Top Questions for the Economy in 2026

Our forecast for 2026 Q4/Q4 GDP growth is 2.5%, above consensus of 2.1%

2. Will business investment growth beat consensus expectations? 

Yes. Goldman Sachs Research expects business investment to be the strongest component of GDP in 2026, growing just over 5% on both a Q4/Q4 and full-year basis, double the consensus forecast. Business investment should benefit from spending on artificial intelligence, easier financial conditions, more generous tax incentives, and reduced trade policy uncertainty.

3. Will single-family housing starts rebound above 1 million?

No. Residential investment was the weakest component of GDP in 2025 and is likely to remain the weakest in 2026. On the multi-family side, the reason for the low level of housing starts and permits is clear—a construction boom earlier this cycle driven by low interest rates and rapidly rising rents has rebalanced the rental market, which has in turn stalled rent growth and reduced the incentive to build.

On the single-family side, the US still has a significant housing shortage, and policymakers are eager to help make owner-occupied housing more affordable, so why not expect a more significant rebound there? Goldman Sachs Research sees several reasons, including:

• A pickup in homebuilding over the last five years raised the vacancy rate a bit, helping to slow price growth and leading builders to pull back on new construction in parts of the country where new supply has increased the most.
• Affordability has become a serious constraint on demand for new single-family housing and is likely to remain challenging this year, even with recent policy actions aimed at helping.
• Familiar constraints remain on the supply side, especially land use regulations and a persistent shortage of construction labor.

4. Will net job losses in the most AI-exposed industries increase meaningfully?

Yes. Goldman Sachs Research sees the labor market as the most uncertain piece of the 2026 economic outlook, and the most difficult question about the labor market is: To what degree will companies replace workers with artificial intelligence or at least hold off on hiring?

Artificial intelligence has played only a small role in the slowdown in job growth so far, accounting for net job losses of about 5,000-10,000 in the subindustries where the technology is most ready to deploy.

But Goldman Sachs Research thinks that AI has the potential to eventually automate a large share of job tasks and displace 6%-7% of current jobs. AI adoption increased last year, especially in areas where work tasks are more exposed to AI automation, and many companies appear eager to implement AI to reduce labor costs.

As a result, Goldman Sachs Research expects to see a more meaningful decline in employment in these industries of at least 20,000 per month in 2026, though this should be partly offset by AI-related job gains in other areas.

5. Will wage pressures remain compatible with inflation at 2% or lower? 

Yes. One of the key reasons Goldman Sachs Research has been optimistic that inflation would return to target over the last few years is that the labor market has gradually rebalanced from the tightest in history in 2022 to noticeably softer than its pre-pandemic state today.

This rebalancing has dampened wage pressures. Goldman Sachs Research’s wage growth tracker is down from a peak of nearly 6% to 3.5%, and forward-looking survey expectations of wage growth have been running at or below that rate in recent months. 

6. Will core goods inflation fall at least 1 percentage point?

Yes. Core PCE inflation likely ended 2025 in roughly the same place as it began, but this stability was the product of two offsetting forces: a continued decline in the underlying inflation trend visible in core services categories, coupled with a bump from tariff effects, mainly in goods categories. The tariff bump has raised core goods inflation to a pace roughly 2 percentage points above its pre-pandemic rate.

Goldman Sachs Research thinks that most of the tariff impact is now behind us for two reasons. First, our analysts expect the administration to avoid any major tariff increases ahead of the midterm elections. Second, most of the impact from tariffs imposed in 2025 on consumer prices has likely already been felt.

Goldman Sachs Research also notes that most of the passthrough from tariff costs to consumer prices took place in the first five months after implementation, with only modest further passthrough beyond that point. Their inflation forecasts assume that passthrough will ultimately peak a bit higher at 70%, but this would still mean that the tariff impact on year-over-year inflation should fall by the end of this year.

7. Will shelter inflation fall below 2.75%?

Yes. The “catch-up effect” that kept shelter inflation elevated over the last few years is now behind us, and alternative data leading indicators of new lease rent growth are now running at just 0.5% year over year. Consequently, Goldman Sachs Research expects shelter inflation to decline further to 2.3% by the end of this year, a pace that on average would likely have been consistent with below 2% overall core inflation in the past.

Goldman Sachs Research’s forecast would be a large decline from the current year-over-year pace, which officially stands at 3.25%, but it is close to 3.5% after adjusting for last October’s missing month of shelter inflation that will be made up for in April.

8. Will the Fed cut again this year?

Yes. Goldman Sachs Research expects the labor market to stabilize this year, which would make further rate cuts less urgent. But the great majority of FOMC participants still think that some additional cuts will be appropriate eventually.

The Fed leadership will likely want any less urgent normalization cuts to be backed by a stronger consensus than the last cut in December was, and it will likely take time for the inflation data to improve enough to create that consensus. As a result, Goldman Sachs Research has penciled in the next 25-basis-point rate cut in June, followed by a final cut in September to 3.00%-3.25%. 

9. Will the effective tariff rate rise meaningfully further?

No. With the midterm elections less than a year away, polls suggest that the cost of living continues to be the top issue of concern to voters. Goldman Sachs Research thinks this will deter the White House from raising tariff rates further this year.

In fact, Goldman Sachs Research thinks the effective tariff rate is likely to fall slightly for two reasons. First, new deals or exemptions could modestly dilute some current tariffs. Second, the Supreme Court looks more likely than not to rule that some of the tariffs the administration has imposed so far are illegal.