EconomicDevelopmentCouncil.com
21st Century Economic Development
Education - Issues - Strategies - Solutions
Economic Development Issues
Based on economic forecasts and recent reports, major economic issues in late 2025 include slowing global growth, rising US inflation driven by trade tariffs, and widespread geopolitical and policy uncertainty.
Global economic slowdown
Decelerating growth: The World Bank and UN both forecast a slowdown in global growth for 2025, falling below 2024 levels. The International Monetary Fund (IMF) projects global growth at 3.0% for 2025, a slight increase from its earlier forecast but still subdued.
Trade barriers and policy uncertainty: A rise in global trade barriers, especially increased US tariffs, and heightened policy uncertainty are major factors contributing to the global slowdown. For instance, a new US trade policy is dampening global demand, particularly in trade-reliant regions like East Asia, Europe, and Latin America.
US economic issues
Resilient but slowing growth: US economic growth is expected to slow significantly in 2025, though it remains more resilient than other major economies due to strong tech investment and consumer spending earlier in the year. The Conference Board and Deloitte project weaker growth for the year.
Tariff-driven inflation: US inflation is set to rise, fueled by the costs associated with new tariffs. While the Fed may implement rate cuts, inflation is predicted to peak in late 2025.
Tight labor market: Despite slowing job growth and a modest rise in unemployment, the US labor market remains relatively tight.
However, restrictive immigration policies are likely to tighten the labor supply further, potentially pushing up wages and inflation in certain sectors.
Weakening consumer spending: Elevated interest rates, higher inflation, and slowing job growth are beginning to strain household finances, causing a slowdown in consumer spending.
Housing market slowdown: Elevated mortgage rates are suppressing residential investment and housing construction, with the benchmark home price appreciation expected to remain subdued.
Inflation and monetary policy
Divergent inflation paths: Global inflation is generally expected to fall, though the US is a notable exception due to tariff pressures.
Central bank policy shifts: While central banks in Europe and other regions may cut interest rates in response to weaker growth and easing inflation, the US Federal Reserve is expected to keep rates steady until early 2026 before potentially cutting.
Supply chain risks
Continuing disruptions: Persistent risks, including geopolitical conflicts, economic instability, cyberattacks, and extreme weather events, continue to threaten supply chains.
Shift to multi-shoring: To build resilience, many companies are shifting from single-region sourcing to multi-shoring strategies, which can help mitigate risks from geopolitical and climate shocks.
Global regional outlooks
China: Growth is expected to moderate as government support measures struggle to fully offset the negative impacts of US tariffs, a weakened property market, and low inflation.
Europe: Weaker exports caused by rising trade barriers are expected to dampen economic activity, though easing inflation may allow the European Central Bank (ECB) to continue cutting rates.
Emerging markets: Many developing economies face significant challenges, including higher trade barriers, tight financial conditions, debt burdens, and inflation risks fueled by a strong US dollar.
American Economic Issues 2025
As of October 2025, major American economic issues include slow economic growth, persistent inflation, rising national debt, and a weakening job market that suggests a possible recession in 2026. Artificial intelligence (AI)-related investment is providing a short-term boost, but the broader economy is experiencing headwinds from high tariffs and elevated interest rates.
Growth and recession warnings
Decelerating growth: The U.S. economy is forecasted to slow significantly, from 2.8% in 2024 to 1.9% in 2025, and further to 1.8% in 2026, according to S&P Global Ratings.
Recession risk: Some analysts suggest the U.S. may already be in a recession, masked by AI investment, with a 30% chance of an official recession in the next 12 months.
Consumption headwinds: Weaker consumer spending is a primary concern, influenced by stagnant real disposable income growth, elevated borrowing costs, and the resumption of student loan payments.
Inflation and interest rates
Sticky inflation: Although well below its 2022 peak, inflation remains above the Federal Reserve's 2% target. The core Consumer Price Index (CPI) rose to 3.1% in July 2025, driven partly by the lagged effect of rising rents.
Higher interest rates: To combat inflation, the Federal Reserve raised rates through early 2025 before cutting them in September 2025. However, long-term interest rates are expected to remain elevated, and further rate cuts depend on whether tariff costs are passed on to consumers.
Tariff-induced prices: High tariffs are a key source of inflationary pressure. The OECD expects price impacts to hit consumers as businesses pass on costs.
Job market concerns
Rising unemployment: The unemployment rate has been ticking upward, reaching 4.3% in August 2025—its highest level in nearly four years.
Weakening labor demand: The job market shows signs of weakness, with rising layoffs and declining hiring plans, particularly in sectors outside of health care. Net job creation has slowed significantly.
Wage growth slows: While wages rose significantly in 2022, the growth rate has since moderated. When combined with inflation, this erodes consumer purchasing power.
Fiscal and monetary issues
Growing national debt: As of October 2025, the U.S. national debt is $37.88 trillion, increasing at a rate of approximately $6 billion per day.
Higher interest costs: The average interest rate on the national debt is higher than in recent years, pushing up interest payments as a share of the federal budget.
Persistent deficits: The Congressional Budget Office (CBO) projects the federal budget deficit will reach $1.9 trillion in fiscal year 2025, fueled by growth in entitlement spending and interest costs.
Future debt projections: The CBO projects the national debt held by the public will reach 118% of GDP by 2035, exceeding the previous record set during World War II.
Housing affordability
Inventory shortage: A persistent shortage of affordable housing inventory and elevated prices continue to be major concerns for many Americans.
Subdued construction: High interest rates are expected to depress housing starts through the first quarter of 2026.
High rental costs: Rent costs, a major component of inflation, remain high. While some market indicators show a slowdown in rental growth, it has yet to be fully reflected in inflation data.
How are Americans doing financially?
In 2024, nearly a third of US adults felt
they were worse off than in 2023.
Updated September 4, 2025 by the USAFacts team
More than a quarter of US adults say they’re struggling financially: 73% of Americans reported “living comfortably” or “doing okay,” according
to October 2024 survey data from the
Federal Reserve. Another 27% said they
were either “just getting by” (19%) or
“finding it difficult to get by” (8%).
The share of people who say they’re doing okay
or better is two percentage points lower than
pre-pandemic levels, and the lowest since 2016.
