This article is part of a recurring series highlighting recent talent mobility industry reports. If you would like the WERC editorial team to consider covering a specific industry report, email mobility@talenteverywhere.org.
The January 2026 EY-Parthenon U.S. Macroeconomic and Strategic Business Outlook Executive Briefing provides an in-depth analysis of the current state and near-term outlook of the U.S. economy, highlighting how policy, consumer behavior, labor markets, inflation, housing, and business activity are shaping economic performance.
It also addresses risks, particularly the impact of AI investment and potential financial market vulnerabilities. The report emphasizes the interplay of crosscurrents, including trade tensions, demographic shifts, technological innovation, and fiscal policies, providing a comprehensive guide for business leaders and policymakers navigating a rapidly evolving environment.
Global and U.S. Economic Snapshot
Globally, growth is expected to remain resilient but moderate in 2026, supported by moderate consumer spending and AI-driven capital investments. Advanced economies, including the U.S., are outpacing others due to robust productivity and continued technology adoption. The U.S. real GDP growth forecast has been revised upward to 2.6% in 2026, reflecting stronger-than-expected momentum from AI-led investment and firm-level productivity gains.
By 2027, growth is projected to slow to 1.8%. Despite this, downside risks remain from tariffs, trade uncertainty, energy price volatility, geopolitical stress, and fiscal pressures. Central banks in the U.S. and abroad are moving from easing to neutral stances, carefully balancing growth and inflation.
Employment and Labor Market Trends
The U.S. is experiencing a jobless expansion characterized by steady unemployment rates despite negative payroll growth in late 2025. The unemployment rate is projected to be 4.6% by the end of 2026, with job growth expected to remain around 30,000 per month. The labor market faces mounting strain due to sector concentration and policy headwinds.
Businesses are adopting cost-control measures in response to high-interest rates and elevated operating costs. Workforce shortages and selective hiring highlight structural challenges, signaling a slower recovery in employment levels relative to GDP growth. These labor dynamics could influence wage growth and consumer spending patterns in 2026.
Consumer Behavior and Spending
Consumer activity remains robust, largely supported by high-income households, borrowing capacity, and the drawdown of savings. Fiscal measures, such as the One Big Beautiful Bill Act, provide a modest tailwind in early 2026. However, the personal saving rate has dropped by two percentage points since April 2025, and the gap between real disposable income growth (1% y/y) and real consumer spending (2.6% y/y) indicates potential unsustainability.
EY projects moderate consumer spending growth of 2.1% in 2026, down from 2.7% in 2025, with further deceleration to 1.9% in 2027. Spending patterns are expected to favor essential goods over discretionary purchases due to affordability pressures.
Housing Market and Affordability
Housing affordability remains stressed despite stable mortgage rates. Elevated home prices continue to outpace wage growth, pressuring potential homeowners. While the housing market shows signs of moderation, the cost of ownership relative to renting remains high, limiting new household formation.
EY anticipates that housing demand will remain concentrated in metropolitan areas with strong employment growth, but overall sales may plateau due to affordability constraints. The slow response of new construction and inventory shortages could sustain upward price pressures, creating persistent barriers for first-time buyers and influencing household consumption choices.
Business Activity and Investment
Business activity benefits from strong AI-driven investment and productivity improvements. Companies are increasing spending on capital, software, and research and development, which is delivering early gains. Equity market performance is increasingly concentrated in AI-intensive firms. However, broader investment decisions are constrained by policy uncertainty, energy price swings, and supply chain vulnerabilities. Firms are focused on cost control amid high operating costs and interest rates.
EY highlights a structural divergence in corporate performance, with technology-focused companies expanding rapidly while traditional sectors experience slower growth.
Inflation and Price Pressures
Headline and core inflation measures remain above central bank targets, reflecting sticky costs in energy, housing, and wages. Core personal consumption expenditure inflation is expected to hover near 3% in H1 2026 before gradually declining toward 2.5% by year-end. Supply constraints, labor market tightness, and elevated energy prices contribute to persistent inflation pressures.
The U.S. inflation trajectory contrasts with other advanced economies, where easing pressures are more pronounced. Businesses must adjust pricing strategies to maintain margins while policymakers balance growth, inflation, and financial stability objectives.
Federal Reserve and Financial Conditions
The Federal Reserve maintains a neutral policy stance after a period of aggressive rate hikes. Current policy rates are projected to remain near neutral, managing risks from inflation and financial markets. EY underscores that the Fed faces trade-offs: supporting growth while avoiding overheating and ensuring financial system stability.
Financial conditions remain tight, with elevated borrowing costs impacting business investment and household spending. Credit availability, equity valuations, and market liquidity are closely monitored as central banks navigate the potential fallout from AI-led market concentration and economic shocks.
Spotlight Risk: AI Bubble Scenario
The briefing identifies the rapid expansion of AI investment as a potential source of financial market risk. Elevated valuations in AI-intensive sectors, speculative venture capital flows, and high concentration in a small number of publicly traded firms may create vulnerability to market corrections.
EY models suggest that a sharp decline in AI equity values could disrupt broader markets, particularly if accompanied by tightening financial conditions. Business leaders are advised to monitor exposure, diversify portfolios, and stress-test operational plans against scenarios involving sudden shifts in AI-related asset prices.
Sector Perspectives
AI adoption is reshaping multiple sectors, including finance, health care, manufacturing, and logistics. EY highlights strong capital allocation toward AI-driven infrastructure, software, and robotics. The tech sector continues to lead investment flows, but energy, health care, and industrial sectors are increasingly integrating AI to optimize efficiency and cost control. Companies with early AI adoption are experiencing productivity gains and competitive advantages, while laggards risk being left behind. Sector-specific strategies are critical for capitalizing on technological transformation without overextending resources or exposure to speculative risk.
Strategies for Business Leaders in a Supply-Fragile World
In a world of constrained supply chains, geopolitical uncertainty, and technological disruption, business leaders must prioritize resilience. EY emphasizes strategic diversification of suppliers, investment in digital infrastructure, and workforce development as core strategies. AI and automation provide opportunities to enhance efficiency and mitigate labor shortages but must be implemented with risk awareness.
Leaders are encouraged to balance aggressive innovation with financial prudence, monitor regulatory developments, and maintain liquidity to navigate crosscurrents in trade, energy, and fiscal policy. Collaboration and scenario planning are recommended to manage systemic and sector-specific risks.
What This Means for Talent Mobility
For talent mobility leaders, the EY-Parthenon outlook points to a more selective and disciplined environment in 2026. Moderate growth, persistent inflation, and a labor market expanding more slowly than GDP suggest continued pressure on costs, even as demand remains strong for highly specialized and technology-driven roles.
AI-led investment and productivity gains are likely to concentrate mobility demand around critical skills and strategic markets, many of which continue to face housing affordability constraints. This raises the stakes for assignment planning, destination selection, and long-term retention, particularly in high-cost metropolitan areas.
Policy uncertainty, trade tensions, and geopolitical risk reinforce the need for scenario planning and flexibility in mobility programs. As companies rebalance supply chains and invest in automation, mobility teams will play an increasingly important role in supporting targeted deployments, workforce resilience, and alignment between talent strategy and broader business risk.