2026 Outlook

The U.S. economy entered 2026 riding a wave of momentum. After a small contraction in the first quarter of last year, real GDP growth accelerated throughout 2025 and is on track to post an increase of between 2.5 and 3 percent (on a Q4/Q4 basis) when all the data are in and the books are closed on the year.

Nearly without exception, members of a panel of economic forecasters surveyed by The Wall Street Journal in early January expect continued economic growth in the coming year, supported by tax and interest rate cuts, real wage growth, ongoing consumer resilience, and continued business investment—particularly in AI-related capacity. A solid year appears in store.

Nonetheless, the pace of real GDP growth is expected to lag last year’s. The labor market is a source of concern. Nonfarm payrolls are likely to show only very modest growth as companies remain hesitant to hire in the near term. At the same time, they are not expected to significantly thin the ranks either, keeping an historically healthy unemployment rate from climbing much beyond its recent range. Inflation is expected to remain above target, but inch lower over the course of the year, setting the stage for further interest rate cuts by the Federal Reserve.

Risks are ever present. Economic growth accelerated sharply last year as economic-policy uncertainty retreated from a spring-time peak. Already in 2026, however, the policy environment has been clouded by the specter of interest rate caps and new tariffs. Indeed, if tariff-driven inflation proves less transitory than expected, it could delay disinflation, weaken real incomes, and limit the Fed’s ability to cut rates.

AFSA Chief Economist Tim Gill is a member of The Wall Street Journal’s Economic Forecasting Survey panel cited above. The panel consists of approximately 75 economists from academia, financial institutions, consulting firms, and trade associations who contribute their own forecasts of key economic indicators four times a year. Here are the calls for 2026:

• After expanding well above trend at an estimated 2.7 percent Q4/Q4 in 2025, real GDP growth is forecasted to moderate to 2 percent this year.
• Nonfarm payroll growth will average approximately 60,000 per month over the course of the year, similar to the pace recorded in 2025, with the unemployment rate at 4.5 percent at year end.
• Price inflation is expected to stabilize with the year-over-year change in the headline consumer price index falling from 2.7 percent in December 2025 to 2.6 percent by mid-2024 and 2.5 percent by year-end. Other inflation gauges, including the Fed’s preferred measure—the price index for core personal spending—are also expected to continue downward.
• The Fed will continue to loosen monetary policy with 2 to 3 more rate cuts of 25-basis points each.
• In the absence of any unexpected shock, the slightly weaker growth and inflation backdrop will lead to largely stable 10-year treasury rates in the low-4 percent range.

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