'We have not seen this rosy picture' says ADP's chief economist, who warns real economy will look pretty different from Wall Street's bullish outlook | Fortune

"For all the volatility 2025 has endured, things have actually turned out relatively well: The S&P 500 is up by more than 17%, inflation hasn't spiked despite an onslaught of tariffs, and the unemployment rate has stayed fairly steady. Analysts and investors are generally feeling positive about 2026 as a result-after all, the U.S. economy's performance has been above expectations since the pandemic, so why not take a bullish stance in the face of huge fiscal stimulus?"

"Well, beneath the relatively robust macroeconomic picture, cracks are beginning to show. Those tremors are already being felt; just look at the Fed's decision to cut the base rate yesterday despite arguments that, under normal circumstances, there would be no particular reason to. Markets expected the cut based on the labor outlook, which is showing some signs of weakness in what Fed chairman Jerome Powell has called a "low-hire, low-fire" economy."

2025 experienced volatility but produced strong outcomes: the S&P 500 rose over 17%, inflation remained controlled despite tariffs, and unemployment stayed relatively steady. Optimism for 2026 has grown because the U.S. economy has performed above expectations since the pandemic and fiscal stimulus promises. However, early signs of strain have emerged, exemplified by the Fed's recent base-rate cut tied to a weakening labor outlook. ADP's private payroll data, highlighted during a government shutdown that halted public payroll releases, shows granular, real-time declines that contradict a uniformly rosy labor forecast. Analysts emphasizing rate cuts, fiscal tax advantages, AI gains, and clearer trade policy may be overstating near-term labor strength.

Read at Fortune