Chapman University released its annual economic outlook this week, projecting 2% real GDP growth next year, a slight improvement over 2025. The forecast is based on nearly five decades of modeling and is widely watched by business leaders and policymakers.
“We don’t see a recession unless there’s a major correction in AI,” said economist James Doti, President Emeritus of Chapman, who has been leading the Economic Forecast since 1977.
Fadel Lawandy, director of the Hoag Center for Real Estate Finance and the Janes Financial Center and clinical associate professor of Real Estate and Finance, addressed the wave of AI-related infrastructure spending, comparing it to the dot-com bubble of the late 1990s.
“We have wiser investors, more sophisticated investors, information is more readily available, and people are able to make more informed decisions,” said Lawandy. “I don’t think personally that it is a bubble, but the valuations are expensive. There are going to be winners and losers, and there’s going to be plenty of losers, so we got to be careful of who we’re backing with our money and our investments.”
Economists also highlighted a striking rise in household wealth—more than $55 trillion since 2020—that has continued to support consumer demand even as borrowing costs climbed.
At the same time, the report warns that recent tariff increases, the largest in about a century, could push up prices for imported goods and strain both businesses and consumers. Though the labor market overall is projected to remain stable, job growth is expected to cool, especially in California.
“Orange County is not all that much unlike California in terms of where we stand, lower than the nation,” said Doti, adding that the Inland Empire is the one outlier in California that is doing extremely well in terms of job creation thanks to growth in high tech establishments.
The housing market, which has struggled under higher mortgage rates, may see relief.
“With mortgage rates projected to dip below 6% in 2026, our forecast suggests a meaningful recovery in home sales is on the horizon,” added Raymond Sfeir, Ph.D., director of the Anderson Center for Economic Research at Chapman. “Lower borrowing costs will make homeownership more accessible for many families and could help stabilize prices in key markets.”
The forecast also identifies several metro areas expected to outperform the broader economy next year. Among larger cities, Atlanta, Tampa, Raleigh, Charlotte and Salt Lake City are projected to lead in population and job growth. Smaller metros such as Louisville, Oklahoma City, Providence, Hartford and Kansas City are also positioned for notable hiring gains.
To uncover more detailed insights for the year ahead, purchase your copy of the 2026 Economic & Business Review.
