Saturday, January 10, 2026

Weekly Indicators for January 5 - 9 at Seeking Alpha


 - by New Deal democrat



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

If anything, the trends over the last few months to a year appear to be becoming more amplified. Measures of consumer spending YoY have been increasing even further, while the global measure of wages to support that spending, as measured by withholding taxes should payments, are relatively speaking languishing. This suggests that the spending is being supported by (paper) asset appreciation, I.e., stock prices.

Clicking over and reading will provide you with the full up to the minute story, and reward me with a little $$$ in my wallet.
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Friday, January 9, 2026

December jobs report: ringing the alarm bells for imminent recession* (*with caveats)

 

 - by New Deal democrat


[Note: Housing permits, starts, and units under construction were also updated this morning for September and October. I will post my remarks on this report on Monday; but in summary I can say it remained recessionary, with some possible “green shoots” that may indicate a bottom.]


This morning’s jobs report for December was the most important single datapoint we have received since the end of the government shutdown two months ago - and to cut to the chase it was in all respects except the headlines recessionary. 

Below is my in depth synopsis. 


HEADLINES:
  • 50,000 jobs gained in total.
  •  Private sector jobs increased 37,000, and government jobs added 13,000
  • October was revised downward by -68,000 and November by -8,000, for a total of -76,000. 
  • The alternate, and more volatile measure in the household report, rose by 232,000 jobs (Important note: this does not take into account the annual population revisions which as usual were added at all once this month).
  • The U3 unemployment rate declined -0.1% to 4.5%.
  • The U6 underemployment rate declined -0.3% to 8.4%.
  • Further out on the spectrum, those who are not in the labor force but want a job now rose 69,000 since September to 6.208 million, aside from August the highest level since September 2021.

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. For the last two months they were mainly negative; this month all but one was negative or unchanged:
  • The average manufacturing workweek, one of the 10 components of the Index of Leading Indicators, declined -0.1 hour to 41.2 hours, down -0.4 hours from its 2021 peak of 41.6 hours.
  • Manufacturing jobs decreased by -8,000, the eighth decline in a row. It is now at a 3.5+ year low.
  • Truck driving was unchanged.
  • Construction jobs declined -11,000.
  • Residential construction jobs, which are even more leading, declined -4,200.
  • Goods producing jobs as a whole declined -21,000, the sixth declinine in the last eight months. 
  • Temporary jobs, which have declined by over -650,000 since late 2022, declined again by -5,700, a new post-pandemic low.
  • The number of people unemployed for 5 weeks or fewer declined -253,000 to 2,289,000 (note that this might also be influenced by the annual Household Survey revisions.

Wages of non-managerial workers 
  • Average Hourly Earnings for Production and Nonsupervisory Personnel increased 0.1%, with a YoY gain of +3.6%, the lowest reading but for one month in 2021 since the pandemic, although it remains above the current YoY inflation rate.

Aggregate hours and wages: 
  • The index of aggregate hours worked for non-managerial workers was increased 0.1%, and is up only 0.7% YoY. With the exception of 1967 and one month in 1994, in the last 60 years before the pandemic such a low YoY increase always took place in or just before a recession.
  • The index of aggregate payrolls for non-managerial workers also rose 0.1%, and is up 4.2% YoY.

Other significant data:
  • Professional and business employment declined -9,000 in October. These tend to be well-paying jobs. This is the sixth decline in seven months, and is the lowest number in over 3 years. It is also lower YoY by -0.4%, which in the past 80+ years - until now - has almost *always* meant recession.
  • The employment population ratio increased 0.1% to 59.7%.
  • The Labor Force Participation Rate declind -0.1% to 62.4% from September through November, vs. 63.4% in February 2020.


SUMMARY

Last month I concluded that the combined October and November report showed “a jobs market is either a hairs-breadth above contraction, or actually in contraction.” This month showed a contracting jobs market in all important metrics except the headlines (which, for the record, were positive).

But all of the important leading metrics, except for the noisiest one (short term layoffs) were negative, or in one case (trucking jobs) unchanged. All the other important goods-producing sectors - manufacturing, construction (including residential construction), and temporary jobs - declined, as did the goods-producing sector as a whole. In the Household Survey, those who want a job but aren’t in the labor force increased. And it is a near certainty that once we have the inflation data we will find out that real aggregate nonsupervisory payrolls declined. Indeed, without the callbacks to government jobs, when we count just private sector jobs, there was only an increase of 37,000.

