The U.S. economy is sending mixed signals in 2025. Growth has slowed, inflation is hanging around, and tariffs are shaking things up. But people are still spending, and jobs haven’t vanished. So is this just a bump in the road or something bigger?

Let’s break it down by the numbers and see what is really going on:

GDP

The U.S. economy shrank by 0.3% in the first quarter of 2025. That might sound alarming, but it was mostly due to a rush of imports before new tariffs hit. In other words, it was a one-time shock, not the start of a full-blown downturn.

Still, GDP growth is clearly slowing. The Conference Board now expects just 1.6% growth for the year, down from 2.8% in 2024.

Consumer Spending

In early 2025, consumer spending grew by 1.8%, which is solid. People are still buying, traveling, and paying for services. That is keeping the economy alive!

Mikhail / Pexels / While consumer spending saw a noticeable increase (1.8%), consumer confidence is dropping.

But consumer confidence is dropping fast. Inflation worries and tariff fears are making folks uneasy. Deloitte thinks spending will keep growing at 2.9% this year, but if confidence keeps falling, that number might be too high.

Jobs

The U.S. economy added 177,000 jobs in April, and unemployment stayed at 4.2%. That is a good sign. The job market is still moving, and most people who want work can find it.

But trouble could be coming. The government is trimming its workforce, and immigration changes are slowing the supply of new workers. EY predicts job gains will fall to just 90,000 per month, down from 160,000 last year.

Inflation

Inflation rose 2.3% in April, which is close to the Federal Reserve’s goal of 2%. That might sound like good news, but core inflation, what you get when you leave out food and energy, was higher at 2.8%.

Why the gap? Tariffs are pushing up prices on imports. And that is making everything from electronics to clothing more expensive. The Fed may wait until September to cut rates, just to make sure inflation doesn’t heat up again.

Interest Rates

The Federal Reserve is playing it safe. Interest rates are stuck at 4.5%, and analysts now think we will only get two rate cuts this year, not three.

That Guy / Pexel / Investors don’t like uncertainty, and right now, there is plenty of it. As trade talks drag on, more market ups and downs are likely.

The yield curve is still upside down. That means short-term rates are higher than long-term ones, a setup that is often followed by a recession. It is not a guarantee, but it is definitely a red flag.

Stock Market & Trump’s Tariffs

The stock market took a hit earlier this year, dropping 20% after the tariff news broke. Since then, it has bounced back a bit, but things are still shaky.

That makes planning tough for businesses and retirement savers alike.

Above all, Trump’s tariffs are now averaging 5 to 10% higher on imports. Analysts say this could knock up to 1% off GDP growth and add up to 1% to inflation in 2025.

The U.S. Economy

It is stable, but slowing. The U.S. economy is not crashing, but it is clearly cooling off. Jobs and spending are holding steady, but they are not immune to pressure. Growth is weakening, and risks are stacking up.

Recession is not here, and it might not come this year. EY gives it a 35% chance in 2025. That is not high, but it is not low either. The Leading Economic Index has dropped 2% in six months, and that is worth watching.