America’s Three Economies: Vibes Sinking, Data Treading Water, Elites Sailing Away

As we approach the end of 2025, it’s a good time to take stock of the US economy. There’s justifiable concern that this year has entrenched a K-shaped economy, where the have-mores leave the haves and have-nots behind. But there are more than two stories going on right now.

First, the vibes are bad (just ask anyone coming out of a grocery store). Second, the real economy—prices, jobs, and consumer and business spending, among other factors—is worse than it was a year ago, but holding up OK (4.4 percent unemployment, GDP growth over 2 percent, and inflation around 3 percent is hardly the stuff of recession). Third, a small number of people and companies are doing extremely well.

Depending on where you stand, you’re hearing very different things about the economy, but a pretty consistent theme is an administration that has not delivered on promises made to voters—while delivering to the president’s family and friends.

Under the Hood, the Story Gets More Complicated

It’s been a predictably rough year for the US economy. Tariffs have raised goods prices and hit manufacturing jobs, immigration crackdowns have crippled the labor force, and reversing energy policies dramatically has unwound an energy investment boom. As a result, the job market is softer, prices are still high, and inflation is up and apparently rising based on the data flow that has (finally) started to trickle back in.

That said, if the data are weaker, the economic mood of the country is, in a word, awful. Consumer sentiment in October was only exceeded by lows from the worst of the early 1980s recession, the peak of the 2022 inflation, and the months following the “Liberation Day” tariff announcement this year. Since January, consumer sentiment has plunged, giving up essentially all gains from a steady rise after the inflation peak of 2022.

That pessimism isn’t purely emotional—it reflects months of higher grocery and utility bills. In fact, across both the major household expectations surveys, families expect inflation to keep going up next year—which most economists expect as well. And roughly twice as many consumers surveyed by the Conference Board expect the jobs picture to be weaker rather than stronger in the next six months.

This view is both pessimistic and realistic given the data we’ve seen so far this year. It’s unmistakably true that the labor market and the inflation picture are weaker than last fall. What’s worrying to the wonkier economy watchers, however, is that the pressures on both inflation and unemployment are in the wrong direction. There are real risks that both inflation and the jobs picture could get worse, but (short of policy reversals) few predictable shocks are likely to make either improve in the near term.

Job growth has stayed positive but slowed dramatically, from an average 167,000 jobs a month in January to just 109,000 in September (and will likely be revised down further with annual revisions early next year). Over 87 percent of all jobs added this year are in health care and social assistance (a given in an aging country), while the rest of the economy has added just 71,000 jobs all year. And there’s little sign that tariffs are about to bring down prices, nor are there signs that the demand side of the economy is about to pick up.

It’s Not Great, but There’s Plenty of Time to Panic Later

The closer you are to the data, the less pessimistic you probably are right now. But, as we can see in recent Fed meeting minutes, the debate is largely between two camps: The first is those who think the labor market is middling and the risks of rising inflation are serious. The second is those who think the risks of rising inflation are less worrisome than the chances the labor market deteriorates further.

It’s clearly too soon to panic about a recession, and the best labor market data we have say things are holding up well by historical standards—September’s 4.4 percent unemployment is better than about 80 percent of months since 2000—it’s just that there’s little to suggest things are about to improve significantly.

That said, the economy continues to chug along on the strength of spending by resilient, yet quite frustrated, consumers. The final reading on second quarter GDP shows US consumer spending keeping the economy going, even as savings deplete.

Early holiday spending numbers look strong, so it seems like US consumers are going to muddle through tariffs. The distribution of consumer spending remains pretty narrow—high earners are doing much more of the broad-based spending in the economy

However, if you get your news from stock markets, or even from retirement statements, the world is different entirely, and much more optimistic—at least from a high level. After a massive swoon in April, the US stock market has had a great year, powered by tax cuts for corporations and the wealthy and an AI investment boom that looks bubble-like to some inside it.

Yet, like in the real economy, the more you dig into the data the farther from the extremes your views can go. Job and corporate earnings growth are concentrated in increasingly narrow slices of the economy. Corporate earnings are notoriously concentrated at this point, with the top 1.4 percent of S&P 500 companies accounting for almost all of stock market gains this year—just seven companies are now one-third of the value of S&P 500.

How Do We Square These Takes?

Overall, the data are on a more even keel than either the awful vibes most Americans are feeling from an affordability crisis or the anxiously warm vibes of investors. We’re not living through the economic boom tech investors see everywhere, nor the near-term dystopia consumers are feeling. The economy is weaker than last year and likely to continue to soften a bit more over the first part of next year, but the good news is at least for now things are not as bad in the data as in the headlines. The bad news is . . . that’s the good news.

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