The year the U.S. economy bent but didn't break
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The U.S. economy was beaten and battered in 2025, and powered ahead despite it all.
The big picture: The question for 2026 is whether the underlying sources of weakness that are already evident will broaden out into something that threatens to undermine its overall resilience.
Threat level: Beneath buoyant growth in GDP and asset prices are serious worries.
- The labor market is looking softer by the month.
- Elevated inflation is pinching family budgets.
- And fears are rising that the AI-fueled boom could leave ordinary workers worse off.
The big picture: Those pain points have already caused public opinion on the economy to turn sharply negative.
- At the same time, one lesson of 2025 is that the U.S. economy is awfully adaptable and can withstand more challenges than you might expect.
Zoom in: In April, President Trump's "Liberation Day" tariffs sent the stock market swooning and economists upgrading their recession odds.
- It wasn't the only sign of trouble. Job growth came to a near-halt over the summer. Deportations and restrictionist immigration are part of the story, along with the aging of the native-born workforce. But part of it is that companies are trying to get leaner.
- Inflation, meanwhile, has become the fire that will not be fully doused. While the sky-high inflation of 2022 is a thing of the past, inflation has been above the Federal Reserve's target 2% target every single month since March 2021.
- Affordability is top of mind in public opinion.
Reality check: It's important to remember, though, that the $30 trillion U.S. economy, for all its flaws, can weather a lot, at least at the macro level. It is, as RSM chief economist Joe Brusuelas puts it, a "dynamic and resilient beast."
By the numbers: The headline data numbers have held up just fine, a trend punctuated by Tuesday's report that GDP rose at a 4.3% annual rate in Q3, amid strong consumer spending and the AI-investment surge.
- The S&P 500 is up more than 17% so far this year.
- The unemployment rate edged up over the course of the year, to 4.6% in November. But that's still lower than it has been in 69% of months dating back to 1948.
Yes, but: You can't eat GDP, or points of the S&P. And the biggest issues for the U.S. economy — and the things that look like pre-eminent risks for 2026, are in what you might call the peripheral data.
- While layoffs are still few, employers have slowed their hiring rates, which means those who do lose their jobs face hard sledding.
- Job creation has been overwhelmingly driven by health care, with usual cyclical sectors like manufacturing and transportation and warehousing shedding jobs.
- Consumer demand is displaying "K-shaped" trends, being highly concentrated among the affluent Americans enjoying surging stock wealth — while the household finances of lower earners are increasingly on a razor's edge.
What they're saying: The fact that strong third-quarter GDP growth coincided with weak job creation, Brusuelas writes in a note, "implies a decoupling between robust topline growth and soft jobs creation which in our estimation is likely to be the major economic narrative looking forward into 2026."
What we're watching: The 2026 economy is set to receive a boost from Washington, as the signature tax law passed in July — the One Big, Beautiful Bill Act — acts as a fiscal stimulus alongside the delayed impact of the Federal Reserve three interest-rate cuts since September.
- It's hard for companies to experience the kind of robust demand for goods and services they've seen in 2025 and not eventually have to hire more workers to help fulfill it.
The bottom line: There are plenty of risks on the horizon for 2026, but the economy's striking resilience in 2025 is a reminder that doom-and-gloom predictions for the U.S. economy often prove wrong.
