US Economy: Weekly Commentary – March 9, 2026

US Market Review

Rising inflation fears pushed US Treasury yields higher. Stocks declined, led by small caps. Oil surged after Strait of Hormuz disruption, boosting the dollar, while gold fell and Bitcoin rose.

US Treasury yields rose last week, with long-term bonds outperforming shorter maturities, which lagged behind. The increase in yields reflects growing concerns about a renewed wave of inflation. Energy prices have risen sharply, directly affecting consumers and adding further strain to an already fragile economic environment.

US equity markets ended the week lower. Micro-cap stocks declined 3.10%, small caps fell 4.00%, and large caps dropped 2.02%. The Nasdaq posted the smallest decline (-1.27%), benefiting from relative safe-haven flows into large-cap companies. The “Magnificent Seven” slipped 0.60%. On a sector basis, materials were the worst performer, falling more than 6.5%, while energy was the only sector to post gains, rising 1.15%.

The US dollar appreciated 1.68%, marking its strongest weekly performance since October 2014. WTI crude oil surged 35.64%, its largest increase since 1990, as the conflict in the Persian Gulf effectively closed the Strait of Hormuz, one of the world’s most critical oil shipping routes. The disruption halted a significant number of oil tankers and reduced global supply, with an estimated 7–11 million barrels per day unable to reach international markets. The supply shock and uncertainty surrounding when the route will reopen have intensified fears of potential shortages. Meanwhile, gold declined 2.18%, while Bitcoin gained 4.50%.

US Market Views Synopsis

US payrolls fell due to weather and strikes, signalling a cooling labour market. However, services and manufacturing expanded strongly, with high energy costs and risks potentially slowing growth.

US labour market data weakened in February, with non-farm payrolls falling by 92,000, though severe winter weather and strike action likely exaggerated the decline. Earlier job gains were revised down and unemployment edged up to 4.4%. Storm disruptions hit sectors such as construction, manufacturing, leisure and hospitality, while strikes reduced employment at physicians’ offices. Despite these distortions, the broader trend suggests a gradually cooling labour market, with hiring subdued and payroll growth averaging around 50,000 per month, while layoffs remain relatively low and job gains concentrated in government, leisure, hospitality, and education and healthcare. Wage growth slowed to 3.8% year on year and real household incomes are stagnating, while rising gasoline prices may further squeeze consumers. However, business activity remains strong: ISM surveys show services and manufacturing expanding, with rising orders and backlogs pointing to solid economic momentum. Even so, high energy and commodity costs and geopolitical risks could weigh on growth and delay Federal Reserve rate cuts in the near term.

Labour Market

US payrolls fell sharply in February, distorted by weather and strikes. Hiring remains weak but layoffs are low. Rising energy costs may squeeze consumers, delaying Fed cuts but potentially easing inflation later.

US job growth lost momentum in February, although temporary factors such as severe winter weather and strike action likely exaggerated the weakness in the latest data. Non-farm payrolls fell by 92,000, well below the consensus expectation for a gain of 55,000, while revisions removed a further 69,000 jobs from the previous two months. The unemployment rate edged up to 4.4% from 4.3%, and January retail sales declined 0.2% month on month. The contrast with January’s relatively strong payroll gain, likely boosted by unusually mild weather that kept construction sites open, suggests the underlying trend may lie somewhere between the two readings. February storms appear to have disrupted activity in sectors such as construction and leisure and hospitality, while strike action contributed to a sharp fall in employment at physicians’ offices. Sector details showed job losses in construction, manufacturing and hospitality, partly offset by modest gains in financial services and retail. Even allowing for these distortions, the broader picture is of a labour market that is gradually cooling, with hiring subdued and payroll growth trending near 50,000 per month, although layoffs remain relatively low. Job creation also continues to be highly concentrated, with government, leisure and hospitality, and private education and healthcare responsible for virtually all net employment gains over the past three years, while the rest of the economy has shed roughly 460,000 jobs since late 2022.

Average hourly earnings rose 3.8% year on year, though this likely reflects compositional effects as lower-paid workers were more likely to miss work during the storms. More broadly, wage growth is slowing and real household disposable incomes are stagnating. With energy prices, particularly gasoline, expected to rise in the coming weeks, consumer purchasing power could come under further pressure, creating a potential headwind for growth later in the year. While higher energy costs may keep inflation elevated in the near term and delay Federal Reserve rate cuts, the squeeze on household finances could ultimately dampen demand and ease underlying inflation pressures, leaving the door open to policy easing in the latter part of the year.

We expect the labour market to remain weak, but with inflation still elevated the Federal Reserve is unlikely to cut rates, at least in the first half of the year.

Business Activity

U.S. economic momentum strengthened early 2026. Services and manufacturing expanded. Business activity, new orders, and backlogs rose. Prices stayed high. Energy costs and geopolitical risks could slow growth.

The U.S. economy started 2026 on a strong footing, with February ISM surveys showing both services and manufacturing sectors gaining momentum. The services sector led the charge, with the ISM Services PMI climbing to 56.1, its highest level since July 2022, marking 20 months of steady expansion. Business activity jumped to 59.9 and new orders rose to 58.6, while employment in the sector edged up to 51.8. Supplier deliveries eased slightly to 53.9, inventories climbed to 56.4, and the backlog of orders reached 55.9, signalling healthy demand. Trade indicators also strengthened, with New Export Orders at 57.2 and Imports at 51.8. Fourteen of 17 industries saw growth, from Mining and Information to Accommodation and Food Services. Prices remained elevated at 63, down from January’s 66.6, offering some relief, though energy and commodity costs, including gasoline and copper, continue to bite.

Manufacturing also showed solid expansion, with the ISM Manufacturing PMI at 52.4, fuelled by gains in production (53.5), new orders (55.8), and a rising backlog (56.6). Employment and inventories remained slightly under pressure at 48.8, and the Manufacturing Prices Index surged to 70.5, reflecting higher steel, aluminium, and tariff-related costs. Growth was concentrated in Chemical Products, Machinery, Transportation Equipment, and Computer & Electronic Products. Overall, the ISM data point to GDP growth above 3, though markets remain cautious. Higher energy costs and geopolitical uncertainty, particularly around the Persian Gulf, could weigh on consumer spending and corporate investment. The Federal Reserve will likely keep a close eye on these developments as it navigates policy through the second half of the year.

We expect that the U.S. economy will maintain solid momentum through the first half of 2026, supported by strong services and manufacturing activity, though elevated energy costs and geopolitical risks could temper growth.