{"id":250557,"date":"2026-07-20T10:15:00","date_gmt":"2026-07-20T14:15:00","guid":{"rendered":"https:\/\/ibkrcampus.com\/campus\/?p=250557"},"modified":"2026-07-21T04:36:28","modified_gmt":"2026-07-21T08:36:28","slug":"economic-update-week-of-july-20-2026","status":"publish","type":"post","link":"https:\/\/www.interactivebrokers.com\/campus\/traders-insight\/securities\/macro\/economic-update-week-of-july-20-2026\/","title":{"rendered":"Economic Update: Week of July 20, 2026"},"content":{"rendered":"\n

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

The U.S. economy grew 2.1% SAAR in 1Q26 as a slowdown in consumer spending was offset by stronger business fixed investment. Consumer spending rose 0.5% while business fixed investment rose 10.6% as spending on equipment and IP products surged due to the AI buildout. Increased business spending also caused imports to rise, and net exports removed 0.37ppts from growth. Government spending rose 4.4% off a low base due to the government shutdown. Real final sales to private domestic purchasers rose 1.7% after a 1.8% gain in 4Q25, suggesting that underlying economic momentum held strong despite challenges materializing late in the quarter.<\/p>\n\n\n\n

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

The June Jobs Report was weaker, reversing the trend of the past three months. Payrolls rose just +57k, well below the 100k consensus, and revisions stripped 74k out of the prior two months. The three-month average falls to +111k from +164k\u2014still solid against a breakeven pace of roughly 50k, but a more normal pace of expansion. The unemployment rate fell to 4.2% from 4.3% due to a shrinking labor force. Participation dropped to 61.5% from 61.8%, and the labor force shrank by 720k. Put together, this is a labor market that is tight, not strong. Corporate America isn’t adding headcount with urgency, but it isn’t cutting either, with layoffs and claims still near the low end of their historical range. We still expect the unemployment rate to drift toward 4% by year-end, driven primarily by weak labor supply growth.<\/p>\n\n\n\n

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

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

The second quarter earnings season kicked off on a strong note. Major banks reported better-than-expected earnings, supported by higher trading and investment banking revenues. Overall, analysts expect yet another strong quarter of earnings growth, with consensus calling for S&P 500 EPS to grow by about 23% y\/y, which, if realized, would mark a second consecutive quarter of 20%+ earnings growth. However, the mixed market reactions following the earnings releases suggest that earnings beat alone may not be enough, with investors also focused on the expense outlook.<\/p>\n\n\n\n

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

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

June CPI cooled more than expected thanks to a sharp decline in energy prices and a flat growth in the core components. Headline inflation fell 0.4% m\/m, bringing the y\/y rate down to 3.5% from 4.2% in May. Within core, shelter prices grew slower than expected at 0.1% m\/m, and auto insurance, which was one of the drivers of inflation a year ago, extended a decline in prices, keeping the m\/m core prices unchanged and decelerating the y\/y core inflation to 2.6%.<\/p>\n\n\n\n

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

At the June FOMC meeting, the committee held the federal funds rate at 3.50% to 3.75%. In his first meeting as Chair, Kevin Warsh delivered a unanimous decision and a much shorter statement, removing the prior reaction function, forward guidance, and easing bias language. He also announced five task forces, most notably on Fed communications, while reaffirming the 2% inflation target. The Fed is likely to stay on hold, though the type and frequency of its communications may change under Warsh.<\/p>\n\n\n\n

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