Short and medium term inflation, interest rates, and the overstretched consumer

 

 - by New Deal democrat

The deluge of data resumes tomorrow with housing permits and starts, industrial production, and durable goods orders. In the meantime, let me make a few “big picture” observations of the economy, and in particular, the short and longer term trends in inflation and interest rates.

1. Short term inflation

A very big outlier in observations of inflation in the past several months has been Truflation, which updates is US CPI calculation daily, presumably based on masses of prices posted online from commercial sites. In the past two months, its measure of YoY inflation has declined precipitously, from 2.66% in mid-December to as low as 0.68% last week:

This has met with open skepticism in some quarters, fueled in part by Truflation’s unfortunate hire of T—-p crony E.J. Antoni just as the big decline started to occur. So this is very much an acid test of the site’s credibility.

According to Truflation, the median time lag between their observations and when the changes show up in the official CPI has historically been roughly two months:

Here is their post-pandemic view:

If their information is accurate, there should be a big decline in YoY CPI no later than in the report for March. And the only way that happens is if there are widespread actual price reductions.

It’s at least within the range of possibility that could happen.

In the first place, official CPI less shelter has paced the Truflation numbers in 2025:

Note that, similarly to Truflation, YoY CPI excluding shelter decelerated sharply from 2.2% to 1.4% between January and April 2025, then gradually increased through the remainder of the year through September 2025, peaking at 2.7% before declining to 2.0% in January. A similar decline through March would take it down to about 1.5%.

And FWIW, there are anecdotal reports of price cuts, particularly for staple food items. In my own neck of the woods, I have seen the price of store brand sodas, which doubled from $0.67 to $1.33 during the pandemic, cut back in the past few weeks to $1.00.

We will see. I’ll keep track of this over the next several months.

2. Longer term inflation

As I have noted many times since the pandemic, house price indexes have a multi-decade record of leading the official CPI measure for shelter costs by roughly 12-18 months. Here is the most recent comparison:

Over the past two years, the FHFA Index has declined from a YoY high of 7% to a low of 1.7% in October. Similarly, the Case Shiller national index has declined YoY from 6.6% to 1.4%. And the house price indexes typically are more volatile than the official CPI shelter index, suggesting it could decline to under 1% over the next 18 months. Beyond that, the median price for existing homes increased only 0.3% YoY through January. The median prices for new single family homes, meanwhile, have actually declined by an average of roughly -2.5% YoY for the past 3 years.

While the relationship isn’t perfect (note, for example, that while YoY price changes in the repeat sales indexes measured roughly 1.5% during mors ot hte 1990’s, CPI for shelter remained in the 3%-3.5% range), the likelihood is that shelter prices in the CPI will not accelerate YoY for the next 12 -18 months, and may very well decline under 2%, making the Fed’s official “target” more attainable (depending on other costs, such as the volatile price of gas, of course).

If, in the face of tariff increases being passed on to consumers, there are signs that inflation might moderate, that is almost certainly due to weakness in consumer spending, at least by the lower 80% of the income distribution. In other words, inflation might be moderating for the same reason it does during recessions: consumers simply cannot afford price increases.

3. Interest rates

A stagflationary scenario is likely playing out in interest rates as well.

The below graphs all compare Treasury rates for the 10 and 30 year durations (orange and gold) with the Fed funds rate (black) and mortgage rates (blue, minus 2% for easier visual comparison).

During the 1980s through 2019, when the Fed lowered interest rates, US Treasury interest rates and mortgage rates followed, albeit not with the same intensity:

But the post-pandemic comparison is more problematic:

Not only have the 10 year bond and mortgage rates not gone down in lockstep with Fed rate cuts, but they haven’t followed the last several rate cuts at all. And the 30 year bond has not followed at all. Interest rates on 30 year Treasurys are just as high now as they were when the Fed funds rate was at its peak 1.75% higher than it is now.

This is reminiscent of the stagflationary 1970s, shown below:

In the 1970s, both the 10 year Treasury and mortgage rates barely responded to Fed rate cuts. This was because bond traders well understood that the underlying inflation dynamics over the medium term were poor.

