Financial FAQs
“Real gross domestic product (GDP) increased at an annual rate of 1.5 percent in the second quarter of 2026 (April, May, and June), according to the second estimate released today by the U.S. Bureau of Economic Analysis (BEA). In the first quarter, real GDP increased 2.1 percent.” BEA.gov
I don’t believe a recession is about to happen, I said last week. The five-year cycle of economic growth begun with the recovery from the Covid-19 pandemic could continue.
For how long? The longest growth cycle to date was during the Obama and Trump I administrations—2009 to 2020 (see above graph). And that was because of the massive government spending to bring U.S. out of the 2008-09 Great Recession.
This is despite Trump’s economic wrecking ball that has reduced nonfarm payroll formation to just 31,000 per month over the past year and canceled or reduced many of President Biden’s bipartisan bills that boosted investment in infrastructure, healthcare, environmental protection, and healthcare services.
And what about the Fed’s rate hike(s)? Barron’s Randall Forsyth reports that interest rate markets believe the Federal Reserve risks causing a recession, or stagflation at least, by raising its Fed Funds rate +0.25 percent one to two more times to fight very stubborn inflation.
That is why economic growth slowed to 2.1 percent and 1.5 percent in Q1 and Q2 this year that the Fed could further damage because of its hawkish rhetoric on inflation.
But something remarkable is happening that could pull Americans away from the precipice. The Atlanta Fed’s GDPNow estimate of third quarter GDP growth is 5.1 percent for the second consecutive month, above most economists’ predictions.
Why? Consumers and governments are on a spending spree, and some $800B is being invested in the construction of A.I. data centers blanketing the country where many Americans don’t want them.
This is while corporations have record profits, which will extend the record stock market run whose prices are already in nosebleed country. The Price-to-Earnings ratio of the S&P 500 is 28 to 1, already far above its long term 15 to 1 historical ratio, according to Nobel Economist Robert Shiller of irrational exuberance fame.
Trump and Republicans can’t do much more damage to growth. Their policies are failing at almost everything they attempt. Trump’s signature tariffs are illegal and require refunding, which will aid the bottom line of corporations and lower the prices of such as Target and Walmart.
He has failed to win the Iran war, and the world is finding ways to work around the consequent energy shortages. This is in part because renewable energy sources are making a comeback. The Japanese have even agreed to build small nuclear reactors and two huge natural gas energy projects in the Midwest and South.
Consumers haven’t stopped spending, either. Surprisingly, American retail shoppers are out in force again with the 1.2 percent August sales increase. Many consumers seem to be recovering from the shock to energy prices since the beginning of the Iran War.
And maybe payroll hiring will continue to improve with the 166,000 new hires in August. But the bottom line is the Iran war must end as well, and everyone knows it.
Harlan Green © 2026
Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen
