Business Times Economic Trends Breakfast: Top Takeaways

Presented by the Milwaukee Business Times, “Capitalize on Disruption” was the theme as this executive briefing got underway on January 24, 2025. Mike Knetter (University of Wisconsin), Stephen Shafer (A.O. Smith), Jeremy Kedziora (MSOE), and Mara Lord (Medical College of Wisconsin) headlined and highlighted key economic activity, global forces, AI, and health care trends impacting performance across industries the coming months.

Key takeaways included:

Economic growth

The United States outperformed every other developed economy in the world, and there aren’t a lot of signs of recession. Overall, the macroeconomic outlook for 2025 is positive. Analysts are anticipating GDP growth around 2.5%.

Labor

Thanks to the return of prime age workers, payroll unemployment is reaching new heights. Older workers, however, have not returned.

Stock market 

U.S. equities continue to outperform. Household net worth is at an all-time high due to homeowners who locked in low interest rates and are holding on to their properties. Discouraged by trading up at a more expensive rate, many are staying put.

Inflation

We’re experiencing a “last mile problem” with inflation, where it’s challenging to squeeze out an additional percentage point. Exploring if we experienced a hard, soft, or aborted landing, Knetter argued for aborted where we’ll see an untypical mix of GDP growth with inflation.

This is primarily due to a Trump policy mix that may result in favorable and unfavorable outcomes from a business perspective. Immigration policy may cause upward wage pressure for entry-level labor, especially in sectors like food processing, hospitality, etc. Tariffs may place additional burdens on businesses and consumers. Proposed tax cuts, however, may partially offset cost concerns businesses and consumers.

Technology

The tech sector is the bedrock of the U.S. economy. Of the top 10 largest U.S. companies from a market cap perspective, only three were non-tech and all launched prior to 1975. Compare the U.S. to Germany, where none of the top 10 are less than 50 years old. Tech will continue to drive the U.S. economy in profound ways for the next several generations.

Artificial intelligence (AI)

Gains in the practical applications for AI are expected to yield efficiencies for those considering deploying technologies. The purpose AI is to automate decision-making and to transform management of complex workflows. A PhD student paying $15 for a major research paper is within reach. Large language models may plateau if we “run out of data” to fuel them. Around 15,000 papers are published on AI monthly.

Summary of key forecasts for 2025

Among the predictions for 2025 include GDP growth around 2.5%, inflation due to policy mix around 3%, a cautionary pause in further action from the Federal Reserve on interest rate cuts, and S&P growth of around 5%.

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