The U.S. economy continued to show resilience in the final quarter of 2025, according to a statement prepared for the Treasury Borrowing Advisory Committee. Despite delays in official government statistics due to a government shutdown and missing data for October, economic indicators through January 30, 2026, suggest that growth remained solid in the fourth quarter. Strong consumer demand and increased business investment in equipment and artificial intelligence contributed to this performance.
Labor supply and demand appear balanced, with hiring rates remaining low but layoffs also at historically low levels. This suggests that companies are focusing on productivity improvements rather than making significant labor changes. The adoption of artificial intelligence is cited as a possible factor behind high productivity growth observed in the second and third quarters of 2025.
Core price pressures eased during the fourth quarter, with monthly core goods prices flat on average and inflation for rent of housing slowing further. Stock markets reached record highs during this period and continued to rise into January 2026.
Due to the government shutdown last autumn, there were delays in GDP reporting. The Bureau of Economic Analysis (BEA) has not yet released its advance estimate for fourth-quarter GDP as of January 30. The most recent BEA estimate showed real GDP rising by 4.4% in the third quarter, up from 3.8% in the second quarter, driven by faster growth in personal consumption expenditure and government spending, along with positive business fixed investment and net exports.
Private-sector forecasts expect economic growth to have remained solid in the fourth quarter, with a Wall Street Journal survey indicating a median forecast of 2.2% annualized GDP growth—an increase from previous projections.
Personal consumption expenditures rose at an annual rate of 2.5% between October and November compared to the third quarter average. If December maintained this pace, real PCE would have grown by 3.2% annually last quarter.
Business investment remains strong, particularly due to advances in artificial intelligence leading to increased spending on data centers, computers, peripherals equipment, and software through the third quarter of 2025.
Labor market data indicate stability despite moderation in job growth and a slight uptick in unemployment rates. Net total job creation declined by an average of 22,000 per month during the fourth quarter—a figure affected by an outsized drop in public payroll jobs related to federal employees leaving under the Deferred Resignation Program. In November and December alone, net job growth averaged 53,000 per month.
The unemployment rate averaged 4.5% during November and December—up slightly from earlier months—but this was attributed more to low hiring than increased layoffs or claims for unemployment benefits.
Labor force participation improved late in the year; among prime-age workers (25-54), participation rose above pre-pandemic peaks while participation among those aged 55 or older declined consistent with demographic trends.
Job openings decreased marginally from pandemic-era highs but remain well above pre-pandemic levels. Productivity surged mid-year as firms increased output without large increases in labor input—possibly reflecting greater use of artificial intelligence.
Inflationary pressures subsided notably during the fourth quarter: headline consumer price index (CPI) inflation stood at 2.7% over twelve months ending December 2025—down from earlier periods—and core CPI inflation slowed to an average monthly increase of just 0.1%. Rent inflation decelerated while non-housing core services also saw slower price increases due partly to lower airline fares and medical service costs.
Energy prices remained volatile amid ongoing geopolitical uncertainty; fluctuations were seen throughout much of last year affecting both energy goods/services CPI components as well as related categories like food prices and airfares.
Looking ahead, economists view recession risk as relatively low—with a Wall Street Journal survey placing it at just 27%, down from previous estimates.
Treasury officials noted ongoing monitoring of private-sector labor developments given slowing employment growth but stable layoff rates—suggesting firms are using attrition rather than layoffs while relying on productivity gains for output expansion.
Artificial intelligence continues to be highlighted as both an opportunity for efficiency gains across industries and a potential source of disruption if not adopted widely or rapidly enough by firms or workers.
In conclusion, “Thus far in President Trump’s second term, the Administration has successfully stewarded major fiscal legislation to prevent a historic tax increase, and it continues to seek further policies to incentivize economic growth,” according to the statement provided for the committee. “Supply-side policies, deregulation, and other reforms will protect the American consumer from high inflation, supply-chain disruptions, and the destabilizing potential of geo-political strife while freeing up investment funds for more productive uses and encouraging a significant increase in domestic energy production.”
“Indeed,” it continued,“the Administration has made extensive progress to enact an agenda that will bring prosperity to all Americans.”
