Research
May 08, 2025
Economic outlook
Economy is expected to slow amid rising uncertainty.
The clear air that greeted the economy at the beginning of the year became increasingly turbulent in recent weeks. Policy-related concerns around tariffs and their potential ripple effects added headwinds that threatened to derail the economic expansion.
Measures of business and consumer sentiment were the first to show cracks, with rising levels of uncertainty leading to a sharp deterioration in confidence. While this suggests that a slowdown is increasingly likely, the official economic data remained largely unscathed thus far.
The most recent exception was GDP, which declined at a 0.3% annualized rate in the first quarter. However, that was largely the result of a surge in imports ahead of the tariffs, the effects of which are expected to reverse in the current quarter.
Other key indicators – including employment and wages – have largely continued to grow at a moderate pace. That gives consumers the financial wherewithal to continue spending and remain the stabilizing force in the economy.
Overall, the Association’s outlook calls for slower GDP and employment growth in 2025, along with elevated expectations for inflation. While a modest economic expansion remains our base case, recession risks are notably higher than they were at the beginning of the year.
This article presents the latest trends in key economic indicators as well as an outlook for the year ahead. Visit this page throughout the year for the Association’s latest projections for the U.S. economy.
Labor market expansion remains intact
Although job growth was uneven in recent months, the labor market expansion showed little signs of stalling. Employers added an average of 181,000 jobs during March and April, which was well above the average monthly gain of 107,000 jobs during the first two months of 2025.
Job growth varies by state
While the national economy is more than 7.2 million jobs (or 4.7%) above pre-pandemic employment levels, some states have yet to fully recover from early-pandemic job losses. Employment levels in states like Idaho (+13%), Utah (+13%), Florida (+11%) and Texas (+10%) are well above February 2020 readings. At the other end of the spectrum, the employment base in 3 states and the District of Columbia remains below pre-pandemic readings.
Unemployment rate remains historically low
The jobless rate ticked higher from the sub-4% lows of 2022 and 2023, but continues to suggest that the economy is at or near full employment. The national unemployment rate stood at 4.2% in April, which represented the 42nd consecutive month at a level of 4.2% or lower.
7 states have jobless rates of 3% or lower
Labor market trends vary significantly by state. Seven states have unemployment rates of 3% or lower – led by South Dakota (1.8%), Vermont (2.6%), North Dakota (2.6%) and Montana (2.7%). Meanwhile, Nevada (5.7%), Michigan (5.5%) and the District of Columbia (5.6%) have the highest jobless rates.
Economy projected to add 1 million jobs in 2025
Job growth was uneven in recent months, but the labor market expansion is expected to continue in 2025 – albeit at a more modest pace. The national economy is projected to add a net 1 million jobs during 2025, which would be down from the 2 million jobs added during 2024. Despite the slowdown, 2025 is expected to represent the 5th consecutive year of job growth, with total gains in excess of 17 million jobs.
Personal income growth expected to slow in 2025
After the income support programs enacted during the pandemic ran their course, household income was buoyed by the healthy labor market. Looking ahead, wage growth is expected to continue in 2025, but decelerating employment gains will likely dampen the increase in aggregate income. Disposable personal income – a key driver of restaurant sales – is projected to increase at an inflation-adjusted rate of 1.4% in 2025. While still positive, that would be down from a stronger 2.7% gain in 2024.
Inflation remains sticky
After hitting a peak of 9.1% in mid-2022 – the strongest 12-month increase in 4 decades – growth in consumer prices moderated in the months that followed. Although progress has been made toward reaching the Federal Reserve’s 2% target level, prices remain sticky in many areas. Adding to the uncertainty is the potential impact that tariffs will have on consumer prices. As a result, the National Restaurant Association expects the CPI to increase 3.6% in 2025 on an average annual basis, which would be up from the 3.0% gain registered in 2024.
Economic growth expected to slow in 2025
Overall, the expectation is that the U.S. economy will slow in 2025. Real Gross Domestic Product (GDP) – the value of goods and services produced in the United States – is projected to increase at a 1.2% rate in 2025. That would be down from the gains of nearly 3% in both 2023 and 2024, and would represent the weakest annual gain since 2020.
