U.S. GDP Surges at 4.4% Pace as Hiring Slows, Raising Fears of a ‘Jobless Boom’

The U.S. economy grew at a 4.4% annual rate in the third quarter of 2025, its fastest pace in two years, even as job creation slowed to a near stall and more Americans remained out of work for months at a time.

The Commerce Department’s Bureau of Economic Analysis (BEA) on Thursday revised its estimate of inflation-adjusted gross domestic product for the July-to-September period up from a previous 4.3%. At the same time, it reported that corporate profits jumped by $175.6 billion, a sharp rebound that followed several weak quarters.

Taken together with recent Labor Department figures showing the smallest annual job gains of the expansion, the data portray an economy in which output and earnings are rising briskly while hiring cools. The split is fueling debate over whether the United States is entering a “jobless boom” in which advances in technology and automation allow companies to grow faster without adding many workers.

What drove the stronger GDP revision

BEA said the third-quarter increase in real GDP “reflected increases in consumer spending, exports, government spending, and investment,” while imports decreased. Because imports are subtracted in the GDP calculation, that decline mechanically boosted the growth rate.

The new “updated estimate” replaces the government’s usual third estimate, which was delayed by a federal shutdown in October and November. BEA said the 0.1-percentage-point revision from the December figure “primarily reflect[ed] upward revisions to exports and investment that were partly offset by a downward revision to consumer spending,” along with an upward revision to imports.

Consumers and business spending

Consumer spending, which accounts for roughly two-thirds of economic activity, rose at a 3.5% annual rate in the quarter, the fastest pace of 2025. Households stepped up outlays particularly on services such as health care, travel and recreation, while spending on goods grew more slowly.

Business investment in equipment and structures increased modestly overall, but economists said technology-related outlays stood out.

“We’re seeing very strong spending on data centers, cloud infrastructure and other digital capital,” said Michael Gapen, chief U.S. economist at Bank of America. “That suggests an AI and automation cycle that is showing up in GDP and profits but not yet in broad-based hiring.”

Trade and government spending boosted the headline

Trade contributed significantly to growth. Exports of goods and services surged at an annual rate near 10% after falling in the prior quarter, while imports declined about 4%. Updated international transactions data showed stronger exports of capital goods, industrial supplies and agricultural products than initially reported.

Government spending also added to growth after being a small drag earlier in the year. BEA said federal defense outlays increased as agencies caught up on spending that had been delayed amid budget disputes leading up to the shutdown.

Stripping out trade and inventories, real final sales to private domestic purchasers — a measure of underlying private demand that combines consumer spending and fixed investment — rose 2.9% in the quarter. That was revised slightly down from 3.0% in December, suggesting the core engine of the economy is solid but not matching the headline boom.

Profits rebound as productivity rises

On the supply side, the report showed that private services-producing industries led the expansion. Their inflation-adjusted value added rose 5.3%, compared with 3.6% for private goods-producing industries. Government output edged down 0.3%.

Profits from current production — a broad measure that adjusts for inventory valuation and capital consumption — climbed by $175.6 billion in the quarter. BEA said that was $9.5 billion more than previously estimated, reflecting stronger earnings, particularly in corporate sectors tied to technology and services.

“The profit picture in the third quarter looks like a rebound,” said Kathy Bostjancic, chief economist at Nationwide. “Margins are improving even as the labor market is cooling, which points to productivity gains and some pricing power.”

A cooling labor market

The labor market tells a very different story from GDP.

Figures from the Bureau of Labor Statistics show employers added 584,000 jobs in all of 2025, an average of about 49,000 a month. That is down from 2 million jobs in 2024 and well below the gains recorded in the immediate recovery from the pandemic, when monthly increases at times topped 400,000.

Nonfarm payrolls rose by 50,000 in December, and the unemployment rate stood at 4.4%. While that jobless rate is low by historical standards, more Americans are remaining out of work for extended periods. About 1.9 million people had been unemployed for 27 weeks or longer in December, accounting for 26% of the unemployed, up from a year earlier.

“The topline unemployment rate masks real signs of softening,” said Betsey Stevenson, a labor economist at the University of Michigan and former White House adviser. “We have slower job growth, rising long-term unemployment and weaker wage gains, even as GDP is running above potential.”

Hiring was uneven across industries late in the year. Food services and drinking places added 27,000 jobs in December, health care gained 21,000 and social assistance 17,000. Retail trade cut 25,000 positions, and federal government employment has fallen by 277,000 since January 2025 — a decline of about 9% — as agencies shrank payrolls following the shutdown and subsequent budget decisions.

Layoff announcements also increased. Outplacement firms reported that U.S. employers planned more than one million job cuts in 2025, the most since 2020, including reductions at large technology and retail companies that are investing heavily in artificial intelligence tools and automation.

Inflation and the Fed’s next move

Inflation remains a central backdrop. BEA said prices for gross domestic purchases — a broad measure of prices paid by U.S. residents — rose at a 3.4% annual rate in the third quarter. The price index for personal consumption expenditures (PCE), the Federal Reserve’s preferred gauge, increased 2.8%, while the core PCE index that excludes food and energy rose 2.9%. Those quarterly figures are in line with year-over-year readings near the high-2% range at the end of 2025.

Fed policymakers cut their benchmark federal funds rate three times in late 2025, bringing the target range to 3.50% to 3.75% in December. Officials have described policy as “moderately restrictive” but moving gradually toward a more neutral stance as inflation cools.

The latest GDP numbers complicate that path. Sustained growth above 4% with profits rebounding could argue against further rapid rate cuts, even with a softening job market.

In a recent speech, Federal Reserve Governor Michelle Bowman said that while “the labor market has softened somewhat,” she believed “there is likely still some room for the Committee to lower the federal funds rate over time” if inflation continues to move toward 2%. At the same time, she warned that the Fed must be “prepared to respond” if inflation pressures reemerge.

Is the boom overstated?

Economists said the third-quarter strength may overstate the economy’s underlying trend. The shift in trade flows, a smaller drag from business inventories and the timing of federal spending after the shutdown all boosted growth. Those forces could reverse in subsequent quarters.

“Some of the 4.4% is payback for earlier weakness and unusual timing,” said Ryan Sweet, chief U.S. economist at Oxford Economics. “But there is also a genuine story of stronger productivity, particularly in tech and services, that is allowing GDP to grow faster than jobs.”

For households, the divergence between strong national statistics and a tepid job market has been evident in surveys showing persistent dissatisfaction with the economy. Many consumers report that even with inflation slowing, higher price levels for groceries, rent and services are straining budgets, while wage gains for typical workers have barely outpaced inflation.

The new GDP estimate underscores how the recovery from the pandemic and subsequent shocks has evolved. The United States is posting growth rates that exceed many economists’ estimates of its long-run potential, even as annual job creation in 2025 was among the weakest in decades outside of a recession.

Whether that pattern marks a brief phase or an early look at a more capital-intensive, AI-driven economy will matter for workers, businesses and policymakers alike. As the Federal Reserve prepares to meet later this month and Congress turns back to budget and tax debates, the question is no longer whether the economy can grow, but how widely the gains from that growth will be shared.