Well, folks, 2024 was quite the rollercoaster, wasn’t it? It was a year of wild swings, unexpected turns, and a whole lot of divided opinions. It seems like we humans just can’t agree on anything these days, from politics to pop culture. To confirm this, Merriam-Webster crowned “polarization” as the word of the year due to our collective inability to agree on anything.
But fear not! As we dive into 2025, we’ll explore the trends shaping our future, from the rise of AI to the future of work. Hopefully, we can avoid polarization with a light-hearted look at some seriously important anticipated trends. So, buckle up, grab your popcorn (or your protest sign), and let’s navigate the economic landscape together.
Onshoring, Reshoring, Local Supply Chains
After years of living abroad, manufacturing jobs are pulling a classic boomerang move – leaving for adventure only to realize there’s no place like home. However, home cooking isn’t the only reason manufacturing is increasingly returning to North America. Numerous economic, geopolitical, technological, and environmental factors will continue to accelerate reshoring across the country. While this trend will continue to span various sectors, industries like electrical equipment, transportation equipment, computer, and electronic manufacturing companies will likely lead the way. Spurred by national security concerns, (potential) trade conflicts, and initiatives such as the CHIPS Act, expect to see more companies at the proverbial economic dinner table in 2025.
Future of the Green Economy
Though it is no secret that the incoming presidential administration supports fossil fuels as opposed to renewable energy sources, there is optimism that renewable energy providers have penetrated the market to ‘sustain’ their efforts (in both meanings of the word). In 2022 the Inflation Reduction Act allocated nearly $400 billion in tax credits and grants to grow the Clean Tech sector which has driven companies to consider how they might fit into the Clean Economy in 2025 and beyond. Though the pace may be slowed, Clean Energy jobs will continue to exist as the market concentration of employers has grown. Through this growth, education providers are continuing to roll out education and training curricula that support Clean Energy education and workforce development programs.
Remote Work and Commercial Real Estate
Who needs an office when you can work from your couch in your pajamas? The rise of remote and hybrid work has turned traditional office buildings into ghost towns. As of October 2024, we are talking about 2.91 billion square feet of vacant space. That’s enough to accommodate 52,909 White Houses! To adapt to this new reality, businesses are rethinking their office strategies.
Affordable Housing Challenges
The housing market is shaping up to be a mixed bag of presents and coal. Mortgage rates are trying to get off Santa’s naughty list and relax a bit headed into the new year. But affordability will probably still be a bit of a Grinch even with the loosening market and projected growth in incomes. Creativity and flexibility in living arrangements are increasing. At an all-time high of 17% of households in the US, multigenerational homes are providing more opportunity for family time. Even with more homes projected to be on the market, over half of new households in 2025 will likely be renters.
Artificial Intelligence
Artificial intelligence will continue to touch every aspect of our lives, including writing corny jokes for unfunny consultants authoring blog posts. While the evolution of AI is expansive and far-reaching, one particular aspect to follow in 2025 is how governments and lawmakers tackle the challenge of appropriately regulating the fast-growing technology. We’ve seen some countries across the European Union attempt to limit AI’s ability to cause harm, such as criminalizing the use of deepfakes, but many challenges remain. The US will have to continue to grapple with China’s growing influence in the Artificial Intelligence space and be forced to work across the aisle to create a regulatory and legislative framework to address misinformation, election integrity, and national security implications.
Digital and Decentralized Currency
ICYMI, the crypto-bros are riding Bitcoin, Ethereum, and other K-9-related coins #ToTheMoon. As of mid-December, Bitcoin has reached an all-time high, eclipsing $105,000. Proponents of cryptocurrency appear to be optimistic that this growth will continue. Former PayPal COO, David Sacks, was appointed White House AI and Crypto Czar – a move that solidified the Trump Administration’s plans to further integrate digital currency into the US economy. This effort will likely address any regulatory barriers advocates for cryptocurrency have faced. President Trump proposed several items including the creation of a Bitcoin reserve, making the U.S. the world’s crypto capital, the elimination of capital gains on Bitcoin transactions, and the creation of a crypto advisory council. If and how these efforts will gain traction remains to be seen, but it appears that crypto currencies may be here to stay.
Aging Population and Healthcare Workforce
We are facing a bit of a senior moment in healthcare. As our population ages, we see a growing demand for medical services. It is like a wave of gray hair crashing down on the healthcare industry while there’s a decrease in available workers. But don’t worry; innovative solutions like telemedicine and AI are here to help us navigate these aging challenges.
Future of the Insurance Industry
The insurance world in 2025 is shaking things up with tech. Artificial intelligence and automation are taking over the boring stuff, like filing claims and pricing policies. Insurers are partnering with tech startups (insurtechs) to deliver slicker, faster, smarter services. Over in cyber insurance, they’re not just waiting for the digital disasters anymore – they’re playing defense against everything from ransomware bullies to those “oops, I clicked the wrong button” moments. Mother Nature is unpredictable, but insurers are gearing up to handle weather and natural disasters. Excess and surplus markets are stepping up and taking on the risky stuff traditional insurers won’t touch.
Tariffs
Tariffs: because nothing says ‘global cooperation’ like a good old-fashioned ‘keep off my lawn’ sign for imports. One of the biggest wildcards in 2025 will be whether the new administration enacts significant tariffs on all those gadgets, gizmos, and thing-a-ma-bobs we all love. While tariffs are projected to improve the trade imbalance with economic rivals like China, the short-term impact could seriously damage consumers’ wallets. More specifically, some prognosticators predict that the proposed 25% imports from Canada and Mexico and an additional 10% on all imports from China would reduce GDP by 0.4 percent and employment by 355,900 jobs from 2025-2034.
Inflation
In 2020, interest rates approached record lows and remained around .25% up until the summer of 2022. With that, inflation continued creeping higher, and the Federal Reserve swiftly raised rates to 5.5%, holding them steady for nearly 18 months. This move has severely cut any talk of a recession, and it appears inflation fears have been mostly subdued (now find some wood to knock on). Yet, reaching the Fed’s annual inflation target of 2% remains a critical milestone. While optimism about this goal has sparked expectations of interest rate reductions in 2025 and 2026, these cuts are likely to be gradual. We shouldn’t anticipate significant changes before the end of 2025.
Immigration Trends
America, the land of opportunity, is more popular than ever! With a record-breaking number of immigrants arriving in 2023, it seems our country is the ultimate destination for dreamers and doers. It’s like a global talent show, and America’s the big stage. However, this influx raises questions about integration and resource allocation. As we navigate this complex issue, we’ll explore the potential benefits and challenges of immigration in the years to come.
Finally, the Wrap-up!
So, there you have it, a whirlwind tour of the economic landscape in 2025. From the rise of AI to the aging population, we’ve covered a lot of ground. While the future is uncertain, one thing is clear: adaptation is key. Economic development organizations must be nimble, innovative, and ready to embrace change.
As we navigate this ever-evolving landscape, let’s remember to keep our sense of humor and our eyes on the prize: a prosperous future for all.
The time to act is now. Let’s work together to build a stronger, more resilient future. Contact TPMA today to discuss how we can partner with you to address these challenges and seize emerging opportunities.
Author:
Brett Wiler, Vice President, Economic Development & Strategic Planning