With the new year on the horizon, here are some of my thoughts on where the Economy will go in the coming year:
Inflation and Economic Growth
Analysts predict moderate economic growth in 2025, with recession fears easing as inflation trends closer to the 2% target. However, proposed tariffs on key trade partners could introduce inflationary pressures, potentially pushing rates toward double digits later in the year. These tariffs may largely serve as negotiation tools, with selective implementation likely. I anticipate some tariffs will take effect, leading to an inflation rate of approximately 3%, which would likely prevent any rate cuts in the latter half of the year.
Housing Market
Zillow forecasts a 2.6% increase in home prices in 2025 (Source). Policies under the Trump administration, including immigration reforms and the removal of the debt ceiling, could drive up bond yields, keeping mortgage rates elevated or even increasing them to approximately 7.5% for a 30-year loan. These high rates will likely deter many prospective homebuyers, limiting housing market activity.
Employment
Unemployment is expected to remain around 4.5%. However, white-collar sectors may experience job losses as AI adoption accelerates. Simultaneously, agriculture, transportation, and construction sectors could face labor shortages due to stricter immigration policies under the incoming administration.
Stock Market
The stock market is projected to grow by approximately 15%, bolstered by regulatory rollbacks. However, geopolitical instability in regions such as Israel, Russia, and China pose risks to market performance. A major crisis could offset these anticipated gains (Source).
Gas and Food Prices
Gas prices may rise to an average of $3.00 per gallon nationally in early 2025 but could decline later in the year as supply increases, assuming no major disruptions in oil-producing regions. Food prices are more unpredictable, hinging on tariff policies. If tariffs are enacted, staples imported from Mexico, such as fruits and vegetables, could see significant price increases of up to 25%. Additionally, labor shortages may exacerbate price volatility and create potential product shortages.
Conclusion
The U.S. economy remains stable and shows signs of improvement. However, this trajectory could be derailed by inflation driven by tariffs and labor shortages linked to restrictive immigration policies. Large corporations are likely to remain profitable, with some potentially reporting record earnings, often at the expense of consumers. Meanwhile, lower-income groups and younger generations could face continued struggles, particularly in housing affordability.
The housing crisis remains a significant concern. Rising costs have already led to an 18% increase in homelessness since 2023 (Source). This trend may hinder younger individuals’ ability to build generational wealth through homeownership, further widening economic disparities.