Weekly Global Economic Update

Week of April 06, 2026

• US job market and other economic data
• China’s economy shows resilience amid the crisis
• Eurozone inflation accelerates

US job market and other economic data

• The US government’s jobs report for March 2026 was stronger than expected, with payroll employment up by 178,000 from the previous month. Yet, one month does not make a trend: The March number was up only 260,000 from a year earlier.  Employment has bounced around for many months. Although it increased sharply in March, it fell sharply in February—down 133,000 from the previous month. Thus, it is too early to know whether the strong job growth in March represents the start of a new trend. In any event, let’s look at the details:
  
  • The US government produces a monthly employment report based on two surveys: a survey of establishments and a survey of households. The survey of establishments found that, in March, nonfarm payroll employment was up 178,000 from the previous month. Still, payroll employment was up only 95,000 jobs since July of last year. Although March growth was very strong, there was no discernible positive trend over the last several months.
    
  • By industry, there were 26,000 new jobs in construction, 15,000 new jobs in manufacturing, and 21,000 new jobs in transportation and warehousing. At the same time, there was a loss of 15,000 jobs in financial services, only 2,000 new jobs in professional and business services, and a loss of 3,000 jobs in the information sector. The only industries with substantial job growth were health care and social assistance (up by 89,900 jobs) and leisure and hospitality (up by 44,000 jobs). Notably, employment in health care and social assistance was up 680,500 in the past 12 months, while overall employment was up only 260,000—which implies that, excluding health care and social assistance, employment fell by 420,500 jobs in the past 12 months.

Two questions arise: first, why was job growth so feeble in 2025? Second, why did it rebound strongly in March? As to the first question, there were several possible factors.  Restrictive immigration policy likely drove the reduction in labor force growth. In addition, companies may have sought to offset the impact of tariffs by cutting costs, including labor costs.  Regarding the second question, it cannot be easily answered. One month does not make a trend, and job growth has alternated between positive and negative for the past few months. Thus, for now, the data is consistent, with an underlying trend implying weakness in the job market.

Meanwhile, the establishment survey also provided data on wage growth in March.  Average hourly earnings of all private sector workers were up 3.5% in March versus a year earlier—the slowest pace of earnings growth since May 2021. The deceleration of wage growth likely reflects weakening demand for labor. Still, wages are rising faster than prices, thereby providing workers with an increase in purchasing power.

Finally, the households survey, which includes measurement of self-employment, found that, in March, there was a sharp decline in labor-force participation. As a result, the participation rate fell. Moreover, the household survey reported an actual decline in employment. Yet, because this decline was smaller than the decline in the labor force, the unemployment rate fell from 4.4% in February to 4.3% in March. Overall, the household survey indicates job-market weakness.

The reaction of the financial market to the employment report was largely overshadowed by news from the Middle East. Crude oil prices of crude oil soared as investors worried about the potential duration and intensity of the conflict in the Middle East. Equity prices fell modestly, while bond yields saw modest increases.

• The start of the conflict in the Middle East appears to have had a negative impact on service industry activity in the United States, according to the latest purchasing manager’s index (PMI) from S&P Global. PMIs are forward-looking indicators meant to signal the direction of activity in the services sector. They are based on subindices such as output, new orders, export orders, employment, pricing, inventories, and sentiment.  A reading above 50 indicates growing activity. The higher the number, the faster the growth.

The PMI for the US services industry fell from 51.7 in February to 49.8 in March—the first reading suggesting declining activity since January 2023. S&P Global commented that “the PMI survey data show the US economy buckling under the strain of rising prices and intensifying uncertainty, as the war in the Middle East exacerbates existing concerns regarding other policy decisions in recent months, notably with respect to tariffs.” It added that, with respect to the decline in services activity, “worst hit is consumer-facing service sectors where, barring the pandemic lockdowns, the downturn reported in March was among the steepest recorded since data were first available in 2009.”

Finally, it noted that “key to the deteriorating growth trend is a pull-back in spending amid worsening affordability, with costs and selling prices surging higher in March amid spiking energy prices. The survey data remains broadly consistent, with consumer price inflation accelerating close to 4%.” Consistent with that view, the Organisation for Economic Co-operation and Development has predicted that US inflation will hit 4% in 2026.

• The US government released data on retail sales in February. The results were fairly good, but this was prior to the start of the conflict in the Middle East. Given the surge in gasoline prices since the conflict began, it is likely that the data for March and April will look quite different. In any event, the government reported that, in February, retail sales were up 0.6% from January and were up 3.7% from a year earlier. On a monthly basis, sales were up 1.2% for automotive dealers, 2.3% for drugstores, 2% for clothing stores, 0.7% for non-store retailers, and up 0.9% for gas stations. The last number on the list will likely be much higher next month.

• The Conference Board reports that, in March, US consumer confidence increased slightly from February, despite the start of the conflict in the Middle East. However, consumer expectations for inflation increased notably.

Specifically, the overall confidence index increased from 91.0 in February to 91.8 in March—a modest gain. The present situation index increased by 4.6 points while the expectations index fell by 1.7 points. Thus, US consumers seem to be confident in their existing circumstances but worried about the future. The overall index reflects these two diverging indices. However, the overall index has been on a downward path for the last four years, reflecting high borrowing costs, high food prices, and concerns about US tariffs in the past year.

