When the AI craze collides with the employment iceberg, where will the US economy go in 2026?
2026-01-12 21:34:13
In 2026, the US economy will enter a new phase of "moderate growth but structural imbalances." Global institutions generally predict a low probability of recession, but the widening K-shaped divergence, structural weakness in the job market, and policy maneuvering are just some of the multiple challenges that make the path to economic recovery uncertain. From growth drivers to consumption patterns, from policy impacts to market hotspots, the multifaceted nature of the US economy is profoundly reshaping domestic livelihoods and the global trade landscape.
After experiencing dramatic fluctuations in 2025, the US economy is characterized by "slow and steady" growth.
Major institutions have differing predictions on growth rates: Goldman Sachs is optimistic that GDP growth will reach 2.6%, with key drivers including fiscal stimulus, tax cuts, looser financial conditions, and reduced tariff resistance. It believes these factors will work together to achieve a soft landing for the economy.
JPMorgan Chase is more cautious, forecasting growth of about 1.8%, while Royal Bank of Canada (RBC) defines the economic outlook as "mild stagflation," expecting GDP growth to be below 2% while core inflation remains above 3%, emphasizing that the slowdown is due to deep-seated structural factors such as an aging population, reduced immigration, and uneven productivity growth, rather than a single cyclical shock.
Despite the differences, there is a broad consensus in the market that the US economy will not fall into a severe recession, but its growth will be highly dependent on policy regulation and will be characterized by significant imbalances.
Economists point out that a series of tax policies under the One Big Beautiful Bill Act—including expanding tax refunds, lowering wage withholding rates, and business incentives—are expected to inject momentum into short-term economic growth, but long-term structural constraints remain difficult to overcome.
The aggressive import tariffs introduced by US President Trump last spring were originally intended to benefit American workers and promote the recovery of blue-collar employment, but the actual results have deviated significantly from the goals.
Since the policy was implemented, manufacturing jobs in the United States have continued to shrink, declining for eight consecutive months as of December 2025. Since the tariffs were implemented in April, factory employment has decreased by more than 70,000 people, falling to 12.69 million, the lowest level since March 2022.
The US is projected to add only 49,000 jobs per month in 2025, a sharp drop of more than two-thirds from 168,000 in 2024. This slowdown in job growth is directly related to cautious business investment triggered by tariffs. More concerning is the structural problem in the job market: while the unemployment rate fell slightly to 4.4% in December from 4.5%, previous months' job growth forecasts were revised downwards, and the low unemployment rate is actually supported by a contraction in labor supply—the Trump administration's strict immigration and deportation policies curbed the steady growth of the labor market during the Biden era, and the stable number of job seekers masked the true weakness in employment demand.
(Trend chart of new non-farm payrolls)
High-income consumers benefit most significantly from this wealth growth. The top 20% of earners control 71% of household net worth and 87% of corporate stocks and mutual fund holdings. Therefore, these consumers have greater capacity to absorb the impact of price increases.
(K-type economic characteristic diagram)
Behind the consumption divergence lies the difference in circumstances among different income groups: high-income families have gained considerable asset appreciation thanks to the stock market boom, coupled with tax policy dividends, resulting in a significant increase in disposable income, which has driven an increase in the supply of "high-end experience services," such as Disney adjusting its theme park pricing system to provide exclusive benefits for high-paying tourists; while the remaining 80% of families are under disproportionate pressure from rising costs, with soaring medical insurance costs and government cuts to medical and food assistance for low-income groups further exacerbating their living burden, leading to a continued contraction in consumption such as dining out.
2026 will be an extremely challenging year for the Federal Reserve. The market expects the Fed to further lower interest rates to support job market stability, but multiple factors have put it in a dilemma between "preserving jobs" and "controlling inflation":
Expanding deficit spending and rising tariffs could push up inflation again, while with the midterm elections approaching, the Federal Reserve faces political pressure to stimulate the economy in the short term through sharp interest rate cuts. This move could lead to excessively loose policies, and if it triggers an inflation rebound, it would further exacerbate economic volatility.
Inflation remains a key point of contention among major institutions' forecasts: JPMorgan Chase believes the continued effect of tariffs will keep price pressures high; Goldman Sachs, however, is optimistic, believing that inflation will gradually decline as the impact of tariffs fades and demand cools. The employment market forecast also differs: JPMorgan Chase expects the unemployment rate to climb further to the mid-range of around 4.5%; Goldman Sachs, on the other hand, believes strong end-user demand and a loose financial environment will support employment, stabilizing the unemployment rate at 4.5%.
Ultimately, with real GDP declining, inflation falling, and unemployment remaining high, the neutral interest rate, as observed by the Taylor formula, will decline, and the Federal Reserve will eventually adjust interest rates to the range of 3.0%-3.25%.
