Oct 03, 2025
Growth Unemployment and Inflation
U.S. Growth Continues, but Tariffs Keep Inflation Outlook Uncertain
Recent grew at an annual rate (change from preceding period) of 3.8 percent in the second quarter of 2025 (April through June), according to the third estimate released by the U.S. Bureau of Economic Analysis. This follows a revised decline of 0.6 percent in the first quarter. The second-quarter growth was driven mainly by a decline in imports, which are subtracted in the calculation of GDP, along with stronger consumer spending. These gains were partly offset by declines in investment and exports (U.S. Bureau of Economic Analysis, 2025). Real GDP expanded by 2.0 percent in the first quarter relative to the corresponding period of the previous year, and by 2.1 percent in the second quarter. At face value, the data implied that further reductions in interest rates by the Federal Reserve were not justified.
Consistent with the growth trend, the unemployment rate averaged 4.4 percent in the first quarter of 2025 and declined to 4.1 percent in the second quarter (3.9 percent in April). It then edged up to 4.6 percent in July before settling at 4.5 percent in August.
The annual inflation rate in the United States rose to 2.9 percent in August 2025—the highest level since January—after remaining steady at 2.7 percent in both June and July, consistent with market expectations. Core inflation (excluding food and energy) stayed near 3.1 %. Many analysts are interpreting these numbers as signs that inflation is proving more persistent than hoped. The full impact of tariffs may still be working its way through to consumer prices.
Overall, while inflation has moderated from earlier highs, lingering pressures—particularly from tariffs—underline the uncertainty ahead and the need for cautious policymaking.
Description: Growth reflects the expansion of an economy's output, while the unemployment rate measures the percentage of people actively seeking but unable to find work, and inflation tracks the rise in prices, impacting purchasing power. Together, these indicators provide a snapshot of economic health and stability.
