The United States economy should continue to grow over the next several years. This growth will be with much slower speed than what we’ve experienced in past years. In 2026, projections show that the economy will grow by just 1.8%. This expansion has brought its own challenges, notably a projected increase in unemployment and ongoing inflationary pressures. Although the national job market is expected to continue to come under pressure, some places—including Indiana—are seeing the opposite economic forces at work.
Economic Growth and Unemployment Trends
The U.S. economy’s growth path shows the continuing evolution to a longer-term, lower-speed expansion phase. Analysts predict an annual growth rate of just 1.8% for 2026, a steep decline from more aggressive rates seen in recent years. Even with this slowdown, the economy continues to remain on an upward trend. Perhaps nothing underscores the rising pressure on the labor market more than today’s post. It projects unemployment rates to rise from today’s 3.6% to a bit over 4%.
Experts are predicting a failure to create enough new jobs. Consequently, the unemployment rate is projected to increase to 4.8% in 2026. This increase signifies a shift in the employment landscape, raising concerns about the overall health of job availability across various sectors. The combination of reduced job creation and rising unemployment presents a challenge that policymakers and businesses will need to address.
Inflation and Investment Dynamics
Inflation continues to be a worry on the horizon, as it is expected to stay near 3% over the next few years. High inflation is being driven, in part, by tariff price shocks. These pressures would more than compensate for any disinflationary advantages from tempered consumer demand. This recent and lasting bout of inflation will change consumer behavior and spending patterns, forcing businesses to change strategies to attract customers and stay in business.
Investment in artificial intelligence (AI) is poised to become one of the big economic storylines of 2026. The implementation of these AI technologies industry-wide has the ability to greatly increase productivity and improve innovation. Companies are eager to continue or start riding that wave by harnessing the potential of AI. Besides growing communities’ economic potential, this investment trend may benefit sectors that have long lagged in recent years.
Regional Insights: Indiana’s Economic Resilience
If the national economic canary coal’s in a coalmine – Indiana is the economic canary telltale heart economic outlier of the Midwest. In particular, the state has seen a boom in nondurable goods manufacturing, helping to be a big part of its comparative strength for the state among its regional peers. This sector’s growth has been instrumental in bolstering Indiana’s overall economic performance.
Yet despite all of this progress, Hoosiers working in manufacturing made just 84.8% of the national-average hourly wage as of August 2025. Average hourly earnings in Indiana’s manufacturing sector grew by 2.6% from August 2024 to August 2025, lagging behind the national growth rate of 3.8%. This gap underscores the lost wages from existing inequalities that can further deter and prevent developing and retaining the workforce we need.
Additionally, Indiana’s real GDP growth rate of 2.6% is higher than the national rate of 2.1%. For the Indianapolis metropolitan area, projections call for a real GDP growth rate of 1.5% to 2% next year. Perhaps a sign that the local economy is building up some positive momentum, despite national headwinds.
Manufacturing Sector and Future Outlook
With the chemical manufacturing industry leading the way, Indiana’s nondurable goods sector is booming. It represents approximately 66 percent of the industry’s output. This concentration reflects both the primary role this industry plays in the economic vitality of the state, as well as its strong potential for job growth.
The Kelley School of Business is excited about the future and very optimistic. They forecast that 2025 will see the S&P 500 index enjoying its third straight year of double-digit performance. Looking further into the future, we forecast the index to continue increasing by 3.2% in 2025 and at a slightly slowed rate of 3.1% in 2026. This base level of performance is driven by strong investor confidence and an overall positive economic environment for big businesses.
Indiana’s economic growth is booming compared to its neighbors. States including Michigan face the prospect of having a growth rate capped at 0.4%. Kentucky is projected to decline at -0.9%, Illinois -1.3% and Ohio will hit -1.4%. This stark regional disparity further highlights Indiana’s special circumstances within the Midwest and growing potential as a center of economic opportunity.