The US economy is expected to grow slightly faster in 2026, but inflation pressures and slow job creation could complicate the recovery, according to a new forecast from the National Association for Business Economics (NABE). The year-end survey, conducted from November 3 to 11 among 42 professional forecasters, shows a cautiously optimistic outlook tempered by concerns over policy decisions and global trade tensions.
Stronger Growth Driven by Consumers and Businesses
Economists now expect the US economy to expand by 2% in 2026, up from the 1.8% projected in NABE’s October survey and far above the 1.3% estimate made in June. The improved forecast is largely attributed to robust consumer spending and renewed business investment, both of which are expected to support momentum next year.
However, the panel nearly unanimously agrees that new US import tariffs introduced by the Trump administration will weigh on growth, shaving at least a quarter of a percentage point off GDP.
“Tariff impacts” were identified as the most significant downside risk to the US economic outlook, both in probability and in severity.
Persistent Inflation Expected to Remain a Challenge
Inflation is projected to end the year at 2.9%, slightly below the October estimate of 3%. Forecasters expect only a modest improvement in 2026, with inflation averaging 2.6%, reflecting continued pricing pressures from trade policies and supply chain disruptions.
Tariffs alone may contribute anywhere from 0.25 to 0.75 percentage points to inflation next year, according to respondents.
Higher productivity could help offset some of the inflationary effects, making it the most likely factor to push growth above expectations. But economists caution that productivity gains may not be strong enough to fully counterbalance the inflationary drag.
Job Growth Slows as Labor Market Softens
The labor market is expected to remain resilient but subdued. Economists predict monthly job gains of around 64,000, faster than today’s pace but well below pre-pandemic norms. The unemployment rate is forecast to rise to 4.5% in early 2026 and stay at that level through the year.
Stricter immigration enforcement, which limits labor supply, is also expected to hold back economic growth.
Federal Reserve Expected to Slow the Pace of Rate Cuts
With inflation proving sticky and unemployment ticking up only modestly, forecasters believe the Federal Reserve will proceed cautiously. They expect a quarter-point interest rate cut in December, followed by only another half-point reduction next year as the Fed moves toward a more neutral policy stance.
The central bank’s slower approach reflects its intention to balance inflation risks with the need to support the cooling economy.
About The Author