(Factors and trends in neutral interest rate adjustment)
The biggest hot spot in the US market in 2026 will undoubtedly be artificial intelligence. Companies will make large-scale investments in AI products and services, and infrastructure construction such as data centers will become one of the core drivers of economic growth.
Although AI-related spending was planned and started long ago, its growth rate remains quite rapid, which to some extent limits the decline in overall business spending caused by cyclical factors.
In 2026, spending growth unrelated to artificial intelligence will plateau, but is expected to accelerate in 2027, potentially contributing about 2 percentage points to the growth of business spending, similar to 2025.
(Trend chart of data center investment growth rate and software spending as a percentage of total expenditure)
Despite the fact that many industry experts believe that the technology sector is currently overvalued, the market's expectations for its future earnings remain extremely high, and optimism about the field of artificial intelligence will continue into 2026.
However, despite the optimism, several risks remain: First, recessions following long-term economic expansion are often difficult to predict in advance. Even if the economy remains stable overall in 2026, significant profit differentiation is inevitable, and some industries may face severe difficulties. Second, the widening income gap and social equity issues caused by a K-shaped economic pattern may further spread to the consumer and political spheres. Third, unbalanced policy decisions by the Federal Reserve could trigger a rebound in inflation or a deterioration in employment, exacerbating economic volatility. Fourth, the surge in federal debt and the weakening of the dollar's status could cause fluctuations in global financial market confidence in US assets.
Overall, the US economy in 2026 presents a pattern of "opportunities and challenges": emerging fields such as artificial intelligence provide growth momentum, and policy regulation supports the economy to avoid recession, but problems such as K-shaped divergence, employment imbalance, and the interplay between fiscal and monetary policies will continue to plague the economy.
The slowdown in immigration has dampened labor supply growth, further exacerbating the already strained job market.
Changes in population structure, especially the aging population, have reduced the labor force participation rate, thereby further limiting the availability of labor.
At the same time, factors such as tariffs and non-labor costs, such as cost shifting by businesses, are also affecting companies' hiring decisions and exacerbating the constraints on employment for low-income groups.
For the United States, whether AI leads the stock market to new highs and increases the wealth effect or whether the imbalance in distribution causes suffering for ordinary people, whether reduced immigration leads to full employment or insufficient labor supply leads to inflation, it is urgent to balance short-term policy stimulus with long-term structural reforms, and take into account both economic growth and social equity, in order to achieve more stable and sustainable development. Investors should also continue to pay attention to inflation and employment data, and grasp the possible turning point in monetary policy in conjunction with the extent of the Federal Reserve's interest rate cuts.
Economic Growth: Moderate Recovery Coexisting with Institutional Divergence
After experiencing dramatic fluctuations in 2025, the US economy is characterized by "slow and steady" growth.
Major institutions have differing predictions on growth rates: Goldman Sachs is optimistic that GDP growth will reach 2.6%, with key drivers including fiscal stimulus, tax cuts, looser financial conditions, and reduced tariff resistance. It believes these factors will work together to achieve a soft landing for the economy.
JPMorgan Chase is more cautious, forecasting growth of about 1.8%, while Royal Bank of Canada (RBC) defines the economic outlook as "mild stagflation," expecting GDP growth to be below 2% while core inflation remains above 3%, emphasizing that the slowdown is due to deep-seated structural factors such as an aging population, reduced immigration, and uneven productivity growth, rather than a single cyclical shock.
Despite the differences, there is a broad consensus in the market that the US economy will not fall into a severe recession, but its growth will be highly dependent on policy regulation and will be characterized by significant imbalances.
Economists point out that a series of tax policies under the One Big Beautiful Bill Act—including expanding tax refunds, lowering wage withholding rates, and business incentives—are expected to inject momentum into short-term economic growth, but long-term structural constraints remain difficult to overcome.
Job Market: Tariff Failure and Structural Differentiation Become More Prominent
The aggressive import tariffs introduced by US President Trump last spring were originally intended to benefit American workers and promote the recovery of blue-collar employment, but the actual results have deviated significantly from the goals.
Since the policy was implemented, manufacturing jobs in the United States have continued to shrink, declining for eight consecutive months as of December 2025. Since the tariffs were implemented in April, factory employment has decreased by more than 70,000 people, falling to 12.69 million, the lowest level since March 2022.
The US is projected to add only 49,000 jobs per month in 2025, a sharp drop of more than two-thirds from 168,000 in 2024. This slowdown in job growth is directly related to cautious business investment triggered by tariffs. More concerning is the structural problem in the job market: while the unemployment rate fell slightly to 4.4% in December from 4.5%, previous months' job growth forecasts were revised downwards, and the low unemployment rate is actually supported by a contraction in labor supply—the Trump administration's strict immigration and deportation policies curbed the steady growth of the labor market during the Biden era, and the stable number of job seekers masked the true weakness in employment demand.
