The U.S. economy entered 2026 carrying meaningful momentum. ISM manufacturing registered its second consecutive month of expansion in February, after snapping a nearly yearlong streak of contraction. January payrolls surprised to the upside at 130,000 jobs added, doubling the consensus estimate of 65,000. This helped push the three-month average back into positive territory at 73,000, while the unemployment rate ticked down to 4.3%. At the same time employment data was improving, headline Consumer Price Index (CPI) continued its downward trajectory, falling to 2.4% year over year. While fourth-quarter GDP was nearly half of the expected value at 1.4% annualized, much of the deceleration can be attributed to the lingering effects of the government shutdown, which distorted data collection and economic activity. Looking ahead, consumer spending should receive a material boost from provisions in the One, Big, Beautiful Bill Act as larger tax refunds begin injecting real dollars into household wallets.
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