Growth is still solid, jobs look steady, and inflation is easing only slowly, so interest rates are likely to stay high.
The economy is still growing, but not picking up speed: GDP, Gross Domestic Product, the total value of everything the US economy produces, was 2.1%, unemployment was 4.2%, and rates remain high. The main shift this week was cooler inflation, with PCE, Personal Consumption Expenditures, the inflation measure the Fed watches most, at 3.41% compared to the same time last year, which may ease pressure for even higher rates, though Iran war fears could still raise gas and heating bills through oil prices. What is holding things steady is a job market that still looks balanced, with unemployment at 4.2% and new jobless claims low enough to avoid a sharper slowdown. Watch the next CPI, Consumer Price Index, the main measure of how much prices are going up, because it can quickly change the outlook for rates and household borrowing costs. Not investment advice.
The biggest moves in the numbers we watch since our last update.
PCE, Personal Consumption Expenditures, the inflation measure the Fed watches most, rose 3.41% compared to the same time last year, cooler than 3.49% expected and down from 3.8% in April. War fears tied to Iran could raise oil prices, which would likely push up gasoline and heating bills. Watch the next Core CPI, CPI without food and energy, which move around a lot month to month. Another reading below 3% would show price pressure is easing.
PCE, Personal Consumption Expenditures, the inflation measure the Fed watches most, rose 3.41% compared to the same time last year, cooler than 3.49% expected and down from 3.8% in April. War fears tied to Iran could raise oil prices, which would likely push up gasoline and heating bills. Watch the next Core CPI, CPI without food and energy, which move around a lot month to month. Another reading below 3% would show price pressure is easing.
The unemployment rate came in at 4.2%, a bit lower than 4.22% expected and down from 4.3% in May. Initial claims, the number of people who filed for unemployment benefits for the first time that week, were 222,000, near 224,500 the week before. Watch the next jobs report. If unemployment rises and hiring stays weak, that would point to a softer job market.
Market risk looks elevated even though the main signal is steady, with investors still leaning toward safer places. War fears tied to Iran and excitement around AI are causing bigger market swings, which can make account balances move more day to day. Watch oil prices and major market moves next week. A further jump in oil or stock swings would raise stress.
GDP, Gross Domestic Product, the total value of everything the US economy produces, was revised up to 2.1% in the Third estimate from 1.6% in the Second estimate. War fears tied to Iran could hurt confidence and spending, even as AI excitement supports some business investment. Watch the next GDP update or retail sales report. A clear slowdown would mean growth is losing momentum.
The Fed, the US central bank, is still on hold, and there was no Fed Policy Decision release this week. News reports suggest rates may stay high into 2026, which can keep pressure on mortgages, car loans, and credit cards. Watch the next Fed meeting and inflation reports. Cooler inflation would make rate cuts more likely.
Geopolitical risk stayed elevated as Iran war effects drove market volatility and inflation concerns, even as easing Hormuz fears and a tariff reversal supported risk assets.
Employment Situation below estimate: actual 4.20 vs 4.22.
Jobless Claims: 222,000.00 (no pre-release consensus available).
GDP: 2.10 (no pre-release consensus available).
PCE below estimate: actual 3.41 vs 3.49.
The week's events, lined up with how they likely affected the economy.
The Fed may keep interest rates high into 2026 because inflation is still running hot, which can keep pressure on stocks, home buying, and borrowing costs.
War fears tied to Iran are making markets jump around, while AI excitement is pushing some tech stocks up, so people managing their own money may see bigger short-term swings.
A sharp drop in big tech stocks could make the market more shaky for a while, especially for people heavily invested in tech funds.
The new Fed chair may be less willing to support financial markets, which could mean more stock swings and tighter borrowing costs for a while.
The US added far fewer jobs than expected in June, which could mean slower pay growth, weaker spending, and more market nerves in the next few weeks.
The 11 main US stock market industries, plotted by whether the economy is helping or hurting them, and how the industry itself is doing. Click any industry for details.
Each force, where it stands today, which way it's headed, and the data behind it.
Realized GDP: 2.10% QoQ SAAR
Real GDP growth is 2.10% QoQ SAAR and 2.68% YoY.
Core CPI: 2.85% YoY; 3m trend: 4.40%
Core inflation is 2.85% YoY with a 3m annualized trend of 4.40% (momentum gap 1.55 ppts).
Unemployment: 4.2%; claims 4wma: 222,000
Unemployment rate is 4.2% (YoY change -0.10 ppts); initial claims 4wma 222,000.
