{"id":239956,"date":"2026-03-09T09:45:16","date_gmt":"2026-03-09T13:45:16","guid":{"rendered":"https:\/\/ibkrcampus.com\/campus\/?p=239956"},"modified":"2026-03-10T06:05:01","modified_gmt":"2026-03-10T10:05:01","slug":"economic-update-week-of-march-9-2026","status":"publish","type":"post","link":"https:\/\/www.interactivebrokers.com\/campus\/traders-insight\/economic-update-week-of-march-9-2026\/","title":{"rendered":"Economic Update: Week of March 9, 2026"},"content":{"rendered":"\n

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

The U.S. economy grew by a weaker than expected 1.4% saar in 4Q25. A very sharp 17% annualized decline in federal government spending was the main culprit for the weak report as real GDP, excluding the federal government, rose by 2.7% annualized. Consumers continued to power the economy forward, with spending rising a solid 2.4%. Spending on equipment and intellectual property also showed strong gains, while spending on both commercial construction and home building fell. Fiscal stimulus should lead to stronger growth in the first half of 2026.<\/p>\n\n\n\n

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

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

The February jobs report looked weak, with nonfarm payrolls falling by 92k. A pick-up in strike activity was partially to blame but revisions to previous months were also downbeat. 69k jobs were removed from December and January, bringing the three-month moving average down to 6k from 50k in January. Similarly, private payrolls fell to 18k from 70k. Private services payroll growth excluding health care and social assistance was also the weakest since last June. After falling for two months, the unemployment rate rose 12bps to 4.4%. Sluggish labor force growth should keep the unemployment rate under control, but this report reminds us that upside risks remain. Despite this weak report, upside risks to inflation lead us to believe that there won’t be any Fed easing until late 2026.<\/p>\n\n\n\n

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

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

S&P 500 EPS grew a strong 13.3% y\/y in 4Q25, 6 percentage points above the December estimate. The three main sources of EPS growth, sales, margins and shares, contributed 8.2, 5.9 and -0.9 percentage points, respectively. From a sector perspective, tech did the heavy lifting, driving 61% of the index’s y\/y EPS growth. Financials and industrials also saw strong earnings growth of 27.8% and 7.7%, respectively. On the other hand, the consumer and health care sectors are struggling as rising costs hurt profitability. The outlook for 2026 earnings growth is similarly strong with continued gains in tech and cyclical support for the rest of the index.<\/p>\n\n\n\n

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

The January CPI report looked encouraging at first glance. Headline and core inflation rose 2.4% y\/y and 2.5% y\/y, respectively. Both eased relative to December, and headline inflation surprised to the downside due to a sharp decline in gasoline prices. The details of core inflation, however, were less reassuring. Core goods prices were flat for a second month, mainly due to a sharp drop in used auto prices. Excluding autos, core goods rose 0.4% m\/m. Core services inflation rose 0.4% m\/m, but excluding rent and owners\u2019 equivalent rent, which are being held down by shutdown-related adjustments, prices climbed 0.6% m\/m. Looking forward, companies may use fiscal stimulus as an opportunity to pass on tariff costs they have been absorbing, and inflation could accelerate through the middle of this year.<\/p>\n\n\n\n

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

At its first meeting of 2026, the Federal Reserve voted to leave the federal funds rate unchanged at a target range of 3.50%\u20133.75%, although Governors Miran and Waller voted in favor of a 25bp cut. New statement language leaned hawkish, with economic activity described as “solid” and the unemployment rate “showing signs of stabilization.” During the press conference, Powell noted that the most likely next move remains a cut, but only after it becomes clear the inflationary effects of tariffs will be temporary. The Fed is well positioned to remain on hold through 1H26 at least, and will likely maintain its current policy stance until the balance of risks, as evidenced by incoming data, decisively favors action on one side of its dual mandate.<\/p>\n\n\n\n

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