Labor Market Remains Stable Amid Steady Consumer Spending and Easing Wholesale Inflation

Matthew Rubin Chief Investment Officer

 

1. Initial unemployment claims fell well below expectations last week, continuing a pullback from elevated spring levels and signaling a stable, low-layoff labor market.
2. Retail sales rose at a slower pace in June as falling pump prices reduced gasoline spending, though underlying demand in autos and electronics remained firm.
3. June producer price data suggested easing inflation at the wholesale level, as lower energy costs pushed goods prices down and limited core inflation pressures.

 

1. Jobless Claims Retreat as Labor Market Holds Steady

Initial jobless claims declined last week, coming in well below expectations. The Labor Department reported 208,000 new unemployment filings for the week ending July 11, down 8,000 from the prior week’s revised level and below economists’ forecast of 217,000.¹

The reading extends a gradual pullback from elevated claim levels that persisted from late May through mid-June.¹ Current filings remain consistent with a labor market characterized by limited layoff activity.

Continuing claims, which reflect the broader pool of workers actively receiving unemployment benefits, fell 16,000 to 1.805 million for the week ending July 4.¹ The decline reinforced the view that job losses are not accumulating broadly.

The Federal Reserve’s latest regional business conditions survey, released last week, noted that net employment increased in early July, with most districts reporting modest gains or little to no change.²

2. Retail Sales Growth Eases as Gasoline Spending Pulls Back

Retail sales increased 0.2% in June to $768.6 billion, a meaningful step down from the 1.0% gain recorded in May.³

The deceleration was largely concentrated in gasoline. A Middle East ceasefire agreement helped push oil prices lower, reducing pump prices and the total amount consumers spent filling their tanks.³

Outside of gasoline, consumer spending remained resilient. Sales at motor vehicle and parts dealers rose 1.9% from the prior month, while electronics and appliance store sales gained 0.8%.³

Overall, consumer spending has held up through a period of persistent supply disruptions. ³ June’s moderation appears tied to falling energy prices rather than a broad pullback in demand across categories.

3. Wholesale Price Inflation Retreats in June

Wholesale price inflation moderated last week with the release of the June Producer Price Index (PPI) report. The PPI measures price changes that producers receive for goods and services before they reach consumers. Headline PPI rose 5.5% on an annual basis in June, down from 6.0% in May, while declining 0.3% on a monthly basis.⁴

Goods prices fell 1.4% for the month, driven primarily by lower energy costs.⁴ Inflationary pressures also eased across other categories. Core PPI, which excludes food and energy, rose just 0.2%, below the anticipated 0.4% gain.⁴

The PPI data followed a softer consumer price report released earlier in the week.⁵ Together, the two readings suggest that the pickup in headline inflation since early 2026 has remained concentrated in energy-related categories rather than broadening across the economy. As a result, bond markets are continue to expect the Federal Reserve to leave interest rates unchanged at its July 29^th meeting.⁶

Looking Ahead

1. Initial Jobless Claims – Thursday, July 24^th
2. S&P Global Flash PMI – Friday, July 25^th
3. New Home Sales – Friday, July 25^th

Why It Matters

Thursday’s claims data will test whether last week’s labor market stability holds. Friday’s Flash PMI offers an early July read on business activity across manufacturing and services, while new home sales will indicate whether easing mortgage rates are beginning to move buyers off the sidelines.

For the period ending 7/17/26.
* Small-cap stocks are represented by the Russell 2000^® Index. International stocks are represented by the MSCI EAFE. Bonds are represented by the Bloomberg US Aggregate Bond Index. Oil is represented by WTI Oil (West Texas Intermediate Oil), a benchmark for light, sweet crude oil and a primary measure for pricing oil contracts and futures in the U.S.

Sources
¹ U.S. Department of Labor, Employment and Training Administration, Unemployment Insurance Weekly Claims News Release, July 16, 2026
² Federal Reserve Board of Governors, Beige Book: Summary of Commentary on Current Economic Conditions, July 2026
³ U.S. Census Bureau, Advance Monthly Sales for Retail and Food Services, July 2026
⁴ U.S. Bureau of Labor Statistics, Producer Price Indexes News Release, July 2026
⁵ U.S. Bureau of Labor Statistics, Consumer Price Index News Release, July 2026
⁶ CME Group, FedWatch Tool, July 2026

Disclosures

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Any opinions expressed here are those of the authors, and such statements or opinions do not necessarily represent the opinions of Cary Street Partners. These are statements of judgment as of a certain date and are subject to future change without notice. Future predictions are subject to certain risks and uncertainties, which could cause actual results to differ from those currently anticipated or projected.
These materials are furnished for informational and illustrative purposes only, to provide investors with an update on financial market conditions. The description of certain aspects of the market herein is a condensed summary only. Materials have been compiled from sources believed to be reliable; however, Cary Street Partners does not guarantee the accuracy or completeness of the information presented. Such information is not intended to be complete or to constitute all the information necessary to evaluate adequately the consequences of investing in any securities, financial instruments, or strategies described herein.
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We undertake no duty or obligation to publicly update or revise the information contained in these materials. In addition, information related to past performance, while helpful as an evaluative tool, is not necessarily indicative of future results, the achievement of which cannot be assured. You should not view the past performance of securities, or information about the market, as indicative of future results.
A Composite PMI is a single index that tracks economic activity by combining the performance of both the manufacturing and services sectors, providing a comprehensive overview of overall business conditions.
Nothing contained herein should be considered a solicitation to purchase or sell any specific securities or investment-related services. It should not be assumed that any of the securities transactions or holdings discussed were, or will prove to be, profitable.
The Consumer Price Index (CPI) measures the monthly change in prices paid by U.S. consumers. The Bureau of Labor Statistics (BLS) calculates the CPI as a weighted average of prices for a basket of goods and services representative of aggregate U.S. consumer spending. The CPI is a measure of inflation and deflation. The CPI report uses a different survey methodology, price samples, and index weights than the producer price index (PPI).
Additional Disclosures: International and Foreign Securities, Fixed Income Investments, the Consumer Price Index, the Producer Price Index.
Comparative Index Descriptions: The Standard & Poor’s (S&P) 500 Index, The Russell 2000^® Index, The NASDAQ Composite Index, The MSCI EAFE Index, Dow Jones Industrial Average^® (Dow Jones or DJIA), The Bloomberg Barclays US Aggregate Bond Index (US Agg Bond), The CBOE Volatility Index (VIX). CSP2026001_28