Let me be clear: the jobs market is being entirely held up by service providing jobs, which tend to rise even in the earliest stages of recessions.

This is a jobs report which is ringing the alarms for imminent recession. The caveats are, as above, how well services spending holds up (we’ll finally get an updated personal consumption report in a couple of weeks), and whether this downturn was a temporary one influenced by the record length autumn government shutdown.


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Thursday, January 8, 2026

Stale news: one “hurrah!” for the positive report on manufacturers’ durable and capital goods orders - for October

 

 - by New Deal democrat


In the category of updated but stale data, yesterday manufacturers’ durable goods orders were released for October. The headline number declined -2.2% to close to a post-pandemic record, while the core capital goods number increased 5.3%: 



Even though it declined, the three month average of capital goods orders was higher than at any point since the pandemic except for the May-July period of last year.

This is - or perhaps more accurately, was - good news. It certainly indicates that through three months ago the general trend of durable goods activity continued to be positive. But the monthly regional Fed reports of manufacturers new orders were also improving through that period, before fading in the past month or two.

So, one “hurrah!” for the good number, but as old news it has little use at this point going forward.


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November JOLTS report consistent with a weak, but sideways rather than negative, trend in the labor market

 

 - by New Deal democrat


Yesterday’s JOLTS report for November was not stale inasmuch as it was at best delayed by a week or two. But nevertheless, since it was for November it remains somewhat old news that can only help to confirm other data we have already received. 

Last month I concluded that the October report “was emphatically not good. In fact, it was red flag recessionary.” But I also noted it was insufficient without confirmation by another month of two’s worth of data. 

In a nutshell, November’s report did not confirm October’s. 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. It was not so in October, but returned to that configuration in November.

To briefly recap, the survey decomposes the employment market into openings, hires, quits, and layoffs. The first of those, openings, is soft data that can be influenced by stale or false postings, and trolling for new resumes. It has been on a general uptrend ever since the inception of the series 25 years ago. In contrast, the other series are hard data representing actual actions - and all of those were bad.

Let’s begin with job openings (blue), hires (red), and quits (gold) all normed to 100 as of just before the pandemic:


The “soft” data of openings has been rangebound between 7.103 million and 8.031 million for the past 18 months. This month it declined -303,000 to near the lower bound of that range at 7.146 million. Meanwhile actual hires declined -253,000 to 5.115 million, the lowest reading since the pandemic except for June of 2024. On the other hand, quits rose 188,000 to 3.161 million, solidly in their 18 month recent range. In general, what we see is a sideways trend in all of these for the past 18 months, with a slight jag towards the lower range in the past 6 months.

On the same vein, layoffs and discharges, which while noisy lead both continued jobless claims (gold) and the unemployment rate (red) declined -163,000 to 1.687 million, right in the middle of their 18 month range:



This suggests that in particular the unemployment rate is unlikely to rise further in this or next month’s report.

Finally, the quits rate (left scale), which typically leads the YoY% change in average hourly wages for nonsupervisory workers (red, right scale), rose 0.1% back to 2.0%, also in the middle of its range for the past 12+ months:


This suggests that nominal wage growth, which has been trending slightly downward during that period, is likely to stabilize at least this month. The question here is very much whether the inflation rate will continue to rise (complicated by the downward kludging of the huge shelter component of inflation that will remain with us for at least several more months).

I called the last JOLTS report for October “a bad, even recessionary, report consistent with actual job losses in October.” This report was also consistent with the slight positive rebound in the jobs report for November. In all, a weak, but sideways rather than negative, trend.
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Jobless claims start the year where they left off: very low firing, problematic hiring possibly easing

 

 - by New Deal democrat


Let’s take our weekly look at jobless claims, which are the best up-to-the-moment measure of the labor market.


Initial claims rose 8,000 to 208,000, while the four week moving average declined -7,250 to 211,750. With the typical one week delay, continuing claims rose 56,000 to 1.914 million:


As a reminder, this is the exact time of the year when hard to adjust for seasonality most comes into play. Additionally, there has been a post-pandemic pattern of claims rising in the first half of the year towards a maximum, and declining in the second half to a minimum. This year fits that pattern, but with a pronounced declined since the beginning of November. Nevertheless, initial claims remain very low historically compared with the last 50 years.

