US economy slowed more than expected at end of 2025
Woman shopping (lechatnoir/Getty Images)
(NEW YORK) — The U.S. economy slowed more than expected over the final months of 2025, federal government data on Friday showed.
The economy grew at an annualized rate of 1.4% in the fourth quarter in the government’s initial estimate, marking a cooldown from blistering-hot 4.4% growth recorded in the previous quarter.
The slowdown at the end of last year stemmed in part from a decline in the pace of consumer spending, the U.S. Commerce Department said.
The GDP report marks the latest distress signal for U.S. shoppers, who account for about two-thirds of the nation’s economic activity.
Retail sales data last week showed flat performance in December, suggesting possible weakness for shoppers during the holiday season. Meanwhile, credit card debt levels have climbed and consumer sentiment has remained glum.
The fresh reading of gross domestic product on Friday provided a key measure of the country’s economic health as policymakers continued to grapple with an ongoing bout of elevated inflation and sluggish hiring.
Inflation cooled in January, dropping price increases to their lowest level in nine months. While the pullback defied fears of a tariff-induced rise in overall costs, inflation continued to hover above the Federal Reserve’s target rate of 2%.
Meanwhile, a recent jobs report showed stronger-than-expected hiring in January, even though an updated estimate released at the same time indicated a near-paralysis of the labor market last year.
A boost in consumer spending helped propel the surge in GDP over three months ending in September, the U.S. Commerce Department previously said.
Over the past year, hiring has slowed dramatically while inflation has remained elevated, risking an economic double-whammy known as “stagflation.” Those conditions have put the Federal Reserve in a difficult position.
The central bank must balance a dual mandate to keep inflation under control and maximize employment. To address pressure on both of its goals, the Fed primarily holds a single tool: interest rates.
The strain on both sides of the Fed’s mandate presents a “challenging situation” for the central bank, Fed Chair Jerome Powell said in December.
The Fed held interest rates steady at its most recent meeting in January, ending a string of three consecutive quarter-point rate cuts.
Futures markets expect two quarter-point interest rate cuts this year, forecasting the first in June and a second in the fall, according to the CME FedWatch Tool, a measure of market sentiment.
Federal Reserve Chair Jerome Powell speaks during a press conference following the Federal Open Markets Committee meeting at the Federal Reserve on December 10, 2025 in Washington, DC. (Chip Somodevilla/Getty Images)
(WASHINGTON) — An inflation report to be released on Thursday will offer a look at price increases for the first time in nearly two months, after the 43-day government shutdown impaired data collection.
The fresh data is set to arrive amid an uptick of inflation over recent months that has coincided with a flurry of tariffs issued by President Donald Trump. Economists expect that acceleration of price increases to have continued last month, forecasting a jump in year-over-year inflation from 3% in September to 3.1% in November.
The report will detail the latest price movements for high-profile items like coffee, beef and eggs.
In September — the most recent month for which data is available — the price of coffee soared nearly 19% and the price of beef jumped about 15%, when compared to the same month a year prior.
The year-over-year price of eggs dropped nearly 5% in September, offering a bright spot for consumers.
The federal government will issue partial price data for October, but the release will not include a figure for the overall rise in prices that month, since officials failed to collect sufficient information during the government shutdown, the Bureau of Labor Statistics (BLS) previously said in a statement.
The latest snapshot of price increases comes at a wobbly period for the U.S. economy, landing in a period marked by sluggish hiring and elevated inflation.
Two major economic data releases earlier this week flashed warning signs, some analysts previously told ABC News.
The U.S. added 64,000 jobs in November, which marked a significant decline from 119,000 jobs added in September, the most recent month for which complete data is available, the BLS said in a jobs report on Tuesday.
The unemployment rate ticked up to 4.6% in November from 4.4% in September. Unemployment remains low by historical standards but has inched up to its highest level since 2021.
A retail sales report on Tuesday also sounded a cautionary note about consumer spending, which accounts for about two-thirds of U.S. economic activity. Retail sales were left unchanged in October from September, meaning performance remained flat despite the ramp-up of the holiday season, U.S. Census Bureau data showed.
Last week, the Federal Reserve cut its benchmark interest rate a quarter of a percentage point in an effort to boost the sluggish labor market. The move amounted to the third rate cut this year, bringing the Fed’s benchmark rate to a level between 3.5% and 3.75%.
