Consumer spending grew at a 3.5% pace in the third quarter of 2025, with America’s gross domestic product (GDP, the nation’s output of goods and services) rose at a 4.4% annual pace, reported the Associated Press, citing data from the Commerce Department.

While the data shows growth, many Americans still report dissatisfaction with the state of the economy and the high cost of living. “The gap between how consumers say they feel and the strong spending numbers might reflect what is known as a ‘K-shaped economy.’ Wealthier Americans are spending more, their incomes boosted by market gains and growing investments, while lower-income households struggle with stagnant pay and high prices,” AP wrote.

“Affluent” households “continue to power the economy forward,” Diane Swonk, the chief economist at KPMG, told the New York Times. “The concentration of gains in the hands of a few households masked the underlying pain many are expressing in consumer attitude surveys.”

The Personal Consumption Expenditures price index released this week showed consumer prices rose moderately in October and November, with prices up 2.7% in October and up 2.8% in November, compared with the same time the previous year. Additionally, goods inflation, which had been notably cooling since 2022, swung back up after the Trump administration implemented tariffs last spring, the NYT reported.

The job market is also facing its own challenges. While unemployment reached record lows in December at 4.4%, hiring has remained sluggish. U.S. filings for jobless aid for the week ending January 17 rose to 200,000, up from 199,000 the previous week—but fewer than the 207,000 new applications that analysts were expecting, AP wrote.

At the same time, employers added just 50,000 jobs last month. In contrast, during the 2021-2023 hiring boom that followed COVID-19 lockdowns, they were creating 400,000 jobs a month. With the low unemployment rate, it suggests a “no-hire, no-fire labor market with companies hesitant to bring on new employees but reluctant to let go of the ones they have.”

An upside to the current economy, many Americans are expected to receive tax refunds this year after cuts were passed into law last year, the NYT reported. Researchers at Bank of America expect new tax provisions—including a higher deduction cap on state and local taxes, “no tax on overtime,” “no tax on tips,” and a higher standard deduction for seniors—will boost tax refunds by 26%, or almost $100 billion.