Consumer spending is driving the U.S. economy to unprecedented heights, achieving its fastest growth rate in two years during the third quarter of 2025. According to a report released by the government on Thursday, the economy expanded at an annual rate of 4.4% from July to September, which is a slight increase from the initial estimate of 4.3% and a significant jump from the 3.8% growth recorded in the previous quarter. This marks the most robust growth since the third quarter of 2023.
The gross domestic product (GDP), representing the total value of goods and services produced in the nation, benefited from a solid 3.5% rise in consumer spending, which constitutes approximately 70% of the GDP. Notably, expenditures on services, including healthcare, advanced by 3.6%, while spending on goods saw a modest increase of 3%. Within this category, durable goods—items designed for long-term use such as vehicles—only grew by 1.6%. In addition to strong consumer activity, a surge in exports coupled with a decline in imports played a crucial role in propelling growth during this quarter.
Moreover, business investments, excluding residential construction, grew at a rate of 3.2%, fueled in part by optimistic forecasts regarding artificial intelligence advancements.
Even amid this positive economic outlook, the resilience of the economy is being tested by uncertainties stemming from President Donald Trump’s economic strategies, particularly his implementation of high tariffs on imports from nearly every country globally.
Despite the favorable growth statistics, a significant number of Americans express dissatisfaction regarding their economic situation, especially in relation to the soaring cost of living.
An intriguing phenomenon is observed: the disparity between consumer sentiment and the reported strong spending figures may indicate what economists refer to as a "K-shaped economy." This term describes a scenario where wealthier individuals are enjoying substantial increases in spending due to rising incomes from market gains and investments, while lower-income families are grappling with stagnant wages and escalating prices.
Additionally, the employment landscape appears less vibrant than the overall economic performance would suggest. Since March, employers have added only a modest average of 28,000 jobs per month. In stark contrast, during the hiring surge following the COVID-19 lockdowns between 2021 and 2023, job creation averaged around 400,000 positions monthly. Nevertheless, the unemployment rate remains relatively low at 4.4%, indicating a labor market characterized by companies that are cautious about hiring new staff while simultaneously reluctant to dismiss their existing workforce.
Heather Long, chief economist at Navy Federal Credit Union, described the current situation as a "jobless boom," noting that robust economic growth is predominantly driven by investments in AI and the spending habits of affluent families. This leaves many middle-class households in an uneasy predicament. A critical question looming over 2026 is whether the middle class will begin to experience the benefits of this economic boom.
