- Deloitte expects the U.S. to slog through 2026 with modest real GDP growth (~1.4–1.5%) as elevated tariffs and weaker migration constrain demand and potential output.
- Core inflation stays sticky in 2025 (core PCE ~3.6% YoY by Q4 2025) before gradually easing, keeping rate cuts and pricing expectations under tension.
- The labor market cools into 2026, lifting unemployment toward ~4.6% baseline with a downside path that risks recession and joblessness above 5%.
- Tariffs, migration, and fiscal policy are the key swing factors that can materially shift growth, inflation, and employment between upside and downside scenarios.
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Deloitte’s most recent U.S. forecast paints a cautious picture: the economy is expected to limp forward in 2026 rather than accelerate, with baseline growth of approximately 1.4–1.5% real GDP. Tariffs play a dual role—driving up input and consumer costs, depressing trade, and weakening investment, but also contributing revenue and servicing political priorities. Inflation driven by trade barriers, combined with high interest rates, will keep price pressures elevated well into 2025, before gradually softening.
On the labor front, job growth remains solid now but is seen weakening through 2025 into 2026. Unemployment is expected to rise toward ~4.6%, especially as government employment contracts and business investment weakens. In a pessimistic scenario (escalating tariffs, zero net migration, adverse Fed missteps), unemployment could breach ~5%.
Another critical dimension is migration: Deloitte revises its estimate of adult net migration from ~6.8 million to ~3.3 million through 2030, with weaker immigration dampening long-term output potential and labor supply. Fiscal policy (notably the “One Big Beautiful Bill” taxation and spending legislation) is slightly stimulative in baseline, but has limited upside due to looming deficits and interest rate constraints.
In upside scenarios—where tariffs fall, trade agreements improve, migration rebounds, and inflation falls—growth could surpass baseline, inflation drops more sharply, and employment resumes stronger momentum. Conversely, in downside paths, the U.S. could flirt with recession in late 2026, with negative GDP growth, rising unemployment, and inflation stays elevated—posing tough trade-offs for the Federal Reserve.
Strategic implications:
- Businesses should prepare for a slow and volatile growth environment; capital expenditures may need to be more selective, especially in sectors sensitive to tariffs and interest rates.
- Policymakers face difficult choices balancing inflation control with growth; aggressive tariff policies increase both inflation risk and trade retaliation risk.
- The labor market cooling may ease some wage-cost pressures, but industries dependent on immigrant labor or government contracts will need to plan for tighter supply and demand conditions.
- Longer term, migration policy and global trade agreements are key levers for boosting growth and reducing inflation—areas to watch closely.
Open questions include: How fast can tariffs be rolled back or trade deals improved? Will migration recover after legislative or administrative changes? Can inflation expectations remain anchored if consumer costs continue rising? To what extent will rate cuts be feasible, given inflation inertia and financial market constraints?
Supporting Notes
- Baseline forecast projects U.S. real GDP growth of ~1.4% in 2025 and ~1.5% in 2026, under elevated tariffs and reduced migration assumptions.
- Core PCE inflation is expected to reach ~3.6% year-over-year by Q4 2025 before easing; headline inflation similarly elevated due to trade barriers.
- Average unemployment rate forecasted to reach ~4.6% in 2026 under baseline; in the downside scenario, unemployment could rise above ~5% by 2027.
- Net adult migration estimate sharply revised lower: from ~6.8 million to ~3.3 million through 2030, reducing labor supply and potential output.
- Tariff trajectory: baseline expects average import tariff rate to ease from ~18.6% in mid-2025 to ~15% by mid-2026; downside assumes rates rise further, upside assumes a drop toward ~7.5%.
- Business investment remains constrained by both policy uncertainty and elevated rates; in baseline, M&E investment declines in 2026 while intellectual property investment grows modestly; upside sees stronger rebound.