A downturn in government and consumer spending contributed to the slowdown in fourth-quarter growth.

"Now Hiring" signage past recruiters as they speak to jobseekers during a career fair in Seattle on Feb. 10.David Ryder / Bloomberg via Getty Images

U.S. economic growth slowed in the final three months of last year, dragged down by the six-week shutdown of the federal government and a pullback in consumer spending.

The nation`s gross domestic product - the output of goods and services - increased at a 1.4% annual rate in the fourth quarter, the Commerce Department reported Friday, down from 4.4% in the July-September quarter and 3.8% in the quarter before that.

Consumer spending rose just 2.4%, a significant slowdown from the third quarter`s healthy 3.5% gain.

The report also underscores an odd aspect of the U.S. economy: It is growing steadily, but without creating many jobs. Growth was a fairly healthy 2.2% in 2025, yet a government report last week showed that employers added less than 200,000 jobs last year - the fewest since COVID struck in 2020.

Economists point to several possible reasons for the gap: The Trump administration`s crackdown on immigration has sharply slowed population growth, reducing the number of people available to take jobs. It`s one reason that the unemployment rate rose only slightly - to 4.3% from 4% - last year, even with the nearly non-existent hiring.

Some businesses may also be holding back on adding jobs out of uncertainty about whether artificial intelligence will enable them to produce more without finding new employees. And the cost of tariffs has reduced many companies` profits, possibly leading them to cut back on hiring.

The economy is also unusual right now because growth is solid, inflation has slowed a bit, and unemployment is low, but surveys show that Americans are generally gloomy about the economy. In January, a measure of consumer confidence fell to its lowest level since 2014, yet consumers have kept spending, propelling growth.

Some of that spending may be disproportionately driven by upper-income consumers, in a phenomenon known as the "K-shaped" economy. Yet data from many large banks suggests lower-income consumers are still raising their spending, even if by not as much.