The U.S. economy entered 2026 from a position of relative strength, continuing to outperform most advanced economies in 2025, a theme that is expected to persist in the coming year, according to a new AM Best report.
According to the Best’s Special Report, “U.S. Economy Grows Despite Emerging Headwinds,” International Monetary Fund projections indicate that the country’s real gross domestic product growth will rise slightly to 2.4% in 2026, compared with 2.1% last year. By comparison, growth across advanced economies as a group is expected to improve only marginally, from 1.7% in 2025 to 1.8% in 2026, underscoring the United States’ comparatively stronger growth outlook and fundamentals.
“Growth dynamics in 2025 were uneven, in part impacted by trade tensions earlier in the year and the government shutdown towards the end of the year,” said Ann Modica, director, AM Best. “Additional headwinds included the tightening of trade conditions, elevated levels of fiscal and policy uncertainty, and slower population and labor force growth.”
Despite these headwinds, the near-term risk of a recession in the United States remains limited. Personal consumption remains the primary engine of U.S. economic activity, accounting for nearly 70% of GDP. In recent years, household spending has been supported by a combination of unprecedented fiscal stimulus, moderating inflation, positive real wage growth, elevated household net worth linked to equity and housing markets, and still-solid labor market conditions.
According to the report, the U.S. labor market softened further over the course of 2025, continuing a gradual rebalancing from the tight conditions that prevailed in the post-pandemic period. Employment growth slowed markedly, with the average monthly nonfarm payroll gains moderating from approximately 380,000 in 2022 to just 49,000 in 2025, reflecting weaker labor demand, heightened employer caution, and a broad-based cooling in hiring activity.
“While this deceleration is consistent with a maturing economic expansion and easing labor market tightness, it also points to a reduced capacity for continued employment gains to support income growth and consumer spending going forward,” Modica said.
To access the full copy of this report, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=362473.
AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.
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