Monthly Economic Outlook
Economic forecast: June 2026 trends and analysis
Macroeconomic insights and outlook from the U.S. Bank Economics Research Group to help guide your business strategy
June 2026
Economic outlook at a glance
The heat is on!
Our June 2026 U.S. economic outlook points to an expansion that remains intact but increasingly uneven beneath the surface. Growth continues at a moderate pace, supported by steady demand and a labor market characterized by ‘defensive stability,’ but underlying momentum is softening as household purchasing power wanes and buffers thin. While activity has yet to materially weaken, we are concerned that consumer spending strength – now more closely tied to wealth as real income shrinks – suggests rising fragility and a narrower margin for error.
At the same time, inflation is proving more volatile and less cooperative than earlier in the year, with tariff- and energy-driven pressures interrupting the disinflation path and progress across core components remaining gradual and uneven. Wholesale prices are climbing higher, increasing expectations of a pass through to core consumer prices. This combination – resilient activity, persistent inflation and elevated uncertainty – will keep the Federal Reserve firmly on hold through 2027. As more Fed members signal concern on upside inflation risks, risks of a rate hike have increased considerably. In this environment, our baseline continues to favor continued normalization rather than recession. The forecast calls for slower growth, a labor market that adjusts through restraint rather than retrenchment, and a delayed – but still evolving – return toward more durable disinflation.
Key takeaways:
Growth: We expect real GDP growth to slow to 1.9% Q4-over-Q4 in 2026 (2.0% annual average) amid higher energy prices and firmer inflation. Consumer spending moderates as purchasing power is squeezed, while strength in AI-related investment and government spending helps offset weaker residential construction – keeping growth slower but intact.
Labor market: Conditions continue to normalize without unraveling. We still expect the unemployment rate to edge up to around 4.6% by late 2026, reflecting modest hiring amid slower labor force growth. Volatile payrolls, still-subdued hiring and low jobless claims support near-term stability but leave the labor market increasingly sensitive to shocks.
Inflation: Core inflation has firmed in the near term, reflecting energy pass-through and tariff-related goods pressures. We expect core Personal Consumption Expenditures (PCE) to peak around 3.3% year-over-year (YoY) in Q2 2026, then ease gradually toward the Fed’s 2% goal by late 2027 as goods prices normalize, shelter cools and wage growth moderates.
Federal Reserve: The Fed remains on hold, with recent communications reflecting a more hawkish tilt amid firmer inflation and energy uncertainty. With labor conditions stable and inflation progress uneven, policymakers have signaled that a pivot toward tightening can no longer be dismissed. We now expect the policy rate to remain on hold at a range of 3.50% to 3.75% through 2027.
Risks
We maintain a 30% 12‑month recession probability, reflecting resilient data, labor market stability and relative insulation from the energy shock. Still, a sustained rise in energy prices – particularly above $130 – and thinning household buffers pose downside risks to the expansion.
Macroeconomics forecast at a glance
Produced by the U.S. Bank Economics Research Group, our in-depth economic forecast examines the trends and economic indicators shaping business decisions this year and into the future.
June 2026 Report
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Sources: U.S. Bank Economics, Bloomberg, Yale Budget Lab, U.S. Bank Economics calculation
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U.S. Bank Economics Research Group
Beth Ann Bovino
Chief Economist
Ana Luisa Araujo
Senior Economist
Matt Schoeppner
Senior Economist
Adam Check
Economist
Andrea Sorensen
Economist
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