State of the Economy

• Jobs and Employment: Revisions to national jobs data show that job growth slowed in the U.S. throughout 2024 and 2025, reaching almost zero percent year-over-year growth by the end of last year. Revisions to state-level job estimates are expected in March.
• Slow-hire, slow-fire: Firms appear less willing to hire, but also reluctant to make any major changes. Some call this a slow-hire/slow-fire labor market.
• GDP: GDP grew more slowly in 2025 (2.2%) than in 2024 (2.8%)
• Inflation: Inflation has been consistently higher than the Federal Reserve’s target rate. Inflation at the end of 2025 was exactly where it was at the end of 2024 at 3%.
• Consumers: Consumer sentiment reached a new low in November 2025.

Notes: This information is meant to provide a monthly check-in on the most recent economic data in Kentucky and the U.S. It is not comprehensive. For additional information on Kentucky’s economy, we recommend resources like Blueprint Kentucky’s annual report on Kentucky’s Rural Economy and the UK’s Annual Economic Report. 

Here are more details on the state of the economy as of February 27, 2026.

Job growth has slowed in both Kentucky and the U.S.
 

• How we look at jobs: This chart displays job growth by showing the 12-month change in jobs as a percentage, which allows for more direct comparisons between Kentucky and the U.S. and removes the seasonality of month-to-month changes.
• Slower growth in the U.S.: Job growth slowed in the U.S. throughout 2024 and 2025, reaching almost zero percent year-over-year growth by the end of last year. 
• Revisions to national data: In January, the Bureau of Labor Statistics released annual revisions to jobs data from 2025. These revisions showed that 2025 was a worse year for job growth than first thought, with the total number of jobs added revised downward from 584,000 to 181,000.
• Health care: The health care sector was a significant driver of job growth in 2025. Throughout 2025, job growth in health care averaged 33,000 jobs per month.
• January rebound: January 2026 looked like a very good month. The preliminary estimates show the US adding 130,000 jobs, with the health care sector accounting for most of that growth (82,000). Social assistance jobs increased by 42,000 in January; and construction, which had been flat in 2025, added 33,000 jobs.
• Kentucky job growth: Kentucky saw positive changes in job growth in early 2025 but growth began slowing after May. Revisions to state-level job estimates are expected in March that could change this picture. 

Hiring is weak, but layoffs are mostly stable—creating a "slow-hire/slow-fire" dynamic.
 

• Slow hire: Hiring in both Kentucky and the U.S. has deteriorated slowly. While the hiring rate in Kentucky was higher throughout much of 2025, it began falling in May 2025. 
• Slow fire: Layoffs and discharges held steady before increasing slightly with more recent months’ estimates. Firms appear less willing to hire, but also reluctant to make any major changes. Some call this a slow-hire/slow-fire labor market. 
• Layoffs in the news: Media stories of mass layoff announcements usually provoke more concern than is warranted. BLS data suggest there are around 1.7 million layoffs and discharges every month in the US. That said, recent preliminary estimates show a small increase in layoffs.
• Slow quit too: Quits have been low, suggesting workers aren’t finding (or expecting to find) better jobs than what they have.

National GDP growth slowed last year compared to 2024
 

• What GDP is: Gross Domestic Product (GDP) = Consumption + Investment + Government spending + (Exports – Imports).
• 2025 vs. 2024: GDP grew more slowly in 2025 (2.2%) than in 2024 (2.8%). 
• Q4 of 2025: The GDP growth in 2025:Q4 slowed relative to Q3 as government spending and net exports fell. Consumer spending slowed and investment increased slightly
• Consumer spending: GDP growth in 2025:Q3 was driven by increases in consumer spending, net exports and government spending. The increase in consumer spending reflected increases in both goods and services. Among services, health care and “other services” were the leading contributors. Among goods, recreational goods, vehicles and “other nondurable goods” (mainly prescription drugs) were leading contributors.
• Business investments: A concerning detail about both the 2025:Q2 and Q3 increases is that they masked decreases in investment. These decreases are consistent with a cooling labor market despite GDP growth. 
• Imports: The main driver of the decline in GDP in 2025:Q1 was a large increase in imports as firms pulled forward imports in anticipation of tariffs. The apparent rebound in 2025:Q2 was then associated with a decline in imports.
• Kentucky: The importance of manufacturing and wholesale trade to Kentucky likely explain why the changes in early 2025 were more pronounced for KY than for the US. 

Inflation remains higher than the Federal Reserve’s target rate.
 

• Core PCE & the Fed: Core Personal Consumption Expenditures (PCE) – which excludes food and energy – is the Federal Reserve’s preferred inflation metric. The Fed targets 2% inflation using Core PCE, which the US has not seen since 2021.
• 2025 vs. 2024: Inflation at the end of 2025 was exactly where it was at the end of 2024 at 3%.
• The tariffs effect: The increase in inflation shown since April 2025 is consistent with the effects of tariffs; however, those effects were very likely blunted by the anticipatory increase in imports earlier in the year. Firms may be reluctant to raise prices until they run through the inventories they accumulated earlier. 

Consumer sentiment has improved since reaching at all-time low in November.
 

• Consumer Sentiment: The University of Michigan produces an index of consumer sentiment and updates it monthly.
• All-time low last November: The November 2025 reading of 51.0 was an all-time low on the index. 
• January 2026 lower than 2025: The January 2026 estimate was 56.4, which was a decrease of 23.9% relative to January 2025.
• Rebound since November: Surveys of Consumers Director Joanne Hsu notes that the recent increase in consumer sentiment is driven entirely by “consumers with the largest stock portfolios.”

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) 
ADP Employment Report
Carlyle
Revelio Labs

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:

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