Interest rates have dropped significantly from a recent peak attained in 2023, but borrowing costs remain well above a 0% rate established at the outset of the COVID-19 pandemic.
The Fed is stuck in a bind, since the central bank must balance a dual mandate to keep inflation under control and maximize employment. To address pressure on both of its goals, the Fed primarily holds a single tool: interest rates.
The pressure on both sides of the Fed’s dual mandate present a “challenging situation” for the central bank, Fed Chair Jerome Powell said at a press conference in Washington, D.C., last week.
“There’s no risk-free path for policy as we navigate this tension between our employment and inflation goals,” Powell added.
The Fed will meet again to adjust interest rates next month. The odds of interest rates being left unchanged stand at about 75%, while the chances of a quarter-point rate cut register at 25%, according to CME FedWatch Tool, a measure of market sentiment.
(NEW YORK) — Starbucks baristas are set to walk off the job in dozens of U.S. cities on Thursday, aiming to galvanize public support and pressure the company on “Red Cup Day,” the coffee giant’s annual holiday promotion.
More than 1,000 Starbucks workers will go on strike at about 65 stores scattered across states as far-flung as California, Texas and Pennsylvania, Starbucks Workers United (SWU), the union representing the workers, told ABC News in a statement.
Union members say Starbucks has failed to make new proposals on key issues like staffing levels and pay since the labor group rejected a company offer in April. The workers also seek to resolve hundreds of allegations over illegal labor practices, including claims of retaliation targeting union members.
“We’re turning the Red Cup Season into the Red Cup Rebellion. Starbucks’ refusal to settle a fair union contract and end union busting is forcing us to take drastic action,” Amos Hall, a barista at a store in Pittsburgh, Pennsylvania, told ABC News in a statement.
In a statement to ABC News, Starbucks spokesperson Jaci Anderson downplayed the scale of the anticipated strike and faulted the union for what she described as a refusal to bargain with the company.
“We are disappointed that Workers United, who only represents around 4% of our partners, has voted to authorize a strike instead of returning to the bargaining table. When they’re ready to come back, we’re ready to talk,” Anderson said.
“Any agreement needs to reflect the reality that Starbucks already offers the best job in retail, including more than $30 an hour on average in pay and benefits for hourly partners,” Anderson added.
Anderson contested the union’s characterization of the impasse in negotiations, saying the union brought an incomplete proposal to its members for the ill-fated vote in April.
Starbucks Workers United said it represents more than 12,000 unionized baristas at over 600 stores. The company provided ABC News with a lower estimate, saying the union counts 9,500 members at about 550 locations.
In February 2024, Starbucks Workers United and Starbucks announced they would work on a “foundational framework” to reach a collective bargaining agreement for stores. Negotiations began in April of that year.
Within months, Starbucks CEO Brian Niccol took the helm of the company, vowing to rejuvenate performance after a years-long spell of sluggish sales.
The company recently reported U.S. same-store sales over three months ending in September had been flat, snapping a streak of six consecutive quarters of decline. Same-store sales is a measure of revenue generated at existing locations over time.
“The plan is working,” Niccol said on a conference call with analysts last month. “We have more work to do, we’re building momentum.”
Meanwhile, the company and the union have yet to strike a deal on a contract. The average length of time before a new union signs its first contract is 409 days, according to a Bloomberg Law analysis in 2021. Roughly 625 days have passed since Starbucks and the union announced a mutual commitment to reach an agreement.
Kate Bronfenbrenner, a labor relations professor at Cornell University, said the strike on Thursday marked an effort to pressure Starbucks and jumpstart negotiations.
“Starbucks workers are striking and engaging customer support to get Starbucks back to the table. They may also need to again mount a large campaign with investors and other stakeholders to convince Starbucks that reaching a first contract is in the company’s best interest,” Bronfenbrenner told ABC News in a statement.
(NEW YORK) — President Donald Trump over the weekend vowed to provide each American a $2,000 dividend to be distributed from what he said was tariff revenue.
“A dividend of at least $2000 a person (not including high income people!) will be paid to everyone,” the president wrote on social media Sunday, in part.
Within hours, however, Treasury Secretary Scott Bessent cast doubt on the plan, saying the payout could merely refer to tax savings enshrined by Trump’s signature domestic spending measure.