Policy mid: 3.625%; gap: 0.515 ppts
Policy midpoint is 3.625% with a 30-day change of +0.000 ppts; market rate gap (2Y minus policy) is 0.515 ppts.
2s10s: 35.0 bps
The 2s10s yield spread is 35.0 bps and the curve is normal.
Things that could change our view of the economy before next week's update.
The next clear turning point is inflation, because the last PCE reading cooled but Core CPI still has a fast 3-month pace. The second key swing is the job market, because unemployment is still low and weekly layoffs are still calm, but another weak jobs stretch would change the story fast.
If CPI (Consumer Price Index, the main measure of how much prices are going up) drops again on July 14, it would back up the cooler PCE reading. That would raise the odds that borrowing costs stop feeling so high later this year.
Core CPI is 2.85% compared to the same time last year, but its 3-month pace is 4.40%. If that short-term pace stays near 4%, the Fed, the US central bank, has a strong reason to keep rates high.
If Jobless Claims rise well above the recent 222,000 four-week average, it would signal more layoffs. That would raise recession worries and could hit spending on travel, shopping, and housing.
Real GDP is still growing at 2.1% compared to last quarter, and unemployment is 4.2%. If spending data and jobs stay steady, the economy can keep growing even with high loan and mortgage rates.
If Iran-related tension pushes oil back up, gasoline and home energy bills would rise quickly. That could slow spending and make inflation harder to bring down.
The 2-year market rate sits about 0.515 percentage points above the Fed funds midpoint. That means investors still see a chance of policy moving, so one hot or cool inflation report could quickly change rate expectations.
Claims are one of the fastest reads on layoffs, and right now the labor market still looks steady at 222,000 on the four-week average.
If claims jump clearly above recent readings, recession worries rise fast. If claims stay low, it supports the view that jobs are still holding up.
This is the biggest near-term test because PCE cooled, but Core CPI still shows fast short-term price growth.
If CPI comes in much cooler than expected, rate-cut hopes grow and housing could get some relief. If it comes in hotter, markets may brace for high borrowing costs for longer.
A second weekly claims report right after CPI can show whether the jobs picture is changing or staying calm.
If claims rise for a second straight week, people may worry that weak hiring is turning into more layoffs. If claims stay near current levels, it helps keep the soft-landing view alive.
This scenario looks closest because PCE already cooled to 3.41% compared to the same time last year. One more friendly CPI report would make it much more believable, even though Core CPI's 3-month pace is still too high.
Confidence is medium because the next CPI and weekly claims reports can change the picture quickly, and there is no fresh spending report in this data set.
A look back at how the economy's signals have shifted week by week.
PCE, Personal Consumption Expenditures, the inflation measure the Fed watches most, rose 3.41% compared to the same time last year, cooler than 3.49% expected and down from 3.8% in April. War fears tied to Iran could raise oil prices, which would likely push up gasoline and heating bills. Watch the next Core CPI, CPI without food and energy, which move around a lot month to month. Another reading below 3% would show price pressure is easing.
Risk mood stayed cautious this week, even though the gap between 2-year and 10-year Treasury rates was a still-positive 31 basis points (one hundredth of a percentage point (25 bps = 0.25%)). Next, watch whether that gap keeps widening and whether stock markets stay shaky. More moves into safer bonds would signal rising worry about growth.
Market risk looks mixed: the gap between 2-year and 10-year Treasury rates was 29.0 basis points, one hundredth of a percentage point. Hopes for an Iran deal lifted stocks and pushed oil lower, which can calm markets and help lower gas prices. Watch oil prices and Middle East headlines next, because a sharp rebound would quickly raise market stress again.
Risk mood stayed cautious this week, even though the gap between 2-year and 10-year Treasury rates was 39.0 basis points (one hundredth of a percentage point (25 bps = 0.25%)). The Iran war could keep gas prices and market swings higher, which can pressure household budgets and retirement accounts. Watch energy prices and Treasury markets next. A bigger jump in oil or bond swings would signal more stress.
Risk conditions are more cautious this week, even though the 2s10s spread sits at 38.0 basis points (one hundredth of a percentage point (25 bps = 0.25%)). The Iran war has pushed oil near $100 and shaken stocks, which can raise gas costs and make markets jumpier. Watch oil prices and headlines from the Middle East. A further jump in oil would likely keep markets uneasy.
Risk conditions look mostly normal in market data, though caution is elevated, with the gap between 10-year and 2-year Treasury rates at 49.0 basis points, one hundredth of a percentage point. Fighting tied to Iran pushed oil prices higher and stocks lower, which can make markets more jumpy. Watch oil prices and bond markets next week; another sharp rise in oil would raise pressure on both inflation and markets.
