Weekly Update 3/27/2026: US Employment Indicators Remain Stable While Inflation Concerns Mount

• Accenture announced an investment in DaVinci Commerce, a leader in agentic AI-powered commerce
• Alphabet researchers tout a new compression technique that could reduce the amount of memory needed for artificial intelligence workloads called TurboQuant
• RTX wins new defense contracts worth approximately $1 billion  

Domestic Economic News  

In terms of the economy, the impact of the conflict with Iran is being felt in a variety of ways. We are seeing an impact here in the US in certain areas, the most obvious being the price at the pump when we fill up, but it has also sent interest rates higher. US mortgage rates climbed for a third straight week, pushing home-financing costs to the highest since level October and dealing a blow to both purchasing and refinancing activity. The contract rate on a 30-year mortgage rose 13 basis points to 6.43% in the week ended March 20, according to Mortgage Bankers Association data released Wednesday. In the last three weeks, the rate has climbed 34 basis points, the most since November 2024. The group’s index of mortgage applications for home purchases fell 5.4% last week, the biggest drop since January. Refinancing applications tumbled another 14.6% after a steeper decline in the prior week. The pickup in home-financing costs and slowdown in mortgage activity illustrates a widening economic toll from the war in the Middle East. Mortgage rates are tied to movements in the US Treasury market, and the yield on the 10-year note has spiraled higher as the conflict stokes concerns about an oil-driven inflation resurgence. Higher borrowing costs represent a headwind for the long-suffering housing market as it heads into the crucial spring selling season. Builders had already been employing incentives and cutting prices to help drum up demand and reduce inventory. The MBA survey, which has been conducted weekly since 1990, uses responses from mortgage bankers, commercial banks and thrifts. The data cover more than 75% of all retail residential mortgage applications in the US.

The cost of imports into the US jumped in February by the most in nearly four years, reflecting a broad pickup in prices even before the war in the Middle East. Import prices increased 1.3% from the prior month, according to Bureau of Labor Statistics data released Wednesday, boosted in part by higher prices for petroleum and natural gas. Excluding petroleum, import costs advanced 1.2%, the most since January 2022 and driven by a record monthly increase in capital goods costs as well as a pickup in prices of consumer merchandise excluding automobiles. Export prices also surged, rising 1.5% in February, the most since May 2022. The acceleration in import prices underscores a growing risk of a resurgence in inflation as companies face higher energy costs tied to the Iran war. US importers are also contending with higher duties set in place by the Trump administration. Tariffs are not included in the government’s import price data. “Given inflation momentum and the Mideast conflict’s anticipated impacts, price pressures will turn higher before they turn lower,” Oren Klachkin, a financial markets economist at Nationwide, said in a note. “We look for the conflict to exert upward pressure on energy and food prices, and for its impact to seep into core prices.” Compared with February 2025, the import price index excluding petroleum climbed 2.8% — the most since October 2022 and suggesting the tariff burden is falling primarily on US importers.  

Meanwhile, the decline in the value of the US dollar since early last year risks eventually making the cost of foreign-made goods more expensive for domestic importers. A cheaper dollar, if sustained, could also underpin demand for US-made goods. The latest figures showed prices of imported capital goods climbed 1.3% from a month earlier, the largest increase in monthly data back to 1988. Higher prices for computers, peripherals, semiconductors as well as industrial and service machinery powered the advance. Prices of imports from Taiwan rose 1.2% in February. Costs of consumer goods excluding automobiles rose 0.5%, fueled by coins, gems, jewelry and collectibles. Imported autos and parts prices also edged higher. Prices of goods originating in China rose the most in nearly four years. They also climbed from the European Union and Canada.

On a more positive note, recurring applications for US unemployment benefits fell to the lowest level in almost two years, indicating ongoing stability in the labor market despite fresh economic headwinds. Continuing claims, a proxy for the number of people receiving benefits, fell by 32,000 to 1.819 million in the week ended March 14, the lowest since May 2024, according to Labor Department data released Thursday. Initial claims increased by 5,000 last week, to 210,000. Filings have remained subdued despite high-profile companies such as Paramount Skydance Corp.’s CBS News and Meta Platforms Inc. announcing job cuts. Many economists have downgraded their forecasts for the US economy this year and boosted projections for unemployment following a surge in oil prices sparked by the Iran war. But initial claims are settling near some of the lowest levels seen in the last year, signaling the labor market continues to be in a low-firing environment.

