Growth is still holding up, but prices remain too high and softer job data may not be enough to bring rates down soon.
The economy is still growing at about 2.5%, unemployment is 4.3%, inflation is still too warm, and the Fed’s rate is about 3.6%. The big picture barely changed this week because growth was flat, but higher oil from the Iran conflict could raise gas prices and keep rates higher. What is keeping things steady is the job market: layoffs are still low, with new unemployment claims near 209,000. Watch next week’s jobs report, because it will show whether hiring is still strong enough to support spending. Not investment advice.
The biggest moves in the numbers we watch since our last update.
GDP, Gross Domestic Product, the total value of everything the US economy produces, was revised down from 2.0% to 1.6% in the Second estimate. Higher oil prices could squeeze household budgets and business costs, which can slow spending and growth. Watch the next GDP update; another downgrade would mean the economy is losing momentum.
GDP, Gross Domestic Product, the total value of everything the US economy produces, was revised down from 2.0% to 1.6% in the Second estimate. Higher oil prices could squeeze household budgets and business costs, which can slow spending and growth. Watch the next GDP update; another downgrade would mean the economy is losing momentum.
PCE, Personal Consumption Expenditures, the inflation measure the Fed watches most, rose 3.29% compared to the same time last year, cooler than 3.36% expected and down from 3.53% in March. Oil prices jumped as fighting tied to Iran continued, which could raise gas, shipping, and grocery costs. Watch next month’s PCE report; another drop would support the view that inflation is easing.
Jobless claims, the number of people who filed for unemployment benefits for the first time that week, were 209,000 after 202,750 the week before. That still points to a labor market that is mostly steady, though the trend has softened some. Watch the next monthly jobs report; a clear rise in unemployment would mean hiring is weakening.
Risk conditions look mostly normal in market data, though caution is elevated, with the gap between 10-year and 2-year Treasury rates at 49.0 basis points, one hundredth of a percentage point. Fighting tied to Iran pushed oil prices higher and stocks lower, which can make markets more jumpy. Watch oil prices and bond markets next week; another sharp rise in oil would raise pressure on both inflation and markets.
The Fed, the US central bank, is still on hold, with a policy midpoint of 3.625%. That means borrowing costs for credit cards, car loans, and business loans are still relatively high. Watch the next Fed meeting; signs of lower rates would ease pressure on borrowers, while delays would keep costs high.
Geopolitical risk spiked as the Iran war entered a fourth month, with U.S. strikes on Iranian drones lifting oil and recession fears. Late-week truce/deal hopes eased markets and oil, but volatility stayed high.
GDP: 1.60 (no pre-release consensus available).
PCE below estimate: actual 3.29 vs 3.36.
Jobless Claims: 209,000.00 (no pre-release consensus available).
Jobless Claims: 202,750.00 (no pre-release consensus available).
The week's events, lined up with how they likely affected the economy.
The Iran war is driving oil prices higher, which could raise gas and shipping costs and hurt stocks if energy stays expensive.
If oil stays above $100 for years, people could face higher gas, travel, and grocery costs, while stocks may be more shaky.
US inflation rose to 3.8%, which likely means higher prices will keep squeezing budgets and interest rates may stay high longer.
Fighting tied to Iran pushed oil prices up and stocks down, which could mean higher gas costs and a shakier market for a while.
U.S. strikes on Iran are making markets more nervous, which can push stocks down and raise oil and gas prices for a while.
The 11 main US stock market industries, plotted by whether the economy is helping or hurting them, and how the industry itself is doing. Click any industry for details.
Each force, where it stands today, which way it's headed, and the data behind it.
GDP nowcast: 2.54% SAAR
GDP nowcast for the current quarter is 2.54% QoQ SAAR; latest realized GDP is 1.60% QoQ SAAR and 2.57% YoY.
Core CPI: 2.75% YoY; 3m trend: 4.72%
Core inflation is 2.75% YoY with a 3m annualized trend of 4.72% (momentum gap 1.97 ppts).
Unemployment: 4.3%; claims 4wma: 209,000
Unemployment rate is 4.3% (YoY change +0.10 ppts); initial claims 4wma 209,000.
Policy mid: 3.625%; gap: 0.365 ppts
Policy midpoint is 3.625% with a 30-day change of +0.000 ppts; market rate gap (2Y minus policy) is 0.365 ppts.
