GDP GROWTH:
Although the Commerce Department postponed its fourth-quarter gross domestic product announcement scheduled for late January, the Federal Reserve Bank of Atlanta’s latest model shows the U.S. economy poised to notch the strongest quarterly growth since early 2018. Additionally, the Federal Reserve’s Federal Open Market Committee and other economic observers viewed the economy at year’s end as being robust, as concerns fade over the impact of tariffs.
Citing strong consumer spending and a narrowing trade deficit, the Atlanta Fed’s GDPNow model raised its estimate of fourth quarter GDP growth to 5.4%. That follows the Commerce Department’s 4.4% third-quarter GDP reading, also postponed due to the government shutdown. Fourth-quarter 2024 GDP was 2.3%. The Atlanta Fed GDPNow model mimics the methods used by the Commerce Deparment’s Bureau of Economic Analysis to estimate real GDP growth by aggregating statistical model forecasts of 13 subcomponents that comprise GDP. Some analysts say the supercharged growth picture is influenced more by a decrease in imports than a surge in domestic production. Nevertheless, there are government reports of positive moves in productivity and business spending.
The BEA made an upward revision to real personal consumption expenditures growth from 2.4% in October to 3% in November and the contribution from net exports reversed sharply from -0.3% to 1.97%. READ MORE >
EMPLOYMENT:
Hiring cooled in the fourth quarter of a pivotal year for the U.S. labor market. There were 50,000 jobs added in December and 584,000 created in 2025 – far less than the 2 million positions added in each of the previous two years and the 4 million jobs in 2022. Hiring was revised downward to 173,000 added jobs for October and 56,000 for November. The 49,000 monthly average of new hires represented the lowest growth rate since 2003, except for the Covid lockdown in 2020 and 2009 recession.
Because 2025’s employment gains are far weaker than typically required to support a healthy economy, however, the data should be viewed somewhat paradoxically. The unique factors disrupting the labor picture are the shrinking base of workers and companies looking for predictability on trade – all influenced by government policies.
The government’s large-scale deportations and restrictions on immigration have dramatically reduced the supply of workers into the country. The Congressional Budget Office reported that net immigration fell to about 410,000 last year from 2.27 million in 2024. Consequently, required job growth needed to keep unemployment stable is less. The unemployment rate closed slightly lower at 4.4% in 2025. Additionally, it is estimated that there could be as many as 317,000 fewer workers on the federal government payroll, while uncertainty over President Trump’s tariff policies have companies exercising extreme caution with plans for expansion and for hiring workers, especially noncitizens. READ MORE>
MONETARY POLICY:
The long-running political drama surrounding the nation’s central bank appears to be reaching its denouement as President Donald Trump disclosed his nominee to succeed embattled Federal Reserve Chairman Jerome Powell, whose term expires in May.
All that remains is the Supreme Court’s decision, which is expected soon, on whether a president can remove a Fed governor as in the current case of Lisa Cook. Justices did not appear swayed by arguments made by attorneys for the president who critics claim is eroding the Fed’s statutory independence.
Initial reactions by the financial markets were mixed to Trump’s selection of Kevin Warsh to lead the central bank. He is seen as a pragmatist rather than ideologue and an inflation hawk who argued as a Fed governor that low interest rates and expansive bond purchases fuel rising prices. He also has been a frequent critic of the Fed since leaving 15 years ago after serving five years on the board of governors during the 2007-08 financial crisis. Warsh has been a fellow at the Hoover Institution and lecturer at Stanford’s Graduate School of Business. The Wall Street Journal called Warsh’s selection significant and compared it to the appointment of Paul Volker by Jimmy Carter in 1979, when inflation was running at 13%. Volker pushed up the federal funds rate to 20%. He served through the Gerald Ford years and was reappointed by President Ronald Reagan. Alan Greenspan followed Volker in 1987 and stressed continuity. Warsh, however, the Journal said, “has promised a clear rupture – a wholesale rethinking of the Fed’s asset holdings, policy framework, role in the economy and relationship with the executive branch.” READ MORE >
GLOBAL ECONOMY:
The worldwide economy is set to grow slightly faster than previously expected but remains sensitive to trade barriers and geopolitical conflicts, according to an update from the International Monetary Fund.
The IMF said the global economy is projected to expand at 3.3% in 2026 and at 3.2% in 2027 – largely unchanged from the predicted 3.3% growth expected for 2025. Since the IMF’s previous economic outlook in October, trade tensions have continued to abate but remain subject to occasional flare-ups. For example, a dispute between China and the United States over semiconductor exports and rare earth minerals was quickly followed by a truce.
U.S. authorities also removed tariffs on some agricultural products, offsetting the higher tariffs on certain sectors that were previously announced and are now in effect. This leaves the overall U.S. effective tariff rate at about the same level as last fall but changes affecting specific nations could be meaningful, the IMF said.
Newly signed bilateral trade and other agreements – often including sizable investment and purchase commitments with limited public disclosure – also add a layer of complexity. Overall, policy uncertainty is lower than it was in October but much higher than it was in January 2025, the IMF said. READ MORE >