Interest Rate Insight and the Fed

Federal Reserve Bank of Chicago President Austan Goolsbee said he could envision the US central bank needing to raise interest rates, or returning to rate cuts, depending on how the war in the Middle East plays out. “We could be back to the environment with multiple rate cuts for the year if inflation behaves,” Goolsbee said Monday in a CNBC interview. “I could see circumstances where we would need to raise rates if it was going a different way, and inflation was getting out of control.” Fed officials kept interest rates unchanged last week, and continued to signal one rate cut this year despite uncertainty created by the Iran war. Since the meeting, investors have rushed to price in higher rates as inflation fears have built in financial markets, though Treasuries rallied Monday after President Donald Trump said he would postpone strikes on Iranian energy infrastructure. Fed Chair Jerome Powell told reporters after last week’s decision that rate hikes weren’t the base case for a “vast majority” of officials. He added it was too soon to gauge the scope and duration of the conflict in the Middle East, and its impact on inflation and growth. Goolsbee, who does not hold a vote on rate decisions this year, said most economic indicators show the Fed is “closer to full employment than we are on the target on the inflation side, so at the moment, I think the inflation has got to be a little ahead of the employment” in the central bank’s calculus. The Chicago Fed chief highlighted the impact of higher gas prices on consumer expectations for inflation, which he said remain consistent with the central bank’s 2% goal so far. An oil shock can hit economic growth while spurring inflation, which is the “most uncomfortable thing for a central bank to have to face” because “there’s not an obvious playbook,” he said.  

Fed Governor Stephen Miran, speaking Monday on Bloomberg Television, acknowledged that oil prices that remain high and could eventually bleed into other goods and services, but rejected the notion that policymakers need to consider rate hikes. “We should wait for all the information to come in before really changing our outlook,” Miran said on Bloomberg Surveillance. “And I think it’s just still premature to have a clear view about what this is going to look like as you look 12 months out.” Miran said he continued to expect four rate cuts this year. Federal Reserve Governor Stephen Miran said the central bank shouldn’t set policy based on short-term considerations related to the US and Israel’s war in Iran. “We should wait for all the information to come in before really changing our outlook,” Miran said Monday in an interview on Bloomberg Surveillance. The conflict in the Middle East has sent oil prices sharply higher, threatening to both put upward pressure on inflation and weigh on economic growth and the labor market. The Fed held its benchmark interest rate steady at its meeting last week for a second consecutive time, as policymakers acknowledged heightened economic uncertainty due to the war and as Fed Chair Jerome Powell emphasized the need for officials to see more progress on lowering inflation. Miran dissented against the decision, preferring a quarter-point reduction instead. While acknowledging a risk that oil prices that remain high could eventually bleed into other goods and services, Miran said his pre-war outlook for four rate cuts this year remains intact.

Impactful International News 

The European Central Bank will act decisively and swiftly if the current surge in energy costs risks a broader bout of inflation, though for now it’s still assessing the shock caused by the Iran war, according to President Christine Lagarde. While the situation is different from 2022, when Russia’s invasion of Ukraine ultimately sent consumer-price growth into double digits, there are “reasons for vigilance,” Lagarde said Wednesday in a speech. “We will not act before we have sufficient information on the size and persistence of the shock and its propagation,” she told the ECB Watchers Conference in Frankfurt. “But we will not be paralyzed by hesitation: our commitment to delivering 2% inflation over the medium term is unconditional.” Soaring energy costs brought on by the conflict in the Middle East are stoking fears of another inflation spike like the one four years ago. Bundesbank chief Joachim Nagel and others have signaled borrowing costs may need to be lifted as soon as April if the price outlook sours further. “We are prepared, if appropriate, to make changes to our policy at any meeting,” Lagarde said. Speaking directly after Lagarde, Chief Economist Philip Lane reiterated the ECB’s determination to be agile in responding to reactions by businesses and consumers to the Iran war. “We mean it when we say we’re data-dependent,” he said, adding that “lots of data” will be arriving in the coming weeks and months. “April, June — ongoing,” he said. Lane also argued that the ECB doesn’t need to know where exactly policy will end up before it starts to act. “It’s a very good idea for us to focus on each meeting to make the immediate decision,” he said. “To make the immediate decision, you don’t need to know the whole — or take a stand about what is going to be the future rate path.”  

