Key Takeaways
\nInvestopedia asked economists at Vanguard to share their predictions for 2026, as their 2025 forecasts are on track to be among the most accurate on Wall Street.The U.S. economy will have solid economic growth, lower unemployment, and slightly lower inflation than in 2026, according to their forecast.
Tariffs will continue to push up inflation in 2026, but the economy will likely get a boost from tax cuts, economists said.<\/p>\n
The year ahead will feature stubborn inflation, an improving job market, and solid economic growth, according to a group of forecasters who nailed their outlook for 2025.<\/p>\n
With all the different 2026 forecasts out there, it’s hard to know whom to trust. So Investopedia reviewed the 2025 outlooks in the Wall Street Journal’s annual survey of economists and found one team that was pretty spot on with their predictions for this year: the group led by Joseph Davis at Vanguard.<\/p>\n
What This Means For The Economy<\/p>\n
The U.S. economy could experience a solid rebound next year if Vanguard’s 2026 forecast is as on target as it was for 2025.<\/p>\n
In December 2024, Davis predicted the unemployment rate would be 4.4<\/a>%, the economy would add an average of 97,500 jobs per month, and the Consumer Price Index would have increased 3% over the year<\/a>. The year isn’t over yet, but these figures all are on track to be close to those levels, and among the most accurate of the 73 economists surveyed by the Journal.<\/p>\n “We always have humility with the forecasts, no question about that,” said Josh Hirt, a Vanguard economist who helped prepare the forecast. “But I think we’re in a very good range.”<\/p>\n Forecasting was particularly challenging at the start of 2025 due to considerable uncertainty about Donald Trump\u2019s second term. It was unclear, for example, whether his threats to impose tariffs were just negotiating positions<\/a> or if he was serious. (They were serious<\/a>.)\n<\/p>\n Hirt said his team assumed Trump would impose tariffs and that the new import taxes would both push up inflation<\/a> and cause the unemployment rate to rise. And that’s exactly what happened<\/a>. They also figured his promised immigration crackdown, combined with the aging of the population<\/a>, would slow down hiring. That too is exactly what happened<\/a>.<\/p>\n What’s Going To Happen Next? <\/p>\n As Hirt mentioned, forecasting is more of an art than a science. So, just because Vanguard’s team got 2025 right doesn’t necessarily mean they’ll be on the money for 2026. However, here’s what they think will happen.<\/p>\n Employment: Vanguard expects the job market to bounce back next year after dragging in 2025, as businesses ramp up their investments in AI and other projects, and economic growth renews demand for workers. Hirt said they expect the unemployment rate to drop to 4.2% from its November 2025 level of 4.6%.\n<\/p>\n Growth: The team expects the economy to accelerate in 2026, putting the GDP’s rate of growth at 2.25%, thanks to two key themes.\n<\/p>\n First, Hirt expects investment numbers to boost growth\u2014and he attributes that to more than just AI. “If you look broadly, the investment numbers that we’re seeing this year are quite strong,” he said.\n<\/p>\n