Jobless claims remain neutral

 

 - by New Deal democrat

In addition to the jobs report, because this is Thursday we also got the latest jobless claims numbers.

To wit, initial claims declined -4,000 to 233,000, and the four week moving average declined -3,750 to 241,500. With the typical one week delay, continuing claims were unchanged at 1.964 million:

The more important for forecasting purposes YoY% changes for once included a positive, as initial claims were down -2.1%. The four week average was higher by 1.8%, and continuing claims were higher by 5.4%:

Because claims for just one week are noisy, this week’s report remains neutral. This is not recessionary, but does not indicate a strong economy either.

June jobs report weakness: not enough for “recession watch,” but not too far away either

 

 - by New Deal democrat



Even before the new Administration took office in Washington, my focus had been on whether the economy would have a “soft” or “hard” landing, i.e., recession. That has only intensified by the utter chaos of this Administration, particularly about tariffs. So my focus now is looking for “hard” vs.”soft” data indicating its impact.

While the headline numbers of this month’s employment report were positive to neutral, the underlying component were mainly weak to negative, including several very important ones.

Below is my in depth synopsis.

HEADLINES:

• 147,000 jobs added. Private sector jobs increased 74,000. Government jobs rose 73,000. The three month average increased +3,000 to +139,000, about average for this year, but above the lowest average last summer.
• Within government jobs, Federal jobs declined -7,000, while State jobs increased 47,000 and local jobs increased 33,000 (likely due to education).
• The pattern of downward revisions to previous months was reversed this month. April was revised upward by 11,000, and May by 5,000, for a net increase of 16,000.
• The alternate, and more volatile measure in the household report, rose by 93,000 jobs. On a YoY basis, this series increased 2,211,000 jobs, or an average of 184,000 monthly.
• The U3 unemployment rate declined -0.1% to 4.1%. Since the three month average is 4.167% vs. a low of 4.0% for the three month average in the past 12 months, or an increase of 0.1.67%, this means the “Sahm rule” is not in play.
• The U6 underemployment rate declined -0.1% to 7.7%, down -0.3% from its 3+year high in February.
• Further out on the spectrum, those who are not in the labor force but want a job now rose by 39,,000 to 6.030 million, its highest level since July 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. This month they were mixed, but more negative than neutral or positive:

• the average manufacturing workweek, one of the 10 components of the Index of Leading Indicators, was unchanged at 41.0 hours, but remains down -0.6 hours from its 2021 peak of 41.6 hours.

• Manufacturing jobs decreased by -7,000. This series had been  in sharp decline, but it has generally leveled off in the past eight months. Nevertheless, with this month’s decline it set a 3 year low.
• Within that sector, motor vehicle manufacturing jobs declined 500.
• Truck driving, which had briefly rebounded, declined another -2,700.
• Construction jobs increased another 15,000.
• Residential construction jobs, which are even more leading, declined -500 from last month’s post-pandemic high.
• Goods producing jobs as a whole increased 6,000 to another post-pandemic high. These jobs typically decline before any recession occurs. But on a YoY% basis, these jobs are only 0.1%, which is very anemic although not necesarily recessionary.

• Temporary jobs, which have declined by over -640,000 since late 2022, declilned again this month, by -2,600, close to their post-pandemic low set last October.
• the number of people unemployed for 5 weeks or fewer declined -210,000 to 2,241,000, vs. its 12 month high of 2,465,000 last August.

Wages of non-managerial workers

• Average Hourly Earnings for Production and Nonsupervisory Personnel increased $.09, or +0.2%, to $31.24, for a YoY gain of just under +3.9%, its lowest YoY% gain in 4 years. Nevertheless, this continues to be well above the 2.4% YoY inflation rate as of last month.

Aggregate hours and wages: 

• The index of aggregate hours worked for non-managerial workers declined -0.6%. This measure up only 0.6% YoY, the 5th lowest reading over the past two years.

• The index of aggregate payrolls for non-managerial workers declined -0.2%, and is up 4.5% YoY. With the exception of January 2024, this is the lowest gain in the past 4 years. Although this remains well above the YoY inflation rate, it has increased only 0.3% in the past three months, meaning it has almost certainly declined in real terms, although we won’t know that until the next CPI is released.

Other significant data:

• Professional and business employment declined another -7,400. These tend to be well-paying jobs. This series peaked in May 2023, bottomed in October 2024, and is up less than 0.3% since then. It remains lower YoY by -0.2%, which in the past 80+ years - until now - has almost *always* meant recession. This is vs.  last spring when it was down -0.9% YoY.
• The employment population ratio was unchanged at 59.7%, vs. 61.1% in February 2020.
• The Labor Force Participation Rate declined -0.1% to 62.3%, vs. 63.4% in February 2020.

SUMMARY

Last month I wrote that “Although the headline numbers were positive to neutral, this was about as poor a report as could be during an expansion.” If anything, under the hood this month was even weaker.

For the second month in a row, the only reason the unemployment and underemployment rates did not go up was that the labor force participation declined significantly. The employment/population ratio also declined. Further out on the spectrum, those not in the labor force but who want a job increased to the highest level in almost 4 years.

