The U.S. Economic Outlook 2025–2026: Strong Momentum Amid Policy Uncertainty
The University of Michigan’s U.S. Economic Outlook 2025–2026 report provides a comprehensive analysis of the current economic landscape, highlighting GDP growth, inflation trends, labor market dynamics, and key policy impacts. With robust economic momentum in 2024, the report explores challenges ahead, including tariff policies, fiscal changes, and monetary adjustments.
Key Findings from the Report
1. Economic Growth Remains Steady Despite Challenges
- Real GDP grew at 2.3% in Q4 2024 and is expected to maintain a similar pace in 2025.
- Projected GDP growth for 2025 and 2026 is 2.3% and 2.1%, slightly moderating from 2024’s 2.8%.
- Major economic uncertainties include tariffs, fiscal policy shifts, and federal government restructuring.
2. Inflation Trends and Interest Rate Forecast
- CPI inflation fluctuated but is projected to moderate to 2.2% by late 2025.
- Federal Reserve to cut rates twice in 2025 (June and December), responding to economic conditions.
- Tariffs on imported goods may temporarily push inflation higher in mid-2025.
3. Labor Market Resilience with a Few Risks
- Unemployment rate dropped to 4.0% in early 2025 and is expected to stabilize around 3.9% by 2026.
- Job growth rebounded after a slowdown in 2024, with monthly payroll gains projected at 188,000 in Q1 2025.
- Potential risks include federal workforce downsizing and immigration policy impacts on labor supply.
4. Housing Market Outlook: Continued Challenges
- Mortgage rates remain elevated, leading to slower home sales and construction activity.
- New home construction stabilizes, with gradual growth in 2026 as affordability improves.
- Rental demand stays strong, but multi-family housing starts may soften in early 2025.
5. Fiscal and Trade Policy Changes
- $200 billion in personal and business tax cuts expected in 2026, increasing the federal deficit.
- Potential import tariffs on Canada and Mexico remain a risk to North American supply chains.
- Trump administration’s fiscal agenda faces uncertainty in Congress, with tax and spending negotiations ongoing.
Why This Report Matters for Entrepreneurs & Business Leaders
The 2025–2026 U.S. Economic Outlook provides essential insights for entrepreneurs, investors, and business leaders navigating economic trends, workforce changes, and policy shifts. As inflation stabilizes and interest rates decline, businesses must adapt to emerging opportunities in trade, housing, and job markets.
📥 Download the Full Report: University of Michigan RSQE U.S. Forecast 2025–2026
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