State of the Economy

Uncertainty has shaped economic conversations throughout 2025, but signs of weakness in the economy have only started to materialize in the hard data recently. While job growth was steady in the first quarter of the year, the months that followed have been notably slower. Similarly, while inflation was trending downwards, there was a slight acceleration in May and June. Fortunately, none of these dynamics appear to have triggered widespread layoffs, and business and consumer sentiment have picked up after a mild downturn earlier in the year. Additional data to be released in August and September will help paint a more complete picture of economic conditions in Kentucky and the U.S. 

Here are five things to know about the economy as of August 4, 2025. 

The Kentucky Chamber hosted a webinar on June 9, 2025, featuring Vice President of Policy Charles Aull and Erica York, Vice President of Federal Tax Policy at the Tax Foundation, to explore how tariff and tax policies in Washington are shaping the economic landscape for Kentucky businesses.

Watch the webinar below:

Read The Full Story on The Bottom Line

Job Growth Has Been Steady in 2025 But Has Shown Signs of Weakness

• Between January and June 2025, Kentucky employers added 20,600 new jobs. This was more than twice the number of new jobs added during the same timeframe in 2024. 
• 60 percent of that growth, or 12,400 jobs, occurred in the first three months of 2025. In June 2025, Kentucky employers added 1,500 new jobs. 
• In the first six months of 2025, Kentucky’s key growth sectors included construction (6,000 jobs), education and health services (3,600 jobs), and government (3,400 jobs). The construction sector recorded 900 less jobs in June 2025 than in May 2025. 
• Manufacturing employment in Kentucky stood at 259,600 jobs in June 2025. This was 900 more manufacturing jobs than in June 2024 but 800 less than in May 2025. 
• Kentucky employers surpassed 2 million jobs on record for the first time in state history in January 2023. As of June 2025, Kentucky had 2,060,200 recorded jobs. 
• Nationally, job growth was steady in the first four months of 2025, producing more than 100,000 jobs each month from January to April. 
• National job growth appears to have slowed in May, June, and July with 106,000 new jobs spread out across all three months. June saw a net gain of just 14,000 new jobs. Note that this data comes from revisions announced by the Bureau of Labor Statistics on August 1. Revisions to state-level data have not yet been announced. 

Layoff Activity Continues to Trend Below Historical Averages

• Claims for unemployment insurance benefits in Kentucky increased in early 2025 but have been flat since then and 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 $1.146 billion as of August 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 Increased Last Year, But Is Low By Historical Standards

• Kentucky’s unemployment rate rose in 2024 but has declined throughout 2025, registering at 4.9% in June 2025. Unemployment in the state remains below typical levels.
• There were 103,060 unemployed Kentuckians in May 2025, a decline of 9,454 since January 2025.
• The national unemployment rate is generally lower than Kentucky’s, registering at 4.2% in July 2025. This was up from 4.1% in June 2025.
• The unemployment rate measures the percentage of adults in the workforce who don’t have a job but are actively looking for one. The unemployment rate can rise and fall due to layoff and hiring activity but also because of more or fewer non-working adults starting to look for work.  
• Unemployed adults are part of the workforce. As of June 2025, Kentucky’s total workforce was 2,119,009 workers, including 2,015,949 employed workers. 

Inflation Has Eased Since 2022, But Ticked Up in May and June

• U.S. inflation rose 2.6% from June 2024 to June 2025, which is above the Federal Reserve’s 2% target. 
• 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 Are Generally Less Optimistic About the Economy Than They Were a Year Ago

• After rising throughout the second half of 2024, consumer sentiment declined in the first quarter of 2025. It began rebounding in June and July.
   

Small Business Owners Are Generally Less Optimistic About the Economy Than They Were a Year Ago

• Similarly, small business optimism rose throughout 2024 but fell in the first quarter of 2025. Like consumer sentiment, it saw a mild rebound in the second 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)