Ten Economic Questions for 2026

by Here is a review of the Ten Economic Questions for 2025. Below are my ten questions for 2026 (I've been doing this online every year for 21 years!). These are just questions; I'll follow up with some thoughts on each of these questions. The purpose of these questions is to provide a framework of how the U.S. economy will likely perform in 2026, and if there are surprises - like in 2020 with the pandemic - to adjust my thinking. 1) Economic growth was probably close to 2% Q4-over-Q4 in 2025. The FOMC is expecting growth of 2.1% to 2.5% Q4-over-Q4 in 2026. How much will the economy grow in 2026? Will there be a recession in 2026?Economic growth: 2) Through November 2025, the economy added 610 thousand jobs in 2025. How many jobs will be added in 2026? Or will the economy lose jobs? Employment: 3) b The unemployment rate was at 4.6% in November, up from 4.2% in November 2024. Currently the FOMC is projecting the unemployment rate will decrease to the 4.3% to 4.4% range in Q4 2026. What will the unemployment rate be in December 2026? 4) b In November 2025, the overall participation rate was at 62.5%, unchanged year-over-year from 62.5% in November 2024, and below the pre-pandemic level of 63.3% in February 2020. Long term, the BLS is projecting the overall participation rate will decline to 61.1% by 2034 due to demographics. What will the participation rate be in December 2026? 5) Inflation: Core PCE was up 2.8% YoY through September. This was down from a peak of 5.6% in early 2022. The FOMC is forecasting the YoY change in core PCE will be in the 2.4% to 2.6% range in Q4 2025. Will the core inflation rate decrease further in 2026, and what will the YoY core inflation rate be in December 2026? 6) Monetary Policy: The FOMC cut the federal funds rate three times in 2025 from "4-1/4 to 4-1/2 percent" at the beginning of 2025, to "3-1/2 to 3-3/4" at the end of the year. The mid-point on the "dot plot" suggests many FOMC participants expect around two 25 bp rate cuts in 2026. What will the Fed Funds rate be in December 2026? 7) Wage Growth: Wage growth was decemt in 2025, up 3.5% year-over-year as of November. How much will wages increase in 2026? 8) Residential Investment: How much will Residential investment (RI) change in 2026? How about housing starts and new home sales in 2025? 9) House Prices: It appears house prices - as measured by the national repeat sales index (Case-Shiller, FHFA, and Freddie Mac) - will be mostly flat in 2025. What will happen with house prices in 2026? 10) Housing Inventory: Housing inventory decreased sharply during the pandemic to record lows in early 2022. Since then, inventory has increased but is still below pre-pandemic levels. Will inventory increase further in 2026?