At the start of 2026, Vice Chair Jefferson strikes a cautiously optimistic tone on the U.S. economy, emphasizing stabilization in the labor market, gradual progress on inflation, and a monetary policy stance that is now closer to neutral. 1. Economic Outlook: Growth Slowing but Still Solid Growth remains resilient : GDP grew at a strong 4.3% annualized rate in Q3 2025, driven by consumer spending and exports. Near-term growth is expected to moderate to around 2% , partly due to the temporary effects of the federal government shutdown. Labor market is cooling, not collapsing : Job growth has slowed, unemployment edged up to 4.4% , and hiring has softened—but layoffs remain low. Jefferson expects unemployment to remain broadly stable in 2026. Labor supply constraints matter : Lower immigration and participation have reduced labor force growth, contributing to slower job creation. 2. Inflation: Progress, but Uneven Inflation has fallen significantly from its 2022 peak , with CPI inflatio...