As per usual, it is the YoY comparison which is most important for forecasting purposes. There, initial claims were down -4.3%, and the four week average down -0.9%. Meanwhile continuing claims are higher by 2.3%:


This is very much in line with the “low hire, low fire” economy. In fact, the “low fire” portion has been getting even lower. Continuing claims, while elevated compared with 2022-24, have also declined significantly since early November, although they remain higher than the earlier part of 2025. So the “low hire” facet of the labor market may have eased a bit.

All in all, another positive report indicating an economy that is still expanding.


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Wednesday, January 7, 2026

ISM services report for December powerful evidence that the services providing sector of the US economy remains in solid expansion

 

 - by New Deal democrat


As I indicated yesterday and earlier today, we got some stale data on factory orders this morning, as well as a JOLTS report for November. I’ll take a look at those tomorrow.


In the meantime, the big news of the morning has to be the very good ISM services report for December, which shows that the 75% or so of the economy that is services was nowhere near recession last month. *All* of the components moved in the right direction.

To wit, the headline number increased 1.8 to 54.4, the best number since October 2024 (recall that any number above 50 means expansion):


New orders increased sharply, by 5.0 to 57.9, the best reading since October 2024:


Employment increased 2.1 from contraction into expansion at 52.0, the best reading since last February:


Finally, price paid decreased (which is good) -1.1 to 64.3, still showing lots of price increases, but still the lowest number since last March:


I will update this note later today with the three month economically weighted average including the manufacturing sector, but with these numbers it is plain to see that the result is that the economy continued in expansion in December, powered by the services sector.

Further, the ISM services report is in accord with the positive number from ADP this morning, much as the decline in truck sales accords with the continuing contraction shown in the ISM manufacturing report on Monday.

Which means that in Friday’s employment report, I will be looking for a decline in goods-producing jobs, but an increase in service providing jobs.

UPDATE: As promised, here are the economically weighted three month averages for both the headline and new orders indexes:

Headline: services 53.1, manufacturing 48.3; economically weighted average 51.9
New orders: services 55.9, manufacturing 48.2; economically weighted average 53.8

As I wrote this morning, it really is an easy call with the December services numbers.


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In December, truck sales tanked while car sales and private jobs (per ADP) increased

 

 - by New Deal democrat



I will write about the biggest economic release of the day, the ISM services report for December, later. In the meantime, here are two other important data releases for December, one from a private source (ADP), and the other from the BEA’s GDP updates.

As an initial matter, I don’t think we can be confident of the month to month accuracy of the official jobs report for several more months - and that is not counting any further disruption from another possible government shutdown in February.

To cut to the chase, ADP reported at 41,000 gain in private jobs in December. As shown in the graph linked to below, according to this series since July only 27,000 jobs have been added to the economy in total, or an average of 5,400 each month(!):


While this is not recessionary, it is about as close as you could come to the precipice. We’ll see what the official report says on Friday.

An important if underutilized short leading indicators for recessions is vehicle sales. After houses, these are the biggest durable purchases made by the vast majority of consumers. As I have noted in the past, typically truck sales decline first (and rebound second), followed by car and pickup truck sales (which rebound first). Additionally, truck sales are much less noisy and so, after housing, give the first clear warning that a recession is likely ahead.

And December truck sales, which declined another -9% from November to .311 million annualized units, and are down -43.6% from their post pandemic peak, are clearly recessionary (note: since FRED for some reason implements a one month delay in updating its graphs, I have subtracted the December values for car and truck sales so that that level shows at the 0 line. Additionally, I have multiplied the truck sales number by 10 for scale):


In fact, there has never been a case where such a decline has not been shortly followed by a recession, if the economy was not already in one.

Car and light truck sales, by contrast, increased 0.4 million in December to 16.0 million annualized units. This is down -11.6% from their post pandemic peak in 2021, and -10.6% down from their secondary peak last March when there was a rush to buy before tariffs kicked in.

Further, while the 3 month average trajectory since March has been declining, at their current levels car and light truck sales are at higher levels than at any time from 2022 through late 2024. So while truck sales are very recessionary, car sales are not recessionary at all.

I’ll try to draw some broader implications for the economy once we have the ISM services report in hand as well.