It is hard to escape the implication that bond traders have similarly responded to the US fiscal situation, as typified by the Big Bad Budget Bust-out Bill last year, as portending the necessity of higher interest rates in order to persuade bondholders to purchase US Treasurys. And that will bleed into longer term consumer rates as well.

The overall picture is that of an overstretched US consumer, unable to absorb price increases, and driving recessionary-type price concessions from sellers, with little prospect of longer term relief as interest rates are unforgiving. 

Real aggregate nonsupervisory payrolls remain relentlessly positive

 

 - by New Deal democrat

Today is Presidents’ Day, so there are no official economic data releases; and there will be no significant releases tomorrow either, before a torrent of both timely and delayed data from Wednesday through Friday, including GDP for Q4.

In the meantime, because of the January updates for employment and inflation last week, one of my important series for forecasting purposes can be updated as well: real aggregate nonsupervisory payrolls.

To recap, this series represents the total amount of paychecks in the economy for all workers except bosses, adjusted for inflation. It is noteworthy not just because the data goes back 60 years, but because it make real world sense: if ordinary working families have less money to spend in real terms, they are likely to cut back spending, and that retrenching brings about a recession.

First, here is the entire historical series. Note it is presented in log scale, so that later data does not obliterate earlier data:

With the exception of the COVID lockdown recession, the series has almost always turned down shortly before a recession has begun; or at very least turned flat.

Here is the same data presented in a YoY fashion:

With the exception of the 2002 “double-dip,” real aggregate nonsupervisory payrolls turning negative YoY has been a perfect indicator of recession, and remaining positive has been a perfect indicator of expansion; and further has typically turned negative within 2 months of the data of onset.

Now here is the post-pandemic look at the absolute series:

The trend has been almost relentlessly higher.

And here is the YoY look:

Again we see that it has never been negative, indeed has never shown less than 1% growth during this entire period. 

The one caveat is that because of the poor “shelter” kludge during the government shutdown, which suggested that rent and owners’ equivalent rent had only grown by 0.1% during those two months (vs. their typical 2025 average of 0.3%), the YoY total change should probably be between 0.2% and 0.4% lower, and that problem will persist through next October.

But even so, real aggregate nonsupervisory payrolls are sending an important signal that, despite virtually nonexistent job growth, wage growth has been strong enough to continue to power consumer spending, which in turn is negativing the onset of any recession in the next few months.

Weekly Indicators for February 9 - 13 at Seeking Alpha

 

 - by New Deal democrat

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

There were no significant changes in the past week. In particular, despite the massive downward revisions to employment showing almost no new jobs were added to the economy last year, the best real-time measures of consumer spending, including such discretionary things as dining out at restaurants, continue not just to be positive, but are becoming even *more* positive in the past few months.

As usual, clicking over and reading will not just bring you up to the virtual moment as to the state of the economy, but reward me a little bit for my efforts in collecting and organizing the data for you.

Disinflating shelter prices and deflating gas prices work wonders for January CPI

 

 - by New Deal democrat

Over the last several years one of my big themes for consumer inflation had been how shelter and gas prices were pulling in opposite directions. After June 2022 gas prices sharply declined, while rents continued to increase just as sharply. By the end of 2024, shelter costs were seriously disinflating (i.e., rising, but at a gradually lower pace), while gas prices were stable or slightly increasing.

Well, today for perhaps the first time since the pandemic, both pulled strongly in the same - beneficial - directions. Beginning in late December, gas prices fell below $3/gallon for the first time since the pandemic. Meanwhile as I wrote on Monday, I expected the disinflation in shelter costs in the CPI to continue - and this morning it did. The result was YoY headline CPI coming in at 2.4%, the lowest except for one month since the pandemic, and core CPI coming in at 2.5%, which was the absolute lowest since the pandemic.

 As an aside, caution is still warranted, however, because the October-November kludge in shelter prices is still present in the YoY calculations, which will probably lower those comparisons by roughly -0.2% through next October.

As per my usual practice for the past several years, let’s start with the YoY numbers for headline inflation (blue), core inflation (red), and inflation ex shelter (gold), which was only up 2.0%:

The good news is that all three of these measures have decreased sharply since Sempteber. This is a significant disinflationary pulse.

