Ahead of State of the Union, what is the state of the US economy?
Ahead of State of the Union, what is the state of the US economy?
Andrea Riquier, USA TODAYMon, February 23, 2026 at 4:26 PM UTC
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As President Donald Trump delivers his State of the Union address to Congress on Feb. 24, he’ll likely point to a strong economy as a key indicator of how America is faring.
Indeed, inflation has fallen, even more than most analysts expected. Job growth accelerated in January, also topping economists’ forecasts. And, perhaps more importantly, the economy is about to get an additional boost this spring, as consumers receive bigger tax refunds than in the past thanks to the signature tax and spending legislation passed last year.
But that picture of the economy is at odds with another one, and opposition Democrats may choose to highlight it instead.
Even if inflation has cooled, it’s left prices at levels that make necessities such as groceries unaffordable to many Americans. Growth has been concentrated in a few narrow segments of the economy: health care and social assistance made up essentially all the jobs gained in January, and AI equipment spending is one of the biggest drivers of GDP. In January, meanwhile, a measure of consumer confidence slid to its lowest level since 2014 – worse than even during the depths of the COVID-19 pandemic.
All of that adds up to an economy that may seem fine, if not impressive – but which ultimately isn’t working well for many people. Even as policy flails about wildly, from on-again, off-again tariffs to Supreme Court reversals, from tax cuts to a Federal Reserve being pushed to cut even as inflation remains a concern, the ordinary Americans whose economic lives are in the balance may feel they're being left out of the discussion.
A Liberty Steel worker loads a pallet with newly rolled barbed-wire Tuesday, Sept. 23, 2025 at the factory in Bartonville.Is the economy growing?
“There is growth, but it’s been narrow growth,” said Don Rissmiller, partner and chief economist for Strategas.
“I don’t think it’s lost on policymakers that AI, nursing homes and Uber do not make a terribly robust economy,” Rissmiller told USA TODAY. “Going forward, I think we have to look for the policies that have been put in place to broaden the growth.”
Rissmiller called economic growth in 2025, the first year of Trump’s second term, “adequate,” and feels relatively optimistic about the forecast, as some of the policy shocks from last year recede and tax cuts stimulate growth.
Echoing some of those views, Goldman Sachs analysts wrote in a Feb. 16 note, “The January employment report offered more evidence that the labor market is taking early steps toward the stabilization that we and the (Fed) expect this year. But other recent labor market data have been weaker, and the case for stabilization is still preliminary.”
“We continue to see the risks to our labor market forecast as tilted toward a worse outcome and see this as the key risk for 2026," the Goldman analysts concluded.
Neither they nor Rissmiller expect a big impact from the Feb. 20 Supreme Court ruling reversing some of Trump's tariffs. Plus, Trump has already announced a new global 15 percent tariff.
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"The policy changes were in line with our expectations, and our estimates of the effects of tariffs on inflation and growth are consequently little changed," Goldman's team wrote shortly after the announcement.
'K'-shaped economy
Other observers are even less optimistic. Diane Swonk, chief economist for KPMG, has written frequently in recent months about the widening gap between haves and have-nots in the American economy, and remains convinced that inequality is “more corrosive than conducive” to growth.
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The AI revolution, which is generating most of the growth in the economy, isn’t generating many jobs, Swonk pointed out. And while higher-end consumers have been able to hold up spending for the entire economy, that may not be sustainable, she said.
“Historically, we’ve seen that extreme periods of inequality do not lead to good economic or social outcomes,” she said.
For Swonk, consumer confidence readings aren’t just a measure of whether people like the economy or not. They’re a sign that people have lost trust in the government.
“There is a sense of betrayal,” she said. “Certainly when I talk to people, how they’re trying to make ends meet each day, it’s very hard. That’s part of why we’re seeing so much vitriol out there.”
Other economists take a more pragmatic view. The inflation shocks of the past few years have pushed prices so much higher that Americans look at things that have nearly doubled in price over a few years and think it’s “ridiculous,” Rissmiller said.
It can take a long time for those prices to feel “right,” and the economy to stop feeling “off,” he said, but at the end of the day, most consumers continue to buy the sandwich, which keeps the economy humming.
“For every shock we’ve had, we’ve had some offsets,” he said.
This article originally appeared on USA TODAY: Ahead of State of the Union, how healthy is US economy?
Source: “AOL Money”
