State of the Economy

• Jobs: Job growth in Kentucky was negative for much of last year, according to newly revised data, while growth in the U.S. cooled considerably. 2026, so far, has shown signs of improvement, with stronger growth nationwide and in Kentucky.
• Slow-hire, slow-fire: Businesses continue to appear less willing to hire, but also reluctant to make any major changes, like layoffs. This “slow-hire, slow-fire” job market, which characterized 2025, is extending into 2026.
• Labor force participation: After a period of relative stability, labor force participation in Kentucky and the U.S. began falling in late 2025 and continued falling in the first quarter of 2026. 
• Inflation: The Federal Reserve’s preferred measure of inflation, which excludes energy and food prices, continues to trend well above its target of 2%. Broader measures of inflation have risen more quickly due to the conflict in the Middle East, and rising producer prices suggest inflation could soon rise faster 
• Energy prices: Conflict in the Middle East has caused oil, diesel, and gasoline prices to spike, but we have seen some improvement since mid-May.
• Consumer sentiment: Consumer sentiment improved slightly in May, after falling consistently for several months.  

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 June 23, 2026.

National job growth has improved in 2026, after a steady decrease last year.
 

• Consistent national job growth in 2026: At the national level, the first five months of 2026 have been positive overall. The US has added an average of 127,315 jobs per month so far in 2026. 
• National job growth slowed in 2025: The U.S. added only 181,000 jobs last year as job growth cooled throughout 2025.
• Kentucky is following a similar trajectory: Last year, Kentucky lost an estimated 5,700 jobs. 2026, however, started more positively. The 12-month differences for Kentucky mask the fact that the state has had positive job growth for three of the four available months for 2026. Kentucky added 2,000 jobs in April and has averaged 1,500 new jobs per month so far in 2026. 
• Jobs in Kentucky. There were an estimated 2.035 million jobs in Kentucky in April 2026, which is the highest number since August 2025.
• How we look at jobs: The chart above 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.

The “slow-hire/slow-fire” job market continues.

• Slow-hire, slow-fire: Despite strong job growth in 2026 relative to 2025, the dynamic of a slow-hire, slow-fire labor market continues. 
• Hiring, firing, and quitting: Hiring deteriorated in Kentucky during the last half of 2025. Estimates of national hiring rates have been volatile so far in 2026, but are currently where they were in November 2025. Layoffs and discharges have held steady. Firms appear less willing to hire, but also reluctant to make any major changes. Quits have also been low, suggesting workers aren’t finding (or expecting to find) better jobs than those they have.
• 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.

After a period of steadiness, labor force participation declined in 2026.

• Declining labor force participation. Labor force participation (the share of the 16+ population working or looking for work) was steady in 2025 in Kentucky at 58.3%, while it fluctuated around an average of 62.4% for the US. From November 2025 to April 2026, however, the rate fell by 0.7% in both the US and Kentucky.
• Fewer employed and unemployed adults. At the national and state level, the decline reflects a reduction in both employment and unemployment. Less employment accounted for approximately two-thirds of the decrease; however, considering that the unemployed accounted for at most 4.5% of the labor force in this period, a reduction in the number of unemployed played a proportionally large role.
• The gap between Kentucky and the U.S. Kentucky has historically trailed the nation in labor force participation rates. The causes of this gap are multifaceted, but the key drivers are low rates of educational attainment in Kentucky and a high share of the population living in rural areas. Kentucky’s urban areas have much higher rates of workforce participation than its rural areas, at 59.9% vs. 52.4%, respectively.

The Federal Reserve’s preferred inflation measure remains elevated.

• 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, which the US has not seen since 2021. Food and energy are excluded because they tend to be more volatile.
• Current rates: Inflation in April 2026 was 0.7% higher than in April 2025. The increase in inflation shown since April 2025 is consistent with the effects of tariffs. The effects of the war with Iran on Core PCE in April are probably still small.
• Iran's impact on inflation: The spike in energy prices due to the war in the Middle East will be felt by consumers and businesses more quickly than they show up in core PCE, which excludes food and energy prices. Indirect effects will show up in various ways, such as higher shipping costs. Other inflation measures are already picking up these impacts. Read more about this below.

Other inflation measures reveal the early impacts of war in the Middle East.

• Early indicators: The impacts of rising energy prices are already showing up in other measurements of inflation.  The headline Consumer Price Index, or CPI, for example, ticked up to 4.2% in May 2026. Headline CPI includes food and energy and is a simpler inflation measure than PCE, meaning that it is produced with a smaller lag. Another measure, called the Producer Price Index – Final Demand, which shows what businesses are charging consumers for goods and services, has also increased.
• What to expect: A measure of what businesses are paying for inputs suggests that consumers may expect higher prices in the coming months. As seen on the chart above, the Producer Price Index – Intermediate Demand has surged in recent data. This measure reflects the prices that businesses are paying for goods they purchase as inputs for goods and services sold to consumers.

Energy prices rose sharply after the conflict with Iran began.

• Indexing energy prices: This chart indexes prices for diesel, gasoline, West Texas Intermediate Crude oil (the standard benchmark for U.S. produced oil prices), and the international traded Brent Crude oil (the standard global benchmark) to February 23, 2026, just before the conflict with Iran started. 
• Oil Prices: Crude oil prices continue to be 35-43% higher than before the conflict, despite the US and China both drawing down inventories.
• Gasoline and Diesel Prices: Gasoline prices tracked are “US Regular All Formulations Gas Price” as tracked by the U.S. Energy Information Administration. AAA tracks gas prices by formulation. As of 6/11/2026, the national average price for a gallon of regular gas is $4.129, compared to $3.125 one year ago. In Kentucky, regular is $3.694 compared to $2.808 one year ago. AAA also reports that gasoline and diesel prices have decreased over the past month.
• Impacts: Diesel prices will have greater impacts on costs to businesses due to how they influence shipping expenses, while gasoline prices will disproportionately affect everyday households. Diesel is 37% higher than before the conflict, and gasoline is 41% higher.

Consumer sentiment has improved slightly since reaching a new low in May.
 

• Consumer Sentiment: The University of Michigan produces an index of consumer sentiment and updates it monthly.
• Recent improvement after a steady drop: The initial estimate for June 2026, 48.9, is over 9% higher than the final estimate for May; however, it is 19.4% lower than the estimate for June 2025, and 13.6% lower than it was in February before the conflict with Iran began.
• Cost of living impacts: The rising cost of living and higher fuel prices continue to drive consumer sentiment downward, with declining sentiment among lower-income consumers being especially pronounced. Survey Director Joanne Hsu notes that consumers are worried about inflation rising beyond the surge in fuel prices.
• About the historic lows: Note that the fact that the current number is a historic low may be due to changes in how the survey was conducted between April and July of 2024. The fact that the index has been declining is much more reliable and relevant than comparisons to historic values.

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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