U.S. Economic Momentum Slows as Job and Wage Growth Persist, Key Deregulation Bill Still Pending

Official US government data show the American economy is slowing in some areas, but the job market and wage growth remain resilient. In May 2025, retail sales fell by 0.9%, the sharpest monthly drop in four months, led by fewer car purchases and lower gas prices.

Industrial production also slipped by 0.2%, with factories operating below normal capacity at 77.4%. Most manufacturing gains came from carmakers, while other sectors stayed weak.

Despite these signs of slower growth, the labor market continues to perform well. The US added 139,000 jobs in May, surpassing expectations and marking ongoing job creation. The unemployment rate held steady at 4.2%.

Sectors such as health care, leisure and hospitality, and financial activities led the gains. Job openings remain above historical averages, and broad layoffs are limited. However, hiring has become more cautious, and employers are more selective, focusing on operational needs.

Wages are rising at a solid pace. Average hourly earnings increased by 0.4% in May and are up 3.9% over the past year. Real wage growth—meaning wage gains after adjusting for inflation—has also been positive.

From April 2024 to April 2025, real average weekly wages grew by 1.7%, and real average hourly earnings rose by 1.4%. This means American workers are seeing their paychecks go further, outpacing inflation, which stood at 2.4% in May.

These wage gains are the strongest in years, and many workers are benefiting from increased purchasing power. Inflation has eased in recent months. The annual inflation rate was 2.4% in May, up only slightly from 2.3% in April, with core inflation steady at 2.8%.

The Federal Reserve has kept its key interest rate at 4.25% to 4.5%. These high rates make loans and mortgages more expensive, which slows spending on big items like cars and homes.

Tariffs remain a significant factor in the current slowdown. The US government has raised tariffs on steel and aluminum imports to 25% and removed previous exceptions.

Now, about 71% of all US imports face higher tariffs, and other countries have responded with tariffs on hundreds of billions of dollars in US exports. These measures make imported goods more expensive for American businesses and consumers and reduce demand for US products abroad.

Treasury Secretary Scott Bessent says the Trump administration’s economic strategy is like a “three-legged stool,” relying on trade policy (mainly tariffs), tax cuts, and deregulation.

Right now, only the first leg—tariffs—is fully in place. The key second leg, a major deregulatory and tax bill known as the “Big Beautiful Bill,” has not yet passed Congress. Bessent has made clear that until this bill is approved, the economy cannot reach its full potential.

All facts in this report come from official US government and Federal Reserve data, as well as public statements by Treasury Secretary Scott Bessent.

While growth in some areas has slowed, the US job market and real wages continue to improve, showing the economy’s underlying strength even as it waits for further reforms.