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Ann Arbor — An economist with the University of Michigan says he believes there's still a path to U.S. economic growth in 2025, even as risks of recession rise from tariffs.
"The economic uncertainty confronting the business community, nonprofit organizations and government leaders is a headwind to growth," Ehrlich said Thursday at Washtenaw Community College. "I continue to believe that there's a path to the economy to keep growing this year, but I do acknowledge that the risk of a recession has risen."
The U.S. unemployment rate in March was 4.2%, up from 3.9% a year prior. Last month, unemployment insurance claims grew to 2.3 million, up from 2.1 million a year prior. The Dow Jones Industrial Average is down 6% year-to-date, though it's up more than 4% year-over-year. The Federal Reserve Bank of Atlanta on Thursday also updated its economic growth forecast, projecting a 2.5% decrease in gross domestic product in the first quarter of 2025.
These are all "warning signs," Ehrlich said, but they're not a flashing alarm: "The economy came into 2025, and there's a lot of momentum."
The RSQE in February had forecasted 2.4% growth in U.S. economic activity in 2025 and 2.1% in 2026. That, however, didn't factor in broad automotive tariffs or widespread duties on trading partners, particularly in North America.
As a result, Ehrlich suggests economic growth likely won't be as high as forecasted in February. Many companies, however, frontloaded orders in an effort to beat tariffs. Therefore, economic growth could slow in the rest of 2025 closer to 2%.
The optimism, Ehrlich noted, is supported by the expectation of continued rate cuts by the Federal Reserve, though at a slower pace than what had happened last fall, and additional longer-term interest rate declines. Additionally, the economists predicted roughly $200 billion in tax cuts across 2026 and 2027 to stimulate the economy and offset tariff costs.
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