The U.S. economy has been relatively stable but faced several headwinds. The job market remained strong, and inflation cooled significantly, but concerns about core inflation, higher interest rates, tariffs, and potential economic slowdown loomed. The Federal Reserve’s cautious approach to monetary policy and the housing market’s ongoing challenges also continued to influence the overall economic outlook, according to the January ITS Supply Chain Report by ITS Logistics.
“As the U.S. entered December 2024, the economic outlook carried both positive and negative trends that could influence the trajectory of the economy in 2025 and beyond,” says Stan Kolev, chief financial officer of ITS Logistics. “While many indicators suggest resilience, a number of challenges pose significant risks to continued growth.”
Key takeaways:
- If inflationary pressures persist or accelerate, it could erode consumer spending and confidence.
- The risk of inflation becoming entrenched could lead to more aggressive action from the Federal Reserve, with possible interest rate hikes impacting consumer borrowing and business investment.
- The global supply chain disruptions and rising geopolitical tensions could negatively impact U.S. exports and supply chains, hurting sectors that rely on international trade.
- If inflation and high borrowing costs weigh too heavily on households, it could lead to reduced discretionary spending, further slowing growth in key sectors like retail, travel, and housing.
- Per the recent incoming Trump Administration announcement, there is a potential for an increase in tariffs. Companies should prepare for the potential of a front-loading event similar to 2018, disrupting transpacific trade lanes from Asia into North America.
- Although job growth slowed compared to earlier in the recovery, demand for workers remained robust, particularly in healthcare, hospitality, and blue-collar industries. However, concerns about higher interest rates and a potential economic slowdown in 2025 could bring more caution to the labor market.
- While the U.S. economy was not yet in recession in December 2024, the risks are heightened as we move into 2025. The key concerns include how inflationary pressures, high interest rates, and global uncertainties will impact growth, consumer confidence, and business investment in the year ahead.
“In December 2024, the U.S. labor market remained strong but showed some signs of slowing as the year came to a close,” adds Kolev. “The U.S. economy added about 200,000 to 250,000 jobs last month, continuing a solid pace of hiring. While lower than the stronger job growth observed in 2021 and 2022, it still represented a healthy expansion, especially given the higher interest rate environment. The unemployment rate remained steady at 3.5%, continuing near historic lows. This suggested a tight labor market, with many employers still struggling to find workers.”
