Economists Raise U.S. Economic Outlook Under Trump
Recent assessments from economists have notably improved regarding the U.S. economy under President Donald Trump. This marks a significant turnaround from the previous pessimism that colored predictions through much of 2025.
A January 2026 survey of 82 economic forecasters indicates that while worries about a recession have declined dramatically, optimism for growth—particularly in the short term—has surged. Predictions show a stronger economic performance as President Trump approaches his second year in office compared to just a few months prior.
The likelihood of a recession occurring within the next year is now pegged at 27%, a decline from a high of 45% in April 2025, which was triggered by concerns over tariffs introduced by the Trump administration. This projection aligns closely with the average probabilities witnessed in the post-pandemic era.
Soaring Growth Expectations
There’s a marked shift in projections for short-term growth. Economists now anticipate a GDP increase at an annualized rate of 2.23% for the fourth quarter of 2025, nearly doubling the earlier forecast of 1.14% from October 2025.
For the first quarter of 2026, the growth forecast has also risen to 2.13%, up from 1.47% previously expected. For the entire year of 2025, projections now estimate a growth rate of 2.35%, compared to 1.92% anticipated a year earlier.
These upgrades imply that economists see the economy gaining stronger momentum going into 2026, potentially allowing Trump to push forward with his policy agenda without risking an economic downturn.
Improving Labor Market Predictions
Job creation expectations have also seen a positive shift. Economists project an average monthly payroll increase of 64,535 over the next year, a 31% rise from the previous projection of 49,367 for October 2025.
Unemployment is expected to remain low, with forecasts placing it at 4.52% by June 2026, which is consistent with the past predictions of 4.50% and much lower than the 4.68% forecasted amid April’s panic.
This more favorable employment outlook contrasts sharply with early 2025 concerns that Trump’s policies could lead to job losses and economic decline.
Revisions in Interest Rate Expectations
The optimistic growth forecast has led economists to adjust their expectations regarding Federal Reserve policies. Projections suggest the central bank will be less aggressive with rate cuts, forecasting a federal funds rate of 3.08% by the end of 2026, revised from an earlier expectation of 3.34% in April 2025.
As fears of recession decrease, long-term interest rates are on the rise. Currently, the 10-year Treasury yield is expected to hit 4.15% by June 2026, an increase from an earlier expectation of 3.70% in October 2024, reflecting a waning demand for safe investments.
Moderate Inflation Outlook
Even with positive growth expectations, inflation projections remain relatively modest. Economists foresee consumer price inflation to rise by 2.80% through June 2026, a decrease from 3.03% in October. This suggests that stronger growth can occur without triggering significant price increases.
This improved outlook comes as Trump pursues an assertive policy agenda that includes raising tariffs, cutting taxes, and deregulation. Initially, some economists were concerned these policies might lead to inflation or hold back economic growth, but the survey results indicate those fears have diminished as the economy has shown resilience.
From Pessimism to Optimism
The transformation in economists’ attitudes has been quite striking. In spring 2025, nearly half believed a recession was imminent within a year. Job creation forecasts were lukewarm, and there was a belief the Federal Reserve would be forced to intervene.
Fast forward to January 2026, and that negativity has largely vanished. Growth forecasts have noticeably improved, particularly for the near term, with job market expectations looking up. As the “recession premium” that had been driving down long-term interest rates diminishes, those rates have started to climb.
This shift suggests that economists now foresee President Trump’s second term as being characterized by solid, sustained economic growth rather than the feared contraction from just a year ago.
Interestingly, the timing of this improvement has accelerated since Trump took office, hinting that forecasters view his administration’s economic strategies in a more favorable light than previously thought.
