MICHEL MARTIN, HOST:
Economic growth slowed in the final months of last year. But the U.S. economy is still growing. Solid consumer spending is still propping up that growth, and so is business investment in artificial intelligence. Even though the economy is getting bigger, it's not adding a lot of jobs. We're going to dig into this with NPR's Scott Horsley. Scott, good morning.
SCOTT HORSLEY, BYLINE: Good morning, Michel.
MARTIN: So the Commerce Department just released a report card on the economy this morning. What does it say?
HORSLEY: It says that gross domestic product - that's the broadest measure of goods and services that we produce in the country - continued to expand in 2025. GDP grew 2.2% last year. That's down a little bit from 2024, but still quite respectable. Growth in the fourth quarter did take a big hit from the six-week government shutdown. But a lot of that is going to be made up in the current quarter or the months to come. As always, consumer spending is the biggest driver of the U.S. economy. And chief economist Mark Zandi at Moody's Analytics says the American people are still spending, especially the rich ones.
MARK ZANDI: Obviously, the consumer drives the economic train. And it's really important they keep on spending. Folks at the top end of the income distribution, the well-to-do, they're doing great. And they're outspending folks in the bottom part of the income distribution - middle parts, not so much.
HORSLEY: Consumer spending didn't grow as fast in the fourth quarter of the year as it did in the third, so that is something to keep an eye on. We've heard from a lot of businesses that cater to low- and middle-income families who say those customers are getting more cautious with their spending.
MARTIN: Now, we've talked a lot about the slowdown in hiring last year. If the economy keeps growing, are employers going to need to hire more people?
HORSLEY: That's usually the way it works. But in 2025, we had kind of a disconnect between the solid GDP growth and very weak job growth. The people who are working are getting more productive, so businesses are able to crank out more goods and services without adding a lot of folks to the payroll. But without some additional paychecks, it's going to be hard to maintain that additional spending. You know, spending has been growing faster than income in the last few months, and that can't keep up forever.
MARTIN: What else is powering that growth in the GDP?
HORSLEY: The other big driver has been business investment, especially in artificial intelligence, and that's just getting stronger. Tech giants like Google and Amazon are spending vast sums on AI. They're putting up data centers around the country. And that's expected to continue in 2026. We could also see business investment broaden out to some other areas this year. You know, the GOP tax cuts passed last summer were designed to encourage business investment. So that all adds to GDP growth.
MARTIN: And, you know, one of the big economic stories of the last year has been President Trump's tariffs. How did they affect GDP?
HORSLEY: You know, one thing that weighs on GDP is the trade deficit. It's gross domestic product, so imports count against that. But even though the president has imposed these very high tariffs, economist Chad Bown at the Peterson Institute for International Economics says that just hasn't put much of a dent in the trade gap.
CHAD BOWN: Despite all of the tariffs of 2025, U.S. imports of goods and services from the world increased.
HORSLEY: In fact, the trade deficit last year was almost identical to what it was in 2024, so not much of a difference in GDP. However, there have been some big changes in where imports are coming from. Imports from China, for example, fell sharply last year. But that was more than offset by increased imports from places like Vietnam and Taiwan, which faced lower tariffs than goods from China did. So global trade routes are being redrawn, but global trade itself continues.
MARTIN: That is NPR's Scott Horsley. Scott, thank you.
HORSLEY: You're welcome. Transcript provided by NPR, Copyright NPR.
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