JPMorgan has released its economic outlook for 2025, outlining two potential scenarios for the U.S. economy. These predictions depend on the policies introduced by the newly elected administration, with a focus on the balance between growth-driven measures and challenges related to trade and regulation.
The bank expects GDP growth to slow slightly to 2% in 2025, with unemployment rising to 4.5%. Although job growth may decelerate, layoffs are likely to remain minimal. Reduced immigration could lead to workforce shortages in key sectors, potentially limiting economic growth.
JPMorgan highlights two contrasting possibilities. The first is a scenario where tax cuts and deregulation boost business confidence and productivity, driving stronger economic growth with manageable inflation. The second is a riskier path, where policy uncertainty, tariffs, and restrictive immigration measures create slower growth and higher inflation.
Wage growth is expected to moderate to about 3% by late 2025, slowing consumer spending but still providing some support for economic activity. Core inflation is predicted to decrease to 2.3%, close to the Federal Reserve’s target, though tariffs on Chinese goods could push inflation slightly higher. To address these challenges, the Federal Reserve is expected to gradually lower interest rates, stabilizing them at 3.5–3.75% by the end of the year.
Trade policies remain a significant concern, with new tariffs on Chinese imports potentially disrupting trade flows and increasing costs. Broader tariff measures could add further strain. On the fiscal side, extended tax cuts and increased government spending are likely to expand the federal deficit, potentially reaching 7% of GDP by 2026.
Corporate investment is expected to grow modestly, supported by consumer demand and government incentives in areas like infrastructure and technology. However, businesses are likely to remain cautious, prioritizing financial stability over aggressive expansion. Consumer spending, which drives much of the economy, is projected to grow at a slower rate of 2%, constrained by slower wage growth, tighter credit conditions, and reduced household savings.
JPMorgan’s report emphasizes the critical role of policy decisions in shaping economic outcomes for 2025. While there are opportunities for growth, significant risks related to inflation, trade, and fiscal management could pose challenges in the year ahead.
