Growth outlook positive with increased risks; some improvement in regional labor market

U.S. real gross domestic product increased at a seasonally adjusted annual rate of 2.3% in the fourth quarter, down from a revised 3.1% in the third quarter. Many analysts are calling this a "soft landing," but what comes next? In this Quarterly Market Report, we discuss how some of the factors in the outlook that have changed in the last three months are clouding the forecast. Overall, the outlook remains positive with one strong possibility being continued growth at or near the long-term trend for the next few months. However, a softer labor market and rising inflation as well as policy uncertainty have increased the risk to the downside.

Midwest economic performance lagged behind the U.S. in the quarter, and this looks to continue at least into the first quarter of 2025. Labor market numbers are still weaker than they were a year ago although in the fourth quarter there appears to be a slight recovery in the Quad Cities job numbers. Manufacturing employment in the metro area remains flat. In our Business Outlook Survey this quarter, survey respondents were roughly split as to the direction of the economy. When asked about the expected effect of tariffs proposed by the incoming presidential administration, most respondents expected approximately no effect to a slightly negative effect on both their business and the national economy.

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