Despite every market indicator pointing toward the need for a major market correction, the U.S. stock market continued to rise in the fourth quarter of 2025, up 2.4 percent at the close and 17 percent for the year. For the quarter, large cap stocks rose 2.7 percent, small cap stocks rose 2.2 percent, foreign stocks grew 4.9 percent, and U.S. bonds rose 1.4 percent. As of December, the rate of inflation was about 2.7 percent.
One of the biggest indications that the U.S. economy at large is struggling, despite the stock market’s continued growth, is that it’s experiencing some major issues in the job market. October saw U.S. employers cut 153,074 jobs, up 183 percent from last year, and November saw 71,321 jobs lost, up 24 percent from 2024, the eighth time in 2025 that job cuts were higher than the same time the previous year. Year to date, job cuts are the highest since 2020, and 2025 is only the sixth time since 1993 that cuts have surpassed 1.1 million in the first 11 months of the year.
Most of these are attributed to both “restructuring” and cuts made by the so-called Department of Government Efficiency (DOGE). While job losses attributed to DOGE are somewhat self-explanatory, what do losses attributed to “restructuring” really mean? According to companies and research, restructuring is a catch-all term that mostly refers to internal structural changes, such as closing departments or branches, or making other major organizational shifts that reduce the number of employees needed. Though this reason is given as a self-evident cause of job loss, it does leave room for uncertainty. What is causing the spike in company restructuring and streamlining? Despite only 54,700 job losses this year being directly attributed to artificial intelligence, I think it is more than likely that some portion of these “restructuring” losses can also directly or indirectly be attributed to AI.
Beyond the amount of white-collar tasks that can now—at least in part—be replaced by AI, AI is expensive, and because of the increased resources needed to fund new AI pilots and tools across the economy, companies are restructuring.
“Companies are finding that the only way to increase investment in AI is to cut costs elsewhere and hence all the layoffs that we’ve been seeing,” Roger Lee of Layoffs.fyi said in a Bloomberg interview. Despite a marked dearth of real-world returns attributable to AI, employers are placing big bets that AI is the future, and employees are facing the consequences.
In addition to jobs, the other ominous specter on the economic horizon continues to be tariffs. I may sound like a broken record, but current and near-term effects of tariffs continue to be among the biggest economic risks in Q4, just like in the three preceding quarters. Though you may be under the impression that the real impacts of tariffs have already come to pass— after all, they have been in effect for months now, and everyone is complaining about price increases— the true costs of tariffs have yet to be fully experienced by the American consumer, as the continued volatility of the administration’s tariff policies for different goods and countries is causing spikes in certain sectors and uncertainty everywhere else.
Though consumers have been up in arms about the lack of affordability in in the U.S. retail sector, even forcing the pugnacious administration to start a nationwide tour focused on affordability, the worst may be yet to come. According to retailers, they have been swallowing a significant portion of the tariff price increases, but that line is rapidly running out.
As the holiday season’s promotions come to an end and retailers run out of the goods they were able to stockpile pre-tariffs, most companies and economists expect a sharp increase in retail prices come the new year. In a market where buyers are already at their wits’ end, the prospect of continued price inflation seems impossible to stomach. But stomach it we must.
Fewer jobs, skyrocketing prices, an administration with neither the will nor the intellectual capacity to address any economic issues? It seems that 2026 might be a tough year for Main Street. Traditionally, this would mean a similar fate for Wall Street, but for years now— more or less since the pandemic— there’s been an apparent disconnect between how the two perform. We will have to wait and see if it is possible for this disconnect to continue or if, finally, the stock market will begin to reflect the economic realities the rest of the economy is experiencing.