The United States economy was one of the most debated and closely monitored issues in 2025 – between tariffs, the uncertain job market, stock market volatility and even egg prices. André Kurmann, PhD, professor of Economics in Drexel University’s LeBow College of Business, spoke with The Drexel News Blog about what people can expect from the U.S. economy this year and what economic issues he’s keeping an eye on.
What is the outlook for the US economy in 2026?
It’s always risky to make any outlook. But, since you asked me, I think the most likely scenario is going to be more of the same. There will be pretty decent growth in Gross Domestic Product (GDP). Unemployment will stay around 4.5%. And inflation will stay around 2.5% to 3%. That’s my best guess. Obviously, there’s lots of different scenarios that could happen.
For instance, a lot of people talk about artificial intelligence and that it can raise economic growth. While that can happen, I think that it’s much more of a slow burn that’s going to occur over several years. Even then, I don’t think it’s going to be 6, 7, 8% annual growth. That’s very difficult to achieve in an economy such as the U.S. But there might be a bit of upside if people become more productive and firms become more productive, and it leads to a little bit of additional growth.
The reason I think the economy might perform well is because there were some pretty big negative shocks last year, a lot of tariff uncertainty, things changing with the new administration, that have been resolved, which is good for growth.
We should also get a boost from lower taxes on businesses and individual incomes, which is usually a good thing for growth in the short run. These two effects are positive for the economy going forward.
On the other hand, there are downsides, from much lower immigration, which makes it harder for firms to find labor and lowers their production. That’s going to be a drag. But overall, I think the economy is looking pretty interesting.
What are some economic issues you wish the public understood better?
I think a really big issue that’s already happening now, and will become even bigger, is the government debt. How much the federal government is indebted and how much interest we pay on this reduces our capacity going forward to respond to issues that require money.
To give you some numbers – the government debt right now is at about 100% of GDP, meaning what we produce in a year. It hasn’t been as large since the end of World War II.
The debt is projected to go up a lot, and I don’t see much that is going to change this. A lot of this increase is not because we have too many government employees, or something like that. That’s only a small part of what the government is spending money on. The debt increase is because of what we call “mandatory spending,” meaning for Medicare, Medicaid, and Social Security. People are living longer. They consume more health care and health care becomes more expensive. And these things are very, very hard to change. No one has any good solution of making health care cheaper, so that’s going to increase.
Now, of course, you could say we can always have more debt. As long as the rest of the world buys our debt, then we have no problem. But already now, we spend about $1 trillion per year just on interest. That’s money that we can’t spend on things like better schools, roads, military, etc. And going forward, this is just going to become worse. And people don’t think about this because it’s kind of in the abstract. It doesn’t really change our day-to-day life. But it has an influence on the capacity of a government to respond to crisis, to make big changes, or to come up with big new projects that fundamentally change or improve the functioning of a society. And I think that’s a really big issue, and I think going forward this will be something that people will feel in their day-to-day life.
What is your best financial advice for 2026?
My main advice is don’t use any of these trading apps that make you essentially gamble with your financial future. These financial apps are as much betting as sports betting. They try to use psychological incentives that can make you make bad decisions. It’s like going to the casino.
My financial advice is you should invest early and broadly, meaning diversify your financial holdings and not really think too much about it. Every month from your paycheck put some money in a 401K or an IRA and keep doing it, and do it broadly. I’m an economist, so I understand maybe more than the average person about financial markets, but even I’m not an expert in stock picking and what’s going on in financial markets. I’m not doing this on a daily basis, so I just invest broadly in a diversified portfolio.
I know it sounds very boring. But, as I said before, it’s hard to predict the economy, and it’s even harder, almost impossible, to predict stock markets.
Is there anything else you think is important to know about the U.S. economy, especially at the start of the new year?
It’s not really about the new year. I’m just really concerned about how certain norms and institutions in the U.S. have deteriorated. People with a lot of wealth and influence have a leg up or are able to access preferential treatment in the U.S. government. This is really not good for equality of opportunity and economic growth in the long run. We want the sort of meritocratic principle where the best succeed.
It’s not just on the individual level, but firms too. Small firms these days, even if they have a great idea, they have a really hard time to compete with incumbents because these incumbents have all kinds of advantages.
Reporters interested in speaking with Kurmann should contact Annie Korp, associate director, News & Media Relations, at 215-571-4244 or amk522@drexel.edu.