As per my comment above, shelter inflation (blue) continued to decelerate YoY, down to a 3.0% increase, with both rent and owners’ equivalent rent increasing only 0.2% for the month. On a YoY basis, rent (gold) was up 2.8% and Owner’s Equivalent Rent (red) up 3.3%, the lowest increase for both since late 2021:

As usual let’s compare that with the YoY% changes in the repeat home sales indexes, which lead by about 12-18 months (/2.5 for scale), to CPI for shelter (blue). YoY home price increases are near or at multi-year lows, each at roughly 1.5%, and shelter inflation has followed (and yesterday we found out that the median price for existing homes had increased only 0.3%). The graph below includes several years before Covid to show its 3.2%-3.6% range during that time:

Not only has shelter inflation declined to back to its pre-pandemic YoY range, it is now *below* that range. Needless to say, this is not only good news, but because of the leading/lagging relationship of house prices to shelter inflation, as I wrote Monday we can expect even further deceleration in the shelter component of inflation during this year.

Another bright spot, as I wrote above, is that gas prices declined -3.2% for the month, resulting in a -7.5% YoY decline, which is welcome news to consumers:

Energy prices as a whole declined -1.5%.

Let’s take a look at a few other areas of interest.

First, new car prices (red) continue to be largely unchanged, flat for the month and up only 0.1% YoY, while used car prices (blue)declined another -1.8%. On a YoY basis new cars are up only 0.2%, and used car prices are *down* -2.0%. The graph below shows the post-pandemic trend by norming both series to 100 as of just before the pandemic:

Both new and used car prices have been basically flat for the past three years. Above I also show average hourly wages for nonsupervisory workers (gold) to show that in real terms, car prices are actually *lower* than just before the pandemic (interest rates for car loans are another issue!).

Every month I check the detailed breakout for “problem children,” I.e., sectors that have increased in price by 4% or more YoY. This month it once again included several minor irritants including non-alcoholic beverages (something that has been very apparent at grocery stores) and tobacco. Another big irritant is hospital services, now up 6.0% YoY. 

Another recent problem child for inflation had been transportation services (blue), mainly vehicle parts and repairs as well as insurance. Of these, only repairs and maintenance (red) are still problematic, as while they only rose 0.1% in January following a -1.3% decline in December, they remain higher YoY by 4.9%:

Electricity prices, which have become a significant problem, likely a side effect of the building of massive data centers for AI generation, declined -0.1% in January, but on a YoY basis are up 6.3%, the highest increase since 2008 except for the shutdown kludge and the immediate post-pandemic inflation. Additionally, piped utility gas increased another 1.0% in January, and is up 9.8% YoY:

As I wrote in the last few months, the electricity issue has already created a backlash, and I expect that backlash to intensify.

In conclusion, this was a tame consumer inflation report, driven by disinflating shelter costs and declining energy costs, although I would continue to treat the YoY headline and core numbers with caution, since they both remain affected (probably by about -0.2%)  by the situation with shutdown shelter kludge. Last month I concluded that “More likely YoY inflation is roughly steady in the 3% range, above the Fed’s target and with employment growth dead in the water.” This month it declined from that range, which would suggest that the weak labor market may also be having an effect. Whether this CPI decline in inflation continues, or is a passing artifact of the sharp recent decline in gas prices, remains to be seen.

Leading sector benchmark job revisions were almost all seriously negative

 

 - by New Deal democrat

Before I get to the main point at hand, let me make a quick note about this morning’s existing home sales report for January: it was more of the same. Sales remained within the sideways range they have been in for nearly the past three years; prices were nearly flat YoY, up only 0.3%; and inventory was above its post-pandemic levels but well below pre-pandemic levels. 

But on to the main course. I have seen a surprising amount of commentary on the Seeking Alpha investment site that yesterday’s jobs gain of 131,000 for January means that employment is on the upswing, completely neglecting that one month does not make a trend, that revisions have been relentlessly downward, and that January is perhaps the most difficult month for the BLS to accomplish seasonal adjustments — in January there were 2,649,000 layoffs! It’s just that the adjustment mechanism expected even more.

