Research
February 07, 2025
Economic outlook
Consumers will likely continue to drive growth in the economy in 2025.
The U.S. economy remained resilient in 2024, defying recession forecasts and demonstrating its strength despite facing significant challenges. This growth was primarily fueled by steady consumer spending, which allowed employers to add 2 million jobs to their payrolls.
As the calendar turned to 2025, there was a renewed sense of optimism that consumers will continue to drive growth in the economy. However, the business cycle is not dead, and eventually there will be sand in the gears of this extended economic expansion.
While an economic slowdown in the year ahead is probable, it doesn’t mean that a recession is inevitable. Given its underlying strength to start the year, the expectation is for the national economy to continue expanding throughout 2025.
This article presents the latest trends in key economic indicators as well as an outlook for the year ahead. Visit this page throughout the year for the Association’s latest projections for the U.S. economy.
Labor market expansion remains intact
Although job growth was uneven in recent months, the labor market expansion showed little signs of stalling. Employers added an average of 237,000 jobs during the last 3 months, which represented the strongest 3-month moving average in nearly 2 years.
Job growth varies by state
While the national economy is more than 7.2 million jobs (or 4.7%) above pre-pandemic employment levels, some states have yet to fully recover from early-pandemic job losses. Employment levels in states like Idaho (+15%), Utah (+13%), Texas (+10%), Florida (+10%) and Montana (+10%) are well above February 2020 readings. At the other end of the spectrum, the employment base in 4 states and the District of Columbia remains below pre-pandemic readings.
Unemployment rate remains historically low
The jobless rate ticked slightly higher during the second half of 2024, but continues to suggest that the economy is at or near full employment. The national unemployment rate stood at 4.0% in January, which represented the 39th consecutive month at a level of 4.2% or lower.
9 states have jobless rates of 3% or lower
Labor market trends vary significant by state. Nine states have unemployment rates of 3% or lower – led by South Dakota (1.9%), Vermont (2.4%) and North Dakota (2.5%). Meanwhile, Nevada (5.7%), California (5.5%) and the District of Columbia (5.5%) have the highest jobless rates.
Economy projected to add 1.5 million jobs in 2025
Job growth slowed during the second half of 2024, but gains are expected to continue throughout 2025. The national economy is projected to add a net 1.5 million jobs during 2025, which would be down from the 2 million jobs added during 2024. Overall, 2025 is expected to represent the 5th consecutive year of job growth, with total gains in excess of 17.5 million jobs.
Personal income growth expected to slow in 2025
After the income support programs enacted during the pandemic ran their course, household income was buoyed by the healthy labor market. Looking ahead, wage growth is expected to continue in 2025, but decelerating employment gains will likely dampen the increase in aggregate income. Disposable personal income – a key driver of restaurant sales – is projected to increase at an inflation-adjusted rate of 1.7% in 2025. While still positive, that would be down from a stronger 2.9% gain in 2024.
Inflation is moderating
After reaching a peak of 9.1% in mid-2022 – the strongest 12-month increase in 4 decades – growth in consumer prices moderated in the months that followed. By December 2024, the 12-month inflation rate stood at 2.9%. Looking ahead, the expectation is that 12-month inflation will continue trending lower and approach the Federal Reserve’s 2% target level by the end of 2025. That would translate to a 2.4% CPI increase on an average annual basis, the smallest annual gain since 2020 (1.2%).
Economy will expand at a moderate pace in 2025
Overall, the expectation is that the U.S. economy will continue to grow at a moderate pace in 2025. Real Gross Domestic Product (GDP) – the value of goods and services produced in the United States – is projected to increase at a 2.4% rate in 2025. While that would be down from the gains of nearly 3% in both 2023 and 2024, it still represents meaningful growth at this stage of the economic expansion.
As the calendar turned to 2025, there was a renewed sense of optimism that consumers will continue to drive growth in the economy. However, the business cycle is not dead, and eventually there will be sand in the gears of this extended economic expansion.
While an economic slowdown in the year ahead is probable, it doesn’t mean that a recession is inevitable. Given its underlying strength to start the year, the expectation is for the national economy to continue expanding throughout 2025.
This article presents the latest trends in key economic indicators as well as an outlook for the year ahead. Visit this page throughout the year for the Association’s latest projections for the U.S. economy.
Labor market expansion remains intact
Although job growth was uneven in recent months, the labor market expansion showed little signs of stalling. Employers added an average of 237,000 jobs during the last 3 months, which represented the strongest 3-month moving average in nearly 2 years.
Job growth varies by state
While the national economy is more than 7.2 million jobs (or 4.7%) above pre-pandemic employment levels, some states have yet to fully recover from early-pandemic job losses. Employment levels in states like Idaho (+15%), Utah (+13%), Texas (+10%), Florida (+10%) and Montana (+10%) are well above February 2020 readings. At the other end of the spectrum, the employment base in 4 states and the District of Columbia remains below pre-pandemic readings.
Unemployment rate remains historically low
The jobless rate ticked slightly higher during the second half of 2024, but continues to suggest that the economy is at or near full employment. The national unemployment rate stood at 4.0% in January, which represented the 39th consecutive month at a level of 4.2% or lower.
9 states have jobless rates of 3% or lower
Labor market trends vary significant by state. Nine states have unemployment rates of 3% or lower – led by South Dakota (1.9%), Vermont (2.4%) and North Dakota (2.5%). Meanwhile, Nevada (5.7%), California (5.5%) and the District of Columbia (5.5%) have the highest jobless rates.
Economy projected to add 1.5 million jobs in 2025
Job growth slowed during the second half of 2024, but gains are expected to continue throughout 2025. The national economy is projected to add a net 1.5 million jobs during 2025, which would be down from the 2 million jobs added during 2024. Overall, 2025 is expected to represent the 5th consecutive year of job growth, with total gains in excess of 17.5 million jobs.
Personal income growth expected to slow in 2025
After the income support programs enacted during the pandemic ran their course, household income was buoyed by the healthy labor market. Looking ahead, wage growth is expected to continue in 2025, but decelerating employment gains will likely dampen the increase in aggregate income. Disposable personal income – a key driver of restaurant sales – is projected to increase at an inflation-adjusted rate of 1.7% in 2025. While still positive, that would be down from a stronger 2.9% gain in 2024.
Inflation is moderating
After reaching a peak of 9.1% in mid-2022 – the strongest 12-month increase in 4 decades – growth in consumer prices moderated in the months that followed. By December 2024, the 12-month inflation rate stood at 2.9%. Looking ahead, the expectation is that 12-month inflation will continue trending lower and approach the Federal Reserve’s 2% target level by the end of 2025. That would translate to a 2.4% CPI increase on an average annual basis, the smallest annual gain since 2020 (1.2%).
Economy will expand at a moderate pace in 2025
Overall, the expectation is that the U.S. economy will continue to grow at a moderate pace in 2025. Real Gross Domestic Product (GDP) – the value of goods and services produced in the United States – is projected to increase at a 2.4% rate in 2025. While that would be down from the gains of nearly 3% in both 2023 and 2024, it still represents meaningful growth at this stage of the economic expansion.