(Trend chart of new non-farm payrolls)
Consumption and Trade: K-shaped Divergence and Intensified Global Competition
High-income consumers benefit most significantly from this wealth growth. The top 20% of earners control 71% of household net worth and 87% of corporate stocks and mutual fund holdings. Therefore, these consumers have greater capacity to absorb the impact of price increases.
(K-type economic characteristic diagram)
Behind the consumption divergence lies the difference in circumstances among different income groups: high-income families have gained considerable asset appreciation thanks to the stock market boom, coupled with tax policy dividends, resulting in a significant increase in disposable income, which has driven an increase in the supply of "high-end experience services," such as Disney adjusting its theme park pricing system to provide exclusive benefits for high-paying tourists; while the remaining 80% of families are under disproportionate pressure from rising costs, with soaring medical insurance costs and government cuts to medical and food assistance for low-income groups further exacerbating their living burden, leading to a continued contraction in consumption such as dining out.
Policy Game: The Fed's Dilemma and Concerns about Fiscal Imbalance
2026 will be an extremely challenging year for the Federal Reserve. The market expects the Fed to further lower interest rates to support job market stability, but multiple factors have put it in a dilemma between "preserving jobs" and "controlling inflation":
Expanding deficit spending and rising tariffs could push up inflation again, while with the midterm elections approaching, the Federal Reserve faces political pressure to stimulate the economy in the short term through sharp interest rate cuts. This move could lead to excessively loose policies, and if it triggers an inflation rebound, it would further exacerbate economic volatility.
Inflation remains a key point of contention among major institutions' forecasts: JPMorgan Chase believes the continued effect of tariffs will keep price pressures high; Goldman Sachs, however, is optimistic, believing that inflation will gradually decline as the impact of tariffs fades and demand cools. The employment market forecast also differs: JPMorgan Chase expects the unemployment rate to climb further to the mid-range of around 4.5%; Goldman Sachs, on the other hand, believes strong end-user demand and a loose financial environment will support employment, stabilizing the unemployment rate at 4.5%.
Ultimately, with real GDP declining, inflation falling, and unemployment remaining high, the neutral interest rate, as observed by the Taylor formula, will decline, and the Federal Reserve will eventually adjust interest rates to the range of 3.0%-3.25%.
(Factors and trends in neutral interest rate adjustment)
Market Hotspots and Potential Risks: Artificial Intelligence Leads the Way, but Caution is Needed as Differentiation Intensifies
The biggest hot spot in the US market in 2026 will undoubtedly be artificial intelligence. Companies will make large-scale investments in AI products and services, and infrastructure construction such as data centers will become one of the core drivers of economic growth.
Although AI-related spending was planned and started long ago, its growth rate remains quite rapid, which to some extent limits the decline in overall business spending caused by cyclical factors.
In 2026, spending growth unrelated to artificial intelligence will plateau, but is expected to accelerate in 2027, potentially contributing about 2 percentage points to the growth of business spending, similar to 2025.
(Trend chart of data center investment growth rate and software spending as a percentage of total expenditure)
Despite the fact that many industry experts believe that the technology sector is currently overvalued, the market's expectations for its future earnings remain extremely high, and optimism about the field of artificial intelligence will continue into 2026.
However, despite the optimism, several risks remain: First, recessions following long-term economic expansion are often difficult to predict in advance. Even if the economy remains stable overall in 2026, significant profit differentiation is inevitable, and some industries may face severe difficulties. Second, the widening income gap and social equity issues caused by a K-shaped economic pattern may further spread to the consumer and political spheres. Third, unbalanced policy decisions by the Federal Reserve could trigger a rebound in inflation or a deterioration in employment, exacerbating economic volatility. Fourth, the surge in federal debt and the weakening of the dollar's status could cause fluctuations in global financial market confidence in US assets.
Summarize:
Overall, the US economy in 2026 presents a pattern of "opportunities and challenges": emerging fields such as artificial intelligence provide growth momentum, and policy regulation supports the economy to avoid recession, but problems such as K-shaped divergence, employment imbalance, and the interplay between fiscal and monetary policies will continue to plague the economy.
The slowdown in immigration has dampened labor supply growth, further exacerbating the already strained job market.
Changes in population structure, especially the aging population, have reduced the labor force participation rate, thereby further limiting the availability of labor.
At the same time, factors such as tariffs and non-labor costs, such as cost shifting by businesses, are also affecting companies' hiring decisions and exacerbating the constraints on employment for low-income groups.
For the United States, whether AI leads the stock market to new highs and increases the wealth effect or whether the imbalance in distribution causes suffering for ordinary people, whether reduced immigration leads to full employment or insufficient labor supply leads to inflation, it is urgent to balance short-term policy stimulus with long-term structural reforms, and take into account both economic growth and social equity, in order to achieve more stable and sustainable development. Investors should also continue to pay attention to inflation and employment data, and grasp the possible turning point in monetary policy in conjunction with the extent of the Federal Reserve's interest rate cuts.
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