{"id":237264,"date":"2026-01-12T09:45:00","date_gmt":"2026-01-12T14:45:00","guid":{"rendered":"https:\/\/ibkrcampus.com\/campus\/?p=237264"},"modified":"2026-01-13T05:40:14","modified_gmt":"2026-01-13T10:40:14","slug":"economic-update-week-of-january-12-2026","status":"publish","type":"post","link":"https:\/\/www.interactivebrokers.com\/campus\/traders-insight\/securities\/macro\/economic-update-week-of-january-12-2026\/","title":{"rendered":"Economic Update: Week of January 12, 2026"},"content":{"rendered":"\n

Growth<\/h2>\n\n\n\n

The U.S. economy grew by a stronger than expected 4.3% saar in 3Q25. Consumers continued to power the economy forward, with spending up 3.5%. Business fixed investment rose 2.8% as spending on equipment and IP products was partially offset by weaker spending on structures, while inventories were a drag. Residential fixed investment remained weak, contracting by 5.1%. Elsewhere, a 2.2% rise in government spending, an 8.8% spike in exports and a 4.7% decline in imports all helped support growth. While the government shutdown likely weighed on activity in 4Q25, fiscal stimulus should boost growth in early 2026.<\/p>\n\n\n\n

NEW THIS WEEK<\/p>\n\n\n\n

Jobs<\/h2>\n\n\n\n

The results of the December jobs report were mixed. Job growth remained sluggish with the U.S. economy adding 50k jobs in December. Downward revisions were sobering, removing 76k jobs from the prior two months. On a more positive note, the unemployment rate fell by 16bps to 4.4% after spiking in November. Total private wages rose 0.3% m\/m and 3.8% y\/y, but wages for private production and non-supervisory workers (~80% of private payrolls) slowed to 3.6% y\/y from 3.8%, suggesting that most of this month\u2019s wage growth came from supervisory or high-skilled roles. On balance, this report showed a labor market with little momentum heading into 2026. Still, with labor demand and supply both weakening, labor market slack is not growing worse. Payroll growth could accelerate alongside economic growth as fiscal stimulus kicks in in early 2026.<\/p>\n\n\n\n

Profits<\/h2>\n\n\n\n

The 3Q25 earnings season has come to a close. EPS grew 13.0% y\/y, well above initial expectations of 7.3%. Looking at the three main sources of EPS growth, sales, margins and shares contributed 7.6, 6.4 and -1.0 percentage points, respectively. From a sector perspective, tech and financials are leading the pack, while energy companies struggle through declining oil prices. Consumer companies are also under pressure as discerning customers dampen demand and tariffs increase costs.<\/p>\n\n\n\n

Inflation<\/h2>\n\n\n\n

The November CPI report came in softer than expected with headline and core CPI up 2.7% and 2.6% y\/y, respectively, vs. 3.0% in September. However, data collection issues, such as the BLS opting to hold prices fixed where October data were unavailable, or the later November collection period potentially capturing some holiday price cuts, may have biased the data lower. For example, the data imply that both measures rose by just 0.1% m\/m in October and November, which seems abnormal given they averaged 0.3% gains per monthin 3Q. Core goods inflation rose in line with its recent pace, while core services cooled due to a 5.4% y\/y decline in airfares. All said, data quirks lead us to put less weight on this report.<\/p>\n\n\n\n

Rates<\/h2>\n\n\n\n

At its last meeting of the year, the Federal Reserve voted to cut the federal funds rate by 25bps to a target range of 3.50% – 3.75%. Three voting members dissented, with Miran voting in favor of a 50bps cut while Schmid and Goolsbee voted to hold rates steady. However, four nonvoting members of the FOMC who may rotate into voting seats next year submitted projections in favor of no December rate cut. Notably, the tweak in the statement stating \u201cin considering the extent and timing of additional adjustments\u201d to policy rates suggests a January reduction is unlikely, while the moderate changes to the committee\u2019s economic projections leaned hawkish. The median interest rate outlook maintained just one cut for next year and in 2027. While the Fed still has an easing bias, it may be less active in adjusting policy in 2026.<\/p>\n\n\n\n

Risks<\/h2>\n\n\n\n