Weekly Indicators for December 29 - January 2 at Seeking Alpha

 

 - by New Deal democrat

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

As 2025 ended, all of the important trends seemed to intensify. The US$ is down 10% YoY by one measure, commodities are higher by the same or more, oil prices continued to fade, and the recent waning in the YoY growth of withholding tax payments - by at least one measure - intensified.

As usual, clicking over and reading will bring you up to the virtual moment as to the state of the economy, and reward me with a penny or two for my efforts collecting and collating it for you.

Economic year end summary for 2025: housing, jobs, and real income stagnant, while spending powers forward

 

 - by New Deal democrat

There is no new noteworthy data today; and the ISM manufacturing index, normally released on the first workday of each month, won’t be released until Monday, so today is an ideal time to check in on the state of the economy in general, and of housing in particular, at the end of 2025.

On Tuesday, both the FHFA and Case Shiller repeat home sales indexes were released for October, with both rising 0.4% month over month on a seasonally adjusted basis. The former index did make a new high, while the latter is still slightly below its February 2023 peak:

 https://fred.stlouisfed.org/graph/?g=1PGCd 

On a YoY basis, both are up roughly 1.5%, among the lowest such comparisons of any time outside of recessions:

 https://fred.stlouisfed.org/graph/?g=1PGCx 

Thus 2025 closes out on a very weak note for housing, which has been a theme throughout the year.

On a broader scale, it is possible that the October and November government shutdown constituted a brief recession, with July as the peak of the post-pandemic expansion:

 https://fred.stlouisfed.org/graph/?g=1PzJV 

As shown in the graph, which norms nonfarm payrolls, industrial production, real manufacturing and trade sales, and real income less government transfers to 100 as of July, only two of the four - real income and payrolls - exceeded their July readings only once, in September, by 0.1%. All other readings since July have been either flat or down, with several not updated yet since the shutdown.

Indeed, taken together, the four series generally show stagnation since March or April. 

It is commonly said that expansions don’t die of old age; they are murdered. If so, the combination of T—-p’s tariffs and the government shutdown may have done the trick, at least briefly.

On the other hand, one item which has consistently held up, however, has been consumer spending, best shown by the weekly Redbook index:

 https://tradingeconomics.com/united-states/redbook-index 

This has shown strength throughout the year, typically up by over 5% YoY nominally. This in turn has probably been goosed by the wealth effect from the appreciation in affluent and wealthy peoples’ stock portfolios, with the S&P 500 up 16.4% in 2025:

 https://fred.stlouisfed.org/graph/?g=1PGEn 

Indeed, as per the last ISM reports, for November, manufacturing continued to be in contraction, while services, which were oscillating between slight expansion and contraction through summer, picked up some strength in October and November:

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

This is the “K shaped” economy, where the lower 80% or so are feeling pinched by inflation and a stalling jobs market, while the top 10% can power forward with spending.

I expect that in 2026 the forces of stagflation will continue to conflict, with a politicized Fed lowering rates to please its mob boss, while inflationary pressures mount, and the average household is caught in between.

Regional Fed services indexes suggest future expansion, but weak employment in the face of strong inflationary pressures

 - by New Deal democrat 

Although the federal government shutdown has been over for a month and a half, most of the data that has been released has lagged badly, especially including data on sales, spending, and business orders. That means that the most current measures of these are the ISM manufacturing and non-manufacturing reports, due Friday of this week and Monday 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. On Monday I looked at the goods producing sector. Now that the Texas Fed has reported, here is the Services sector.

As with the manufacturing chart, month over month changes are in parentheses, showing momentum (the 2nd derivative), with the absolute diffusion values for November following. The final number is the average change and absolute number for all 5 together. The chart includes, in order, NY, Philadelphia, Richmond, Kansas City, and Texas:

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

Headline:  (+1.7) -20.0; (-0.5) -16.8; (+4) -11; (+10) 3; (-1) -2.3; (+2.8) -9.6     

Cap Ex   (+0.2) -6.9; (+10.6) 10.6; (-6) -9; (+14) 9; (+3.6) 23.6; (+3.5) 5.5

Prices Paid  (+10.2) 72.1; (+5.6) 40.3; (+1.3) 6.1; (+2) 34; (-1.4) 26.2; (+3.3) 35.7

Prices Rec’d (+10.4) 30.5; (-3.0) 19.0; (+0.1) 3.2; (-4) 10; (+1.4) 7.9; (+0.9) 14.1  

Wages (-1.7) 23.7; (-3.2) 46.1; (+5) 17; (-11) 13; (-3.9) 10.8; (-3.0) 22.1 

Employment (-1.2) -7.4; (+7.1) 9.6; (+4) 5; (+10) -6; (-3.9) -0.8; (+3.2) 0.0

The only clear positive trend is strong CapEx growth, implying building capacity for increased demand in the future. Wages also continued to show broad growth, although they may be growing too fast for the underlying business conditions. By contrast, headline business conditions continued to indicate contraction, although less than in November, and employment was dead in the water. Meanwhile both prices paid and prices received continued to show broad increases, the former more than the latter. This suggests sustained services inflation will continue, and even perhaps amplify in the months ahead. 

