Sizing Up the U.S. Economy in Trump’s First Year

Tuesday’s State of the Union address gives President Trump a big platform to tout the economy’s performance on his watch.

He has already given himself a grade—“A-plus-plus-plus-plus-plus,” he told Politico in December. The report card for the economy is a bit more mixed, however, after his first year back in office.

Jobs

Needs improvement

Economic and trade uncertainty made some companies more reluctant to add workers. Some tech companies are reversing their postpandemic hiring boom by slashing payrolls. Trump’s immigration crackdown meant fewer foreigners available for hire.

The labor market showed signs of life in January 2026, with employers adding 130,000 jobs—well above economists’ predictions. But hiring was largely anemic beyond a surge in healthcare and social services.

Unemployment

Exceeds expectations

A key reason, according to economists: the drop in immigration. Goldman Sachs estimates that net immigration—the difference between people moving to the U.S. and people leaving—fell to around 500,000 in 2025, down from an average of around one million in the 2010s. That drop means fewer people looking for work, which means fewer new jobs are needed to keep the unemployment rate stable.

Inflation

Shows Promise

Trump has imposed tariffs and waged trade wars without triggering the inflation surge many economists feared.

Wages

Satisfactory

Annualized real wage growth in 2025, by income brackets

Overall, real wages rose slightly faster in the 12 months ended in January than in the prior 12 months. That resilience, combined with the low unemployment rate, helps explain why consumer spending has held up, boosting the economy. But the picture isn’t all positive. Americans with the lowest incomes saw their real wages fall in 2025, according to a study from the Economic Policy Institute, a think tank that analyzed census data.

A weakening labor market tends to hit low-skill workers first, and that is exactly what happened last year. These are the kinds of workers who also don’t tend to benefit from stock-market investments lifting wealthier households. Economists call this phenomenon a K-shaped economy: The wealthy are surging ahead, while the poorest are falling behind.

Stock Market

Exceeds expectations

Stocks were on a tear last year.

This seemed unlikely on April’s “Liberation Day,” when new tariffs sent markets into a tailspin. The downturn was brief. The S&P 500 index is up by more than a third from its April low as investors piled into AI-related stocks, and the Dow Jones Industrial Average recently hit 50,000 for the first time. That is good news for the economy: Rising stocks boost household wealth, propping up consumer spending.

Economic Growth

Acceptable

The economy has managed to keep growing despite the hiring slowdown. But the pace has slowed.

Gross domestic product in 2025 expanded by 2.2%, measured from the fourth quarter of the prior year, down from 2.4% in 2024 and the slowest pace since 2022. The record-long government shutdown in the fall crimped growth in the most recent quarter.

That is hardly the “new golden age” Trump promised on the campaign trail, but it is also better than what many anticipated after last spring’s tariff rollout, when economists surveyed by The Wall Street Journal expected growth of just 0.8% last year.

Trade Deficit

Needs improvement

Economists and politicians differ on whether the U.S. buying a lot more goods from other countries than it sells is fundamentally bad. Some blame trade deficits for killing blue-collar jobs. Others see the imbalance as the mark of an advanced economy with lots of foreign investment.

Trump isn’t a deficit fan, but he hasn’t managed to stop them: The goods-trade deficit rose to a record $1.241 trillion in 2025, up from $1.215 trillion in 2024, although it fell slightly as a share of the economy. Tariffs weren’t enough to discourage imports, partly because many goods were exempt. Also, U.S. firms were often able to switch to suppliers in countries facing lower levies, like tapping smartphones from India rather than China. Surging chip imports from Taiwan to feed the AI boom also helped prop up the trade deficit.

Housing Affordability

Needs improvement

A median-income household looking to buy a median-price home now has to set aside 42% of its monthly earnings for mortgage payments, property taxes and insurance. That is slightly improved from 44% in January 2025 but still a heavy cost.

Mortgage rates eased last year yet remain far above where they were in early 2022, when the Federal Reserve started raising interest rates to battle inflation. Home prices haven’t budged. And rents have come down in some Sunbelt cities but are still far higher than before the pandemic.

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