US Economic Data Shows Slowdown, Stubborn Inflation
Recent data indicates a challenging environment for the Federal Reserve, with Q4 real GDP growth coming in at 1.4%, well below the 3% expected. Concurrently, core PCE inflation rose to 3.0% year-over-year, its highest level since early 2024. This combination of slowing growth and persistent inflation has fueled market discussions about a potential stagflationary period.
- The U.S. unemployment rate ticked down to 4.3% in January 2026. However, California's unemployment rate was notably higher at 5.5% as of December 2025, making it one of the highest in the nation. - In its January 2026 meeting, the Federal Reserve held the benchmark interest rate steady at a target range of 3.50% to 3.75%. The committee was divided, with two governors, Stephen Miran and Christopher Waller, dissenting in favor of a 0.25% rate cut. - From January 2025 to January 2026, real average hourly earnings for all employees increased 1.2%, factoring in inflation. This was the result of a 0.4% increase in average hourly earnings combined with a 0.2% increase in the Consumer Price Index. - JPMorgan Chase CEO Jamie Dimon is among the financial leaders who have warned against an overly optimistic outlook, stating he "couldn't rule out" a stagflationary outcome. This sentiment has been fueled by recent data showing slowing growth alongside rising costs for businesses. - The U.S. housing market is showing signs of cooling, with J.P. Morgan Global Research forecasting national home prices to stall with 0% growth in 2026. While sales of existing homes saw a bump at the end of 2025, the market faces headwinds from elevated mortgage rates. - While job growth appeared robust initially, revised figures from the Bureau of Labor Statistics showed that only 181,000 jobs were added in all of 2025, a significant downward revision from the original estimate of 584,000. - The technology sector, a key driver of California's economy, has had a mixed start to the year. The US 100 Tech Index, after hitting a 12-week high in late January 2026, has since retreated, reaching a 6-week low in early February. - The Federal Reserve's own economic projections from late 2025 signaled expectations for higher unemployment and inflation. The forecast for unemployment was raised to 4.5% for 2026, with core inflation expected to hit 3.1% in 2025 before easing.