On Monday I summarized the manufacturing situation thusly: “The December regional Fed reports suggest that while new orders have continued to be positive, the increasing trend has abated, with overall actual contraction of production. Prices paid by manufacturers continue to increase, but at a slower pace, while the prices they receive have firmed. Meanwhile employment is barely positive, but wage growth continues.”

When we examine both the manufacturing and services sector in full as reported by the regional Feds in December, giving much more weight to services as per their share of the economy, we see promising signs of future expansion,  but stalling present production and employment, in the face of continued inflationary prices both at the commodity and final demand levels. Whether wage growth can continue to match this is very much at issue, as wage growth tends to follow employment growth (or lack thereof). If the trends continue, strong inflation and weakening wage growth are a recipe for a consumer led recession.

Positive trend in jobless claims continues through year end

 

 - by New Deal democrat

[Note: Yesterday was a travel day, and I didn’t get around to posting the regional Fed services survey averages for December. I’ll try to get to that later today.]

The last weekly jobless report continues the trend of an improved picture - as in, very few people are getting laid off - that has typified the second half of this year.

Initial jobless claims declined -16,000 to 199,000, the second best reading all year, and one of the very best in the entire last 50 years. The four week moving average increased 1,750 to 218,750, still close to the lowest readings this year. With the typical one week delay, continuing claims declined -47,000 to 1.866 million, among the best readings in the past six months. Here’s a link to the last four years of data:

 https://fred.stlouisfed.org/graph/?g=1PAGT 

The above view shows how post-pandemic seasonality has not been expunged from the seasonal adjustments. Claims have risen in the first half of the year, peaked in early summer, and then declined towards the end of the year. Such has been the case this year as well, although the trend has been more muted. Additionally, note that this was for Christmas week, which like Thanksgiving week is notoriously hard to seasonally adjust, so take this big weekly decline with extra caution. The four week average, while very good, is likely giving a truer picture.

As per usual, the YoY% changes are more important to my forecast. There, initial claims were lower by -4.8%, and the four week average down -1.6%. Continuing claims remained higher, by 2.1%:

 https://fred.stlouisfed.org/graph/?g=1PAHw 

Since mid-year, more weeks than not initial claims have been lower YoY, while continuing claims have been higher, but even that increase has faded since the beginning of November. Needless to say, this suggests the economy will continue to expand over the next several months.

Although I won’t bother with the graph this week, since jobless claims typically lead the unemployment rate, and one year ago the unemployment rate was 4.1%-4.2%, the improvement in claims over the last six weeks suggests that the unemployment rate is likely to decrease from its November high of 4.5%.

Regional Fed manufacturing indexes suggest 2025 trends are slowly abating

 

 - by New Deal democrat

Although the federal government shutdown has been over for a month and a half, most of the data that has been released has lagged badly, especially including data on sales, spending, and business orders. That means that the most current measures of these are the ISM manufacturing and non-manufacturing reports, due later this week and 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. With the last regional manufacturing index reported this morning, here is the December update for that 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 December following. The final number is the average change and absolute number for all 5 together.

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

Headline:     (-22.6) -3.9; (-8.5) -10.2; (+8) -7; (-7) 1; (-0.5) -10.9; (-7.5) -5.2          

New Orders (-15.9) 0.0; (+13.6) 5.0; (+14) -8; (+2) 0; ( -11.2) -6.4; (+0.5) 1.9 

Prices Paid  (-11.4) 37.6; (-13.5) 43.6 (-0.3) 6.5; (+4) 40; (+0.7 ) 36.0; (-4.1) 31.5 

Prices Rec’d (-4.2) 19.8; (+6.7) 24.3; (+1.9) 5.0; (+9) 22; (-2.6) 6.2; (+2.1) 15.5

Wages* (n/a) n/a; (n/a) n/a; (0) 24; (n/a) n/a; (+6.4) 21.8); (+3.2) 23.0

Employment  (+0.7) 7.3; (+6.9) 12.9; (+6) -1; (-15) -4; (-3.3) -1.1; (-0.9) 2.8

____

* only 2 of the banks report this information

Last week durable goods and core capital goods orders were updated through October, showing a -2.2% decline and a 0.5% gain, respectively. On a YoY basis, the trend of increasing strength has continued, at +4.8% and +6.2% respectively:

 https://fred.stlouisfed.org/graph/?g=1Pvmw 

The December regional Fed reports suggest that while new orders have continued to be positive, the increasing trend has abated, with overall actual contraction of production. Prices paid by manufacturers continue to increase, but at a slower pace, while the prices they receive have firmed. Meanwhile employment is barely positive, but wage growth continues. 

Tomorrow the Texas Fed will report on that region’s service sector, and that (larger) portion of the economy for December can be examined as well.

Weekly Indicators for December 22 - 26 at Seeking Alpha

 

 - by New Deal democrat

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

The year ended with a magnification of several trends that have been a theme all year: the US $ is down almost 10%, largely responsible for a nearly 15% rise in commodity prices, while consumer spending ended with a bang as well.

As usual, clicking over and reading will bring you up to the virtual moment as to all these trends, and reward me with a penny or two for my efforts.