2s10s: 46.0 bps
The 2s10s yield spread is 46.0 bps and the curve is normal.
Things that could change our view of the economy before next week's update.
The next turn likely comes from jobs, prices, or oil. Labor looks closest to a turning point because claims and unemployment are still okay, but both have softened enough that one weak report could change the story fast.
The Employment Situation report could quickly shift the outlook. If unemployment moves above 4.3% and hiring looks weak, people may spend less and recession worries would rise.
CPI means Consumer Price Index, the main measure of how much prices are going up. Core CPI is 2.75% compared to the same time last year, but the 3-month pace is 4.72%, so another hot reading would raise the odds of higher borrowing costs for longer.
If Iran fighting keeps oil near or above $100, gas, shipping, and some food costs could rise. That would squeeze household budgets and make it harder for inflation to cool.
If CPI and PCE keep easing, the Federal Reserve, the US central bank, would face less pressure to keep rates high. That would help mortgages, car loans, and rate-sensitive parts of the market.
Initial claims means the number of people who filed for unemployment benefits for the first time that week. The 4-week average is still low at 209,000, but a clear move higher over the next few weeks would signal layoffs are spreading.
News about a possible Fed leadership change could move rate expectations even before policy changes. That could help or hurt stocks and bond yields depending on whether markets expect lower or higher future rates.
Claims are still low at a 209,000 4-week average, so this report will show if labor weakness is spreading or staying contained.
If claims jump well above recent readings, recession worries rise fast. If claims stay low, it supports the view that jobs are still holding up.
Unemployment is 4.3%, so this report is the clearest near-term test of whether the job market is bending or breaking.
A weaker report would raise fears of slower spending and slower growth. A stronger report would support growth, but it could also keep rate cuts farther away if wage pressure stays firm.
Inflation has cooled on the yearly view, but the recent 3-month pace is still too hot, so this report could change the rate outlook quickly.
If CPI comes in much hotter than expected, borrowing costs may stay high longer. If it comes in cooler, markets will likely expect easier policy sooner.
A second weekly claims report right after payrolls can confirm whether any labor weakness is real or just noise.
Another high claims reading after a weak jobs report would make slowdown fears stronger. A calm reading would ease those fears.
This scenario is the closest because labor is no longer improving and growth is only holding steady, not speeding up. One weak jobs report or a few higher claims readings could push the story in that direction.
Confidence is medium because the growth nowcast is steady, but the next jobs and inflation reports could change the picture quickly, and oil risk is hard to measure day by day.
A look back at how the economy's signals have shifted week by week.
GDP, Gross Domestic Product, the total value of everything the US economy produces, was revised down from 2.0% to 1.6% in the Second estimate. Higher oil prices could squeeze household budgets and business costs, which can slow spending and growth. Watch the next GDP update; another downgrade would mean the economy is losing momentum.
Growth still looks positive, with the GDP nowcast at 2.66% SAAR, a yearly pace based on one quarter. Higher oil prices from the Iran conflict could raise business costs and leave people with less money to spend. Watch the next GDP update. A clear drop from this nowcast would suggest the economy is losing speed.
Growth still looks steady, with the GDP nowcast at 2.66% SAAR, a running estimate of economic growth. Higher gas prices from the Iran war could leave families with less money to spend on other things. Watch the next GDP update. A clear drop would suggest the economy is losing speed.
GDP, Gross Domestic Product, the total value of everything the US economy produces, grew at a 2.0% annual rate in the Advance estimate. Higher oil prices and possible new auto tariffs could raise costs and slow spending by families and businesses. Watch the next GDP revision; a meaningful cut would suggest growth was weaker than first reported.
GDP, Gross Domestic Product, the total value of everything the US economy produces, grew at a 2.0% annual rate in the Advance estimate. Oil above $120 a barrel could raise business costs and leave people with less money to spend elsewhere. Watch the next GDP estimate; a downward revision would suggest growth was weaker than first reported.
Growth looks weak, with Real GDP, GDP after adjusting for inflation, running at 0.50% QoQ SAAR, compared to last quarter at an annual rate. Higher oil prices from the Iran conflict could squeeze household budgets and leave people with less money to spend. Watch the next GDP update or consumer spending report: a further slowdown would show the economy is losing momentum.
