US GDP grows 2.2% in 2025 as job creation nearly stalls
Output decouples from hiring outside recession playbook, K shaped gains reward capital while entrants queue for scraps
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The US economy managed to grow in 2025 while barely creating jobs—an outcome that would be merely odd in a post-recession rebound, but is more revealing in a year described as “relatively strong” overall. According to Business Insider, revised data show GDP expanded 2.2% in 2025, yet net job creation was only about 181,000—one of the weakest years since 2003 outside recessions. Unemployment stayed low, but hiring slowed sharply and job openings fell, leaving entrants and job-switchers stuck.
This is not just a statistical curiosity; it is a distributional mechanism. When output rises without broad-based hiring, the marginal gains accrue to sectors where scaling does not require many additional workers: capital-intensive businesses, automation-heavy logistics, finance, and increasingly cloud and AI infrastructure. Business Insider notes job growth is concentrated in healthcare and social assistance—sectors driven by demographics and public reimbursement rather than productivity breakthroughs. That is a polite way of saying the labor market is bifurcating into (1) high-margin, high-capex systems that reward owners of capital and (2) labor-heavy care work whose “demand” often reflects state funding and regulatory mandates.
Economist Mohamed El-Erian has argued in the Financial Times that the US is seeing a “decoupling of job growth from economic growth” that usually appears only during recoveries. EY’s Gregory Daco told Business Insider the situation masks a “growing bifurcation” and may persist due to supply shocks, trade and tax policy uncertainty, AI adoption, and demographics.
The incentive story is straightforward. Firms facing uncertain policy and financing conditions delay hiring because labor is a quasi-irreversible commitment; machines and software can be turned off, written down, or redeployed. Meanwhile, regulatory regimes and subsidies tilt investment toward large incumbents that can amortize compliance and negotiate bespoke deals. The result is a K-shaped economy: asset holders and high-income professionals keep spending because balance sheets inflate, while wage earners experience near-zero real wage growth and job insecurity.
Moody’s chief credit officer Atsi Sheth told Business Insider that consumers see prices staying high even as wages and job reliability weaken. That perception matters: it reduces household risk-taking (moving, retraining, starting businesses) and increases precautionary saving—further dampening labor demand. It also channels political pressure toward “fixes” that often deepen the problem: industrial policy, targeted credits, and public procurement that reward the same capital-heavy sectors already winning.
If 2025 is the template, policymakers will keep citing GDP growth as proof of success while quietly expanding transfer programs to manage the social fallout. Growth becomes a headline; employment becomes a footnote; and “prosperity” is redefined as the ability of a shrinking slice of the economy to compound returns on subsidised infrastructure and protected market power. The labor market is not failing randomly—it is responding rationally to the rules of the game.