Additionally, most leading sectors declined, including total and auto manufacturing, trucking, temporary help, and residential construction. Professional and business employment also declined, as did government employment.

Perhaps even more ominous, both aggregate hours and aggregate payrolls outright declined this month, even before accounting for inflation. In other words, the American middle and working class as a whole almost certainly saw an absolute decline in their purchasing power last month - something that typically has happened a few months before a recession begins.

What saved this report from being even weaker was (1) state and local government jobs, mainly in education, which almost certainly involves residual unresolved post-pandemic seasonality; and (2) specialty and finishing construction trades, which tend to be later in the construction process. Additionally, the pattern of downward revisions to previous months was broken this month.

Finally, this report was of a pattern with last month’s personal spending report, which showed a decline in the purchases of goods in real terms. Indeed, if construction jobs had turned down, this report would probably have merited going on “recession watch.” We’re not quite there, but we’re not far away either.

JOLTS survey for May still consistent with “soft landing” scenario

 

 - by New Deal democrat

As promised, let me parse the JOLTS survey for May, which was reported yesterday. 

As a quick refresher, this survey decomposes the employment market into openings, hires, quits, and layoffs. In 2024 the data were most consistent with a “soft landing,” but the actions of the new Administration, especially on trade, have exacerbated the fear that this might transform into a “hard” landing, a/k/a a recession.

Yesterday was a good “soft landing” report.

To start, here are job openings, hires, and quits all normed to 100 as of just before the pandemic:

Openings are “soft” data and have generally trended higher going all the way back to the turn of the Millennium. They have remained above their pre-pandemic levels, and this month increased by 374,000 to 7.769 million. Voluntary quits also rose by +78,000 to 3.293 million. On the other hand, actual hires declined by -112,000 to 5.503 million. 

Both hires and quits remain below their pre-pandemic levels, but above their level through much of last year, consistent with a continuation of the “soft landing” scenario as shown in the below graph of the past 12 months:

Now let’s turn our attention to several components are slight leading indicators for jobless claims, unemployment and wage growth.

Recently one item of concern has been layoffs and discharges, which generally have averaged higher since last July. In May, they declined by -188,000 to 1.601 million, one of the three lowest readings since then, and about average since the beginning of 2023:

This is better than both the increase in the unemployment rate over the past year (red, right scale) to new levels in the past year, as well as the recent trends in new and continuing jobless claims (not shown), both of which typically follow with a short lag.

Finally, the quits rate (left scale) typically leads the YoY% change in average hourly wages for nonsupervisory workers (red, right scale):

In May the quits rate rose 0.1% to 2.1%, tied with its highest rate in the past 12 months. Although in the past few months the trend has been a slight improvement, this is still below any post-pandemic reading before last September. Nevertheless, the downshift that began late last summer has not yet been reflected in average hourly wages, which tend to follow with a lag. Thus this continues to suggest that wage growth will decelerate further on a YoY basis over the next few months.

The last few JOLTS reports have all been consistent with the “soft landing” scenario remaining intact through May. Tomorrow we will find out whether the June employment report continues to support this.

Construction spending continues contraction, amplifying yellow flag caution from manufacturing

 

 - by New Deal democrat

I concluded last month’s post on construction spending by writing “Putting this report together with this morning’s other report on manufacturing from ISM, it appears the goods-producing part of the economy as a whole is very slightly contracting. It will be interesting to see if this is reflected in a decline in goods-producing jobs in Friday’s report.”

If anything, this morning’s construction spending report suggests a contraction that is a little less “slight,” as total construction spending (blue in the graph below) declined -0.7%, while residential construction spending (red, right scale) declined -0.5%:

Further, since on a nominal basis both series peaked exactly 12 months ago, on a YoY basis as well as on an absolute basis from peak, they have declined -3.5% and -6.5%, respectively:

Adjusting by the cost of construction materials, which again rose last month, the declines from peak are -8.9% and -10.4%, respectively:

If construction spending has declined more severely from peak, and manufacturing is in contraction as well, that amplifies somewhat the conclusion that the entire goods-producing sector of the US economy is in a downturn. In which regard, here is the latest update to industrial (blue) and manufacturing (red) production, indicating slight declines from peaks several months ago:

In answer to the question posed at the top of this post, last month there was indeed a slight -5,000 decline in goods-producing jobs. On Thursday we will find out if that continues for a second month.

Preliminary economically weighted ISM average for June continues in “recession watch” territory

 

 - by New Deal democrat

As usual, we start out the month with reports on both manufacturing and construction. Ill post separately on construction. Additionally, the May JOLTS reports was posted, but I’ll discuss that tomorrow. So let’s start with the ISM manufacturing report, a recognized leading indicator for the past 60+ years, although of diminished importance since the turn of the Millennium (it was in deep contraction both in 2015-16 and again in 2022 without a recession occurring).

To recap briefly, any number below 50 indicates contraction. The ISM itself indicates that the number must be 42.5 or less to signal recession. 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. After both reports were posted one month ago, I indicated they justified a “recession watch.” 

