The Atlanta Fed’s GDP Now Estimates 5.4 Percent Growth
Plus, Trump tells people of Iran: “Feel strongly about freedom. There’s nothing like freedom.”
The Atlanta Fed’s GDP Now estimate, which correctly called the 3rd quarter 2025 growth that came in at 4.3 percent, now has the 4th quarter 2025 real GDP number at a blistering 5.4 percent. Separately, but somewhat relatedly, the Bureau of Labor statistics released data showing that in the third quarter “Productivity, or nonfarm employee output per hour, soared at a 4.9% annualized rate,” as Bloomberg put it.
At the risk of The Editors becoming known for obsessing over an obscure outlying statistical indicator the way the late New York Post Washington bureau chief, Deborah Orin, used to talk about the Zogby Poll, the Atlanta Fed figure is worth keeping an eye on. The press has a negativity bias that emphasizes bad news, so the estimate probably won’t get much attention, and if the actual growth number does come in that strong, the newspapers will use words like “unexpectedly” and “surprise.”
Worries that the strong growth will fuel inflation are probably misplaced, as inflation is headed lower on the basis of sagging shelter and energy prices. The strong growth would bring a dramatically improved federal budget picture; ironically, just as the Atlanta Fed updated its estimate for the 4th Quarter of 2025 to 5.4 percent, the Congressional Budget Office, which estimates the cost of tax and spending legislation, issued its own revised projections with 4th quarter 2025 real GDP growth at an anemic 1.2 percent. Either the Atlanta Fed Nowcast is going to be way off or the CBO is going to be way off, because there is a lot of distance between 5.4 percent growth and 1.2 percent growth. (The New York Fed’s Staff Nowcast sits at 2.07 percent for Q4 2004 and 2.17 percent for Q1 2025.)
We wrote here December 23, 2025: “Complex systems are hard to predict, but if Bessent is correct and 2025 was setting the table and 2026 is the feast or the banquet, we would not be surprised here to see some quarterly or even annual growth numbers starting with 5 or 6, not 2, 3, or 4. People have forgotten what is possible on the upside.”
Treasury Secretary Bessent spoke to the Economic Club of Minnesota today in his first speech of 2026. In his prepared remarks he said in part, “With capital flowing, productivity surging, and prices easing, the stage is set for robust, non-inflationary growth in 2026.” He also said, “President Trump led a 12-month transformation of our economy, which delivered roughly 4% GDP growth in his first two full quarters in office and nearly 3% GDP growth in the fourth quarter, even amid a Democrat-led government shutdown. This growth is just a harbinger of what’s to come.”
This is the case even though the Trump economic policy and messaging is not 100 percent optimal. For example, yesterday Trump targeted a defense contractor, Raytheon: “if Raytheon wants further business with the United States Government, under no circumstances will they be allowed to do any additional Stock Buybacks, where they have spent Tens of Billions of Dollars, until they are able to get their act together.” Trump is proposing such a large increase in defense spending that Raytheon is going to do pretty well even without stock buybacks, but the precedent of a president dictating how a private company, even a federal contractor, can allocate capital is concerning. Trump also said:
All United State Defense Contractors, and the Defense Industry as a whole, BEWARE: While we make the best Military Equipment in the World (No other Country is even close!), Defense Contractors are currently issuing massive Dividends to their Shareholders and massive Stock Buybacks, at the expense and detriment of investing in Plants and Equipment. This situation will no longer be allowed or tolerated! Also, Executive Pay Packages in the Defense Industry are exorbitant and unjustifiable given how slowly these Companies are delivering vital Equipment to our Military, and our Allies. Salaries, Stock Options, and every other form of Compensation are far too high for these Executives. Defense Companies are not producing our Great Military Equipment rapidly enough and, once produced, not maintaining it properly or quickly. From this moment forward, these Executives must build NEW and MODERN Production Plants, both for delivering and maintaining this important Equipment, and for building the latest Models of future Military Equipment. Until they do so, no Executive should be allowed to make in excess of $5 Million Dollars which, as high as it sounds, is a mere fraction of what they are making now. Additionally, the maintenance and repair of Equipment, once sold, is far too slow, and must be immediately enhanced. As President, I am demanding that maintenance be “spot on, on time.” Therefore, I will not permit Dividends or Stock Buybacks for Defense Companies until such time as these problems are rectified — Likewise, for Salaries and Executive Compensation. MILITARY EQUIPMENT IS NOT BEING MADE FAST ENOUGH! It must be built now with the Dividends, Stock Buybacks, and Over Compensation of Executives, rather than borrowing from Financial Institutions, or getting the money from your Government. Longer term, this is good for both Executives and Shareholders, because it will be GREAT for our Country! Thank you for your attention to this matter. MAKE AMERICA GREAT AGAIN! DONALD J. TRUMP PRESIDENT OF THE UNITED STATES OF AMERICA
Trump has also been talking negatively about “the big fat cats in the insurance companies” and announced, “I am immediately taking steps to ban large institutional investors from buying more single-family homes, and I will be calling on Congress to codify it. People live in homes, not corporations.” The Committee to Unleash Prosperity described that as an “almost comical blunder” and noted, “one unintended consequence of banning institutional investment in housing is this will surely reduce the incentive to build new homes.”
