Tariffs, politics and an AI boom – “What a year!” said Mark Mathews, chief economist; executive director of research at the National Retail Federation, at a press briefing at the organization’s 2026 Retail’s Big Show at the Javitz Center in New York City. But, on the whole, 2025 was less disruptive than it could have been. “In sum, it’s been another year of resilience for the U.S. economy and the consumer overall,” Mathews said.
Mathews was joined by Michael Pearce, chief U.S. economist at Oxford Economics, and David Tinsley, senior economist at the Bank of America Institute, Bank of America. All three had a generally optimistic outlook for 2026 in terms of the U.S. economy and consumer spending, despite persistently low levels of consumer confidence.
“The forecast for this year is that the U.S. economy is going to grow 2.8% this year, up from 2.2%, which is pretty good,” said Pearce. “But that doesn’t resonate with a lot of people, because of bifurcation, especially of the consumer.” He was referring to what’s increasingly being termed the “K-shaped” economy, where higher-income households are getting richer (and spending more), whereas lower-income households are getting poorer (and spending less), with consumer spending in last 6 months driven largely by older, richer households.
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Pearce said he was concerned about the weak jobs growth in the U.S. in 2025, saying we could be looking at a “jobless expansion.”
“Even with positive wage growth, and inflation falling back, if you’re not employed… I’m worried about the impact, especially on younger consumers. It could deepen the K-shaped economy.”
Tinsley the money coming into higher-income households was up 3% in 2025, and only 1% for lower-income households. “So, the wealth effect is a huge part of this. But there’s a second leg to it, which is that the labor market is supporting the higher-income range more than lower income. So it’s a bit of a double whammy.”
“There’s been a lot of negative sentiment around the economy and unemployment, and so on,” said Mathews, adding however that overall consumer sales remained strong through 2025, indicating that people were “griping, but swiping.” Tinsley said that this was not an unusual situation, because a gap opened up between consumer sentiment and what people actually do in terms of spending in the 2010s. “I suspect we will continue to see pretty depressed consumers along with pretty robust consumption,” he said
Pearce agreed that the relationship between consumer confidence and spending was a lot stronger in the past, compared to now. “People give very different answers to online surveys than in-person ones,” he said. “Also, there’s a huge political divide in how people feel about the economy and that’s been an increasing factor.”
“Overall, the economy is growing pretty strongly because of increased productivity, but job growth is lagging behind,” said Pearce, citing “weak” population growth because of a fall in net migration. “Two years ago, we needed to add 200,000 jobs per month to stay ahead of migration, now it’s more like 35,000,” he said.
In terms of the impact of tariffs, Mathews argued that, while the “Liberation Day” import duties announced by President Donald Trump in April 2025 presented an “extreme scenario” at first, most of those had been racked back. “ The impact of tariffs was a 2025 story, and will fade in 2026 in terms of change in tariffs,” said Pearce. He pointed out that tax refunds announced last year will arrive this year, most likely keeping consumers spending. He also welcomed lower mortgage rates, because people tend to buy furniture, building supplies and other items when properties change hands. “The outlook for the overall economy is relatively positive, especially if you add in AI,” he said.
The panel of economists agreed that the impact of AI on the economy, and on consumer spending, was likely to be more visible after 2026. On the one hand, investment in technology is larger, as a share of the total U.S. economy, than it was during the dotcom boom, Mathews said. But, on the other hand, those investments are mostly being financed out of firms’ earnings rather than debt (which is what happened in the dotcom boom and bust). “We’re still in the very early stages of the upward part of the S-curve,” he said. “There’s maybe more to worry about in the future.”