Outlook for the US Economy – 1st Quarter 2026
By M. Ray Perryman, PhD, CEO and President
The Perryman Group
Employment – The United States economy gained 235,000 net new jobs over the 12-month period ending March 2026 for an annual employment growth rate of 0.15%. Over the past year, the educational services, health care, and social assistance industries featured both the largest gains in workers (651,000) and the fastest growth in percentage terms (2.39%). Some industries did shed jobs, however, with the largest losses in the government sector, down -246,000 workers from March 2025 to March 2026. The nation’s seasonally adjusted unemployment rate in March was 4.26%, up 0.088 percentage points from a year prior.
Even with the uncertainty from the Middle East conflict and other issues, the labor market has remained fairly resilient with some 178,000 jobs added in March. However, performance has been uneven, and if geopolitical and policy uncertainty ramps up, it will be difficult to generate momentum.
Inflation – The conflict in the Middle East is having multi-faceted effects on the economy. In addition to increasing uncertainty, the conflict is affecting oil and gas markets. With little traffic through the Strait of Hormuz over past weeks, oil prices have risen significantly. About 20% of the world’s oil navigates the Strait, and supplies have dropped and prices have jumped. Even so, the current level is not unheard of (prices were significantly higher for a significant portion of 2022, for example), but effects are nonetheless notable. Higher energy prices work their way through the economy and tend to increase inflationary pressure.
Inflation remains a notable challenge, affecting Federal Reserve decisions about potential interest rate cuts. Recent data indicated an uptick, though it was largely due to higher gas prices. Housing costs remain relatively high, even with signs of a shift toward a buyer’s market in some areas. Once traffic through the Strait of Hormuz gets back to a more normal pattern, it is likely that oil prices will fall. However, some elements of the inflation environment may persist.
Economy – In spite of downside risks and uncertainty, The Perryman Group’s most recent projections indicate real gross product is expected to expand by +2.27% this year on a year-over-year basis, with +2.44% growth in 2027. Job gains are projected to be over 1.444 million through 2026, with an increase of more than 1.972 million jobs the following year. Both years reflect projections below long-term trends.
Additional information is provided in the following tables:
About Dr. M. Ray Perryman and the Perryman Group
Dr. M. Ray Perryman is President and Chief Executive Officer of The Perryman Group (www.perrymangroup.com). He also serves as Institute Distinguished Professor of Economic Theory and Method at the International Institute for Advanced Studies.