By far more important for the trend, and in particular the trend for the leading indicators within the jobs report, were the revisions to the past 12+ months of data. And as we saw from the headline adjustment, it was very large and very bad. So let’s start there, and then go through the most important leading sectors and metrics.

The total adjustment over the relevant data was nearly a -1,000,000 jobs. For the year 2025, the adjustment was just over -400,000, causing a previous 584,000 gain to turn into only a 181,000 gain, for an average of only 15,000 jobs added per month:

Even worse, for the eight months from April through the end of the year, a grand total of only *12,000* jobs were added, and no that’s not a typo. That’s 1,500 jobs per month! That’s about as close to recessionary as you can get without actually being in one (that we know of, at this point).

So let’s turn to the leading sectors, starting with manufacturing. There a -166,000 decline through December since Mary 2024 turned into a -251,000 decline, before its very slight 5,000 increase in January:

Next, here is construction. There, a slightly increasing trend throughout the year that added 14,000 jobs turned into a declining trend through October that ended up with a net -1,000 decline for the year:

But even the rebound since October disappear when we look at the even more significant residential construction sector. There, an increase through March followed by a slightly declining trend thereafter, resulting in a -1,400 decline for the year turned into a nearly relentless decline since March 2024 that ended with a -12,900 decline during 2025:

The entire rebound in construction was because of nonresidential building construction (and asociated specialty trades, not shown below):

Through October of last year revisions added 3,700 jobs, and then 12,000 more since.

For the goods producing sector as a whole, the -90,000 decline from its April peak through December turned into a nearly relentless-184,000 decline from a peak in July 2024 through last October, before increasing 49,000 since (again, all due to nonresidential building construction and associated specialty trades):

In short, *all* of the leading employment sectors of the economy declined during 2025. The only significant leading indicator in employment that remained postive was the average workweek in manufacturing, but even that did not improve:

Finally, let’s turn to aggregate nonsupervisory payrolls. We won’t know what the “real” number was for January until we get tomorrow’s CPI report, but since there was a nominal 0.8% gain last month, it is likely the “real” number will be positive as well. Here the revisions subtracted roughly -1% from the previous trend, but retained an almost identical positive trajectory:

Decomposing the metric, revisions indicated a -0.6% decline compared with the previous index for aggregate hours worked:

But the previous vintage showed a 0.7% gain for the year, which was reduced to 0.4%, but still a gain.

This further compensated for by a 0.2% increase in average hourly earnings over the year ending in December:

In other words, while the absolute number for aggregate payrolls was revised downward, the upward *trend* remained intact. That, along with the intract trend of increased average weekly hours in manufacturing, were the sole leading positives that came out of the benchmark revisions. All of the others were negative.

This feeds into the dominant “K-shaped economy” narrative which I believe is correct: the AI data center boom has led to a stock market boom, which - aside from being a likely source of the increase in nonresidential construction employment - has been feeding a “wealth effect” increase in spending by the top 10%-20% of consumers.

Unresolved post-pandemic seasonality likely continues in jobless claims

 

 - by New Deal democrat

Unresolved post-pandemic seasonality likely continues to rear its head. This is a probable explanation for yesterday’s strong monthly gain in employment, and it appears to be behind the trend in this morning’s jobless claims report as well. 

Later this morning as promised yesterday I will discuss at some length the nature and implications of the revisions to the last 12+ months’ employment data in yesterday’s jobs report. But first, let’s take our usual look at weekly jobless claims. 

Last week initial claims declined -5,000 to 227,000, while the four week moving average increased 7,000 to 219,500. With their typical one week delay, continuing claims rose 21,000 to 1.862 million. The below graph shows the last three years to highlight the post-pandemic seasonality issue:

In case it isn’t apparent immediately, for the last three years claims have risen from lows at the beginning of each year towards midyear, and then declined during the second half of the year. That appears to be happening again this year so far.

Which is yet another reason that I pay more attention to the YoY changes in this data. So measured, initial claims were higher by 4.5%, the four week average higher by 1.0%, and continuing claims by 1.3%:

This is the second week in a row that the data has been higher YoY, after a steady stream of lower YoY readings that began last July. It’s too soon to know if this is the beginning of a change in the trend or not, but it at least merits further attention. At the same time, unless readings go higher YoY by over 10%, it does not suggest economic contraction ahead.