A tariff dividend may come “in lots of forms,” Bessent told ABC News’ “This Week” on Sunday, adding that he had not spoken with Trump about the proposal.
The idea of a potential tariff dividend – reminiscent of pandemic-era stimulus checks – has raised questions about who would qualify and what to make of the Trump administration’s mixed signals about the proposal. Some economists questioned whether the dividend is achievable with available tariff funds.
Here’s what to know about the proposed $2,000 tariff dividends.
What is a dividend?
The term “dividend” typically describes a payout to individual shareholders, funded by a company’s profits.
In this case, the concept functions in a similar fashion, indicating payouts to Americans that are funded by tax raised by Trump’s far-reaching tariffs.
The proposal mirrors the three stimulus checks mailed to Americans during the pandemic, two of which were authorized by Trump. Those three payments totaled as much as $3,200 per tax filer, as well as $2,500 per child, according to the Pandemic Response Accountability Committee, a watchdog established by Congress.
What did Trump say about a potential $2,000 tariff dividend?
Trump announced the policy proposal in a brief message on social media on Sunday morning, focused on tariff-related tax revenue.
“People that are against Tariffs are FOOLS! We are now the Richest, Most Respected Country In the World, With Almost No Inflation, and A Record Stock Market Price. 401k’s are Highest EVER,” the president wrote. “A dividend of at least $2000 a person (not including high income people!) will be paid to everyone.”
The message did not specify who would qualify for the payout or how the policy would operate.
Who would qualify for the $2,000 dividend?
It is not clear who would qualify for the payout, though Trump said the measure would exclude “high income people.”
The pandemic-era stimulus checks enacted by Trump were made available to individuals bringing in as much as $75,000 per year and couples earning up to $150,000. Beyond those benchmarks, higher earners were eligible for smaller payments.
Last year, median U.S. household income was $83,730, the Census Bureau found.
Did Treasury Secretary Scott Bessent cast doubt on the dividend checks?
Hours after Trump’s announcement, Treasury Secretary Bessent appeared to throw cold water on the likelihood of tariff-related dividend checks.
On Sunday, Bessent suggested the $2,000 savings may instead be rooted in tax cuts previously enshrined by Trump’s One Big Beautiful Bill legislation, which he signed into law on July 4.
“It could be just the tax decreases that we are seeing on the president’s agenda. No tax on tips, no tax on overtime, no tax on Social Security, deductibility on auto loans. Those are substantial deductions that are being financed in the tax bill,” Bessent told ABC News’ “This Week” Sunday.
“The real goal of tariffs is to rebalance trade and make it more fair,” Bessent added.
The dueling remarks from Trump and Bessent come days after the Supreme Court heard arguments about whether a president has the constitutional authority to unilaterally levy tariffs. Arguing on behalf of the Trump administration, Solicitor General John Sauer downplayed the revenue-raising component of the policy, saying the tariffs do not encroach upon the taxing power afforded to Congress under the Constitution.
“The fact that [the tariffs] raise revenue is only incidental,” Sauer told the justices.
Has the U.S. raised enough tariff revenue to fund $2,000 checks?
If Trump were to make the dividend payments available to anyone earning $100,000 or less, the policy would reach about 150 million Americans, amounting to roughly $300 billion in dividends, Erica York, a policy expert at the Tax Foundation, said in a post on X.
As of Sept. 30, the federal government had generated $195 billion in tariff-related revenue, according to the Treasury Department.
By that math, the estimated $300 billion cost of the dividend check proposal would far exceed the amount of currently available tariff revenue.
When factoring in only revenue generated by Trump’s new levies and deducting some negative budgetary impact from those policies, York estimated net tariff revenues of only $90 billion, falling even shorter of the $300 billion required.
Moreover, depending on how the Supreme Court may rule regarding Trump’s legal authority to levy tariffs, the White House may be forced to return tens of billions of dollars in revenue to importers who paid the tax, the Committee for a Responsible Federal Budget found.
In theory, however, the Trump administration could promise to pay the dividend from anticipated tariff revenue. The Treasury Department has forecast $3 trillion in tariff revenue over the next decade. Should the Trump administration choose that route, the dividend payments would add the federal debt, which currently stands at over $38 trillion, according to the Treasury Department.
