Treasury Reports Robust Business Investment and Strong Labor Market in Q1 2026
The U.S. Treasury released economic data showing business investment surged over 10% in the first quarter of 2026 while employment growth accelerated significantly. Wage growth remains strong and outpaces inflation despite elevated energy costs from the Iran conflict.
Investment Surge
Business investment rose by over 10% in the first quarter of 2026, driven by investments in new equipment and intellectual property, and average monthly private payroll growth surged in 1Q26 to over 2.5 times above the monthly average in 2025.
Labor Market Strength
Other indicators point to stable labor markets: the layoffs rate remains stable and low, initial unemployment claims remain exceptionally low by historical standards, and the hires rate has remained remarkably stable for over two years. Workers realized strong nominal wage growth, with average hourly earnings (AHE) for all employees up 3.5% over the year ending in March 2026.
Wage and Inflation Dynamics
Because year-over-year labor productivity growth ranged between 2.0% and 2.5% throughout 2025, wage growth is almost certainly not a driver of inflationary pressures at this time—and likely is disinflationary.