NRI PULSE STAFF REPORT
Atlanta, GA, August 28, 2025: The U.S. economy is showing signs of strain, and simply cutting interest rates may not be enough to revive growth, warned Rajeev Dhawan, director of the Economic Forecasting Center at Georgia State University’s J. Mack Robinson College of Business.
Speaking at his semi-annual forecast, Dhawan pointed to a “drip-drip of weakening hard data,” including first-half real GDP growth of just 1.2 percent and “sharp downward revisions in nonfarm jobs data for May and June.” The result, he said, is “corporate hesitation to hire and slowing consumer spending.”
“Sudden and massive downward job revisions in BLS (Bureau of Labor Statistics) data can be disconcerting, not just to monetary policymakers but also to forecast practitioners,” said Dhawan. “Triangulating the number of jobs with tax collections, especially federal-level Social Security collections, explains the reality of the ongoing spending slowdown.
Social Security tax collections grew at a 6.0 percent rate in the second half of 2024, moderated to 4.1 percent growth in the first quarter of 2025, and then increased an anemic 0.8 percent in the second quarter of 2025, in sync with weak job growth numbers.
“In my ‘Triangle of Money’ concept, jobs produce income that, in turn, predict consumer spending, and then real estate trends. So, if jobs data fluctuates too much and conceals the actual trend (a weak signal-to-noise ratio), use tax collection numbers to gauge the health of the economy,” said Dhawan.
Weakened spending power will result in further softening in coming quarters on travel, dining out, furniture-buying, and even healthcare spending, which now accounts for almost 20 percent of total consumer spending, Dhawan said.
The forecaster expects the Federal Reserve to begin cutting rates in September and to be aggressive in cutting them to arrest the steady deterioration of the economy, as evident in weak tax collections.
“Although firms are not laying off workers, they aren’t hiring them either. Instead, they are ‘labor hoarding.’ Thus, the metric of a steady unemployment rate sends a false positive signal about the labor market,” said Dhawan, who expected rate cuts potentially totaling 150 basis points (bps) by spring 2026, easing financing costs for small businesses and consumer mortgage rates.
As for tariffs, Dhawan noted that, “Tariffs aren’t inflationary, because most consumption — domestic services, groceries, and fuel — are exempt from tariffs. But tariffs will reduce the trade deficit, meaning fewer dollars coming in from abroad for investment in U.S. assets.”
“Mortgage rates may fall 75-100 bps initially following rate cuts, but they will not stay down for long due to the unintended consequence of lower trade deficit lessening demand for U.S. treasury bonds,” Dhawan said, adding that 10-year treasury bond yields will snap back to above the 4.5 percent level by late 2027.
The July 4 passage of the One Big Beautiful Bill Act means fewer federal handouts for state and municipal budgets, Dhawan said. “State and local government employs 13 percent of U.S. workers, almost as many as the corporate sector. Federal layoffs are already hurting the housing market in the Washington, DC area, and reduced federal spending will lead to stagnant job growth at the local government level, too.”
National Outlook Highlights (Dhawan Forecasts):
- GDP: 1.7% (2025), 1.6% (2026), 2.0% (2027)
- Monthly job gains: 87,300 (H1 2025) dropping to 36,600 (H2 2025), rebounding to 128,000 (2027)
- CPI inflation: 2.9% (H2 2025), moderating to 1.8% (2027)
- 30-year mortgage rates: 6.5% (2025), dipping to 5.8% (2026), back to 6.5% (2027)
Georgia Faces Challenges, Finds Opportunity
Dhawan also weighed in on Georgia’s economy. “Federal layoffs, less tourism, and a pullback in film and TV spending have hit the state hard,” he said. Job growth slowed sharply: “Job additions in 2024 totaled 41,900, much lower than 66,800 in 2023… In H1 2025 the state added only 11,700 jobs.”
The white-collar, middle-management, service-sector jobs are under pressure from AI and global uncertainties. “The bread-and-butter of middle-class jobs… constitute almost one-fourth of the state’s employment base and have lost more than 37,000 jobs since Jan. 2023,” Dhawan said.
Yet there are bright spots. “Georgia has surpassed Northern Virginia as the nation’s most active market for data centers,” Dhawan said. “This is good news for construction industry, and other supporting professions… who have had steady work and will continue to do so.” Aerospace and defense firms may also benefit from NATO spending commitments, he added.
Georgia Forecast Highlights:
- State jobs: 33,700 (2025), rising to 83,300 (2027)
- Atlanta metro jobs: 24,800 (2025), rising to 60,500 (2027)
- Personal income growth: 5.4% (2025) to 6.0% (2027)
- Housing permits: down 21.5% in 2025, rebounding 13% by 2027
Dhawan concluded, “Georgia will have to ride the economic swells as best as it can before job growth starts to pick up by early 2026 as tariff structures settle, and aggressive Fed rate cuts help the housing market.”