Measures of business and consumer sentiment were the first to show cracks, with rising levels of uncertainty leading to a sharp deterioration in confidence. While this suggests that a slowdown is increasingly likely, the official economic data remained largely unscathed thus far.
The most recent exception was GDP, which declined at a 0.3% annualized rate in the first quarter. However, that was largely the result of a surge in imports ahead of the tariffs, the effects of which are expected to reverse in the current quarter.
Other key indicators – including employment and wages – have largely continued to grow at a moderate pace. That gives consumers the financial wherewithal to continue spending and remain the stabilizing force in the economy.
Overall, the Association’s outlook calls for slower GDP and employment growth in 2025, along with elevated expectations for inflation. While a modest economic expansion remains our base case, recession risks are notably higher than they were at the beginning of the year.
This article presents the latest trends in key economic indicators as well as an outlook for the year ahead. Visit this page throughout the year for the Association’s latest projections for the U.S. economy.
Labor market expansion remains intact
Although job growth was uneven in recent months, the labor market expansion showed little signs of stalling. Employers added an average of 181,000 jobs during March and April, which was well above the average monthly gain of 107,000 jobs during the first two months of 2025.
Job growth varies by state
While the national economy is more than 7.2 million jobs (or 4.7%) above pre-pandemic employment levels, some states have yet to fully recover from early-pandemic job losses. Employment levels in states like Idaho (+13%), Utah (+13%), Florida (+11%) and Texas (+10%) are well above February 2020 readings. At the other end of the spectrum, the employment base in 3 states and the District of Columbia remains below pre-pandemic readings.
Unemployment rate remains historically low
The jobless rate ticked higher from the sub-4% lows of 2022 and 2023, but continues to suggest that the economy is at or near full employment. The national unemployment rate stood at 4.2% in April, which represented the 42nd consecutive month at a level of 4.2% or lower.
7 states have jobless rates of 3% or lower
Labor market trends vary significantly by state. Seven states have unemployment rates of 3% or lower – led by South Dakota (1.8%), Vermont (2.6%), North Dakota (2.6%) and Montana (2.7%). Meanwhile, Nevada (5.7%), Michigan (5.5%) and the District of Columbia (5.6%) have the highest jobless rates.
Economy projected to add 1 million jobs in 2025
Job growth was uneven in recent months, but the labor market expansion is expected to continue in 2025 – albeit at a more modest pace. The national economy is projected to add a net 1 million jobs during 2025, which would be down from the 2 million jobs added during 2024. Despite the slowdown, 2025 is expected to represent the 5th consecutive year of job growth, with total gains in excess of 17 million jobs.
Personal income growth expected to slow in 2025
After the income support programs enacted during the pandemic ran their course, household income was buoyed by the healthy labor market. Looking ahead, wage growth is expected to continue in 2025, but decelerating employment gains will likely dampen the increase in aggregate income. Disposable personal income – a key driver of restaurant sales – is projected to increase at an inflation-adjusted rate of 1.4% in 2025. While still positive, that would be down from a stronger 2.7% gain in 2024.
Inflation remains sticky
After hitting a peak of 9.1% in mid-2022 – the strongest 12-month increase in 4 decades – growth in consumer prices moderated in the months that followed. Although progress has been made toward reaching the Federal Reserve’s 2% target level, prices remain sticky in many areas. Adding to the uncertainty is the potential impact that tariffs will have on consumer prices. As a result, the National Restaurant Association expects the CPI to increase 3.6% in 2025 on an average annual basis, which would be up from the 3.0% gain registered in 2024.
Economic growth expected to slow in 2025
Overall, the expectation is that the U.S. economy will slow in 2025. Real Gross Domestic Product (GDP) – the value of goods and services produced in the United States – is projected to increase at a 1.2% rate in 2025. That would be down from the gains of nearly 3% in both 2023 and 2024, and would represent the weakest annual gain since 2020.