In 2024, a Pew Research poll found that only 23% of Americans viewed the US economy in positive terms, as excellent or good.
But the US economy grew last year, according to data from the US Department of Commerce's Bureau of Economic Analysis (BEA). United States Gross Domestic Product (GDP) GROWING from $27.72 trillion in 2023 to $29.17 trillion in 2024. GDP growth came from Americans earning more and spending more, for BEA.
Now, looking ahead to 2025, EY chief economist Gregory Daco says he expects the US economy to continue to grow and lead the global economy.
Related: 'Inflation is no longer a concern': Here's what American families should worry about instead.
“The various policies that can affect economic activity in the US have effects on the rest of the world,” Daco said entrepreneur.
Here are some predictions Daco shared for the US economy this year.
1. The US will be the leader of global growth – and disruption.
Daco said the US economy will lead global growth in 2025 due to rising incomes, rising productivity and easing monetary policy. It will continue to be the largest economy in the world.
At the same time, the US is poised to be a major drag on global growth, with a September KPMG survey of 600 US business leaders showing that nearly seven in 10 US companies expressed concern about market disruptors in their company's growth.
Daco says the disruption could come from the next administration's pro-business policies, including tax cuts and deregulation, which could lead the US economy to grow at a faster pace. The positive effects, he says, will flow to economies that depend on the US for their growth.
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On the other hand, if the US economy grows at a slower pace due to higher inflation, Daco said “it would be a huge drag on global economic activity”.
2. Federal rate cuts will slow.
In December, the Federal Reserve lower the federal funds ratewhich is the range of interest rates set by the Federal Reserve that banks charge each other to borrow, by 0.25% in a range of 4.25% to 4.5%. The move followed two previous rate cuts, one in September AND another in November.
This year carries the risk of rising inflation in the second half of the year following possible tariffs approved by the new administration, which could lead to higher prices for imported goods.
“In that environment, we think Fed policymakers will be more gradual in easing monetary policy,” Daco said.
Daco predicts the Fed will cut interest rates by 0.75% in total this year, for a 0.25% cut at each next meeting. So the Fed will cut rates in March, June and September.
Related: The Fed just cut rates for the third time this year
3. The unemployment rate will increase.
For the last seven months of 2024, the unemployment rate has remained stable to 4.1% or 4.2%. Daco expects weaker job demand to push the unemployment rate above 4.5% in 2025.
He says that the reason is a slowdown in the demand for work, observed during the last two years. Really working website reported on this slowdown in July 2024, noting that after about two years of slowing, wage growth has become more stable.
“Business leaders are becoming much more careful about who they hire, how much they hire and at what pay,” Daco said. “The combination of these factors has led to a very slow rate of employment.”
He emphasized that the employment rate is currently at one 10-year lowwhich means employers are being more selective now than ever.
According to the last Summary of the employment situation from the US Bureau of Labor Statistics, the US economy added an average of 186,000 new jobs per month in 2024 for a total of 2.2 million jobs.
Daco predicts that weaker demand will halve job growth in 2025, averaging 75,000 to 100,000 new jobs added per month this year.
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