U.S. Economy Grows 4.4% in Q3 on Consumer Spending/ Newslooks/ WASHINGTON/ J. Mansour/ Morning Edition/ The U.S. economy expanded at a 4.4% annual rate in the third quarter of 2025, its fastest pace in two years. Strong consumer spending and rising exports drove the growth, despite high inflation and limited job creation. Economists warn that underlying inequality clouds the optimistic numbers.
U.S. GDP Growth Quick Looks
- U.S. GDP rose 4.4% in Q3 2025, revised from 4.3%.
- Fastest economic growth since Q3 2023.
- Consumer spending rose 3.5%, with services outpacing goods.
- Durable goods spending increased only 1.6%.
- Exports surged while imports fell, boosting net trade.
- Business investment climbed 3.2%, fueled by AI developments.
- Job growth remains sluggish—just 28,000 jobs/month since March.
- Unemployment holds steady at 4.4%.
- Wealthy Americans drive growth, while low-income families feel squeezed.
- Economists warn of a “K-shaped” economy dividing rich and poor.
Deep Look: Consumer Spending Pushes U.S. Economy to Fastest Growth in Two Years, but Inequality Persists
WASHINGTON — The U.S. economy delivered its strongest performance in two years in the third quarter of 2025, growing at an annualized rate of 4.4%, according to a revised report from the Commerce Department released Thursday. The upward revision from the initial 4.3% estimate reflects stronger-than-expected consumer spending and export performance.
The surge in gross domestic product (GDP)—a comprehensive measure of the country’s economic output—was fueled largely by robust consumer activity, which accounts for nearly 70% of the U.S. economy.
Strong Spending, Uneven Gains
Consumer spending increased at a 3.5% annual rate, with spending on services such as healthcare rising by 3.6%, outpacing the 3% increase in goods purchases. Spending on durable goods—items like cars and appliances designed to last three years or more—saw a more modest 1.6% gain.
The report also highlighted a sharp rise in exports and a simultaneous decline in imports, which together improved the U.S. trade balance and helped boost overall economic performance.
While business investment, excluding housing, rose by 3.2%, much of that increase is being attributed to an influx of capital into artificial intelligence technologies, a sector increasingly seen as a pillar of future economic expansion.
Trump’s Trade Policy Creates Economic Uncertainty
The rapid growth comes despite ongoing economic uncertainty stemming from President Donald Trump’s trade policies. His administration has imposed double-digit tariffs on nearly all imports, leading to global trade tensions and concerns from economists about long-term stability.
These policies have had a mixed effect—reducing reliance on imports but also creating pricing pressures in industries dependent on foreign goods.
A “Jobless Boom”?
Despite the strong GDP numbers, the labor market tells a more complicated story. Since March, employers have added an average of only 28,000 jobs per month, a sharp contrast to the 400,000 monthly jobs created during the post-COVID hiring boom from 2021 to 2023.
Still, the unemployment rate remains low at 4.4%, suggesting that companies are neither hiring aggressively nor laying off workers—a trend economists call a “no-hire, no-fire” labor market.
Heather Long, chief economist at Navy Federal Credit Union, summed up the paradox:
“The United States is experiencing a jobless boom where strong growth is powered by AI investments and consumption by wealthier families, but there is almost no hiring. It’s an uneasy situation for many middle-class families.”
A K-Shaped Recovery?
The disconnect between strong GDP growth and consumer sentiment underscores what economists refer to as a “K-shaped recovery”—an economy in which upper-income households continue to thrive, while lower- and middle-income Americans struggle with stagnant wages and high prices.
Despite market-driven gains and increased investment returns for wealthier households, many Americans report frustration with the high cost of living, especially for essentials like food, housing, and healthcare.
Economists warn that if this inequality persists, it could undermine broader economic stability even as topline metrics like GDP remain strong.
What’s Ahead for 2026?
Looking to the year ahead, economists are asking whether the strong economic performance will finally start to lift the middle class, or whether inequality will further widen the gap between perception and reality.
With job creation slowing, inflation still elevated, and political uncertainty surrounding trade and regulation, the sustainability of this growth remains uncertain.
The big question, as Long put it, is whether “2026 will be the year when the middle class begins to feel the uplift from the boom.”
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