After a chaotic year filled with trade wars, market gyrations and the longest government shutdown in history, the U.S. economy has, once again, proved more resilient than many forecasters feared.
But “resilient” isn’t quite the same thing as “good.”
Many Americans are entering 2026 worried about their jobs, stressed about their finances and unconvinced that things will improve in the new year.
The flow of official economic data resumed last week after a prolonged delay caused by the government shutdown. The reports were muddled by technical quirks related to the shutdown, but on balance they suggested the economy remained stuck in the same uneasy limbo it was in before the data blackout began.
Job growth was decent in November, but unemployment rose. Retail sales were solid, but wage growth slowed. Inflation cooled, but remains elevated.
That mixed picture is far better than the dire forecasts of last spring, when many economists warned that President Trump’s tariffs would lead to runaway inflation, a recession — or both.
Instead, data this week is expected to show that gross domestic product, which measures overall economic output, grew at a robust pace in the third quarter. Full-year data, when it becomes available early next year, is likely to show that output, adjusted for inflation, grew at about a 1.5 percent pace in 2025, a downshift from 2024 but far from a recession.
A gradual deterioration, though, is still a deterioration. In surveys, Americans overwhelmingly say they are struggling with the cost of living and do not believe the economy is working for them — an impression borne out by data showing that consumer spending is being driven by a relative handful of rich households.
Mr. Trump tried to shift that narrative in a combative — and often misleading — prime-time speech last week in which he blamed his predecessor for economic problems and promised that a “Golden Age” was just around the corner.
Many forecasters do expect a rosier backdrop next year. But the problem for Mr. Trump is that few of the larger economic problems that pushed voters away from the incumbent party in 2024 have improved, and some have gotten worse.
Tariffs haven’t caused a spike in inflation, but they have pushed up prices for some consumer products. Homeownership remains out of reach for many Americans. Child care is still broadly unaffordable, electricity bills are rising and health care premiums are set to rise for millions of families when insurance subsidies expire at the end of the year.
“When individual Americans think about the economy, they are thinking about: ‘Can I afford the things I need and want? Do I have economic opportunities?’” said Heather Boushey, who served as an economic adviser to President Joseph R. Biden Jr.
When the answer to those questions is “no,” she said, it is hard to convince people that the economy is strong — a lesson she and her Biden administration colleagues learned the hard way.
“You can’t tell people what their reality is,” Ms. Boushey said.
An Uneven Picture
Despite Mr. Trump’s claim that he “inherited a mess,” the economy when he returned to office was strong by most measures. Unemployment was low. Wages were rising. Inflation, though higher than normal, had fallen significantly from its peak in 2022.
The frenetic early months of the Trump administration threatened to derail that progress. The president’s on-again, off-again tariff threats, combined with Elon Musk’s efforts to eliminate programs and cut the federal work force, led to steep drops in consumer confidence and wild swings in the stock market.
Then on April 2, Mr. Trump announced tariffs on nearly all U.S. trading partners. Markets plunged, and economists warned of a recession or “stagflation,” the dreaded combination of high inflation and weak growth last seen in the United States in the 1970s.
The worst predictions never came to pass, partly because Mr. Trump reversed course, rolling back some tariffs and delaying others. That gave companies an opportunity to build up inventories and re-engineer supply chains. Companies also proved more reluctant to pass price increases on to consumers than many economists initially expected, perhaps because they doubted that customers would be willing or able to stomach the extra cost.
The U.S. economy also turned out to have unexpected sources of strength that helped offset the drag from the trade war. A surge in construction of data centers for artificial intelligence models helped prop up business investment, while a rising stock market — also tied primarily to optimism around A.I. — encouraged consumer spending.
“If it weren’t for the A.I. spending boom, we would be in a different place,” said Michael Strain, an economist at the American Enterprise Institute, a right-leaning think tank.
But the benefits have not been evenly distributed. Wealthy households have reaped most of the stock market gains, even as the softening labor market has led to slower wage growth, particularly for the lowest earners. As a result, consumer spending has become bifurcated, with high-income households spending and lower-income households increasingly falling behind on financial obligations. Car repossessions and other signs of financial stress have picked up this year.
“Yes, there are people who are doing great, but I don’t think there’s this sense that the tide is really coming in and lifting all the boats,” said Michael Madowitz, an economist at the Roosevelt Institute, a liberal think tank.
For some groups, the cooling labor market has turned downright icy. Recent college graduates are having the hardest time finding jobs since the aftermath of the Great Recession more than a decade ago. The unemployment rate for Black workers jumped to 8.3 percent in November, up from 6.1 percent at the end of last year and double the rate for white workers.
“That’s a level that would be considered an economic crisis if they were happening to Americans overall,” said Jessica Fulton, a senior fellow at the Joint Center for Political and Economic Studies, a think tank focused on issues affecting Black Americans.
Cuts to the federal government have hit Black workers disproportionately, Ms. Fulton noted. But she warned that the problems affecting Black families today — a weakening labor market, cuts to federal safety net programs, rising electricity prices that are partly a result of the rapid growth of A.I. data centers — may soon be felt more widely.
“People are being squeezed from all sides,” Ms. Fulton said. “We’re seeing that from Black workers now, which I think could foreshadow the same thing for everyone else.”
Cautious Optimism
Despite such concerns, many forecasters expect growth to pick back up next year, and for the labor market to improve rather than deteriorate further.
They point to several potential sources of strength. The tax cuts that Congress passed this year should lead to larger refunds for many Americans, which should provide a lift to consumers early in the year. The law also included provisions to encourage companies to invest.
Lower interest rates — the result of a series of cuts the Federal Reserve made this fall — should also help businesses and consumers. Policymakers are weighing whether to deliver more reductions in the coming year.
But perhaps the biggest lift could come from reduced uncertainty after a uniquely tumultuous year in which businesses and investors contended with seismic changes related to tariffs, immigration restrictions and government regulation.
“2025 was hampered by all the policy-related uncertainty,” said Stephen Stanley, chief U.S. economist at Santander, a bank. “The policy landscape is going to allow businesses to re-engage, and when they do that, I think you’ll see a pickup in investment.”
Policymakers are similarly optimistic. John Williams, president of the Federal Reserve Bank of New York, said in an interview with CNBC on Friday that he was “feeling actually pretty good” about the economy.
“We got through 2025,” he said. “This has been an uncertain year. A lot has happened, and the economy has come through this.”
But that rosy outlook could be upended if the A.I. boom fades and takes the stock market along with it, or if the calmer year many hope for from Mr. Trump does not come to fruition, either because of new tariffs or other policy changes.
Even without a new shock to the system, there is a risk that the steady deterioration could continue. Veronica Clark, an economist at Citigroup, forecasts that sluggish monthly jobs growth and more muted wage gains will finally start to weigh on consumer spending next year. Higher unemployment will offset the benefits of larger tax refunds and other tailwinds, she predicts.
“If the labor market is really weakening, then those other things almost don’t matter,” Ms. Clark said.
Ben Casselman is the chief economics correspondent for The Times. He has reported on the economy for nearly 20 years.
The post The Economy Avoided a Recession in 2025, but Many Americans Are Reeling appeared first on New York Times.
