U.S. Economy in June 2025: Stable Growth with Mixed Signals#

As of June 2025, the U.S. economy is growing at a 1.8% annual rate, slightly below its 2% long-term trend, according to EPB Macro Research’s Aggregate Economy Index. Despite stable growth over the past two years, mixed signals among key indicators and policy uncertainties—including tariffs and federal workforce reductions—suggest a complex outlook. Using a Four Economy Framework, this analysis clarifies the economy’s current position and underscores the importance of leading and cyclical variables for forecasting [0,].

Aggregate Economy: A Snapshot of Stability#

The Aggregate Economy Index, built on six National Bureau of Economic Research (NBER) variables—real personal income, nonfarm payrolls, employment (household survey), real personal consumption, wholesale-retail sales, and industrial production—measures the business cycle’s core dynamics. These variables capture the interplay of income, consumption, production, and employment, providing a comprehensive view of economic health [0].

Growth Rate: The economy’s 1.8% growth in May 2025 is slightly down from recent months but has remained remarkably stable since mid-2023. This contrasts with S&P Global’s forecast of 1.9% annual GDP growth for 2025, down from 2.8% in 2024, due to tariff disruptions and federal spending cuts [Link]. Link
Comparison to Trend: Growth below the 2% trend aligns with Conference Board projections of 1.6% real GDP growth in 2025, signaling a slowdown driven by trade barriers [Link]. Link
Historical Context: In 2008, the economy grew at 1.7% before entering a recession, highlighting that current growth alone isn’t a reliable predictor of future stability [0].

Unusual Cyclical Dynamics#

The business cycle typically sees NBER variables peaking or troughing within months of each other. However, the 2025 cycle is atypical:

Peaked Variables: Real retail sales peaked in 2022, unemployment rate (inverted) in 2023, and industrial production shows weakness, mirroring early 2008 patterns [0].
Strong Variables: Nonfarm payrolls, real personal consumption, and real personal income remain robust, offsetting weaker components [0].
Implications: This divergence underscores the need for a holistic approach, as selective focus on strong or weak indicators can mislead. For instance, unemployment at 4.2% in March 2025 is near the non-cyclical rate, but job growth slowed to 152,000 per month in Q1 2025, down from 209,000 in Q4 2024 [Link].Link

Leading Indicators Signal Caution#

While the Aggregate Economy reflects current conditions, leading and cyclical variables offer forward-looking insights:

Conference Board LEI: The Leading Economic Index (LEI) fell 0.1% in May 2025, after a 1.4% drop in April, with a 2.7% decline over six months, triggering a recession signal. However, The Conference Board expects a significant slowdown rather than a recession, with GDP growth at 1.6% in 2025 [Link]. Link
Consumer Sentiment: Consumer confidence weakened in Q1 2025, with precautionary saving restraining spending amid tariff uncertainty and federal layoffs [Link]. Link
Business Outlook: NFIB Small Business Optimism Index dropped in January and February 2025, reflecting uncertainty over trade policies and government efficiency reforms [Link].Link

Policy Challenges and Economic Risks#

President Trump’s policies, including tariffs and federal workforce reductions, are shaping the economic landscape:

Tariffs: A 90-day tariff pause announced on April 9, 2025, reduced the average tariff rate from 25% to 14%, but trade tensions with China persist, with 145% tariffs on Chinese imports. These could shave 40 basis points off U.S. GDP by mid-2026 [,]. Link Link
Government Spending: The Department of Government Efficiency (DOGE) aims to cut federal spending, but state governments are hiring laid-off workers, mitigating some labor market strain [Link]. Link
Inflation: Core inflation at 2.8% in October 2024 remains sticky, driven by labor-intensive services. Tariffs and immigration restrictions could reignite inflationary pressures in 2025 [Link].Link

Posts on X reflect mixed views on the economy’s health:

Some highlight stability, citing 2% GDP growth, 4.2% unemployment, and stock market highs as signs of strength [Link]. Link
Others warn of vulnerability, noting rising jobless claims, tightening credit, and fading consumer spending [].
These perspectives are inconclusive but underscore public uncertainty amid geopolitical and policy shifts.

Key Highlights#

Growth Rate: The U.S. economy grows at 1.8%, slightly below the 2% trend, with stable performance over two years [0,].
Cyclical Divergence: Real retail sales and unemployment peaked early, while payrolls and consumption remain strong [0].
Leading Indicators: LEI dropped 2.7% in six months, signaling a slowdown but not a recession [].
Policy Impacts: Tariffs and federal layoffs pose risks, with inflation at 2.8% a concern [].
Mixed Sentiment: X posts reflect both optimism and caution about economic stability [,].

Conclusion#

In June 2025, the U.S. economy maintains 1.8% growth, slightly below its 2% trend, with remarkable stability despite policy uncertainties. However, divergent cyclical signals—weakness in retail sales and industrial production versus strength in payrolls and consumption—and a declining LEI suggest a slowdown ahead. Tariffs, federal spending cuts, and sticky inflation add complexity, requiring a structured framework like EPB’s Four Economy Framework to navigate. While not in a recession, the economy’s resilience will be tested by trade tensions and policy shifts in the coming months.