025 U.S. economy was a tale of resilience vs. affordability

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The U.S. economy was buffeted by waves of stormy factors in 2025 including erratic trade policy changes, pesky inflationary pressures and a jobs market that has been mostly in decline for the past 12 months.

But while there were plenty of worrisome data points along the way, U.S. investment markets, buoyed in large part by booming artificial intelligence investment, are nearing the end of a stellar year. And the most powerful economic driver, consumer spending, has remained strong in spite of sour sentiment and overall economic conditions that are challenging family budgets.

The Federal Reserve ended the year with a series of cuts to its benchmark interest rate, aiming to bolster the lagging employment sector as U.S. unemployment hit its highest level in four years alongside an inflation report that came in lower than expected but was widely questioned thanks to data collection limited by the government shutdown.

The economic prospects of 2026 are, for the moment, hazy at best, but here are the issues that drove the biggest economic news stories of the past year.

President calls himself ‘Tariff Man’

President Donald Trump made it clear during his 2024 campaign that, should he regain office, he was set to fundamentally rework U.S. international trade policy. The president made his biggest move on fulfilling those promises in April when he announced a raft of reciprocal tariffs ranging from 10% to 50% that targeted dozens of trading partners. Trump argued that addressing perceived trade imbalances would help drive manufacturing investment back to the U.S., bring down prices and bolster the jobs market. Most of those rates were later walked back, but not before U.S. and global investment markets lost some $2.5 trillion in value.

In May, former congressman and Trump insider Mike Pompeo spoke at a Utah trade summit, noting the interdependency of the world’s individual economies have been a boon for the U.S. business community and the country as a whole.

“The global economy is deeply interconnected,” Pompeo said. “That’s important and creates enormous value for the United States of America … we’re not going to make everything here.”

Pompeo also offered some insight as a past member of the president’s cabinet, noting he believes Trump will continue to wield tariff policy as a tool to address perceived issues with other countries.

“As for President Trump and his tariff policy … you should know he believes it with all his heart, rightly or wrongly,” Pompeo said. “He calls himself ‘Tariff Man.’ Does that leave any doubt in your mind? He believes that bilateral trade deficits in goods are bad and no one is going to convince him otherwise.”

A report released earlier this week by the University of Pennsylvania’s Wharton School finds the effective overall U.S. tariff rate as of September was 10.65%, up from 2.2% in January. Among major trading partners, China faces the highest tariffs, with effective rates reaching 37.1% in September, according to the Wharton analysis. Steel and aluminum products are the most heavily tariffed product category at 40%, followed by automobiles at 18.2%.

The waning U.S. jobs market

So far in 2025, U.S. employers have added less than a half million new jobs, pacing far behind the 1.6. million positions added in 2024. According to the latest federal reporting, unemployment hit 4.6% in November, the highest since September 2021. U.S. unemployment stood at 4% in January and, except for a 0.1% dip in June, has been ticking up steadily throughout the year.

Businesses grew employee roles by 64,000 in November but October saw a loss of 105,000 jobs, mostly driven by reductions in the federal government workforce.

The latest Labor Department release also included downward revisions to previously reported jobs numbers with August’s job losses adjusted from 4,000 to 26,000 and September’s job gains lowered from 119,000 to 108,000.

The past six months have seen net U.S. job losses in June, August and October and some economists, including Federal Reserve chairman Jerome Powell, believe the overall losses this year may be even greater.

“The U.S. economy is in a jobs recession,” Heather Long, chief economist at Navy Federal Credit Union, told CNBC earlier this month. “The nation has added a mere 100,000 in the past six months. The bulk of those jobs were in health care, an industry that is almost always hiring due to America’s aging population.”

What does it all cost?

U.S. inflation kicked off the year at 3% and moved down in steady increments before hitting 2.3% in April. Since then, the Consumer Price Index has been headed mostly up with the exception of the most recent reading, which has been called into questions thanks to truncated data collection that was a result of the 43-day federal government shutdown.

Polling conducted in October by the Deseret News in partnership with the University of Utah’s Hinckley Institute of Politics offered some insight into the kind of impacts rising prices are having on household budgets.

The statewide survey of registered voters found a majority of Utahns are living paycheck-to-paycheck and 1 in 4 have even more serious struggles.

When asked to choose the best description of their current financial situation, 51% of respondents said they were managing to cover expenses but faced difficulty saving money and 25% reported they are financially strained and struggling to cover basic expenses. Less than a quarter of poll participants, 22%, say they’re financially secure and comfortably covering their living expenses.

When asked to identify their biggest financial concerns of the moment, 23% of respondents said it was saving for the future, including putting away money for retirement; 19% listed paying for everyday expenses and 15% identified either managing debt or covering housing costs as their most significant financial challenge. Medical or health care issues are the top issue for 12% of poll participants and 8% said job security/income stability was their biggest worry.

In a Deseret News interview, Heber City resident Emma Mendez-Edwards said she and her husband, both college-educated professionals, were facing mounting financial pressures amid rising inflation and government shutdown conditions.

“The cost of groceries and utilities are continuing to rise,” she said. “With the new administration, the ending of the SAVE program (a federal program which helped limit the size of student loan payments), that’s also a concern for us at the moment with increasing student loan monthly costs.”

Consumer spending is king, but not everyone is wearing a crown

The final performance report on the overall U.S. economy arrived just before Christmas, surprising most economists with an unexpectedly upbeat reading.

U.S. gross domestic product, a measure that captures the total value of goods and services produced in a specified time period, grew by 4.3% in the July-September period, according to the Dec. 23 Commerce Department report, easily surpassing the 3.2% quarterly growth rate most economists were expecting.

The primary driver of third quarter growth, per the report, was consumer spending, which rose 3.5% over the period, well ahead of the second quarter’s 2.5% uptick. Export volumes and government spending also helped push the GDP measure higher and corporate profits shot up by $166.1 billion, or 4.2%, compared with a gain of $6.8 billion in the second quarter, according to the new Commerce Department data.

While the economic growth spurt is a positive measure of how the U.S. economy is functioning, the report included a less cheery inflation rate with average prices on consumer goods and services up 2.8% over the three-month period, jumping from the second quarter’s 2.1% rate.

Consumer spending drives an outsize portion of the U.S. economy, accounting for some two-thirds of overall GDP. And it was reflected in the third quarter GDP report with the uptick in consumer spending the main factor behind the period’s growth.

But economists have been highlighting that a closer look at the demographics of consumer spending reveals a profound division has emerged in which wealthier Americans are in solid economic stead while lower income households are on budget watch amid rising costs.

That dynamic, identified as the K-shaped economy, represents a broader separation of the haves and have-nots in the current economic climate, where higher income Americans, represented in the upper arm of the K, are prospering as their wealth, vested largely in stock and real estate holdings, is on the rise. Most U.S. households, however, are tracking with the downward K arm as inflation, rising housing costs and slowing wage growth pushes lower level earners into more dire economic straits.

In a recent Deseret News breakdown of the workings of the K-shaped economy, Mark Zandi, chief economist for Moody’s Analytics, identified the household income line separating those in the upper and lower arms of the K-shaped economy as roughly $175,000.

If your earnings are over that threshold, as are around 20% of U.S. households, your fiscal health is likely solid and moving in a positive direction. But the 80% of households that fall under that figure are facing diminishing prospects and more serious challenges amid the current economy.