Interestingly, the survey found that the most optimistic cohort tended to be consumers under the age of 35 while the least optimistic tended to be those above 55. By income, only those consumers with incomes between US$25,000 and US$39,999 and those with incomes above US$125,000 were more optimistic. Everyone else was less optimistic.  Finally, by politics, Republicans tended to be optimistic while independents and Democrats tended to be pessimistic.

Meanwhile, the survey also found that consumer expectations for inflation in the next 12 months increased sharply in March to the highest level since August 2025. Recall that, in August, consumers were worried about imminent tariff announcements. Now consumers are incorporating the Middle East situation into their expectations. In addition, an increasing share of consumers now anticipates higher interest rates while a decreasing share expects higher equity prices.

• The US government released its latest job openings and labor turnover survey for February 2026. The data indicates a further weakening of the US job market. The number of job openings fell by 5% from January to February, while the number of people hired fell 9.3% in the same period. The job opening rate (the share of available jobs that are not filled) fell to 4.2% in March—roughly similar to the levels seen in the past year.

By industry, the highest job opening rate was 5.3% in professional and business services, followed by 5.2% for accommodation and food services, and 5.1% for health care and social assistance. The latter two are industries that employ a large number of recent immigrants. The lowest job opening rates were in wholesale trade (2.3%), private education (2.3%), construction (2.4%), and real estate (2.6%).

China’s economy shows resilience amid the crisis

• China’s manufacturing activity grew in March: This was unexpected given the disruption from the Middle East. This is according to the government’s manufacturing PMI. The PMI is a forward-looking indicator meant to signal the direction of activity in the manufacturing industry. It is based on such subindices as output, new orders, export orders, employment, pricing, inventories, and sentiment. A reading above 50 indicates growing activity. The higher the number, the faster the growth.

The manufacturing PMI published by China’s National Bureau of Statistics increased from 49.0 in February to 50.4 in March. While relatively low and indicative of slow growth, it was a positive surprise in that some observers anticipated a negative impact from the conflict in the Middle East. Instead, activity rose modestly, and does not appear to be impeded by the rise in energy prices or the disruption of shipping routes from the Middle East. On the other hand, if the crisis continues, it could have a negative impact on the ability of Chinese manufacturers to produce their wares. Such disparate industries as food, semiconductors, automobiles, steel, and chemicals could be affected by the shortage of commodities and goods traversing the Strait of Hormuz.

• In recent weeks, we have seen a sharp increase in the yields on bonds issued by many major countries including the United States, those of Western Europe, and Japan. This likely reflected investor concern about rising inflation, potential tightening of monetary policy, and rising budget deficits. However, the one exception is China, where the yield on the 10-year bond has fallen modestly since the conflict in the Middle East began.

There are several reasons for China’s exceptionalism. First, China is far less dependent on imported oil than many other countries, although it does import a large volume from the Middle East. But it has substantial reserves of oil and substantial ability to shift electricity generation toward domestically mined coal. Plus, it uses a huge number of electric vehicles. Second, China has very low inflation. Thus, it can afford to absorb a bit more inflation without having to tighten monetary policy. In fact, it is possible that the central bank will choose to loosen monetary policy despite the crisis. Third, China’s budget deficit is relatively modest. Moreover, unlike some other countries, it is not likely that China will engage in fiscal measures to protect consumers from higher energy prices. Thus, the deficit is not likely to be affected by this crisis.

China’s very low borrowing costs reflect both a high level of domestic saving and increasing attractiveness of Chinese debt on the part of global investors. Meanwhile, many investors have shown wariness toward debt issued by the United States, European economies, and Japan. In each country, there is concern about rising inflation and about potential tightening of monetary policy. And, in each country, there is concern about fiscal probity.

Eurozone inflation accelerates

• In the 20-member eurozone, consumer price inflation surged in March, largely due to the sharp increase in energy prices following the start of the conflict in the Middle East.  Consumer prices were up 2.5% in March from a year earlier—the biggest increase since January 2025. Prices were up 1.2% from the previous month—the biggest gain since October 2022. Energy prices were up 4.9% in March versus a year earlier and were up 6.8% from the previous year.

When energy and food prices were excluded, core prices were up 2.3% in March versus a year earlier—lower than the 2.4% recorded in February and roughly unchanged for much of last year. Thus, underlying inflation has remained relatively stable. Yet, this could change in the months to come if energy prices remain elevated, thereby influencing the cost of producing other goods and services.

As such, investors are now expecting acceleration in core inflation, which in turn, would likely lead to a shift in monetary policy on the part of the European Central Bank (ECB).  In fact, the futures market is pricing a strong likelihood that the ECB will raise the benchmark interest rate one or two times before the end of 2026. ECB President Christine Lagarde recently said that, if inflation rises in the eurozone “significantly and persistently” above the ECB’s target, it might be necessary to raise the benchmark interest rate. On the other hand, if a rise in inflation is seen as temporary, and if there is risk to economic growth, the ECB could decide to leave rates unchanged.

Meanwhile, inflation varied by country. The European Commission reports that, in March, consumer prices were up from a year earlier by 2.8% in Germany, 1.9% in France, 1.5% in Italy, 3.3% in Spain, 2.6% in the Netherlands, and 2% in Belgium. For the ECB, this disparity creates a challenge for monetary policy decision-making.