Economic Update: Week of June 8, 2026

Growth

The U.S. economy grew 1.6% SAAR in 1Q26 as a slowdown in consumer spending was offset by stronger business fixed investment. Consumer spending rose 1.4% while business fixed investment rose 10.4% as spending on equipment and IP products surged due to the AI buildout. Increased business spending also caused imports to spike, and net exports removed 1.3ppts from growth. Government spending rose 4.4% off a low base due to the government shutdown. Real final sales to private domestic purchasers rose 2.4% after a 1.8% gain in 4Q25, suggesting that underlying economic momentum held strong despite challenges materializing late in the quarter.

NEW THIS WEEK

Jobs

The May Jobs Report was solid. Payrolls rose +172k, above the +105k consensus expectation, and the prior two months were revised up by a combined +122k, making three straight months of solid job growth. The government added an outsized +52k, almost all of it local in categories like public works and parks. Hiring was reasonably broad, but leisure and hospitality and health care did most of the lifting. Even with the increase in hiring activity, wage growth was tame at +0.3% over the month and +3.4% for the year. Overall, the report leads us to believe the labor market is improving without stoking wage inflation.

Profits

The 1Q26 earnings season is coming to a close. With 95% of market cap reporting, consensus is currently projecting EPS growth of 26.9% y/y, up from the quarter-end estimate of 12.1%. Looking at sectors, technology is the largest contributor, on track to drive 52% of this quarter’s y/y EPS growth. However, the health care sector is a meaningful drag as companies continue to contend with cost inflation. Despite the conflict in Iran, estimates for the full year have moved higher, driven by AI and the boost to energy earnings from higher oil prices.

Inflation

The April CPI report came in hot with headline inflation up 0.6% m/m and 3.8% y/y as the conflict in the Middle East continued to put upward pressure on prices. Energy prices rose 18% y/y alongside higher gas prices. Core goods were flat despite supply chain tensions and tariffs, as ongoing auto weakness offset other pressures. Shelter rose 0.6% m/m, largely reflecting a statistical adjustment tied to last fall’s government shutdown. Higher kerosene prices lifted airfares, pushing core services ex-shelter up 0.5% m/m. While softer demand and moderating wage growth should limit underlying inflation, a prolonged conflict could add pressure via higher energy and input costs. Inflation is expected to firm through mid-2026 before easing back toward 2% during 2H26.

Rates

At the April FOMC meeting, the FOMC voted to hold the federal funds rate steady at a range of 3.5% to 3.75%. Governor Miran dissented in favor of a rate cut while three other members voted in favor of removing the easing bias from the statement language to acknowledge mounting upside risks to inflation. During the press conference, Powell announced that he will remain on the Board of Governors until he is confident that Fed independence is not at risk. Moving forward, the Fed is likely to remain on hold given a stable unemployment rate and inflation moving away from target. However, the type and frequency of communication from the Fed could immediately change under Kevin Warsh as Chair.

Risks

• Delayed tariff pass-through and fiscal stimulus could put upward pressure on inflation.
• An extended conflict in the Middle East could weigh on growth and pressure inflation higher.
• Elevated geopolitical tensions could spark bouts of volatility, particularly in expensive markets.

Investment Themes

• Solid fundamentals should allow U.S. markets to continue to grind higher.
• Fiscal stimulus, dollar weakness and regional catalysts should support strong international performance.
• Private markets can offer investors more ways to access the AI theme.

This weekly update provides a snapshot of changes in the economy and markets and their implications for investors.

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Originally Posted June 8, 2026 – Economic Update

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