A rather peculiar year for the US economy

In 2025, the best thing for a US economic forecaster to do would have been to take a year’s sabbatical leave. When he/she returns, he/she will find that the US has broadly delivered on what was forecast, i.e. real GDP growth of around 2.0% and inflation of just over 2.5%. In the meantime, noise, lots of noise, is President Trump's trademark. However, the labour market is now much more fragile than it was a year ago. Labour supply was disrupted by the intensification of the fight against undocumented workers. Labour demand has been dampened by uncertainty, pressure on margins (tariffs shock) and by AI, which is reducing the recruitment prospects of high-level graduates.