With Trump targeting real estate investors, military contractors, and insurance companies and with Vice President Vance out today denouncing the “corporate media” in the style of the socialist Senator Sanders, you start to wonder what parts of the economy are safe.
Truth is, some of the growth is about Trump and some of it has to do with artificial intelligence, big data, and other technology related trends. I was in Children’s Hospital in Boston earlier this week and there was a George Howell coffee “robo cafe” with a Jaka robotic arm making the drinks. George Howell is a sort of famous figure in coffee circles, probably best known as the inventor of the Frappuccino.
You can read about the Starbucks Workers Union or about increases to minimum wage, but when all you need is a worker to come by once a day to refill the “robo cafe” rather than three workers to take orders, accept payments, and make the coffee drinks by hand—well, that’s the productivity growth that fuels economic growth.
That’s not to be dismissive of what Trump and Bessent and Republicans in Congress are doing on taxes and regulation and energy, a lot of which has been helpful, just to say that some of the trends may go beyond politics. Also, there’s a whole industry (including a recent half-million dollar conference at Harvard’s David Rubenstein Treehouse) now devoted to the idea that GDP growth is not the only measure that should matter. I don’t totally disagree with that, either, but I also wrote a book, “JFK, Conservative,” partly about how Kennedy won the presidency in 1960 by targeting 5 percent growth.
Trump tells people of Iran: “Feel strongly about freedom. There’s nothing like freedom.” This is encouraging: President Trump went on the Hugh Hewitt show. Hewitt asked him if he had a message for the people of Iran. Trump said, “Feel strongly about freedom. There’s nothing like freedom.” It made my heart leap to hear it.
It’s also a contrast with Vice President Vance’s remarks at a press appearance today. Asked about Iran, Vance replied by saying that what was true two months ago is true today, that the Iranian leadership should engage in “a real negotiation with the U.S.” It’s possible this is a clever, intentional attempt to misdirect the Iranian regime about efforts to give Ayatollah Khamenei the Maduro treatment, but if Vance was sincere, he was contradicting existing messaging from Trump that the Iranian regime had a chance to negotiate and missed the opportunity that had once existed but no longer does. The only thing left for Iran regime to negotiate at this stage is surrender, exit, and safe passage, perhaps amnesty for their many crimes. But the idea of a new nuclear deal involving sanctions relief just is a lifeline for the ayatollahs. It risks discouraging the protesters and snatching defeat from the jaws of victory.
Also worth a look on the Iran story today, which is fast moving, is a recent post on X by The Editors contributor David Wurmser. He writes:
I think the momentum is now toward regime collapse. They have deadly options as they go down, and it may be a violent week, including against Israel. But the regime is dying and such a “Samson option” will not save them. I will not interfere in internal opposition Iran politics and judge who should rule afterwards. Only Iranians should. I can only reflect analytical observations. But clearly the MEK was caught off guard by events and are struggling to show relevance. They are currently using considerable effort to darken Western views of other oppositionists, especially the Shah. But their claim to be the only effective structure on the ground has proven inflated vastly. The slogans the MEK says are being said, “no to dictatorship of any kind including Monarchy” might be said somewhere, but I have watched dozens of hours and I have not seen that slogan. I have seen Javed Shah (Long Live the Shah) all over, and several other slogans. Clearly the Shah has at least symbolic currency, which reflects a total failure of Western intelligence agencies since assessing that the Shah was universally as hated and rejected as his father was in 1979 seemed to be the only solid thing they all agreed upon in full consensus, and that appears to be flat out wrong. That said, the real operational leadership that is emerging is within Iran, not outside. The nation needs a symbol, but a symbol must stay above factions and the rough and tumble of ruling. The U.S. and Israeli statements supporting the Iranian people, combined with the immense damage Israel did to the regime’s command structure and image of omnipotent effective brutality last summer as well as the sobering shock to the regime by Maduro’s seizure by the U.S. so flawlessly a week ago, all have converged to become game changers and given the Iranian people a tailwind and a confidence unseen before. The threat of force by President Trump strongly reinforced that. It is a game changer on top of a game changer. But I worry about a U.S. intervention — Not because of the “rally the flag” issue, which I think is total BS. Indeed, it would cause a “rally around the U.S./Trump” phenomenon that puts us in a good position theoretically. But because it would then put the steering wheel fully in our hands, and we do not have an end game concept for Iran. And we are lousy imperial overlords, nor do our government structures understand Iranian society. Nor should we even if we could do it effectively. It has to be left to the Iranian people. But the temptation to fall prey to “we broke it; we must fix it” is too great, and we would be drawn into things it is best we not be drawn into. In contrast, if Israel acted, they would have far more limited aims and are too small to be tempted by grand planning. So, if an intervention is to be, and I think quite probably it might be and certainly would be if Iran exercised the “Samson option,” it would be best were it to be by our regional ally and not by us.
The “Samson option” by Iran could include, God forbid, some kind of barrage of missiles aimed at Israel. Some estimates say Iran still has half the missile arsenal it had before the 12-day war of June 2025, and also that it retains the capacity to manufacture missiles at a rate of 2,000 or 3,000 a year. Let’s hope it doesn’t get a chance to use them.
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