Last year's odd economy in five charts

WASHINGTON — The economy in 2025 was filled with contradictions, as growth was healthy while hiring slowed, inflation stayed elevated and unemployment rose. Last year's odd outcomes raise a host of questions for the upcoming year: Will a growing economy eventually boost the sluggish job market? Or are last year's weak job gains a sign of a stumbling economy that could get worse? There is another uncomfortable possibility: The economy could keep growing without much hiring, as technology — particularly artificial intelligence — enables more companies to step up their production of goods and services without adding more workers, leading to a "jobless expansion." Adding to the complications, the six-week government shutdown last fall disrupted the collection and publication of economic data, leaving policymakers at the Federal Reserve with a cloudier view of the economy that will only slowly clear up this year. "2026 begins at a time when it is hard to say how 2025 ended," Stephen Stanley, chief U.S. economist at Santander, an investment bank, said in a note to clients. Sharp inequality has also meant that wealthier U.S. households account for a rising share of spending, so that even healthy growth figures mask underlying weaknesses among lower-income families — what many economists refer to as the "K-shaped" economy. Still, Stanley, like many economists, is somewhat optimistic: He expects that hiring will pick up on the back of stronger growth fueled by large tax refunds early this year, a result of President Donald Trump's tax cut legislation. Companies may also step up hiring because they face much less uncertainty this year from tariffs. This year "could turn out to be a better year," said Federal Reserve governor Christopher Waller last month. "Now whether that pulls the labor market along with it, I certainly hope it does." Here are five charts that illustrate the economy in 2025, and where it may be headed. Growth accelerated after a weak start Surveys suggest Americans have a gloomy outlook on the economy, but that hasn't kept many of them from spending at a healthy clip. Solid consumer spending — likely fueled mostly by higher-income Americans — boosted growth to a 4.3% annual pace in the July-September quarter, a much better than expected showing and the biggest increase in two years. The healthy gain followed two quarters where Trump's tariffs distorted the economy. A surge in imports in the first three months of the year caused the economy to shrink as businesses sought to bring in products from overseas ahead of the duties. Growth likely continued in the final three months of the year, but the government shutdown almost certainly weighed on output, reducing growth by one percentage point, economists forecast. Hiring stayed weak and unemployment rose Even as the economy picked up, hiring did not — in fact job gains weakened after Trump's announcement of sweeping tariffs in early April, which he dubbed "Liberation Day." The economy even shed jobs in June, August, and October. The unemployment rate, meanwhile, rose from 4% in January to 4.6% in November, highest in four years. December's figures will be released Jan. 9. There were several reasons hiring likely slowed: The uncertainty around tariffs, which Trump imposed, then in some cases lowered or removed, or delayed, led many companies to put hiring on hold. Still, layoffs remain low, in what has been a "low-hire, low-fire" job market. At the same time, the ongoing adoption of artificial intelligence may have led many firms to hold off on adding workers, as they sort out what the new technology can do for them. "AI, AI, AI, AI -- that is all I have heard since this summer," Waller said last month, referring to comments he has heard from business executives explaining why they are reluctant to add jobs. Still, there are signs of improvement: Employers cut 105,000 jobs in October, but that was mostly because of a large drop in federal government jobs stemming from the Trump administration's purge of government workers, which didn't formally take effect until that month. Excluding government, businesses added an average of 75,000 jobs a month in the three months ended in November, a significant increase from just 13,000 in the three months ending in August. However, most of the hiring this year has been heavily concentrated in just a few sectors — health care, restaurants and hotels, and government (outside of October). Most large private industries have shed jobs. Inflation remained stubbornly high Even though inflation fell sharply in 2023 and 2024 from a four-decade high, there was little improvement last year. Annual inflation, according to the Federal Reserve's preferred measure, actually ticked higher to 2.8% in September — the latest data available — from 2.7% in December 2024. Elevated costs became a potent political issue in races as diverse as governors' contests in Virginia and New Jersey and New York City's mayoral race. All were won by Democrats as Trump found himself grappling with issues of "affordability," which he referred to as a "hoax." Inflation cooled in November, according to the more widely-followed consumer price index, though economists said the figures were distorted by the government shutdown. Prices were mostly collected in the second half of November, after the shutdown ended, when holiday discounts were more likely to be in effect. Some economists worry inflation will worsen in early 2026, as companies implement annual price changes and pass through more tariff costs. But most expect inflation will continue to slowly cool in 2026 and move closer to the Fed's 2% target.