The U.S. economy expanded at a robust 4.3% annual rate in the third quarter of 2025, far exceeding forecasts and marking the fastest growth in two years.
Yet beneath the celebratory headlines, hiring remained sluggish, with unemployment climbing to 4.6% – leaving economists scratching their heads over this unusual jobless boom.
This mismatched growth delivers a mixed bag for everyday Americans. While the headline figure boosts market confidence and gives policymakers something to cheer about, the lack of job creation means many households feel little of the prosperity.
Corporate profits jumped $166 billion, rewarding shareholders handsomely, but for workers facing stagnant real incomes, the surge feels more like a distant fireworks show – spectacular from afar, yet offering no warmth up close.
A temporary lift from tax refunds in early 2026 might spark broader spending, but experts warn it could merely inflate service-sector prices further, turning a short-term buzz into longer-lasting sticker shock.
The Bureau of Economic Analysis released its delayed third-quarter GDP estimate on December 23, revealing a 4.3% annualized growth rate.
Consumer spending rose sharply, driven largely by unavoidable outlays in healthcare – the biggest spike since the Omicron days of 2022.
Outpatient visits, hospital stays, and nursing facilities saw rapid increases, fueled by aging populations, rising medical costs, and the ongoing popularity of pricey weight-loss drugs.
Real disposable income stayed flat at 0% growth. Americans maintained their spending by dipping into savings or leaning on credit.
Services dominated the spending surge, particularly those hard to postpone, like medical care and insurance. Corporate profits from current production soared by $166 billion, a stark acceleration from the prior quarter’s modest gain.
Businesses, meanwhile, trimmed inventories leftover from pandemic hoarding and showed little appetite for expanding capacity. Hiring hesitation ruled the day. Companies squeezed more output from existing staff, achieving productivity gains without adding headcount.
KPMG chief economist Diane Swonk called it unprecedented. Strong GDP typically follows job growth, not the other way around. This reversal has created what many describe as a fully matured K-shaped recovery.
Affluent households, buoyed by soaring stock markets and AI-fueled gains, continued splurging on premium experiences. Lower- and middle-income families, however, spent out of necessity, absorbing higher costs amid an ongoing affordability squeeze.
Recreational services held up, thanks mostly to high earners filling premium seats on flights and hotels. Even there, overall vacation activity in August hit near-record lows, second only to the pandemic lockdown month.
Business investment dipped, with companies waiting on the sidelines rather than betting big on expansion. The divide raises vulnerabilities. Growth tied to wealth effects can vanish quickly if markets wobble.
Spending born of constraint, on the other hand, has natural limits when savings thin out. Swonk noted that layering temporary stimulus on elevated service inflation risks making price pressures even stickier.
As 2025 ends, the economy heads into the new year with momentum – but on uneven footing.
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