SCOTT DETROW, HOST:
The U.S. economy is closing out the year in better shape than many forecasters had expected. The job market has softened but unemployment is still fairly low. And the Federal Reserve has been lowering interest rates, making it cheaper for families and businesses to borrow money. Many people are still unhappy about the economy, though, especially the high cost of living. NPR's Scott Horsley has been covering this all year. He joins us now. Hey, Scott.
SCOTT HORSLEY, BYLINE: Hi. Good to be with you.
DETROW: Let's start with the good news. What has gone right with the economy this year?
HORSLEY: This was a year when the economy really showed its toughness. You know, it took some punches, but it just kept on going. Last week, we learned that GDP expanded in the third quarter at a faster clip than most people had predicted. And that was mainly driven by solid consumer spending. The stock market also had a good year, which helps wealthy people who own a lot of stocks. So by some yardsticks, this has been a positive economic year. But, you know, you can't eat GDP. And as you mentioned, a lot of people are not feeling that good about the economy. That includes Megan Graves (ph), who lives outside of Boise.
MEGAN GRAVES: I make more money now at my job. I recently was promoted. But it doesn't seem like I'm able to save more because my rent price is now $500 more than it was three years ago. And even our utilities have increased. We can't keep up.
HORSLEY: Graves took part in an NPR/PBS News/Marist poll this month, which found 6 in 10 people who say the economy is not working for them. And that unhappiness is really weighing on President Trump's approval rating.
DETROW: And a lot of President Trump's economic agenda centered around tariffs. That was an enormous story this year. How are those import taxes affecting the economy?
HORSLEY: Tariffs have taken a toll, although maybe not as big a toll as some people were expecting when the worldwide taxes were first rolled out during the spring. Jay Foreman (ph), who runs a toy company that imports Tonka trucks and Lincoln Logs, was afraid tariffs were going to put him out of business when the tax on Chinese products briefly soared to 145%. Ultimately, that was cut back to less than 50%, though. So Foreman has been able to limp along.
JAY FOREMAN: We dodged the bullet of our business being destroyed and now we're looking at a year with no profits. And by the way, what does no profit mean? Means no corporate income tax. Might mean no bonuses or raises for your employees. It might be some layoffs. So none of this is good for the economy.
HORSLEY: Right now, tariffs are bringing in about $30 billion a month for the federal government. But the government might have to give some of that money back if the Supreme Court decides that some of these tariffs are illegal.
DETROW: We mentioned before, interest rates are coming down. What should we make of that?
HORSLEY: Well, it does make it a little cheaper to buy a car or grow a business. You know, mortgage rates have also come down a little bit. The mortgage giant Freddie Mac said today that the average rate on a 30-year home loan is down to 6.15%, which is the lowest it's been all year. That could give a little boost to the housing market, which has been in a deep slump. The reason interest rates are falling, though, is the Federal Reserve is worried about the job market. You know, hiring has dropped sharply this year. The unemployment rate has been creeping up. We're still not seeing a lot of layoffs, but Fed Governor Chris Waller warns the job market could go south quickly if middle- and lower-income families start cutting back on spending. Waller says that's a real possibility given today's two-speed economy.
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CHRIS WALLER: You know, when I've talked to retailers, CEOs who cater to the top third of the income distribution, everything's great. Confidence is great. They can pass tariffs through. It doesn't matter. The people can afford to pay them. It's not a big deal. It's the lower half of the income distribution that is staring at this stuff going, what happened?
HORSLEY: Now, the Trump administration argues, once its big tax cut kicks in next year, people will start to feel better about the economy. But, you know, the benefits of that tax cut are heavily skewed towards the wealthy, so it may not do a whole lot for the average family that's really feeling squeezed right now.
DETROW: NPR's Scott Horsley. Thank you.
HORSLEY: Happy New Year. Transcript provided by NPR, Copyright NPR.
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