Finally, particularly in view of yesterday’s -0.1% decline in the unemployment rate, let’s update the graph of comparison of that with initial and continuing claims, as to which there is a 60 year history of the latter leading the former:

The decline in claims that occurred all last autumn did indeed show up in the decline in the unemployment rate, with the important caveat that the annual revisions in the Household Survey data which gives rise to that rate were delayed until next month, so the numbers might change a little.

January jobs report: superb monthly gains, but the birds came home to roost for 2025

 

 - by New Deal democrat

This is the month the birds came home to roost, at least for the year 2025. While the month over month numbers were almost all positive, some strongly so (a repeat of what we saw last January as well, so beware unresolved seasonality), the benchmark revisions were brutal. Which is likely what the Administration was telegraphing in bright neon flashing lights the past few days. In particular, the *entire* gains for 2025 were reduced from 584,000 to 181,000 - an average of only 15,000 jobs gained per month. Also, the normal yearly revisions to the Household Survey, which gives us things like the unemployment rate, did not take place as usual this month, but have been delayed until next month. 

As per usual, I am going to report on the monthly changes below. But I anticipate there will be *much* more to say once I have digested the revisions for all of the important leading numbers. 

Below is my in depth synopsis.

HEADLINES:

• 130,000 jobs added. Private sector jobs increased 172,000. Government jobs declined -42,000. The three month average rose to +73,000.
• The pattern of downward revisions to previous months continued. November was revised downward by -15,000 to +41,000, and December was revised downward by -2,000 to 48,000, for a net decline of -17,000. 
• The alternate, and more volatile measure in the household report, rose by 528,000 jobs. On a YoY basis, this series increased 689,000 jobs, or an average of 57,000 monthly.
• The U3 unemployment rate declined -0.1% to 4.3% compared to its recent high of 4.5%.
• The U6 underemployment rate declined -0.4% to 8.0%.
• Further out on the spectrum, those who are not in the labor force but want a job now declined by -399,000 to 5.809 million..

Leading employment indicators of a slowdown or recession

These are leading sectors for the economy overall, and help us gauge how much the post-pandemic employment boom is shading towards a downturn. These were almost all very positive:

• The average manufacturing workweek, one of the 10 components of the Index of Leading Indicators, rose 0.3 hours to 41.4hours, now down only -0.2 hours from its 2021 peak of 41.6 hours.

• Manufacturing jobs rose 5,000.
• Truck driving jobs declined -4,300.
• Construction jobs rose 33,000.
• Residential construction jobs, which are even more leading, rose 300.
• Goods producing jobs as a whole rose 36,000. 

• Temporary jobs rose 9,100.
• The number of people unemployed for 5 weeks or fewer declined -134,000 to 2,155,000.

Wages of non-managerial workers 

• Average Hourly Earnings for Production and Nonsupervisory Personnel increased $.12, or +0.4%, to $31.95, for a YoY gain of +3.8%, a rebound from its post-pandemic low of 3.6%. This continues to be significantly above the 2.7% YoY inflation rate as of the most recent report.

Aggregate hours and wages: 

• The index of aggregate hours worked for non-managerial workers rose 0.4%.

• The index of aggregate payrolls for non-managerial workers rose 0.8%, and is up 5.1% YoY.

Other significant data:

• Professional and business employment rose 34,000.
• The employment population was unchanged at 64.8%.
• The Labor Force Participation Rate increased +0.1% to 62.5%.

SUMMARY

On a monthly basis, this was a very good report. Almost everything moved in the positive direction. In fact, the only negatives were a decline in trucking jobs and the continuing drumbeat of downward revisions to previous months. Everything else — positive, coincident, and lagging indicators of the employment market — were positive. 

But before you break out the champagne, keep in mind that the revisions to the past 12 months were very bad. For all of 2025, less than 200,000 jobs were added. Even with this month’s good report, the 12 month increase was only 359,000 jobs, or an average of 30,000 per month.

I’ll have more to say either later today or over the next few days once I break out the revisions for each significant statistic.

