The state of the union economy is surprisingly strong.
At least on paper. Jobs, wage growth, consumer spending and inflation under President Donald Trump look pretty decent or have remained mostly stable and the stock market is near a record high.
Yet Americans despise this economy. Consumer confidence is near historic lows and recent polls show Trump’s economy receives dismal marks from potential voters, a political liability for Republicans heading into this year’s midterm elections.
Why so much negativity?
Affordability. It’s a term Trump hates (and claims to have defeated). But after the pandemic, prices increased during the Biden administration and consumers have not yet adapted. In particular, housing and childcare are largely inaccessible and unaffordable. And loan defaults, especially for low-income Americans, are starting to become worrying.
Trump will deliver this year’s State of the Union address on Tuesday night. Here’s a look at some of the economic indicators that look strong, those that look stable, and those that are raising red flags.
Despite a recent tariff- and AI-induced selloff this year, shares remain near their all-time highs. The market is definitely not the economy, but Wall Street’s enthusiasm helps fill retirement accounts, which can give consumers the confidence to spend their money.
The US economy grew 2.2% in 2025. Although it was the slowest pace since 2020, it was very much in line with the last three years of strong economic growth. And the longest government shutdown in history wiped a lot of productivity off the books in the fourth quarter — growth the U.S. economy should regain this quarter.
Solid (but not high) growth could keep inflation under control. Growth that is neither too hot nor too cold led Stephanie Roth, chief economist at Wolfe Research, to call this economy “Goldilocks.”
The US labor market was historically weak last year. Federal Reserve Governor Christopher Waller, one of Trump’s finalists for the Fed chair, said this week that he believes revisions to jobs data will ultimately show that 2025 was one of three years since World War II in which the U.S. economy lost jobs.
So what is “stable” about that? U.S. job growth was significantly higher than expected in January, the unemployment rate remains low, and the economy doesn’t actually need to create as many jobs due to historically low immigration and birth rates. Economists believe the labor market may be on the road to recovery
The bad news: Wage growth has been in steady decline for more than three years. The good news: So has inflation, which is slowing at a faster pace.
After a couple of recoveries in the last two years, annual inflation (2.4%) appears to be on the decline again. That means annual wage growth (3.7%) is stretching our salaries further overall. Still, the economy’s imbalance, also known as K-shaped, means that’s more true for wealthier Americans than for lower-income people.
Income and wealth inequality are not new concerns for the American economy, but the gap between the haves and have-nots widened last year. While booming stock prices – in turn fueled by rampant investment in artificial intelligence infrastructure – have increased the prosperity of high-net-worth individuals.
However, for some low- and middle-income Americans, finances appear to be getting tighter and burdens are increasing. A growing share of American households are finding it increasingly difficult pay inflated credit card bills, to keep up with expensive car payments, to make student loan payments (deferred during the pandemic but now back in the mix) and having enough money in the bank to cover the monthly mortgage check.
One troubling result of that wealth divide: A growing number of Americans are more than three months behind on their loans. Mortgage delinquencies in particular have skyrocketed in recent years, and auto loan delinquencies are at the same level as during the Great Recession. Student loan delinquencies increased after the U.S. government ended the pause on payments at the end of 2024.
Overall, Trump’s economic record in his second term appears to depend as much on the narrative as the numbers.
