Goldman Sachs predicts that the global economy will grow steadily in 2026, but the job market is still sluggish

The Zhitong Finance App learned that Goldman Sachs chief economist Jan Hatzius (Jan Hatzius) said in an outlook report that the global economy is expected to maintain steady expansion next year, but the labor market will remain relatively sluggish, while inflation will gradually fall back to the target level of central banks.

In the report entitled “Macro Outlook 2026: Steady Growth, Stagnant Employment, and Stable Prices”, released on December 18, Goldman Sachs expects the global GDP growth rate to be 2.8% in 2026, higher than the 2.5% generally expected by the market. Goldman Sachs believes that the US economy will continue to outperform other major developed economies. The GDP growth rate is expected to be 2.6% in 2026, mainly benefiting from weakening tariff drag, tax reduction policies, and a relaxed financial environment.

Meanwhile, Goldman Sachs predicts China's GDP growth of 4.8% in 2026 — also exceeding market consensus. Strong export performance will offset the impact of weak domestic demand. The economic outlook for the Eurozone is relatively bleak. The GDP growth rate is expected to be 1.3%, but Goldman Sachs pointed out that Germany's fiscal stimulus and Spain's relatively steady economic growth can cushion the pressure brought about by long-term structural challenges to a certain extent.

The report warns that while overall output growth remains stable, improvements in the labor market may be difficult to keep up with economic expansion. Goldman Sachs points out that rising productivity has raised the economic growth threshold needed to create new jobs. This “disconnect” is particularly evident in the US — even with steady GDP performance, the unemployment rate is slowly rising.

In terms of inflation, Goldman Sachs expects the downward trend in inflation to accelerate again in 2026 after falling short of expectations in 2025. Goldman Sachs expects the core inflation rate in the US and the UK to fall from the current level of about 3% to close to 2% by the end of 2026, due to the gradual decline in the impact of tariffs, slowing wage growth, and the cooling of housing-related inflation. Furthermore, falling oil prices, increased supply of Chinese commodities, and accelerated productivity growth will also help curb price pressure.

Goldman Sachs expects the Federal Reserve to cut interest rates by 50 basis points next year, lowering the federal funds rate to a range of 3.0% to 3.25%. The bank believes that the risk bias will be further relaxed due to reasons such as confidence in falling inflation, concerns about the labor market, and potential changes in the Federal Reserve's leadership. Goldman Sachs also anticipates that the UK and several emerging market countries (especially Brazil) will also cut interest rates, while the Eurozone may keep interest rates unchanged.

Overall, Goldman Sachs said that this macro outlook supports the stock market and many emerging market assets, and believes that the market may still underestimate the positive impact of the “steady growth+falling inflation” combination. However, the bank also warned that higher valuations — especially in sectors related to artificial intelligence — and weak labor markets may drive up market volatility, and once growth expectations are thwarted, downside risks cannot be ignored.