Real retail sales turn down monthly and YoY in December, boding poorly for employment

 

 - by New Deal democrat

Real retail sales, one of my favorite broad-economy indicators, was updated through December this morning — still stale by one month, as under normal circumstances January’s numbers would have been released this week. 

Still, with consumer spending being about 70% of the entire economy, this is one of the most important economic reports of the month, and along with real personal spending, the two best measures of that sector. Further, because of their leading albeit noisy relationship with employment, they are particularly important right now, with job creation on the verge of turning down. 

Nominally, retail sales were unchanged in December, after a downwardly revised +0.5% in November. After taking the monthly 0.3% increase in prices into account, real sales were down -0.3%. Since there was no October CPI report, the best we can say about November is that in real terms sales (blue in the graph below) were higher by 0.2% compared with September:

But so calculated, real retail sales in December were down -0.4% from their September peak. Further, if you believe, as I do, that the shutdown shelter kludge removed about 0.2% from consumer inflation during the September-November period, then the comparison becomes similarly worse.

Note that the above graph also shows the similar but more comprehensive measure of real personal spending on goods (gold), which did make a new high as of its most recent report for November. 

Beyond that, real retail sales turned back negative YoY for the first time since September 2024. Going back 75 years (although I won’t bother with the long term historical graph), a decline in YoY real retail sales has almost always meant a recession (but both the obvious exception in 2023!):

This is particularly salient because as I wrote above consumption leads employment. With the YoY comparison deteriorating in late 2025 and now negative, needless to say this bodes poorly for employment in the early months of this year.  Here is the update of YoY real sales and real personal spending on goods (/2 for scale) together with employment (red):

Last month I concluded that “This sharp deceleration in YoY growth in consumption forecast the slide in employment, and suggests that the jobs reports in the next several months will get no better.” This month’s report adds to the evidence. We’ll find out if that was true in January tomorrow.

Expect shelter inflation to continue abating in the next few CPI reports

 

 - by New Deal democrat

There’s no significant economic news until Wednsday’s jobs report, as to which Scott Bessent gave an interview this morning on CNBC which amounted to, “Don’t Panic!!!” Which I am sure inspires confidence in everybody (I’ve been expecting downward revisions to much of last year as part of the annual benchmarking, so that could be primarily what we will see).

Anyway, another important report later this week will be an updated CPI, as to which the important dynamics are shelter (where I’ve been expecting disinflation) and all other components (as to which I’ve been expecting re-inflation).  In any event, the BLS finally updated its “New-“ and “All Tenants Rent Index” last week. 

To recapitulate, the “New Tenants” index is very leading, but very noisy; whereas the “All Tenants” index is less leading, but generally does follow the “new tenants” index, but leads with far closer correlation the shelter component of CPI.

In Q2, the new tenants measure fell off a cliff, with an actual negative YoY number, at -2.4%, while the All Tenants component remained  positive, at +3.3% YoY. As per above, both led the shelter component of CPI:

In the Q3 report released last week, the “New Tenants” component rebounded to +1.2%, while the “All Tenants” component disinflated further, to 2.9% YoY:

Unfortunately, I haven’t been able to find a graph showing the updated “All Tenants” component, which is why I showed you the first graph above.

As I’ve been updating over the past several months, the FHFA and Case Shiller repeat home sales indexes (not shown) have been at nearly 15 year lows in the vicinity of +1.5% YoY for the past few months. The latest New- and All-Tenants Rent index confirms that disinflation in the rental market.

Because both of these lead CPI for shelter with a substantial delay, this is potent information suggesting that this important component of the CPI is going to continue to show slowing inflation from its last reading of +3.2% YoY (itself a 4 year low) in the months ahead.

Weekly Indicators for February 2 - 6 at Seeking Alpha

 

 - by New Deal democrat

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

The main movement this week was in the speculative commodity or asset area, where Bitcoin crashed and gold and silver also broke trend, taking down the broad commodity baskets with them.

But as has been true for the past number of months, it really has been the case that “the stock market is the economy,” as paper wealth gains drive real spending by the top 10% of so of consumers.

