What else is new?

The economic story as we begin 2026 is one we’ve heard over and over since 2020: not as bad as predicted, not nearly as good as advertised.

Start with the good news. GDP growth has come in stronger than expected. Consumers are still spending. Businesses are still investing — carefully, yes, but they haven’t slammed on the brakes. There are signs of re-industrialization and re-shoring. The recession that was supposed to be inevitable never quite showed up. After years of inflation shocks, rate hikes, and geopolitical whiplash, the simple fact that the economy is still moving forward counts for something.

“5% Growth? Or Even Better?” Larry Kudlow gushed for Real Clear Politics. 

“Just to reprise my New Year’s message that a Trump economic boom could deliver 5 percent, 6 percent, or even 7 percent growth, there are numbers out today that are uniformly stronger than even I thought,” Mr. Kudlow wrote. “Economists take note: President Trump knows the economy better than you do. And what’s wrong with 5 percent or better growth?”

“The Atlanta Fed GDPNow for the fourth quarter, which you recall was the shutdown quarter, was revised up to 5.4 percent,” he added. “Meanwhile, the productivity of the economy, which is one of the most significant variables, has averaged 4.5 percent the last two quarters. That’s output per hour, for the non-farm economy. Perhaps more importantly, non-financial corporate productivity, last two quarters, is up 3.8 percent. So, productivity trending around 4 percent opens the door wide open for 5-percent plus economic growth. And once again, I want to remind everyone about the greatest story never told, that sinking oil prices, which is a positive oil shock, which means it’s like a big tax cut for consumer and business, which is to say Trump deflation is replacing Biden inflation.”

“And a whiff of deflation from oil after nearly 5 years of Covid-Biden inflation, is a very big positive for the economy,” he explained. 

But then there’s the jobs report — and that’s where the mood shifts.

“U.S. payrolls rose 50,000 in December, less than expected; unemployment rate falls to 4.4%,” reported Jeff Cox for CNBC this week.

“A more encompassing measure that includes discouraged workers and those holding part-time jobs for economic reasons dropped to 8.4%, down 0.3 percentage point from November,” reported Cox. “The household survey, which is used to calculate the unemployment figures, showed an increase of 232,000 while the labor force participation rate edged lower to 62.4%.”

“The report presented a muddy view of the labor market, with companies reporting a low level of hiring but households showing employment gains,” Mr. Cox went on.

Basically, hiring is cooling. Job gains are thinner, more uneven, and clustered in fewer industries. Wage growth is slowing at the exact moment when higher prices have stopped being a headline and become a permanent feature of daily life. Rent, insurance, groceries — these aren’t spikes anymore.

This is the disconnect defining the moment. The macro numbers look good enough to soothe markets and policymakers. The micro reality still feels tighter, more anxious, and less forgiving for ordinary households and average pocketbooks.

Going into 2026, the economy isn’t in crisis. But it isn’t healthy either. It’s in a holding pattern. And whether this turns into real, durable growth — or just a long, grinding plateau — will depend on something simple: whether economic gains start showing up in paychecks.

As in the days of the previous Trump administration, Americans may be about to see a major tax rebate as well. Most families are likely to see new tax savings.

Will it be enough to help the GOP in time for the midterms?

(Contributing writer, Brooke Bell)