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Tuesday, January 6, 2026

Real wages and consumer spending have been crucial positives; here is the most updated look


 - New Deal democrat



We are still suffering the aftereffects of the government shutdown, with no data today, but a helping of mainly stale government data tomorrow and Friday. Tomorrow we get up to date private data from the ISM for services, and from ADP for private employment, along with manufacturers’ orders for October. On Friday we get the official employment report for December along with the very stale housing permits, starts, and construction data for September and October. And if there is another government shutdown in February, these will likely be the last government updates on those subjects until that is over. My plan is to report on the current data on the dates of release, but delay one day until Thursday and Monday to look at the already stale data.

In the meantime, let me do an update on the overall economy and focus on the components of a crucial employment indicator that will be updated as part of Friday’s jobs report.

Let me start by reporting a link to a graph I put up last Friday , which norms nonfarm payrolls, industrial production, real manufacturing and trade sales, and real income less government transfers to 100 as of July. As I noted then, 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. In general the four series, taken together, have been largely stagnant since March or April:
Thus, as I noted, it is possible that July was an expansion peak, with at least a brief shallow recession lasting through the government shutdown.

On the other hand - again as I noted last Friday, by way of Redbook’s weekly retail spending data, one crucial component of the economy has held up well: consumer spending. The official government reporting on this is also very stale, with the last updates only through September, and no further updates scheduled (as of now) until January 29. 

With that major drawback, here is a link to real personal consumption on goods (red), services (blue), and real retail sales (gold) through September, normed to 100 as of last December:


As shown in this graph, both real retail sales and real spending on goods have barely budged since then, with the highest reading only 0.4% higher, in August; while real spending on services has continued to climb on trend. As I have noted in the past, real spending on services tends to continue to increase even through most recessions. And the three month average of the other two measures has continued to increase throughout 2025 at least as of the last reading for September. It appears that, at best, we won’t know if this average turned down in October or November until the end of this month.

Another metric that has continued to rise in 2025 has been real average hourly wages. 

As you probably recall, one of my headline leading indicators is real aggregate nonsupervisory payrolls. This shows the aggregate amount of $$$ in real terms that average American households have to spend, and have reliably peaked (though no indicator is perfect!) a few months before the onset of recessions. Indeed it is likely that consumers pulling back in reaction to shrinking real payrolls is a main driver of most recessions.

In that regard, the below link goes to a graph which shows the two components of that measure: aggregate hours worked (blue) and real average nonsupervisory hourly wages (red). Becuase there was no update for inflation for October, I also show nominal hourly wages (gold) through November. These are all normed to 100 as of March: 


Since then, aggregate hours worked by nonsupervisory workers have been all but stagnant, higher by only 0.2% as of November. Through September, real hourly wages had risen at best 0.4% in July. Together these meant that real aggregate payrolls were all but stagnant. 

Then, due to the CPI report for November (which featured a seriously anomalous low reading for the large shelter component of inflation), real hourly wages jumped by another 0.4% to 0.6% higher than in March. This contributed to a 0.8% increase over March of real aggregate payrolls as well. 

Let me draw this together. The number of jobs and hours worked in 2025 through November was almost completely flat. But wages, both nominal and real, continued to improve - at least through September - helping to drive consumer spending and in particular, on a three month averaged basis, on goods. It is this spending which *may* have kept us out of recession, depending on how the data is reported for the months of the government shutdown. 

Which also means that on Friday I will be paying particular attention to the nominal increase in nonsupervisory wages, both monthly and YoY. This will be important in estimating whether real aggregate payrolls have continued to increase, or whether November’s spike was an outlier and possibly a peak.

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Monday, January 5, 2026

December ISM manufacturing report: continued contraction, continued stagflation, poor employment

 

 - by New Deal democrat


We are still suffering the data aftereffects of the government shutdown. Normally we begin each month with reports on both construction spending as well as manufacturing. But the construction report even now has only been updated through August, and won’t be updated for September and October until January 21. And by the way, the current spending bill expires on February 1, so another shutdown may be around the corner.

Which means, as I have said repeatedly for the last month or more, that the regional Fed manufacturing and services reports, as well as the ISM manufacturing and services reports, are our best contemporary picture of the economy.

And this morning’s ISM manufacturing report for December confirms what the regional Fed reports were telling us: the forward-looking situation is improving, in the sense of being “less bad,” while prices paid increased remain widespread, even if not so much as earlier in 2025, and employment in the goods producing sector continues to contract.

