A sneak peek at the 2026 economy

Daniel Island resident and national economic guru Steve Slifer gave his annual report card on the state and stability of the economy at the Daniel Island Club last month and ended his hour-long presentation with three simple words: No easy answers.

HOW WE FEELING?

Slifer, a former senior economist at the Federal Reserve, pinpointed the biggest worry for consumers heading into 2026: inflation.

"When you ask us how we feel, the answer is, 'We feel terrible,'" he said.

Slifer said Americans' fears about a continued spike in food prices and services are roughly at the same bottomed-out levels of the Great Recession of 2009.

Ironically, Slifer said consumers in 2025 were still intentionally spending more.

"After years of doing this, I think I've stumbled on the answer."

Slifer said an increase in home prices and a jump in the stock market increased consumers' net worth to a record high, allowing them to pull out savings and home equity to spend more.

"It seems to me that if you own a house, you own stocks, you're fine. You're probably annoyed by inflation," he said. "But now take the folks at the other end of the spectrum, lower income… they're really hurting and suffering."

HOME AFFORDABILITY

Home affordability has been a hurdle for would-be homebuyers, as increased home prices, mortgage rates, and a shortage of homes have "whacked" the market.

But Slifer said a recent trend shows home prices have begun to slowly decline, and with more home availability expected in 2026, he believes the ability to buy a home will increase and mortgage rates could drop to 5.6% by the end of the year.

"If we keep cranking out jobs, wages keep rising, (then) income is going to rise. You can better afford a house, right? At the same time, if inflation sort of slows down a little bit, that is going to bring mortgage rates down with it."

JOBS GROWTH

Slifer said jobs growth has slowed "dramatically" –170,000 last month to 60,000 now. Coupled with an unemployment rate of 4.4%, he said the 2026 job outlook on paper looks weak.

But Slifer believes the numbers are skewed, noting the foreign-born labor force "dropped by 1.2 million" since last January, which "works out to about 150,000 a month."

"If we hadn't made that change in immigration policy, we'd be looking at employment growth that's around

200,000 a month," he said. "And guess what? We probably wouldn't be having this discussion about exactly how weak the labor market is."

ARTIFICIAL INTELLIGENCE

Near the end of the presentation, Slifer perked up the audience.

"If you've been sleeping out there already, this is the time to wake up. This is the only interesting part of the whole thing," he joked.

Slifer predicted the use of artificial intelligence could boost the potential gross domestic product from 2% over the last 10 years to 3% over the next five years.

"We introduced the internet (and it) changed everything, right? So, I'm going to suggest, ‘Why can't AI do the same thing,’" he said. "If we can do that, the economy grows more swiftly, we earn more income, our companies are more profitable, the stock market goes up, it helps to keep inflation in check, and lots of good things happen."