Real GDP growth is forecasted to range between 1.5% and 1.75% in 2025. While this marks a slowdown, it reflects normalization rather than contraction. The U.S. continues to outperform many of its global peers, driven by a resilient private sector, innovation-focused capital markets, and a culture of entrepreneurship.1
Balancing Resilience and Risk:
Key Takeaways from the 2025 U.S. Economic Forecast
First American recently hosted our 9th annual economic forecast webinar with Gerard Cassidy, Managing Director at RBC Capital Markets. Drawing from his analysis and insights from other industry leaders, here are key takeaways on how monetary policy, labor dynamics, and global trade are shaping the economic landscape.
Growth Normalizes
Rates Stay High
Short-term interest rates are likely to stay elevated until the Federal Reserve sees sustained evidence that inflation is under control. A 25–50 basis point rate cut could occur later in the year if inflation remains in check, but the Fed remains cautious about whether new tariffs could reignite inflationary pressure.1 Long-term rates, influenced largely by global capital markets, are expected to stay above 4%.2
Labor Market Holds Steady
Despite signs of softening, the employment picture remains strong. Job openings are hovering around 7.5 million, and wage growth—particularly among entry-level workers—is outpacing inflation. Structural drivers, including the retirement of baby boomers and a persistently tight labor supply, are expected to support employment for the next several years.1
Consumer Spending is Strong
Consumer spending continues to show resilience, supported by real wage growth, high household net worth, and over $2 trillion in interest income—now equal to 14% of total wages. Spending is projected to slow modestly but remain resilient, even in the face of elevated borrowing costs and uneven inflation pressures across income groups.1
Tariff Tensions Rise
New tariffs that took effect August 7 have raised average effective rates to multi-decade highs, with import duties reaching up to 50% in some categories. While headline inflation has not spiked, certain sectors—like clothing, textiles, and electronics—may experience renewed pricing pressure.3 The full impact will become clearer in the fall as costs work their way through supply chains.
Real Estate Slows
Higher mortgage rates continue to weigh on the housing market. Existing homeowners who locked in sub-4% rates during the pandemic are staying put, contributing to reduced housing turnover. Commercial construction is also experiencing a slowdown, with the Architectural Billings Index descending. Meanwhile, urban office space continues to face elevated vacancy rates and limited new development.1
Capital Investments Surge
Capital expenditures were near record levels in Q1 2025 and are continuing to grow. Much of this activity is tied to onshoring efforts by U.S. manufacturing companies. For example, Intel is currently building a $20 billion semiconductor fabrication plant in Columbus, Ohio that the state estimates will generate over $100 billion in long-term economic activity.1
Stablecoins Enter Mainstream
The recently passed GENIUS Act (Guaranteeing Essential National Infrastructure in US-Stablecoins) marks the United States' first major crypto legislation. It provides a federal framework for stablecoin regulation, requiring 1:1 reserves and compliance with anti-money laundering standards.* This regulatory clarity is expected to accelerate adoption of digital payment technologies, particularly in underbanked regions and for cross-border transactions.4
While U.S. economic growth has moderated, it is far from fragile. Consumer balance sheets are strong, capital investment is expanding, and monetary policy is holding firm. Risks remain—from persistent deficits and global trade uncertainty to housing stagnation—but the foundation is stable. Assuming inflation remains under control, interest rate relief may be on the horizon later this year, supporting continued economic expansion into 2026.
Sources:
- Gerard Cassidy, 2025 U.S. Economic Forecast Webinar with First American, July 2025
- Deloitte Global Economics Research Center, United States Economic Forecast, June 2025
- The Budget Lab at Yale, State of U.S. Tariffs: August 7, 2025
- World Economic Forum, “The GENIUS Act Is Designed to Regulate Stablecoins in the US, but How Will It Work?”, July 2025
This article is for informational purposes only and is not intended to constitute legal, financial, or other professional advice. The accuracy of the information is not guaranteed and should not be regarded as a complete analysis of the topics discussed. No endorsement of any third parties or their advice, opinions, information, products, or services is implied by First American Equipment Finance or its affiliates.
Featured Speaker
Gerard Cassidy
Managing Director of Equity Research, RBC
Gerard Cassidy is a Managing Director of Equity Research with RBC Capital Markets. He is a former Director and Secretary of the New York Bank and Financial Analysts Association. Often quoted in The Wall Street Journal, The New York Times, Forbes, Business Week, The American Banker and other leading newspapers and periodicals, Cassidy also regularly appears on leading broadcasts discussing banking and economic issues and its impact on bank stocks.
