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 slower. In June 2025, the U.S. economy reported losing jobs (on net) for the first time since December 2020. Slower job growth, along with few job openings, suggest weakening demand for workers, making it harder to find a job for those who are looking. While inflation was trending downwards, there was slight acceleration in May, June, and July. Fortunately, none of these dynamics appear to have triggered widespread layoffs, so far; and business and consumer sentiment have picked up after a mild downturn earlier in the year. 

Here are five things to know about the economy as of September 5, 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

After a Period of Steady Growth, Monthly Job Gains in the Economy Have Begun to Stall.

• Between January 2025 and July 2025, Kentucky employers added 20,000 new jobs. This was more than twice the number of new jobs added during the same timeframe in 2024 (+8,100). 
• 62 percent of that growth, or 12,400 jobs, occurred in the first three months of 2025. In June 2025, the total jobs in Kentucky decreased slightly, by 300. In July 2025, Kentucky employers added 1,200 jobs.  
• Kentucky employers surpassed 2 million jobs on record for the first time in state history in January 2023. As of July 2025, Kentucky had 2,059,600 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 began slowing in May. In June 2025, the economy shed 13,000 jobs – the first negative monthly jobs reading since December 2020.
• In August 2025, U.S. employers added 22,000 new jobs. 

Despite Slower Job Growth, Layoffs Remain Relatively Low.

• Claims for unemployment insurance benefits in Kentucky increased in early 2025 but have been generally 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 $1.125 billion as of September 5, 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 in Kentucky Increased Last Year but Is Low by Historical Standards. National Unemployment Has Been Ticking Up. It May Be Getting Harder for Unemployed Adults to Find a Job.

• Kentucky’s unemployment rate rose in 2024 but has declined throughout 2025, registering at 4.9% in July 2025. Unemployment in the state remains below Kentucky’s 20-year historical average.
• There were 102,820 unemployed Kentuckians in July 2025, a decline of 9,694 since January 2025.
• The national unemployment rate is generally lower than Kentucky’s, registering at 4.3% in August 2025. This was up from 4.0% in January 2025. There were 7.3 million unemployed adults in the U.S. in August 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 layoffs 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 July 2025, Kentucky’s total workforce was 2,117,737 workers, including 2,014,917 employed workers.
• Unemployment levels are frequently compared to reported job openings as one way of assessing how easy or difficult it may be to find a job. In Kentucky, there were 105,000 reported job openings in June 2025 compared to 103,000 unemployed workers that same month. Nationally, in July, there were 7.181 million reported job openings vs. 7.384 million unemployed workers. 

Inflation Has Eased Since 2022, But Has Ticked Up Recently.

• U.S. inflation rose 2.6% from July 2024 to July 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. Measured year-over-year, inflation rose in May, June, and July.
• 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 but declined again in August.
   

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)