Six questions that will define the U.S. economy in 2026

The U.S. economy surprised a lot of people in 2025 — growth held up, inflation stayed relatively contained, and the labor market never fell apart the way some feared. But resilience is not the same as relief, and heading into 2026, the gap between what the data says and what households feel remains one of the defining tensions in American economic life.

According to CBS News, about seven in ten Americans polled in December said they were struggling to pay for food, housing, and health care — even as economists broadly expect conditions to improve. Oxford Economics chief U.S. economist Michael Pearce told CBS News he believes 2026 will be a better year, with tax cuts taking center stage and economic strength broadening out. But better on paper and better at the kitchen table are two different things, and a cluster of unresolved questions will determine which version of 2026 most Americans actually experience.

Analyses from economists including former Biden White House officials point to several of the same fault lines. Their analysis, alongside forecasts from Vanguard, the Conference Board, the Federal Reserve, and others, points to six questions that will shape the year.

**Will inflation finally come down enough to matter?** The Consumer Price Index ran at 2.7% in November, above the Fed's 2% target, according to CBS News. The Fed's own December forecast penciled in inflation cooling to around 2.4% in 2026 — still above target. William Blair economist Richard de Chazal warned in a report cited by CBS News that higher inflation will continue to weigh on family finances. Fed Chair Jerome Powell put it plainly at a December press conference: wages need to outpace inflation for a sustained stretch before people start feeling ahead.

We're going to need to have some years where … nominal wages are higher than inflation for people to start feeling good about affordability.— Jerome Powell, Federal Reserve Chair

**What will the Federal Reserve do with rates?** After three consecutive cuts beginning in September 2025, the Fed signaled in December that only one additional cut was likely in 2026, according to CBS News. President Trump has publicly pressed for steeper cuts, and with Chair Powell's term expiring in May, his successor's posture on rates will be one of the most consequential personnel decisions of the year.

**Is the job market about to shift gears?** The labor market entered 2026 in what economists describe as a low-hire, low-fire equilibrium — stable but not dynamic. Goldman Sachs economists, cited by CBS News, projected average monthly payroll gains could more than double to around 70,000 as growth accelerates and tariff effects fade, with wages climbing 2.3%. The wildcard is AI: some economists warn that companies accelerating automation may keep hiring muted even as output grows.

**Will housing get meaningfully more affordable?** Modestly, and slowly. Redfin's head of economics research Chen Zhao told CBS News that mortgage rates are likely to stay in the low 6% range and home price growth should trail income growth — a directional improvement, but not a transformation. 'It's a slow process that might take five or six years,' she said. Realtor.com projects price dips in roughly two dozen major cities, mostly in the Southeast and West. For renters and first-time buyers, the math remains hard.

**Are AI stocks in a bubble?** The S&P 500 finished 2025 up more than 17%, driven heavily by AI and big tech, according to CBS News. Whether those valuations reflect genuine earnings potential or speculative excess is the central debate in financial markets. Jonas Goltermann, deputy chief markets economist at Capital Economics, noted in reporting by CBS News that current valuations remain below dot-com-era peaks — a data point that reassures some investors while doing little to resolve the underlying question.

**How much will tariffs and fiscal policy reshape the picture?** The Trump administration's steep tariffs on imports were a defining feature of 2025, and their second-order effects — on prices, supply chains, and business investment — will continue to ripple through 2026. Potential court rulings on tariff authority remain a variable that could shift the landscape quickly. Meanwhile, the national debt and limited fiscal space constrain how much the government can cushion any slowdown. Vanguard and the Conference Board project real GDP growth of roughly 2.0–2.3% for the year — solid, but not the kind of acceleration that resolves affordability pressures on its own.

The through-line connecting all six questions is a simple one: the U.S. economy is growing, but the gains are unevenly distributed and the costs of the past few years are still being absorbed. For most analysts, 2026 looks like a year of gradual normalization rather than a turning point — which may be the most honest forecast of all.

Why it matters — The answers to these six questions will determine whether 2026 marks the year Americans finally feel the economy working for them — or another year of growth that doesn't reach their wallets.

Reported by stanford.edu, corporate.vanguard.com, conference-board.org, federalreserve.gov, cbsnews.com, reuters.com, rbc.com, brookings.edu