Economists Expect Strong U.S. Growth but Slower Job Gains and Stubborn Inflation

Economists foresee steady U.S. economic growth driven by rising business investment, even as employment expansion slows, unemployment increases, and inflation remains sticky, according to a new survey by the National Association for Business Economics (NABE).

The survey found that higher corporate investment is expected to offset weaker consumer spending and global trade, keeping the economy broadly on track. However, NABE members cautioned that sluggish job creation, higher joblessness, and persistent inflation could weigh on future prospects.

A key concern remains the Trump administration’s new import tariffs, which many economists view as a drag on performance. More than 60% of the 40 economists surveyed said the tariffs could trim growth by as much as half a percentage point by curbing both imports and exports and raising consumer prices. None believed the tariffs would boost growth.

Still, the latest quarterly survey, released Monday during NABE’s annual meeting, reflected a more optimistic outlook than earlier this year, when worries about tariff damage and the risk of a broader trade war were at their peak.

The median forecast now sees the U.S. economy growing 1.8% in 2025—roughly in line with estimates of its long-run potential—up from 1.3% projected in the June survey.

Inflation, measured by the Federal Reserve’s preferred personal consumption expenditures (PCE) price index, is expected to end the year at 3%, slightly below June’s 3.1% projection. For 2026, the rate is forecast to ease to 2.5%, compared with 2.3% in the June outlook—signaling only gradual progress toward the Fed’s 2% target.

Unemployment, meanwhile, is projected to rise modestly through next year, though less sharply than previously feared—reaching 4.5%, compared with 4.7% in the prior survey.

The Federal Reserve is expected to cut interest rates again this year, though at a slower pace than investors anticipate. NABE respondents predict just one additional rate cut in 2025, compared with market expectations for two quarter-point reductions.

The survey also highlighted one of the puzzles that Fed officials are grappling with: surprisingly strong GDP growth alongside weak job creation. Economists surveyed expect monthly employment gains to average only about 29,000 for the rest of this year, improving modestly to around 75,000 in 2026—well below June’s forecast of 97,000.

One possible explanation for this divergence is a surge in capital investment, particularly in computing power and artificial intelligence, which may be boosting output without significantly expanding the workforce.

The survey found that business investment is rebounding sharply, with expected growth of 3.8% this year—more than double the 1.6% forecast in June—and a continued 1.7% rise next year, up from the earlier 0.9% projection.

The housing sector, however, remains weak. Residential investment is now forecast to fall 1.6% in 2025, reversing a modest 0.5% increase seen in the June survey, with growth next year expected to remain below 1%.