2025 got weird

We had a chaotic year (to say the least), but the US economy proved remarkably durable. Real GDP still grew 2.1% through the first three quarters of the year, helped by three interest rate cuts and consumer spending that remained high in spite of fears to the contrary.

To help us make some sense of what happened, and to prepare for what’s coming next year, here are the big themes that shaped 2025.

Trump vs. the Fed

The Fed’s independence, the backbone of its credibility with markets, came under constant political pressure this year. President Trump repeatedly pushed for rate cuts and even suggested firing the Fed chair, a legally murky move that rattled the financial world. According to CNBC’s September Fed Survey, 82% of top money managers, strategists, and economists said Trump’s actions were aimed at limiting or eliminating the central bank’s independence.

He may get what he wants: Fed Chair Jerome Powell will step down in May 2026, opening the door for the President to replace him with a friendlier central banker (more on that later).

Tariffs & inflation

Under President Trump’s leadership, the US abandoned its long-held free-trade stance and slapped double-digit tariffs on imports from much of the world—including China, Canada, Mexico, and the EU—pushing trade policy to its most protectionist stance since 1935.

Studies show retail prices began climbing almost immediately after the March tariff announcements and continued rising for months. Consumers felt it directly: during Thanksgiving week, shoppers spent more but walked away with fewer goods as higher import costs filtered through to store shelves. The effect of tariffs wasn’t large enough to derail inflation, but they sure made everything feel more expensive.

The labor market

The labor market bore the brunt of this year’s turbulence. Unemployment edged up to 4.6% in November, the highest since 2021, while the rate of people quitting fell to its lowest point since the pandemic recession. Layoffs reached 1.1 million for the year, driven largely by AI, with companies explicitly attributing 54,694 cuts to automation this year. Tariffs contributed too, triggering 8,000 job cuts, while broader organizational restructuring filled in the rest.

Government shutdown

One of this year’s most economically damaging events was the 43-day government shutdown, the longest in US history. Triggered by a budget standoff, the impasse froze key federal agencies, leaving 1.4 million workers furloughed or unpaid, and temporarily cutting off SNAP access for 42 million Americans. The economic impact was severe: estimates suggest a hit of roughly $15 billion per week, as delays in contracts, benefits, and federal approvals reverberated across households and businesses.

So, what happens next?

Well, even with solid GDP growth on the surface, it’s worth noting that several recession indicators have quietly accumulated below the surface:

📦 The cardboard box index is down nearly 10% over the last three years, signaling slowing manufacturing industry activity.

🍲 Hamburger Helper sales jumped 14.5% year-over-year through August, showing consumers are trading down to cheaper meal options.

🚚 Heavy-truck sales are down 14.6%, their lowest level in three years, pointing to weaker demand for goods and slowing logistics activity.

♻️ Thrift store foot traffic is up 39.5%, reflecting a broad shift toward cost-conscious, secondhand spending.

Together, these micro-signals suggest that consumers are becoming more cautious, hinting that beneath the resilience of 2025, the economy may already be bracing for what comes next.—SY