In more detail, the headline number declined -0.3 to 47.9 (recall that any number below 50 means contraction), the lowest reading since October of 2024; but higher than most readings in 2023 and 2024:


The more forward looking new orders component increased 0.3 to 47.7, generally continuing the “less bad” trend of the latter part of 2025 and more broadly, since 2023:


On the other hand prices paid were steady at 58.5, lower than the readings approaching 70 last spring, but aside from that higher than all but one reading in 2023 and 2024:


And employment remained dismal at 44.9, up 0.9 for the month, but on a three month rolling basis continuing the declining trend since the middle of 2024.


This suggests a further decline in goods-producing jobs when we get the December employment report at the end of this week.

For forecasting purposes, I use an economically weighted three month average of the manufacturing and non-manufacturing indexes, with a 25% and 75% weighting, respectively.

With today’s report, the three month average for the headline number is 48.3. The more significant news is that the three month average of the more leading new orders subindex declined slightly further to 48.2. At the same time, both remain slightly better than their low points in 2022-23, which is noteworthy because there was no recession then.

As I have noted in all of these monthly reports for the past year, for the economy as a whole the weighted index of manufacturing (25%) and non-manufacturing (75%) indexes is more important. In the non-manufacturing report, the averages of the last two months for the headline and new orders numbers have been 54.4 and 54.5, respectively. Needless to say, if the services sector remains as strong in December as it has been in October and November, then the weighted average is going to remain signficantly in expansion territory.


To sum up, the ISM manufacturing report for December, to which I would give more wight, confirmed the average of the regional Fed manufacturing reports for the month. Those indicated a stabilizing to slightly contracting manufacturing sector, with contracting employment,  and also facing continuing stagflationary price pressures. 

There has been a very significant divergence in 2025 between the regional Fed services reports, which have indicated pronounced weakness, vs. the ISM services reports, which for all months but one this past summer have indicated good growth. On Wednesday we will see if this continues, or whether services are also beginning to weaken.
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Saturday, January 3, 2026

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.

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Friday, January 2, 2026

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:


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


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:


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:


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:


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:


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.

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Wednesday, December 31, 2025

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.


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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:


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%:


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%.

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Monday, December 29, 2025

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:


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.
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Sunday, December 28, 2025

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.

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Friday, December 26, 2025

How the “wealth effect” fueled Q3 GDP

 

 - by New Deal democrat


In Q3, personal spending rose 1.6%, or 6.4% annualized, while personal incomes only rose 0.8%, or 3.3% annualized. A little more precisely, personal spending rose 0.75% more than personal incomes.

Just how much more did spending rise than the income to fuel it compared on a historical basis?

In the past 80 years (or 280 quarters), spending only exceeded income by 0.75% or more only 29 times. In other words, in only 10% or all quarters has spending exceeded income so much:


Needless to say, this is not sustainable. This is particularly so when real disposable personal income did not grow at all last quarter, and real personal income excluding government transfer payments has not increased at all in the past two quarters:


As I have written a number of times in the past few months, this is probably spending driven by the “wealth effect” which in turn is driven by stock market gains. 

Unless you think we are headed for AI-driven nirvana, this is not going to last.

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Wednesday, December 24, 2025

The low pace of firings continues to Christmas

 

 - by New Deal democrat


Our last bit of news before Christmas continued the positive news, as initial jobless claims declined back to 214,000, while the four week average also declined to 216,750. The last three weeks collectively have had the lowest seasonally adjusted numbers since January. Meanwhile, continuing claims rose back above 1.9 million to 1.923 million.


As is usual, for forecasting purposes the YoY% changes are more important. Here, initial claims were -2.3% lower than one year ago, the four week average down -4.2%, and continuing claims higher by 2.2%:


Although per the recent QCEW update through Q2 as well as the recent nonfarm payrolls reports show that on net almost no hiring is happening, jobless claims tell us there is very little firing as well. This is a positive report.




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Tuesday, December 23, 2025

Strong Q3 GDP, but long leading components are mixed; first preliminary positive signs for production in October

 

 - by New Deal democrat


Because today is a travel day for me, I am going to keep my comments about the much-delayed Q3 GDP report brief.


As was obvious, a 4.3% annualized real GDP print is very good, as was the real final sales to domestic purchasers number. One of the comments I made repeatedly at the time, as the summer regional Fed reports came in, as well as the weekly consumer retail spending numbers, was that they were surprisingly good - probably reflecting a rebound from the weak spring numbers immediately after “Lbieration Day” tariffs. Basically I think the excellent GDP numbers reflect that.

