U.S. Economy: Slowing Growth, Resilient Fundamentals in Q1 2026
- Economic Growth: U.S. GDP growth slowed to 0.7% in Q4 2025, reflecting temporary headwinds including the government shutdown and weaker exports. While momentum appears soft, these pressures are cyclical rather than structural.
- Productivity Gains: Labor productivity remains a key strength, averaging ~2.0% annual growth from 2019–2025, above the prior cycle trend. Automation, AI adoption, and digital transformation continue to support efficiency gains.
- Labor Market: Job openings remain stable at ~6.95 million, layoffs are slightly down, and unemployment holds at 4–4.5%. However, hiring has slowed to its lowest level since April 2020, with reduced worker mobility signaling mild softness.
- Consumer Finances: Household balance sheets remain stable overall, though pockets of stress are rising. Student loan delinquencies have increased to 16.2% following the end of forbearance programs.
- Corporate Health: Corporate fundamentals remain strong, with S&P 500 gross margins at 70.3% and business loan delinquencies low at 1.3%. Balance sheets are healthy, supporting continued deal activity.
- Public Credit Markets: High-yield spreads remain stable at ~3.3%, with recent moves driven by sector-specific repricing. Credit quality continues to improve, with BB-rated bonds now over 50% of the index.
- Bank Lending: Loan-to-deposit ratios remain stable at 72%, with strong capital buffers (Tier 1 at 14.1%). Lending capacity is high, though sentiment remains cautious.
👉 Read our latest U.S. Credit Report for full insights and updates.