Chapman University released its annual economic outlook, projecting 2% real GDP growth next year, a slight improvement over 2025.

“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.

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 the 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.”

To watch a replay of the forecast, visit economicforecast.chapman.edu.