State of the Economy

Concerns about the economy took center stage in the first months of President Trump’s second term, as the administration announced new tariffs that would reshape international trade policies around the globe. Since then, a cloud of uncertainty has loomed over business decisions and the short-term trajectory of the U.S. economy. Further complicating the situation, some tariffs have been postponed while bilateral trade negotiations take place, and the courts have intervened to potentially halt the imposition of some tariffs.

Against this backdrop, the available economic data paints a complicated picture. On the one hand, employers in Kentucky and the U.S. are continuing to add new jobs, unemployment and layoffs remain low, and inflation has cooled. On the other hand, additional data suggests that hiring has slowed down, and consumers and small business owners are pessimistic about the future of the economy.

Here are five things to know about the economy as of June 6, 2025. 
 

Job Growth Remains Steady

• As of April 2025, Kentucky’s labor market appeared strong. The state added 12,800 new jobs in the first four months of 2025. By comparison, Kentucky added 5,400 new jobs in this same time frame in 2024. 
• Kentucky employers surpassed 2 million jobs on record for the first time in state history in January 2023. As of April 2024, Kentucky had 2,052,400 recorded jobs. 
• The U.S. economy added 147,000 jobs in April 2025 and 139,000 jobs in May 2025. From January through May 2025, the country added 500,000 new jobs signaling continued national growth.

Layoff Activity Continues to Trend Below Historical Averages

• Claims for unemployment insurance benefits in Kentucky increased in early 2025 but remain low by historical standards.
• Many workers claim unemployment insurance benefits when they lose their job through no fault of their own, such as layoffs. Low rates of claims suggest that layoffs are still relatively limited despite recent upticks.
• One of the positives of low rates of unemployment insurance claims is that the balance of the state’s Unemployment Insurance Trust Fund was more than $1.1 billion as of June 4, 2025. This helps ensure that the state is well prepared to support laid-off workers in the event that the economy slows or experiences a downturn.

Unemployment has Risen, and Hiring has Decreased

• Kentucky’s unemployment rate rose in 2024 to above 5% and has remained there in 2025 as more adults looked for work. Despite this increase, unemployment in the state remains below typical levels. The U.S. unemployment rate was 4.2 percent in April and May 2025.
• At the same time, hiring rates in Kentucky dipped below normal levels as employers added fewer new workers to their headcounts.
• Some economic observers have coined the term, “The Great Stay,” to describe this dynamic of rising unemployment and reduced hiring. The term is intended to convey that employed individuals are generally staying employed in their current roles, while unemployed individuals are having trouble finding a job.
• To learn more about why Kentucky’s unemployment rate rose in 2024, read a Policy Brief written by the Center for Policy and Research in February 2025.

Inflation has Eased but Remains Higher Than What We Want

• U.S. inflation rose 2.14% from April 2024 to April 2025, which is just above the Federal Reserve’s 2% target but trending in the right direction.
• Inflation has eased since June 2022’s 7.2% peak but remains a key issue for consumers and businesses.
• This measure of inflation is the personal consumption expenditure index (PCE), which is the preferred inflation measurement for the Federal Reserve. It is different from the more commonly known consumer price index (CPI) in that it more effectively accounts for changes in consumer behavior. Read more here.

Consumers and Small Business Owners are Worried About Economic Conditions

• After rising throughout the second half of 2024, consumer sentiment declined in the first quarter of 2025. 
• Similarly, small business optimism rose throughout 2024 but fell in the first quarter of 2025.

On this web page, we provide economic updates on Kentucky and the United States, using a range of key metrics from the U.S. Department of Labor, U.S. Bureau of Economic Analysis, the University of Michigan, the St. Louis Federal Reserve, and the U.S. Chamber of Commerce. All data is analyzed by the Kentucky Chamber Center for Policy and Research. On this page, we cover jobs, unemployment, unemployment insurance claims, hiring, workforce participation, inflation, consumer sentiment, and small business optimism.   

Sources
Federal Reserve Bank of St. Louis, Federal Reserve Economic Data
MetLife and U.S. Chamber of Commerce, Small Business Index
University of Michigan, Survey Research Center, Surveys of Consumers
U.S. Bureau of Economic Analysis, Personal Consumption Expenditures Price Index
U.S. Bureau of Labor Statistics, Local Area Unemployment Statistics
U.S. Bureau of Labor Statistics, Labor Force Statistics from the Current Population Survey
U.S. Department of Labor, Employment and Training Administration, Unemployment Insurance Data
U.S. Federal Reserve, Economy at a Glance – Inflation (PCE)