The economic word(s) of the year for 2026

We've been taking stock of 2025 as we look ahead at what might be in store for the economy in the year to come. The biggest economic story of the year was, of course, tariffs. President Donald Trump raised them to their highest rate in nearly a century. Consequently, the word we heard from economists most often was probably "uncertainty."

That said, we wanted to see which economist was brave enough to look uncertainty in the eye and make some predictions for 2026. So “Marketplace Morning Report” host Nova Safo spoke with Bank of America’s Stephen Juneau about what to expect in the coming year. The following is an edited transcript of their conversation.

Nova Safo: When it comes to the economy, what do you expect will be the most spoken word that you will utter in 2026?

Stephen Juneau: Continued outperformance. Maybe that's two words, obviously.

Safo: OK, go on. Explain yourself.

Juneau: Well, I think when we look to next year, there's good reason to expect that we can continue to see the U.S. economy just outperform its peers, continue to grow kind of above trend. There's a lot of tailwinds for next year. You have an expansionary fiscal bill. You have, hopefully, less tariff uncertainty, less uncertainty relative to this year. You have an easing Fed, so lower rates should help on the margin. And then you have the AI-related CapEx that should continue next year, that we saw was obviously a big reason for kind of the resiliency this year, in the face of all this uncertainty.

Safo: Where do you see the inflation headed and where do you see the job market, the labor market, headed in the next six to 12 months?

Juneau: So inflation, I think, is going to continue to be a problem for the Fed, you know, maybe coming down a little bit as the tariff-related inflation subsides in the second half of the year. But largely speaking, you're still going to have inflation above targets.

And then the labor market, I think, is a little bit more interesting. We've obviously seen job growth slow this year. Some of that is due to the fact that we had this uncertainty shock. Obviously, when businesses are faced with uncertainty, they pull back on hiring plans, pull back on investment plans. But another reason for the slowdown in job growth is, of course, labor supply. We've had less immigration this year, that leads to a negative labor supply shock. That pulls down job growth as well. Looking to next year, I think the thing that will change for the labor market is that you'll have less uncertainty. Businesses are not going to face the same volatile policy environment that we face this year, and they'll be able to kind of broaden out their hiring.

Safo: One thing that is kind of an uncertainty overhang still is this impending decision from the Supreme Court about the legality of the bulk of President Trump's tariffs. What happens if the Supreme Court reverses and strikes down the tariffs?

Juneau: What we think will happen is that the administration will pivot to other authorities. They're going to be able to prevent a very steep decline in the effective tariff rate. So, tariff rates won't go down as much as they would if IEEPA is just gone completely. There are other ways that you can keep tariff rates elevated, and you'll also see refunds go out to businesses who paid these tariffs. So that's a bit of stimulus too. Unfortunately, what that means is, if you got even more growth above potential, what that could mean is that inflation is actually going to be even more stubborn.