As usual, my focus is on the more forward looking components of the GDP release: real private residential fixed investment (housing) and corporate profits.

The story in housing continued to be negative, as real private residential fixed investment declined -1.3% in the Quarter:

 
This means housing is down -15.3% from its 2021 peak, and -3.5% from its secondary peak in early 2024. And keep in mind that the best forecasting model is to deflate this metric by real GDP - and since there was strong improvement in real GDP in Q3, the relative decline is even worse.

The story on the second long leading indicator, corporate profits, was completely different, as they grew by a strong 4.2% after accounting for inventories to another new all-time record:


The bottom line: if the rear view mirror, coincident reading of Q3 GDP was very positive, the measures which forecast where the economy is headed in 2026 were mixed.

Keep in mind, though, this is a report covering July through September, i.e., 3 to 5 months ago. In other words, more stale data. We still have very little data from the period of the government shutdown months of October and November. On that score, manufacturers new durable goods orders for October were reported this morning. The headline number increased 0.5%, but the core capital goods number declined -2.2%:


The YoY trend for both remains in strong expansion, up 4.8% and 6.2% respectively:


I have been very concerned that the government shutdown may have tipped the economy into recession. The jobs numbers have certainly been recessionary. But the weekly consumer spending data has, contrarily, been very healthy. This morning’s two reports make it all but certain that there was no recession in Q3, and are the first -preliminary - positive indications that at least in the first month of the shutdown, the economy continued to make progress.

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Monday, December 22, 2025

Two important employment indicators from November: one says continued expansion, the second recession

 

  - by New Deal democrat


This is going to be a sparse week for data, with the exception of tomorrow’s long-delayed Q3 GDP report, and jobless claims on Wednesday. Sadly, so much of the data is still missing or stale that the best source for up-to-date information is in the regional Fed reports, most of which will be updated by this Friday (so stay tuned for that). And don’t be surprised if I play hooky for a day or two.


That being said, one important - and positive - data point can be updated based on last week’s November jobs and CPI reports: real aggregate nonsupervisory payrolls. To recapitulate, these always peak before a recession begins, usually within 3 to 6 months. And there is a very good fundamental reason for that: once the average American household has less cash to spend in real terms, consumption promptly gets tightened, and that downturn in consumption typically brings about all the other indicia of recession quickly.

But the news from November was good. For the two months covered by the updated jobs report, nominally aggregate payrolls increased 0.9%. Meanwhile, the official cpi index only increased 0.2% for the two months from September through November, meaning that real nonsupervisory payrolls increased 0.7%. In the graph linked to below, November’s level is set to 100, which is the only visibleway to show  the increase since September:


Note that even if the much-criticized shelter increase of 0.1% were instead changed to 0.3% each month, the average over the previously reported months this year, real aggregate payrolls would still have increased 0.2% for the two month period, still a new high.

Nevertheless I recommend taking this will a heavy dose of salt.

On the negative side, it is difficult to imagine such a weak labor market not being on the cusp of, if not already in, a recession. As of November, service providing jobs were only up 0.7% YoY, while goods producing jobs were down -0.15% YoY. A shown in the graph linked to below, which normalizes both readings to zero, only once in the past 85 years - in 1944 - has employment in both sectors been this low YoY without either being already in, or at least on the doorstep of, a recession:


Keep in mind, by the way, that this data is not yet adjusted for any of the QCEW reports this year, which have suggested at by the end of June, employment was only up 0.3% compared with 12 months before, as opposed to the 1.0% higher indicated by the current nonfarm payrolls surveys.

We are still in many ways flying blind. In particular, we really need to see reliable real sales, production, and consumption data through the period of the government shutdown to determine whether or not that self-inflicted wound pushed the economy into contraction or not. Without it, any conclusion I might reach would just be speculation.
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Saturday, December 20, 2025

Weekly Indicators for December 15 - 19 at Seeking Alpha

 

 - by New Deal democrat


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

All of the trends that we have been seeing for the past several months appear to be becoming more entrenched. That includes the re-normalization of the yield curve on the positive side, and weak withholding tax payments and transportation metrics on the negative side. One trend that doesn’t seem to be affected: consumer spending, which is still chugging along as it has for the past several years.

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 towards my lunch money.

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