As of January 26, 2026, the U.S. economy is navigating a period of strong top-line growth coupled with significant trade tensions and a divided labor market.
Current Economic Indicators
GDP Growth: The economy expanded at an annualized rate of 4.4% in the third quarter of 2025, driven by robust consumer and government spending.
Inflation: Consumer prices rose 2.8% through November 2025. While down from previous peaks, inflation remains "sticky" as businesses pass tariff costs to consumers.
Employment: The labor market is seeing a "dead calm". While unemployment fell to 4.4% in December 2025, overall job growth for the year was the weakest since 2020.
Federal Debt: The national debt now exceeds $30 trillion, with projections suggesting the government will need to borrow an additional $21 trillion through 2035.
Trade and Policy Developments
Tariff Conflicts: Tensions have escalated with Canada, with President Trump threatening 100% tariffs if Canada reaches a trade deal with China. Similarly, the EU has paused a U.S. trade deal following tariff threats.
Greenland Dispute: Markets have been volatile following the president's threats to use tariffs or force to gain territory in Greenland, though he recently walked back some of these threats citing a vague "deal".
Federal Reserve Standoff: The White House is in a legal battle over the president's attempt to oust Lisa Cook from the Federal Reserve Board. The Supreme Court recently appeared skeptical of this move.
Banking Clash: President Trump is suing JPMorgan Chase and CEO Jamie Dimon for $5 billion, alleging "debanking" following the January 6 Capitol riot.
Key Outlook for 2026
Interest Rates: The Federal Reserve is expected to keep rates steady in the near term, with markets anticipating potential quarter-point cuts later in 2026.
Recession Risk: Moody's Analytics puts the risk of a 2026 recession at 42%, noting the economy is "on the edge" and highly vulnerable to any further shocks in inflation or labor.
Housing: Pending home sales have fallen unexpectedly, leading to a new focus on a national housing affordability plan expected to be unveiled soon.
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