Jobless claims: the positive regime change continues, suggesting a lower unemployment rate ahead

 

 - by New Deal democrat

Let’s take our normal weekly look at jobless claims. As a general reminder, these are a good high frequency short leading indicator for the economy as a whole, and also somewhat noisily for the monthly unemployment rate.

In the past several months, I have highlighted what appears to be a “regime change” in claims that dates back to the middle of last year, as most weeks since then have seen claims lower than they had been a year previously.

That continued this week, as new claims declined -1,000 from an upwardly revised (by 10,000!) 210,000 last week to 209,000. The four week moving average increased 2,750 to 206,000. Continuing claims, with the typical one week lag, declined sharply, down -38,000 to 1.827 million, the lowest reading since September of 2024:

 https://fred.stlouisfed.org/graph/fredgraph.png?g=1R0cN&height=490 

The lower YoY% comparisons continued, with initial claims down -0.5%, the four week average down -3.4%, and continuing claims down -1.2%:

 https://fred.stlouisfed.org/graph/fredgraph.png?g=1R0de&height=490 

These are all positive readings for the economy. It is hard to see a downturn with so few people being laid off. Again, I caution that (1) there may be some unresolved post-pandemic seasonality in these numbers, in which case they will begin increasing in the next several weeks; and (2) they may also be impacted by immigrant labor abandoning their jobs (or worse).

Finally, the significant downturn in initial and continuing claims since early November strongly suggests that the unemployment rate, which peaked at 4.5% in November, is likely to continue to decline towards the range of 4.2% or even 4.1% in the next several months:

 https://fred.stlouisfed.org/graph/fredgraph.png?g=1R0dY&height=490 

We’ll find out the first draft of that answer next week.

Finally, an administrative note. As you all are aware, my ability to post graphs to this blog was nuked by Apple’s IOS update in December (and by all accounts, the further update this month is far more buggy). After attempting to fix this on my own, I have contacted the local Apple expert to see if they can fix it — which stinks, because I write this blog pro bono, and the fix will cost me $$. Apparently, my problem is a combination of Apple’s recent crapification combined with retaliatory crapification by Google, such that Google images refuses to recognize the “handshake” from the Apple update.

The bottom line is that one of two things is likely to happen in the next week. Either the problem will be fixed, and I will be able to post images again, or I am going to need to launch a “lifeboat” site separate from this blog for new posts. In the meantime, my readership appears to have been unaffected, so thanks to all of you for sticking with me through this time.

Regional Fed manufacturing indexes suggest rebound continued in January, with continued inflationary (tariff-related?) pressures

 

 - by New Deal democrat

Although the last federal government shutdown has been over for 2.5 months — and a new one might begin this weekend — with the exception of a few headline indicators like inflation, industrial production, and employment, most of the data is still lagging by at least one month, i.e., it has only been released through November. And some is still two or more months behind.  

That means that the many of the most current measures for sales and orders are lagging by at least one month, i.e., the most recent update was for November. And many of the others, especially having to do with sales, rents, and orders, are still lagging by two months or more. 

Which means that the most current measures of economic activity in many areas continue to be the ISM manufacturing and non-manufacturing reports, due next week; and the regional Fed banks’ manufacturing and services indexes. While certainly not perfect, in the aggregate they at least sketch on outline of where the economy has been going in the past month. 

Today let me update the regional manufacturing indexes for January. While this is only about 1/4 of all economic activity, it is the  most volatile, and generally the most leading sector.

The below chart includes, in order, NY, Philadelphia, Richmond, Kansas City, and Texas. Month over month changes are in parentheses, with the absolute values for January following. The final number is the average change and absolute number for all 5 together.

Regional Fed:     NY.           PHL.           RVA.       KC.    TX.    Avg

Headline:     (+11.4) 7.7; (+22.8) 12.6; (+1) -6; (-1) 0; (+10.1) -1.2; (+8.0) 2.8          

New Orders (+7.6) 6.6; (+9.4) 1.; (+2) -6; (0) 0; (+15.4) 11.8; (+3.5) 5.4 

Prices Paid  (-1.4) 42.8; (+3.3) 46.9 (-0.5) 7.1; (+4) 44; (+1.9 ) 37.1; (+4.1) 35.6 

Prices Rec’d (-11.0) 14.4; (+3.5) 27.8; (-0.4) 4.6; (-3) 19; (+9.7) 18.5; (+1.4) 16.9

Wages* (n/a) n/a; (n/a) n/a; (-10) 14; (n/a) n/a; (-4.3) 17.4); (-7.2) 16.0

Employment  (-16.5) -8.0; (-3.2) 9.7; (-5) -6; (+4) 0; (-0.2) 8.2; (-1.8) 0.6

____

* only 2 of the banks report this information

To summarize, the January regional Fed reports suggest that headline activity and new orders continue to improve, and at an improving pace (after a pause in December). Inflation in commoditiy prices remains widespread and even increasing (which may also reflect the weakening US), and while the prices they have received also continue to increase significantly, they are not recouping anything like their production costs. Meanwhile employment continues to be just barely positive, but wage growth continues, although at a more subdued pace.

