Fresh US economic data released this week shows an economy that keeps surprising to the upside, with jobless claims dropping to just 197,000, retail sales beating expectations, and business activity expanding at its fastest pace in more than five years.
Labour market stays robust
Initial unemployment claims for the week of September 19 fell to 197,000, below the market forecast of 201,000. The four-week average also fell, to 202,250, indicating the labour market remains strong and recession risks have receded for the time being.
Consumers and business hold firm
August retail sales rose a stronger-than-expected 1.2% from July and 6.0% from a year ago. The September private-sector PMI showed the highest growth in over five years for both services and manufacturing, reaffirming the strength of the real economy. The housing market also showed some resilience, with new-home sales increasing 6.4% in August — although the median price of a new home was 5.8% lower than a year ago.
The catch: stronger data is keeping bond yields elevated. The 10-year Treasury yield climbed above 5.2%, its highest level since 2007, while mortgage rates moved back above 7%. The market has begun pricing in roughly a 64% probability of an additional Fed rate hike at the October FOMC meeting and about 48% for December.
Markets and the week ahead
Despite higher borrowing costs, stocks moved higher — investors appear to be treating much of the rise in rates as a reflection of stronger growth rather than just inflation. The S&P 500 closed up 0.51% at 7,743.41 on Friday, the Nasdaq gained 0.48%, and WTI crude settled at $92.41.
No major CPI or PCE inflation report was released this week, making Wednesday's PCE price index report — the Fed's preferred inflation gauge — particularly important for the direction of interest rates in the weeks ahead.
Sources:
Rodeo Realty: Economic Update | Week Ending September 26, 2026
Summa Money: 2026 US Economic Outlook Updated September 26