American employers added just 181,000 jobs throughout 2025 compared to more than 1.4 million the previous year, raising concerns about economic sustainability despite GDP expansion driven by wealthy consumers and artificial intelligence investment.
The sharp hiring slowdown accompanied credit card balances expanding to $1.15 trillion in the fourth quarter, $39 billion more than the previous year, according to credit rating agency TransUnion. The combination of stagnant employment and rising consumer debt suggests lower and middle-income families are borrowing to maintain spending levels.
Mark Zandi, chief economist at Moody’s Analytics, warned the jobs situation “just can’t hold,” stating: “If that continues, I think we’ll start to see unemployment tick higher, consumers become more cautious, and the economy will struggle. So hopefully we start to see some job growth here in the not too distant future.”
A Commerce Department report released Friday showed the economy grew at an annual rate of 1.4 percent in October, November and December, slowing from a 4.4 percent pace the previous quarter. For all of 2025, gross domestic product grew 2.2 percent following 2.4 percent growth in 2024.
Consumer spending rose at an annual rate of 2.4 percent in the fourth quarter, propped up primarily by wealthy Americans benefiting from rising home values and stock portfolios. “The well-to-do, they’re doing great and they’re out spending,” Zandi stated. “Folks in the bottom and middle of the income distribution, not so much.”
Businesses catering to lower-income shoppers have noted increased consumer caution, though overall spending has held up as some families drain savings or borrow money to maintain consumption levels. The rising credit card debt suggests financial strain for households without investment portfolio gains.
Hiring did pick up in January 2026 with 130,000 jobs added, although most positions were in healthcare, an industry that tends to add workers in good times and bad. The concentration in a single sector provides limited reassurance about broader labour market health.
Business investment, especially in artificial intelligence, boosted fourth quarter GDP as tech companies spent huge sums on data centers and facilities to power the AI boom. “That’s a bright, shining star that should continue to shine brightly in 2026,” Zandi said.
Recent data suggests investment could spread beyond AI to other sectors in coming months. Wells Fargo economists Tim Quinlan and Shannon Grein wrote: “While the A.I. investment boom is expected to continue, recent data suggests early signs of a broader pickup. This is occurring amid supportive tax incentives and a growing willingness by firms to finance investment beyond A.I.”
The GOP tax bill passed last summer encourages business investment by giving companies immediate tax deductions rather than spreading them over multiple years. This incentive structure aims to stimulate capital expenditure across sectors.
GDP figures fluctuated quarter-to-quarter last year due to international trade swings. Imports soared early in 2025 as businesses stockpiled goods before President Trump’s tariffs took effect, making GDP appear weaker. Once tariffs were implemented, imports dropped, making growth look stronger. For full year 2025, the US trade deficit remained little changed from 2024.
Government spending declined in final months due partly to the six-week federal shutdown, subtracting from fourth-quarter growth, though much will be recovered in early 2026.
Housing remained a persistent economic weakness throughout 2025. “One dark spot in the economy that continues to be a problem in 2026 will be housing,” Zandi stated. “Affordability is a real issue there. People just can’t afford to buy homes at these house prices and mortgage rates.”
Mortgage rates fell to just over 6 percent from nearly 7 percent a year ago, yet existing home sales and new house construction remain sluggish. The housing market weakness represents a drag on residential investment that subtracted from economic growth throughout the year.
The economic outlook hinges on whether job growth accelerates sufficiently to support consumer spending without further increases in household debt levels. The current trajectory of minimal hiring growth combined with rising credit card balances suggests vulnerability if labour market conditions deteriorate further or if wealthy households reduce spending.
