The U.S. Department of the Treasury provided an update to the Treasury Borrowing Advisory Committee, outlining recent economic trends and risks for early 2026.
According to data available through January 30, 2026, the U.S. economy showed continued strength in the fourth quarter of 2025. Consumer demand and business investment—particularly in equipment and artificial intelligence—remained strong. The report noted that "labor supply and labor demand appear to be roughly in balance – and while hiring rates remain concerningly low, layoff rates are also low, suggesting that firms are delaying major labor decisions and achieving output growth via productivity improvements." It added that advances in artificial intelligence may be contributing to these productivity gains.
Official statistics for some government indicators were delayed due to a shutdown last autumn, leaving gaps in October’s data. However, private-sector forecasts cited by the Treasury suggest solid GDP growth continued into late 2025. The most recent Bureau of Economic Analysis (BEA) estimate showed real GDP grew by 4.4% in the third quarter of 2025, up from 3.8% in the second quarter.
Preliminary figures indicate consumer spending increased at an annual rate of 2.5% between October and November compared with the previous quarter. Business investment was driven by capital goods shipments rising at a 6.7% annualized pace over those two months. Artificial intelligence remained a key driver: “Through 3Q25, advances in artificial intelligence drove a surge in investment in data centers, computers and peripherals equipment, and software.” Real spending on data center construction reached $25.2 billion in Q3—a year-to-date increase of 22%.
Labor market conditions stayed stable despite slower job growth and a slight rise in unemployment toward year-end. In November and December, average monthly job creation was about 53,000 positions—similar to earlier quarters—and private payrolls added around 43,500 jobs per month during this period.
Unemployment averaged 4.5% at year-end versus 4.3% previously; however, this uptick was attributed more to slow hiring than layoffs or job losses: “Even so, the increase in the unemployment rate is attributable to a low hires rate rather than a rising layoffs rate – the latter remains stable and low…” Labor force participation among prime-age workers improved slightly above pre-pandemic levels.
Inflationary pressures eased further as core price increases slowed across several categories during late-2025. As measured by headline Consumer Price Index (CPI), twelve-month inflation fell to 2.7% as of December—down from both September’s level (3%) and its June-2022 peak (9%). Core CPI inflation dropped notably: “After averaging 0.3% per month during 3Q25, core CPI slowed to an average 0.1%, marking the slowest quarterly average since June 2024.”
Energy prices remained volatile due to geopolitical uncertainty but contributed only moderately higher inflation late last year; food price inflation held steady overall but rose for certain items such as beef and coffee.
Looking ahead into early-2026, economists surveyed by The Wall Street Journal put recession risk at its lowest since January-2025—with just a one-in-four chance seen over twelve months.
Treasury officials highlighted ongoing monitoring of labor markets as well as potential impacts from energy prices or rapid technological change: “Firms’ continued investment in artificial intelligence may lead to efficiency gains… However…the timeline for when such boosts are realized…is still uncertain.” They cautioned that AI could either deliver temporary or lasting productivity improvements—or have disruptive effects if adoption lags among firms or workers.
In conclusion, Treasury stated: “Thus far in President Trump’s second term, the Administration has successfully stewarded major fiscal legislation to prevent a historic tax increase…and it continues to seek further policies to incentivize economic growth.” Supply-side measures were credited with protecting consumers against high inflation while supporting domestic energy production.
