Solutions Economic and Market Watch

Welcome to the Economic & Market Watch podcast for the week of January 12, 2026. This is Antony Davies.

In this first episode of 2026, I'll take a look at what forecasters think about the year ahead. For the moment, forget about growth numbers, inflation paths, and recession chatter. Consider instead the disturbing fact that economists, policymakers and even the Fed itself have been flying blind for the past three months.

The numbers I'm about to discuss are among the first informed forecasts anyone has seen since September. The 2025 government shutdown disrupted federal data collection and analysis from October through mid November. During that period, the Bureau of Labor Statistics, the Bureau of Economic Analysis, the Census Bureau, the Congressional Budget Office, the Economic Research Service, the Office of Tax Analysis, the National Agricultural Statistics Service and the Bureau of Transportation Statistics either stopped or curtailed their activities. Thousands of people responsible for collecting, recording, cataloging, analyzing and reporting economic data for the world's largest economy went silent. Shutting these functions down was as easy as flipping a switch. Turning them back on, however, is far more complicated.

Economic data are assembled slowly. Missing numbers must be estimated, estimated numbers must be revised and millions of observations from thousands of sources must be collected, verified, organized and recorded.

Then comes the analysis. Thousands of economists sift through the data applying mathematical and statistical models to separate meaningful information from background noise.

Finally comes action, as policymakers, business leaders, and investors make decisions based on these analyses. Much of the data that should have been collected during the shutdown wasn't. Some can be estimated. Much will never be known.

Let us turn then our attention to the 2026 economy, which I describe as solidly meh. If the 2026 economy were a food, it would be a plain boiled potato, filling yet unappetizing.

The economy will grow. Yay! At a steady 2%. Meh. That's solidly not recession, but also, COVID aside, the third slowest growth since 2009.

The unemployment rate's thirty month upward march will halt. Yay! Though if it declines, it won't be by much. Meh.

Inflation will continue to slow. Yay! Though, we'll settle around one percentage point higher than the pre-COVID average. Meh.

Short term interest rates will fall giving us the first normalized yield curve since 2021. Yay! Though long-term rates will remain elevated. Meh.

At the state level, Moody's Analytics sees real median household income rising for all the states though at varying rates. Alaska, Ohio, Mississippi, and New Mexico can expect increases of 1.8% or more. Wyoming, Colorado, Nevada, Idaho, and North Carolina can expect 0.7% or less.

Back at the national level, labor markets are finally getting some good news. Unemployment is expected to stabilize and possibly decline slightly starting in the second half of 2026. If that happens, it would mark the first decline since 2022.

The data also reveal a compositional shift. From January 2025, unemployment among college educated workers rose by seven tenths of a percentage point, but unemployment among workers with only a high school education fell by three tenths of a point. And unemployment among workers with associate's degrees fell by more than one percentage point.

This pattern matches anecdotal evidence that employers are reconsidering the value of college degrees relative to skilled labor. On the Treasury front, the consensus has short-term rates declining throughout the year while long-term rates remain unchanged. This will result in the yield curve normalizing for the first time since 2021. Taken together, the post blackout data paint a picture of a sturdy economy, if not a spectacular one. In all, expect 2026's economy to be a plain boiled potato. We won't end the year hungry, but nor will it be a memorable meal.

This is Antony Davies for the Economic & Market Watch podcast. Thank you for listening.

For more details on the first forecasts of 2026, download the weekly Economic & Market Watch intelligence brief and dashboard and start the new year off right by sending us email at economicresearch@nrucfc.coop.