Trend watch
Weekly U.S. air passenger counts ebbed in the past 7-day period to 18.0 million. That’s consistent with the seasonal pattern, whereby traffic levels off in the two weeks following Memorial Day. Looking ahead, volume should pick up this week and peak in the third week of July.
At this point, we’re expecting it to peak just north of 20 million this summer. That would be above last summer’s 19.6 million, which is the all-time high. However, we’re keeping a keen eye on impact in summer travel due to the surge in crude oil prices in the aftermath of the Iran War.
Meanwhile, as we show on slide 7 (available to clients in the full report), U.S. gasoline and diesel prices appear to have peaked. That said, gasoline prices are still up more than 33% from a year ago.
Our take
Don’t look now, but the U.S. economy appears to be powering through the uncertainty caused by the Iran War. The most recent labor market data illustrates continued resilience. The U.S. recorded its strongest three-month stretch of job gains since 2024, underscoring sustained hiring momentum. Gains in May were led by restaurants and local governments, while the unemployment rate held steady for three straight months. This combination suggests that labor demand remains healthy, even as the pace of expansion stabilizes. It has been reinforced by the continuous slide in the number of workers receiving unemployment benefits, which dropped 6.5% thus far this year.
Activity in the manufacturing sector also showed notable improvement. The ISM manufacturing index climbed to a four-year high in May, signaling a meaningful rebound in production and new orders. Importantly, price pressures within the sector eased, suggesting that improving supply conditions may be helping to moderate input costs. Overall, the manufacturing dashboard reflects broad-based strength, with key components pointing to solid momentum.
The services sector, which represents the largest share of the economy, also moved higher in May following an April slowdown. ISM services activity improved, with subcomponents indicating continued expansion across demand and employment measures. However, prices in the services sector continued to rise, highlighting an ongoing source of inflation pressure. Taken together, the data suggest an economy that is regaining momentum, though with a mixed inflation backdrop across sectors.
Other recent data also point to a modest easing in inflation pressures alongside a steady pickup in economic activity. U.S. gasoline prices appear to have peaked in late May, offering some relief to consumers after a period of upward pressure. While energy costs remain an important driver of headline inflation, this recent stabilization could help temper near-term price concerns and support household purchasing power.
Bottom line
The U.S. economy appears to be demonstrating resilience despite geopolitical uncertainty. The most recent evidence has been strong monthly job gains, a steady unemployment rate, and declining unemployment claims. Together those signal healthy labor demand. Manufacturing and services activity both improved in May, pointing to renewed economic momentum, although inflation dynamics remain mixed as goods prices ease while service sector pressures persist. Broader data suggest moderating inflation alongside steady growth, with stabilizing energy prices offering some near-term relief to consumers and supporting purchasing power.
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