The U.S. economy has shown surprising resilience in 2025, pushing through trade disruptions, tighter immigration policies and widespread expectations of a slowdown or recession. Growth has continued to outpace that of other advanced economies, largely because American consumers have kept spending and businesses have poured money into AI infrastructure. Even as confidence in the economy remains weak.
Consumer spending and massive investment in AI-related projects, such as data centers, accounted for nearly 70% of economic growth in the third quarter. Economists note that this highlights the unusual nature of the current expansion. Pessimism about prices, jobs and policy uncertainty has not translated into a sharp draw of demand. Instead, higher-income households—particularly the top 10% of earners—have driven a disproportionate share of spending, benefiting sectors like airlines, luxury retail and international travel.
This outcome has defied many forecasts made earlier in the year. When President Trump’s aggressive tariff plans were announced and immigration restrictions led economists and markets to brace for recession. Financial markets briefly plunged after the announcement of sweeping “Liberation Day” tariffs, and major banks raised recession odds. Yet the economy avoided contraction, in part because the most extreme trade measures were later softened and businesses found ways to work around higher tariffs.
Growth, however, has not come from a revival of manufacturing as promised. It comes rather from stock-market-fueled wealth effects and the AI boom, which now represents tens of billions of dollars in annual investment. Even when GDP dipped in the first quarter due to a surge in imports ahead of tariffs, consumer spending remained solid, helping growth rebound in subsequent months.
Consumers Spend On Even as Anxiety Lingers
Still, warning signs are accumulating. Lower-income and younger consumers are showing strain, with companies like Walmart and Chipotle reporting softer demand in those groups. Some businesses, such as specialty importers, have been hit hard by higher costs tied to tariffs. The job market is weakening, wage growth has slowed. Now the economic expansion increasingly resembles what economists describe as a “jobless expansion,” leaving the economy more vulnerable to shocks.
Additional concerns include a falling savings rate, flat inflation-adjusted disposable income and declining consumer confidence, which has dropped for five consecutive months. A government shutdown and cooling business investment could further weigh on growth going forward.
Yet, paradoxically, spending remains robust. Holiday retail sales rose notably, according to Mastercard data, underscoring the disconnect between how Americans feel about the economy and how they behave. Personal stories reflect this tension. Individuals express anxiety about jobs and finances while continuing to spend on travel, family experiences and major purchases.
Overall, the picture is one of an economy that is still expanding despite heightened uncertainty. Now driven by affluent consumers and transformative technology investment, but facing growing risks as labor market softness, policy volatility and uneven gains threaten the durability of that growth.
Reference
Whalen, J., & Wolfe, R. (2025, December 23). The U.S. Economy Keeps Powering Ahead, Defying Dire Predictions. The Wall Street Journal. https://www.wsj.com/economy/consumers/the-u-s-economy-keeps-powering-ahead-defying-dire-predictions-f064a402?st=S3Pvf3