The United States ended 2025 with an economy that was still functioning but clearly slowing down. Inflation was much lower than its earlier peak, workers were still receiving wage increases, and consumers continued spending, but hiring was weak, household saving was low, and inflation remained above the Federal Reserve’s goal.
Consumer prices increased 0.3% during December and 2.7% over the previous year. Core inflation, which removes food and energy because their prices can move sharply from month to month, rose 0.2% during the month and 2.6% annually. Shelter prices rose 0.4% and were the largest contributor to the monthly increase, while food prices rose 0.7% during December and 3.1% over the year, and food away from home rose 4.1% annually. Inflation had improved a great deal compared with its post-pandemic peak, but a 2.7% annual rate was still above the Federal Reserve’s 2% target.
The Federal Reserve’s preferred measurement showed an even larger gap. The Personal Consumption Expenditures price index rose 0.4% during December and 2.9% over the year, and core PCE inflation was 3.0%, which several economists noted was the highest reading since early 2025 and a reversal of the earlier downward trend.
The first December employment report estimated that employers added 50,000 jobs, while the unemployment rate stayed at 4.4% with about 7.5 million people unemployed. Employment continued growing in food services, health care, and social assistance, while retail businesses lost jobs.
Later information changed the picture in a way worth pausing on. By the time the February employment report came out, the December estimate had been revised from a gain of 48,000 jobs to a loss of 17,000. This is a good example of why one monthly jobs number should not be treated as permanent, because the government keeps updating it as more businesses respond and as seasonal adjustments are recalculated. The direction of the revision also mattered: December looked meaningfully weaker in hindsight than it did on the day it was first reported.
Wages kept rising despite the weak hiring. Average hourly earnings increased 0.3% during December to $37.02 and were 3.8% higher than one year earlier. That figure is consistent with the later reports, since average hourly earnings rose to $37.17 in January and $37.32 in February. Teen unemployment was 15.7% in December, far above the overall rate of 4.4%, so teenagers were facing a much more competitive labor market than the national headline suggested.
Households kept spending, but they were not saving much. Personal income increased 0.3% in December, consumer spending increased 0.4%, and inflation-adjusted spending rose only 0.1%, while the personal saving rate was 3.6%. A low saving rate can support the economy temporarily, because people are spending more of their income, but it also gives households less protection against an emergency, a job loss, or another rise in prices. Several economists pointed out that spending was increasingly being funded by saving less rather than by rising real incomes.
Producer prices were also rising. The Producer Price Index increased 0.5% during December, and producer prices rose 3.0% across 2025 after rising 3.5% during 2024. The December increase came from a 0.7% rise in service prices, while prices for final-demand goods were unchanged, which suggested that the pressure was coming from services rather than physical products.
December’s data was also affected by the earlier government shutdown. Some October and November CPI observations were unavailable, and the December personal-income report was postponed until February, so it is especially important not to treat every monthly comparison from this stretch as perfectly complete.
For high-school students, the clearest issue was the job market. A 15.7% teen unemployment rate meant students looking for work faced much more difficulty than older workers, and a weak overall hiring month only sharpened that competition. At the same time, restaurant prices were rising faster than overall inflation, so a student earning a slightly higher wage could still feel squeezed if food, transportation, and other regular expenses were climbing quickly.
Family finances matter here too. A 3.6% saving rate suggested that households were spending most of their available income, which can affect how much a family has left for transportation, college applications, activities, and other education expenses. December did not end with a recession or a new inflation crisis. It ended with a weaker labor market, continued price pressure, and households with limited room in their budgets, and the economy entered 2026 in a fragile position.