This is of a piece with the most recent data on manufacturers new orders through November, on which I reported on Monday, and the December industrial production report from several weeks ago, both of which indicated improvement in orders and production in the manufacturing sector. It is of interest that the regional growth appears to be concentrated in Texas. Aside from that region, growth (including prices) is must more muted. As per my speculation on Monday, I suspect this has much to do with the building of AI-related data centers.  

Repeat home sales indices for November indicate continued rebalancing vs. new home prices — at a glacial pace

 

 - by New Deal democrat

For the past year, my view has been that the housing market is in recessionary territory, although that has not translated to the economy as a whole. As per usual, home sales lead house prices; and that trend continued with the Case Shiller and FHFA repeat sales house price indexes through November, released this morning. 

On a seasonally adjusted monthly basis, both indices rose 0.4%. This is the fourth straight seasonally adjusted increase, after 4-5 months of seasonally adjusted declines earlier in 2025 [Note: as per usual, FRED has not  updated this month’s FHFA readings yet]:

 https://fred.stlouisfed.org/graph/fredgraph.png?g=1QWdZ&height=490 

So it is safe to say that the downtrend in both prices indices has reversed.

But as indicated by the YoY% changes, the reversal has not in any way accelerated price increases. Rather, the November numbers for the Case Shiller Index were equivalent to those 12 months ago, while for the FHFA index, the increase was lower than last year. In other words, the YoY% increase in the Case Shiller index has leveled out at 1.4%, while that for the FHFA Index has declined to 1.7%, as shown in the last 5 years of YoY% changes linked to below:

 https://fred.stlouisfed.org/graph/fredgraph.png?g=1QWeg&height=490

 

More significantly, the long term historical view shows that the YoY gain in the FHFA Index is the lowest in the past 35 years outside of the 2007-11 housing bust and 2 months in 1993:

 https://fred.stlouisfed.org/graph/fredgraph.png?g=1QWen&height=490

But viewed in terms of affordability, existing home prices still have a long way to go. The graph linked to below shows both repeat home prices indexes vs. average nonsupervisory hourly earnings, as well as the median price for new houses, all normed to 100 as of the peak of the house prices surge in June 2022:

 https://fred.stlouisfed.org/graph/fredgraph.png?g=1QWgf&height=490 

While hourly earnings have increased slightly more than existing home prices since then, as measured by the two repeat home price indexes, and the median price of new homes has trended *downward* ever since, repeat home sales prices have still increased over 20% more than average wages since before the recession, and median new home prices have increased about 10% since then even as of the latest report.

So if we continue to see a very gradual rebalancing of the housing market between new and existing home prices, both remain much less affordable than before the pandemic, even leaving the increase in mortgage rates aside. 

I anticipate that the recessionary trend in new home construction will continue so long as affordability is only being addressed at a glacial pace. We simply need much more new and existing home inventory - i.e., a big increase in supply - to balance out the demographics-driven demand.

Stale data watch: manufacturers’ new orders soared in November — more evidence of AI data center building?

 

 - by New Deal democrat

With another likely government shutdown looming at the end of this week due to DHS funding, we are still playing catch-up from the last one that ended in November. This morning’s edition of stale data was durable goods manufacturing for November.

One of the stories of the latter part of last year is that manufacturers appear to have adjusted to the increased tariff regimen imposed by Washington. That was apparent in this morning’s data, as new orders for durable goods (blue in the graph linked to below) increased a strong 5.3% in the months, while core capital goods orders (red), which convey more signal and less noise, increased 0.7%:

 https://fred.stlouisfed.org/graph/fredgraph.png?g=1QUzm&height=490 

This is in stark contrast to new orders for consumer goods (gold), which, while they have not been decreasing, completely stalled over the past 2 years. 

Note that this is in contrasst to the ISM manufacturing index, which has been in contraction since February of last year:

 https://tradingeconomics.com/united-states/business-confidence 

Since the ISM metric is a diffusion index, meaning that the number of respondents reporting contraction have outnumbered those reporting expansion, this suggests that the increase in new orders for manufacturing is concentrated in relatively few industries. The biggest driver, per the report, appears to have been transportation equipment, although we know that the trucking industry is suffering greatly. Beyond that there is little information, but my suspicion is that we are seeing a byproduct of the big build-up in AI-related data processing centers.

Weekly Indicators for January 19 - 23 at Seeking Alpha

 

 - by New Deal democrat

My “Weekly Indicators” post is up at Seeking Alpha.

The trends from last year are continuing so far this year. On the plus side, initial jobless claims are very low while stock prices continue near all time highs, and consumer spending is on a tear. On the minus side, the US$ started sliding again, and commodities, and in particular precious metals, are soaring - a bet against the US and its economy on a global scale.

As usual, clicking over and reading will bring you up to the virtual moment as to all these trends, and bring me a penny or two for collecting, collating, and presenting the data in organized fashion.