US Economy Grows 1.4% in Fourth Quarter, Slower Than Expected/ Newslooks/ WASHINGTON/ J. Mansour/ Morning Edition/ U.S. economic growth slowed to a 1.4% annual rate in the fourth quarter, according to the Commerce Department. A six-week federal government shutdown and weaker consumer spending weighed on GDP. Despite solid annual growth, job creation remained sluggish, highlighting unusual economic trends.
US Economy Grows 1.4% in Fourth Quarter Quick Looks
- GDP increased at a 1.4% annual rate in Q4
- Growth slowed sharply from 4.4% in Q3
- Consumer spending rose 2.4%, down from 3.5%
- Federal government shutdown impacted output
- 2025 full-year growth reached 2.2%
- Job gains were under 200,000 — lowest since 2020
- Unemployment edged up slightly to 4.3%
- Consumer confidence fell to lowest level since 2014
Deep Look: US Economy Grows 1.4% in Fourth Quarter, Slower Than Expected
The U.S. economy expanded at a modest 1.4% annual rate in the fourth quarter of 2025, slowing significantly from earlier in the year, according to new data released by the Commerce Department. The deceleration follows a strong 4.4% pace in the third quarter and a solid 3.8% gain in the second quarter, marking a noticeable cooling trend as the year concluded.
Several factors contributed to the weaker fourth-quarter performance. A six-week federal government shutdown disrupted economic activity, while consumer spending — a critical driver of U.S. growth — softened compared to previous months. Household expenditures rose 2.4% during the quarter, down from a 3.5% increase in the July-September period.
Consumer spending accounts for roughly two-thirds of the nation’s gross domestic product (GDP), making any slowdown in household demand particularly significant. The moderation suggests Americans may be becoming more cautious amid lingering economic uncertainty, even though overall inflation has eased compared to earlier peaks.
Despite the fourth-quarter slowdown, the broader picture for 2025 remains relatively stable. The U.S. economy grew 2.2% for the full year, reflecting steady expansion even as headwinds intensified late in the year. However, the labor market tells a more complicated story.
A separate government employment report revealed that employers added fewer than 200,000 jobs in 2025 — the weakest annual job growth since the COVID-19 pandemic disrupted hiring in 2020. That slowdown in hiring stands in contrast to what would typically be expected from an economy growing above 2%.
Economists suggest several reasons for the apparent disconnect between economic growth and job creation. Immigration restrictions have slowed population growth, limiting the expansion of the labor force. With fewer new workers entering the job market, companies may face constraints in hiring, even if demand remains relatively steady.
As a result, the unemployment rate rose only modestly — from 4% to 4.3% — despite sluggish hiring. The limited increase suggests that labor supply constraints, rather than widespread layoffs, are influencing the employment picture.
Technological shifts may also be playing a role. Businesses are increasingly exploring artificial intelligence and automation tools that allow them to boost productivity without expanding payrolls. Some firms may be holding off on hiring while evaluating whether AI investments can meet future demand more efficiently.
In addition, the cost of tariffs continues to pressure profit margins for many companies. Higher input costs may be prompting some businesses to reduce hiring plans or delay expansion decisions.
Another unusual dynamic in the current economy is the contrast between measurable economic strength and public sentiment. While GDP growth remains positive, inflation has cooled somewhat, and unemployment remains historically low, Americans appear increasingly pessimistic.
In January, consumer confidence fell to its lowest level since 2014, reflecting widespread concerns about financial stability and economic prospects. Yet despite gloomy survey responses, consumer spending has continued — albeit at a slower pace — sustaining overall economic expansion.
Some analysts describe the current environment as a “K-shaped” economy. In this scenario, higher-income households continue spending at stronger rates, while lower-income consumers face greater financial strain. Even so, data from major banks indicates that lower-income Americans are still increasing their spending, though not as robustly as wealthier households.
The divergence underscores a key question for policymakers: Can economic growth remain resilient if job creation remains subdued and consumer sentiment weakens further?
Federal Reserve officials are closely monitoring the balance between slowing inflation, steady growth, and softening hiring trends. Any sustained deterioration in employment could influence future interest rate decisions.
For now, the economy remains in expansion territory, but momentum has clearly cooled. The fourth-quarter GDP report highlights an economy navigating multiple crosscurrents — government disruptions, cautious consumers, labor market shifts, and structural changes driven by technology.
Whether growth reaccelerates in early 2026 may depend on improvements in hiring, stabilization in consumer confidence, and clarity on trade and fiscal policies. Until then, the U.S. economy appears stable but slowing, maintaining forward progress at a more measured pace than earlier in the year.
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