The U.S. economy is an enigma. One minute, it’s growing; the next, it’s giving us all whiplash. In 2025, it seems we’re in for more twists and turns. Gregory Daco, chief economist at EY, offered a sneak peek at what’s to come. He says the U.S. will be the global growth leader—but also its biggest disruptor. Oh, and don’t get too cozy with low unemployment or aggressive federal rate cuts, because those might change too.
Here’s what Daco predicts for 2025.
1. The U.S.: Both Growth Leader and Disruptor
The U.S. is set to lead global economic growth in 2025, thanks to factors like higher incomes, productivity improvements, and relaxed monetary policies. Sounds great, right? But there’s a catch.
Daco warns that disruption is also part of the package. A KPMG survey of 600 U.S. leaders revealed that 70% of companies are uneasy about how market disruptors might derail their growth plans.
Why? The incoming administration’s pro-business agenda, which includes tax cuts and deregulation, could supercharge U.S. economic growth. That’s fantastic news—if you’re on board with those policies. But if growth stumbles because of rising inflation, Daco says, it could be a “big drag on global economic activity.”
Essentially, the U.S. will be steering the ship in 2025. Whether it’s a smooth sail or a bumpy ride depends on how these policies play out.
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2. Federal Rate Cuts: Expect a Snail’s Pace
Remember those three federal rate cuts last year? Don’t count on that pace continuing. In December, the Fed shaved 0.25% off the federal funds rate, landing it at 4.25%-4.5%. This year, though, Daco predicts a much slower approach.
Why the hesitation? Blame inflation—again. Daco suggests that new tariffs under the incoming administration could push up prices for imported goods. In response, he expects the Federal Reserve to ease up gradually, with three small 0.25% cuts spread out over the year.
Translation: Don’t expect the Fed to come riding in with aggressive cuts anytime soon.
3. Rising Unemployment: A Growing Concern
Here’s the not-so-great news: The unemployment rate might creep above 4.5% in 2025.
Daco points to weaker labor demand as the culprit. “Business leaders are being much more cautious as to who they hire, how much they hire, and at what salary,” he explained. After two years of a hiring slowdown, wage growth has leveled out, and the hiring rate is now at a 10-year low.
Sure, the U.S. added 2.2 million jobs last year, but Daco thinks we’ll see that number cut in half in 2025, with monthly job growth averaging 75,000 to 100,000.
If you’re job hunting, buckle up. Companies are more selective than ever, and finding that dream role might take a little longer.
So, What Does This Mean for You?
If Daco’s predictions are right, 2025 will be a year of growth—but not without challenges. Inflation, cautious hiring, and slower rate cuts are all on the table. The U.S. will be the world’s economic leader, but the disruptor role it plays could make things tricky for businesses and workers alike.
What can you do? Stay informed. Adapt quickly. And maybe start keeping an eye on those policy changes—they’ll probably hit closer to home than you think.
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