U.S. Economy Update: Productivity Jumps, Consumers Grow Anxious, and Data Delays Cloud the Outlook

U.S. Productivity Surges, Hinting at AI-Driven Efficiency

New government data show that U.S. worker productivity surged at a 4.9% annual rate in the third quarter, the fastest pace in two years.[3] Economists say the jump suggests that businesses’ recent investments in technology and artificial intelligence are starting to help companies do more with fewer workers.[3]

The report also shows unit labor costs fell 1.9% in the same period, signaling that rising wages are not currently feeding stronger inflation pressures.[3] Analysts note that if productivity gains continue, the economy could grow faster without sparking another inflation spike, potentially giving the Federal Reserve more room to keep interest rates steady or lower them gradually.[3]

Some economists credit tax cuts, deregulation and AI-related capital spending for the improvement, while warning that it is still too early to call this a lasting trend.[3] As tariffs raise input costs for many firms, Richmond Fed President Tom Barkin said companies are leaning on automation and slower hiring instead of passing higher prices directly to consumers.[3]

Consumers Expect Higher Inflation and Tougher Job Market

Even as productivity improves, American households are growing more uneasy about their personal economic prospects. A new Survey of Consumer Expectations from the Federal Reserve Bank of New York shows that short‑term inflation expectations in December ticked up to 3.4% for the year ahead.[5] Expectations for inflation three and five years out held steady at 3.0%, indicating that long‑run inflation views remain relatively anchored.[5]

The most striking shift is in the labor outlook. Expectations for how easy it will be to find a job in the next year fell to a new series low, the second time in six months the measure has hit a record low.[5] At the same time, fears of job loss increased, suggesting many workers see the labor market cooling more sharply than headline job numbers may show.[5]

Households expect their incomes to grow around 3.0% over the next year, slightly above the recent average, but they also anticipate slower growth in spending, with expected consumption rising 4.9%—near the narrow range seen since mid‑2025.[5] Delinquency expectations on debts climbed to their highest level since the start of the pandemic, underscoring financial stress for some borrowers, even as respondents reported being slightly more optimistic about their longer‑term financial situations.[5]

Key Federal Economic Reports Delayed After Data Disruptions

Adding to the uncertainty, the Bureau of Economic Analysis (BEA) has announced new delays and changes to the federal economic release schedule for growth, income and spending data.[4] After earlier disruptions, BEA will now release combined reports on Personal Income and Outlays for October and November 2025 on January 22, instead of separate releases originally scheduled for late November and mid‑December.[4]

Because the Bureau of Labor Statistics did not produce a full set of Consumer Price Index data for October, BEA will estimate some inflation measures by averaging September and November price data.[4] Those inflation figures are crucial inputs for calculating the widely watched Personal Consumption Expenditures (PCE) price index, a key gauge for the Federal Reserve.[4]

The first official estimate of fourth‑quarter 2025 GDP has also been pushed back to February 20 from its prior January 29 date.[4] On the same day, BEA now plans to release the delayed December 2025 Personal Income and Outlays report.[4] Second‑estimate GDP figures for the quarter and the January 2026 income and spending report, originally slated for February 26, will be rescheduled because sufficient source data will not be available in time.[4]

Economists say the delays mean policymakers, markets and the public will have to navigate several more weeks without a complete official snapshot of how fast the economy ended 2025. That gap puts extra weight on private data, Federal Reserve communications and high‑frequency indicators as investors and households try to gauge whether the economy is slowing, stabilizing, or poised to reaccelerate.

What It Means for Households and Businesses

For U.S. workers and consumers, the combination of strong productivity, softer but still‑positive income expectations, and rising job worries paints a mixed picture. If AI‑driven productivity gains hold, they could help sustain growth and gradually ease inflation pressures, creating room for real wage gains.[3][5] But deteriorating job‑finding expectations and higher expected delinquencies highlight ongoing stress, especially for more vulnerable households.[5]

Businesses, meanwhile, appear to be cautiously leaning into technology and automation to manage costs in an uncertain demand environment.[3] With key federal data delayed, corporate leaders may need to rely more heavily on their own real‑time indicators—such as sales, inventories, and hiring pipelines—while watching upcoming releases on GDP, income, and spending for clearer confirmation of where the U.S. economy is headed.[4]