The ‘Big Money Show’ panel breaks down falling gas prices, record stock gains and why strong economic data has critics scrambling.
The recovery in the US economy in 2025 is expected to continue when the calendar turns to 2026, with growth expected to increase as tax cuts and favorable fiscal conditions become stronger and more urgent in costs and inflation, according to Goldman Sachs.
Goldman Sachs Economists led by Jan Hatzius wrote in their 2026 outlook that this year’s economic growth is underpinned by a larger-than-expected cost impact, which pushed the effective tax rate on US imports a few percent higher than expected.
“While the strengthening headwinds in the US economy eventually pushed up prices, as we had predicted, it did not look permanent and the estimated growth rate of 2.1% was 0.4pp below our forecast,” they wrote. “Our interpretation of the deficit is that the effective tax rate rose by 11pp, more than the 4pp we assumed in our baseline forecast although less than the 14pp we assumed in our worst case scenario.”
Goldman economists see The US economy is growing at a rapid pace in 2026 with a strong real GDP forecast of 2.6%, above the Bloomberg consensus of 2%. That continues the post-pandemic trend of optimism surrounding the US economy relative to consensus forecasts.
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Goldman Sachs’ 2026 outlook shows accelerated US GDP growth, although the labor market is expected to remain stagnant. (Michael Nagle/Bloomberg via Getty Images)
Goldman projects that US economic growth will accelerate through 2026 due to three factors. One of those is the reduced tax rate, as the report notes that the 11pp increase in the average effective tax rate has reduced it by 0.6 US GDP in the second half of 2025, but if prices “remain unchanged from here, this impact is likely to end in 2026.”
I tax cuts and the reforms included in the One Big Beautiful Bill Act (OBBBA) are the second forces expected to drive the fastest economic growth in 2026.
Goldman Sachs economists estimate that consumers will receive an additional $100 billion tax refund in the first half of next year, which is equivalent to about 0.4% of annual revenue. Additionally, they noted that OBBBA’s corporate tax provisions allowing for full plant and equipment costs “have already begun to improve forward-looking capex indicators.”
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The third factor contributing to the forecast of rapid economic growth in 2026 is favorable financial conditions due to the reduction of interest rates by the Federal Reserve, as well as deregulation and financial development. artificial intelligence (AI).
While Goldman Sachs’ outlook for next year sees faster economic growth, it doesn’t see that translating into significant improvements in the labor market, which has cooled through 2025 amid economic uncertainty caused by inflation, immigration reforms and federal government cutbacks.
The unemployment rate rose from 4.1% in June to 4.6% in November and some of that may have been caused by the government shutdown, the analysis noted that the labor market started to cool in the middle of the year before the shutdown and, therefore, the trend cannot be ignored.
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Goldman’s opinion said it still sees the biggest productivity gains from AI as a few years off and that while it sees the US unemployment rate stabilizing at around 4.5% in 2026, economists added that “we don’t see a meaningful decline anytime soon.”
“In fact, we can easily imagine that the unemployment rate will increase in the near term if the applications of AI that enable productivity arrive faster than expected or the management teams of companies increase their focus on reducing labor costs by 2026,” Goldman economists wrote.
The outlook for next year also sees progress inflation after it has reached 3% during the 2025 period. Goldman economists noted that “the main reason why core PCE inflation has remained at a higher 2.8% in 2025 is the tariff pass-through,” and that without the tariffs, inflation would have fallen to around 2.3%.
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Goldman economists said that when i tariff pass-through may rise modestly from 0.5pp now to 0.8pp in mid-2026 – assuming prices stay around their current levels – the impact of inflation will ease in the second half of next year, allowing core PCE inflation to fall to above 2% by the end of 2026.
