{"id":258236,"date":"2026-10-05T10:45:00","date_gmt":"2026-10-05T14:45:00","guid":{"rendered":"https:\/\/ibkrcampus.com\/campus\/?p=258236"},"modified":"2026-10-05T11:55:10","modified_gmt":"2026-10-05T15:55:10","slug":"economic-update-week-of-october-5-2026","status":"publish","type":"post","link":"https:\/\/www.interactivebrokers.com\/campus\/traders-insight\/economic-update-week-of-october-5-2026\/","title":{"rendered":"Economic Update: Week of October 5, 2026"},"content":{"rendered":"\n

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

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

The U.S. economy grew 2.2% SAAR in 2Q26 as a widening trade deficit and weaker government spending were offset by accelerating consumer spending and continued strength in business fixed investment. Consumer spending rose 3.8% while business fixed investment rose 7.7% as spending on equipment rose again due to the AI buildout. Net exports removed 1.1% from growth as imports jumped 12.6%. Government spending fell 0.1% due to weaker nondefense spending. Real final sales to private domestic purchasers rose 4.6% after a 1.7% gain in 1Q26, suggesting that underlying economic momentum held strong with temporary fiscal support from tax refunds, but could fade later in the year.<\/p>\n\n\n\n

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

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

The September jobs report was much more subdued compared to August’s hot print. Nonfarm payrolls rose by 29k, below consensus estimates of 90k.The unemployment rate ticked up to 4.2%, with labor supply still looking tight. Private payrolls rose 46k, led by construction and health care, but employment in financial activities fell by 7k. However, government payrolls fell by 17k in September. Despite inflation remaining stubbornly above target, wages have only increased by 3.0% over the last year, which is the smallest y\/y gain since 2021. Workers appear less willing to quit their jobs or push aggressively for higher pay, suggesting confidence in the job market may be softening. While this report doesn’t raise any immediate concerns about the health of the labor market, it does point to a more muted pace of hiring than we’ve seen in recent months. If that trend continues, it could have meaningful implications for the policy path going forward.<\/p>\n\n\n\n

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

The second quarter earnings season was strong, driven by AI and energy. S&P 500 EPS grew about by about 48% y\/y, the second consecutive quarter of 20%+ earnings growth. Importantly, the numbers are being skewed by large paper gains from the hyperscalers’ investments in private AI companies. Excluding those, earnings growth would still be strong at around 37%. Growth remains concentrated, but has followed capex dollars out of the hyperscalers and into the semiconductor industry, which is driving over half the index level growth.<\/p>\n\n\n\n

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

August CPI held the y\/y rate at 3.4% from the month prior, driven primarily by a reacceleration in energy prices. Core CPI came in hotter than expected, rising 0.3% m\/m compared to consensus estimates of 0.2%, and 2.4% y\/y. Core inflation was led by communication, as boosts to telecom plan prices pushed the category up 5.4% in August and added nearly 0.1% to core inflation. Elsewhere, food prices were contained and auto insurance continued to cool. With core CPI still elevated relative to the Fed’s target, the question on investor’s minds has now shifted from “Will the Fed hike rates?” to “How many times will the Fed hike rates?”<\/p>\n\n\n\n

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

At its September meeting, the Federal Reserve unanimously voted to raise the federal funds target range by 25 bps to 3.75%-4.00%. The Committee emphasized persistent inflation pressures and reaffirmed its commitment to returning inflation to its 2% target. Policymakers also highlighted strong consumer spending and continued labor market resilience as evidence that economic activity remains on solid footing.<\/p>\n\n\n\n

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