GYF’s Business Valuation & Litigation Support Services Group continues to monitor economic conditions. As of December 31, 2025, the U.S. economy showed limited overall change, reflecting moderate expansion tempered by policy uncertainty, lingering inflationary pressures, and the aftereffects of a prolonged government shutdown.
Economic activity has expanded at a moderate pace. Consumer spending declined further during the government shutdown, though higher-end retail remained resilient. Manufacturing activity increased modestly despite tariff-related headwinds, while nonfinancial service revenues were generally flat to down. Unemployment rose slightly to 4.4%, despite notable gains in food services and healthcare. While the labor market showed an uptick in widespread layoffs, more Districts reported the use of hiring freezes, replacement-only hiring, and attrition through layoffs. Artificial Intelligence has increasingly impacted the labor market, and multiple firms noted AI replacing entry-level positions or enabling existing workers to maintain productivity.
Inflation remained somewhat elevated, with the Consumer Price Index reading rising 0.3% month-over-month in December to 2.7%, though recent data may be distorted by delayed collection during the government shutdown. In response to moderating economic momentum, the Federal Reserve reduced the target federal funds rate by 0.25%, contributing to two prime rate cuts during the quarter. Equity markets responded positively, with the Dow, S&P 500, and NASDAQ all posting gains, signaling cautious investor confidence despite ongoing uncertainty.
Overall, the economic outlook remains guarded but constructive. Federal Reserve projections anticipate moderate GDP growth over the next several years, easing inflation, and a gradual decline in unemployment and interest rates. However, continued risks tied to trade policy, depressed consumer sentiment, fiscal legislation, and labor market disruption from AI adoption remain, being critical considerations for forward-looking financial decision-making. For more details about Q4 of 2025, download our Economic Recap.