In her speech, Lagarde laid out three possible ECB responses to the current situation. For a limited and short-lived energy shock, “the classical prescription of looking through should apply. Transmission lags mean that a monetary-policy response would arrive too late and risk being counterproductive.” For a large but not-too-persistent inflation overshoot, “some measured adjustment of policy could be warranted. The optimal response to such a deviation is smaller when the cause is exogenous supply disruptions rather than strong demand, but it is not necessarily zero.” For a significant and persistent deviation from the inflation target, “the response must be appropriately forceful or persistent. Otherwise, self-reinforcing mechanisms would kick in and the risk of de-anchoring would become acute.” Inflation that had been at risk of undershooting 2% just a few weeks ago now looks set to significantly surpass that target in the months ahead. Last week’s ECB’s baseline scenario foresees consumer prices advancing 2.6% this year. In an extreme outcome where disruptions to energy supplies persist, inflation would hit 6.3%. Governing Council member Olli Rehn — speaking at the same event — urged caution in reacting to immediate price shocks triggered by the Iran war, arguing that the implications over time aren’t straightforward. “As a medium-term-oriented central bank, we keep a cool head and a broad perspective,” Rehn said. “What matters most is not the immediate increase in inflation, but whether the shock has persistent effects on inflation and the general price level.”

Costlier oil and gas could also derail Europe’s economy. Data on Tuesday showed private-sector activity in the currency bloc rising at the slowest pace since last May. Lagarde said historical evidence suggests the risk of broad pass-through from energy prices “is the exception rather than the rule” in the euro area. But that picture may change due to the intensity and duration of the shock as well as its propagation, which depends on the macroeconomic environment. “It is essential to identify as early as possible when the shock is at risk of broadening,” she said, stressing the ECB’s “agility.” The signs at the moment aren’t good, with Lagarde cautioning that with attacks on the energy infrastructure in the Gulf region “the likelihood of a quick normalization is diminishing.” That could mean firms and workers react faster this time than four years ago, when the ECB was heavily criticized for underestimating the dangers and acting even later than many peers. The central bank is “ready to respond to any eventuality,” Governing Council member Alvaro Santos Pereira said in Lisbon, adding that the policy path will depend on how the conflict — as well as inflation — evolve over time. “Speculating about interest rates now would be more than premature.”  

Company Events

SGK writes additional weekly commentary for clients of the firm detailing recent events and earnings of core equity holdings.

Please remember that past performance is no guarantee of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Steigerwald, Gordon & Koch, Inc. [“SGK”]), or any non-investment related content, made reference to directly or indirectly in this blog will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this blog serves as the receipt of, or as a substitute for, personalized investment advice from SGK. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. SGK is neither a law firm nor a certified public accounting firm and no portion of the blog content should be construed as legal or accounting advice. A copy of the SGK’s current written disclosure Brochure discussing our advisory services and fees is available for review upon request or at www.sgkwealthadvisors.com. Please Note: SGK does not make any representations or warranties as to the accuracy, timeliness, suitability, completeness, or relevance of any information prepared by any unaffiliated third party, whether linked to SGK’s web site or blog or incorporated herein, and takes no responsibility for any such content. All such information is provided solely for convenience purposes only and all users thereof should be guided accordingly. Please Remember: If you are a SGK client, please contact SGK, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services, or if you would like to impose, add, or to modify any reasonable restrictions to our investment advisory services. Unless, and until, you notify us, in writing, to the contrary, we shall continue to provide services as we do currently. Please Also Remember to advise us if you have not been receiving account statements (at least quarterly) from the account custodian.