Forecasters now see lower recession risk, faster growth, and a steadier labor market as confidence in the U.S. economy rebounds entering President Trump’s second year.
By yourNEWS Media Newsroom
Economists have markedly upgraded their outlook for the U.S. economy under President Donald Trump, according to the latest Wall Street Journal forecasting survey, signaling a decisive shift away from the recession fears that dominated much of 2025.
The January 2026 survey of 82 economists shows a broad improvement across growth, employment, and financial conditions, with forecasters now expecting substantially stronger momentum heading into Trump’s second year in office than they projected just months earlier.
The probability of a recession occurring within the next 12 months has fallen to 27 percent, down sharply from a peak of 45 percent in April 2025, when economists reacted negatively to the Trump administration’s Liberation Day tariff policy. The current estimate is roughly in line with the post-pandemic average and reflects a significant easing of earlier concerns.
Expectations for economic growth have seen the most pronounced reversal. Economists now project fourth-quarter 2025 gross domestic product growth of 2.23 percent on an annualized basis, nearly double the 1.14 percent forecast in October 2025. Forecasts for the first quarter of 2026 have also risen, climbing to 2.13 percent from 1.47 percent three months earlier. On a fourth-quarter-over-fourth-quarter basis, full-year 2025 growth is now expected to reach 2.35 percent, up from 1.92 percent in the prior survey.
Forecasters say the upgrades indicate the economy is carrying stronger underlying momentum into 2026 than previously believed, reducing the likelihood that new policy initiatives will trigger a near-term downturn.
Labor market expectations have improved alongside growth forecasts. Economists now anticipate average monthly payroll gains of 64,535 over the next four quarters, a 31 percent increase from the 49,367 jobs per month predicted in October 2025. The unemployment rate is expected to remain historically low, with a forecast of 4.52 percent by June 2026, essentially unchanged from recent estimates and below the 4.68 percent projected during the height of recession fears last spring.
The revised outlook marks a departure from earlier warnings that Trump’s economic agenda could weigh on employment or destabilize hiring trends.
Stronger growth expectations have also reshaped views on monetary policy. Economists now anticipate less aggressive interest-rate cuts from the Federal Reserve, forecasting the federal funds rate at 3.08 percent by the end of 2026, compared with 3.34 percent expected in April 2025.
Long-term rates have moved higher as well. The 10-year Treasury yield is now projected to reach 4.15 percent by June 2026, up from the 3.70 percent forecast in October 2024. Economists attributed the increase to fading demand for safe-haven assets as recession risks recede.
Despite the improved growth outlook, inflation expectations remain relatively restrained. Forecasters now expect consumer price inflation to stand at 2.80 percent by June 2026, down from 3.03 percent in October, suggesting confidence that stronger economic activity will not translate into a renewed surge in prices.
The more optimistic projections come as Trump advances an agenda centered on tariffs, tax reductions, and regulatory rollbacks. While many economists initially warned those policies could spark inflation or slow growth, the latest survey indicates those concerns have diminished as economic data has held up better than anticipated.
The contrast with sentiment earlier in 2025 is stark. At that time, nearly half of economists surveyed expected a recession within a year, job growth forecasts were subdued, and expectations for Federal Reserve easing were elevated amid fears of weakening demand.
By January 2026, that pessimism has largely dissipated. Near-term growth forecasts have strengthened, labor market expectations have firmed, and long-term interest rates have risen as recession-related caution has ebbed.
The timing of the shift — accelerating after Trump’s inauguration and as his second-term policy agenda has taken shape — suggests economists increasingly view the administration’s approach as compatible with continued economic expansion rather than the contraction many once feared.
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