According to our forecasts, GDP growth will exceed 2.0% this year and next despite the slowdown in the labor market. While on the growth side, risks show an upside bias, the most important risk at present, especially for monetary policy decisions, is the persistent closure of the Strait of Hormuz by Iran. Indeed, five weeks after the outbreak of the conflict in the Middle East, the closure of the corridor through which 20% of global oil trade passes has begun to impact consumer prices. This slowdown in employment confirms a lower dynamism in the labor market. And there is no clear end in sight to this situation anytime soon. In the United States, the average price of gasoline exceeded $4 per gallon for the first time since 2022. Likewise, the revisions of the two previous months (upward in January and downward in February) practically balanced out. On the other hand, in detail, from March 2025 to March 2026, the US economy created a total of only 327,000 jobs, a figure considerably lower than the million generated twelve months earlier. Indeed, inflation has become the main macroeconomic risk. This shock has intensified short-term inflationary pressures, generating concern about the trajectory of prices and also about the decisions of the Federal Reserve. It will be crucial to observe a correction once the geopolitical conflict is resolved. Even above the slowdown that could be generated by the weakness of employment. March's monthly inflation could be at 0.7% or more, driven mainly by a near 35% increase in gasoline prices in the United States. This increase has led us to raise our overall inflation expectation for 2026 from 2.7% to 3.0% annually, while our estimate for underlying inflation is at 2.8% annually. Even though we anticipate a eventual fall in oil prices at some point in the second quarter, we do not expect them to return to the $60 per barrel levels recorded at the beginning of the year. Likewise, the unemployment rate fell from 4.4% to 4.3%. The US non-farm payrolls for March surprised to the upside, though with mixed signals within the figures. On the one hand, the data exceeded the median analyst consensus by around 110,000 jobs by coming in at 178,000. Additionally, although the unemployment rate decreased, this decline was explained mainly by a lower labor force participation rate. In part due to the uncertainty faced by employers in the United States in the face of a lack of clarity in the current government's economic policies, in part due to a strict migration policy that has significantly contracted the labor supply, and in part due to the replacement of certain job profiles with artificial intelligence (AI), the slowdown in employment is noticeable and will eventually impact private consumption, a variable that represents 70% of US GDP. In this context, at INVEX Analysis, we forecast that US economic growth in 2026 will be driven largely by public spending and non-residential investment, especially in the technology sector where AI predominates. The big unknown is when it will actually be resolved seriously. Despite the declines in public sector payrolls and some professional services, gains in the health, hospitality, and recreation sectors stood out.