As usual, clicking over and reading will bring you up to the virtual moment as to the state of the economy, and bring me a penny or two to buy my lunch.

December JOLTS report shows stabilizing at near stall speed, despite one negative “soft data” outlier

 

 - by New Deal democrat

I’m glad I waited a day to write about yesterday’s JOLTS report for December, because I got to read a lot of other commentary on the report, which convinced me to add some additional commentary about the entire JOLTS series. 

Let’s start with the fact that it was not “stale” inasmuch as the report was only delayed by two days. Still, it was for December, so a look in the rear view mirror. Secondly, too much commentary continues to focus on the “soft” job openings number, which over the course of its history has increased far more than any of the other series, as shown in this graph:

There are simply thousands of phantom job postings that are either permanent or designed to convince people that companies are hiring when they really aren’t. It has been a secular trend at least since the Great Recession. 

A second issue is that the monthly variations with all of the series are very noisy. For example,  for most of 2025, in contrast to much other data in the jobs sector, the JOLTS reports had been very much consistent with a “soft landing” jobs scenario. Then in October, all of the numbers were strongly recessionary. At the time I wrote that I would want confirmation for at least one or two more months before hopping on that bandwagon. And indeed, between revisions and improvements in November, October now very much appears to have been an outlier.

Similarly, yesterday there was a fair amount of commentary about a big decline in the job openings data to a new post-pandemic low. So let’s take my usual look at job openings (blue), hires (red), and quits (gold) all normed to 100 as of just before the pandemic:

 

The “soft” data of openings did decline -386,000 to 6.542 million, as indicated above a new low since the pandemic. On the other hand, actual hires rose 172,000 to 5.293 million, in line with the monthly average over the previous six months. Quits also rose 11,000 to 3.2.04 million, also solidly in their 18 month recent range. In other words, with the exception of openings, what we see is a sideways trend in all of these for the past 18 months, with a slight downward step in the past 6+ months.

On the negative side, layoffs and discharges increased 61,000 to 1.762 million, again right in the middle of its average for the past 6+ months, which range has been slightly higher than earlier in 2025:

In short, the numbers paint a picture of an employment sector that weakened in the second half of 2025, compared with the first half, but with no ongoing declining trend.

Now let me get to some additional commentary about the series as a whole. 

1. Historically, job openings have been much more volatile than hires, but on a YoY basis tend to cross the “0” threshold from expansion to contraction and visa versa contemporaneously with hires:

2. On a YoY basis, the one series for which there is some evidence of a slightly leading characteristic is layoffs and discharges (purple, inverted in the YoY graph below; all series averaged quarterly to cut down on noise):

Here is a close-up of the last year of all four data series YoY, monthly. Again, layoffs and discharges are inverted so that an increase shows as a negative number:

With just a few exceptions (March, September, November), the trend in all of the series has been negative, although quits has been positive for the past several months. This suggests a labor market which has continued to decelerate, but on a very slow basis, fitting a “soft landing” scenario.

3. Although layoffs and discharges may be slightly leading (and as I wrote a month ago, they generally lead the unemployment rate and continuing jobless claims), they are quite noisy as compared with the monthly average of initial jobless claims, which also generate fewer false signals. First, here’s the historical look:

And here is the post-pandemic look:

In other words, initial jobless claims YoY, especially as averaged monthly or on a 4 week average basis, continue to be the better indicator, and they are much more timely.

4. Finally, as I have pointed out before, the quits rate (left scale), which typically leads the YoY% change in average hourly wages for nonsupervisory workers (red, right scale), held steady in December, also in the middle of its range for the past 12+ months:

This suggests that nominal wage growth, is likely to remain stable with little variation in the next few months. at least this month. 

To conclude, December’s monthly report continued to be consistent with a “soft landing” despite the noisy downside lurch of job openings. Again, I would want to see another month or two of confirming lower readings before treating this as much other than noise in a “soft data” indicator. To the extent there is leading data in the JOLTS series which helps us forecast, as indicated just above the improvement in Quits suggests nominal wage growth will continue on trend. And layoffs and discharges suggest further slow deceleration in the employment market, but the much less noisy and current initial jobless claims data disagrees, suggesting stability albeit at a near stall over the next several months