This morning’s report confirms that. While the headline number for June rose 0.5 to 49.0 (still contractionary), the more leading new orders subindex declined -1.2 to 46.4.

Here is a look at both the total index (gray) and new orders subindex (blue) for the past ten years:

Note that both remain better than they were in 2022-23.

Hare the last six months of both the headline (left column) and new orders (right) numbers:

JAN 50.9  55.1

FEB  50.3  48.6

MAR 49.0. 45.2

APR 48.7. 47.2

MAY 48.5. 47.6

JUN. 49.0. 46.4

The current three month average for the total index is 48.7, and for the new orders subindex 47.1. 

As I indicated above, 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 average of the last two months for the headline and new orders numbers has been 51.8 and 49.4, respectively. While the economically weighted headline number remains slightly above 50, at 50.4, the new orders average is 49.0.

In short, pending the release on Thursday of the ISM non-manufacturing report, for the second month in a row the new orders average is forecasting economic contraction in the next few month. Which means that, as of today, the “recession watch” forecast signal continues in place.

Pay close attention to real personal spending on goods

 - by New Deal democrat

 This week data arrives in two batches: a smaller batch (ISM manufacturing and construction spending) tomorrow, and a huge tranche (nonfarm payrolls, jobless claims, ISM services, and factory orders) on Thursday. Which means I might take Wednesday off, and/or delay reporting on some of Thursday’s data until Friday.

In the meantime, let me take a deeper look at Friday’s report on personal spending. That’s because as I’ve written before, spending on goods turns down before spending on services. In fact, spending on services often sails right through recessions without ever turning down at all. Further, spending on goods tends to turn negative before the recession actually hits. And of course since consumer spending is roughly 70% of the economy, it also has a big impact on GDP.

First let me show you the historical YoY% change in real spending on goods (red) and services (blue), averaged quarterly to cut down on noise:

Except for very shallow recessions, real spending on goods has always turned negative YoY, whereas before COVID real spending on services only turned negative during the severe Great Recession. And since real spending on goods is much more volatile, if it is decelerating to a lower level than that on goods, it is a frequent harbinger of recession.

Now here is the post-pandemic look. I’ve broken this out monthly just because it is much easier to see what is going on:

Real spending on goods only turned negative YoY one year exactly after the large 2021 stimulus, which led to a lot of immediate spending on goods. Even with the big miss on Friday, it was still positive YoY by 2.5%.

But as I have often noted, a measure peaks or bottoms before the YoY measure turns positive or negative. Thus, where we have seasonally adjusted data, that is the better way to took for leading turning points.

Since real personal spending on goods and services is seasonally adjusted, let’s look at the % change in each on a quarterly basis. I’ve broken down the 60 years of data before the pandemic into 3 graphs so the important markers are easier to see.

Here is 1960-80:

1981-2000:

And 2001-2019:

Again, note that real spending on services rarely turns down, even during recessions, although usually its growth does declerate below 1% annualized during the quarter just preceding or starting the recession.

Further, if real spending on goods is positive, with exactly one exception in 60 years it either meant an expansion was ongoing, or we were close to the end of a recession.

More often than not, even a negative quarterly number for real spending on goods did not signal a recession either. But if we remove all such cases were quarterly real spending declined less than -1%, we get a much more reliable signal, albeit not perfect. About 50% of the time sharper downturns indicated an oncoming recession, and about 50% just a slowdown. If growth in real spending on services was also decelerating sharply, even if still positive, it almost always meant recession.

Now let’s look at the quarterly post-pandemic data, beginning with Q2 2021:

Although Q2 and Q3 in 2021 were negative, they were a reaction to the huge front-loading of spending in Q1 (which would have dwarfed all the other readings). Only one quarter - Q4 of 2022 - came in with a downturn of more than -1%, a false positive. Q3 and Q4 of 2024 again likely featured front-running. The payback was in Q1 of this year, when the quarterly increase for both goods and services was almost exactly 0.

Now here is the monthly look at the last year:

In the first two months of Q2, total real spending has declined by -0.8%, while services has been basically unchanged. If there is a further decline in June, based on the above discussion that would likely trigger a “recession watch” signal.

Weekly Indicators for June 23 - 27 at Seeking Alpha

 

 - by New Deal democrat

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

There have been a number of reversals since April, most notably the stock market going from a 12 month low to a new all-time high, but also the front-running by consumers apparent in the weekly Redbook report has also reversed, from over 7% YoY to 4.5%, one of the lowest readings of the past 12 months.

Whether this is more than just a temporary reversals will likely play out over the next two months.

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 little lunch money.

May personal income and spending: consumer payback for Tariff-palooza! is a B!t©h

 

 - by New Deal democrat

The last significant data for the first half of 2025, personal income and spending for May, was released this morning. It was the first month that reflected the impact of Tariff-palooza!, and boy howdy was it impacted. Not a single metric was positive. One metric was unchanged; everything else was negative. Let’s take a look at the carnage.

Nominally personal income declined -0.4%, and personal spending declined by -0.1%. Since the PCE deflator increased 0.2%, real income was down -0.6, and real spending down -0.3%. Here is this month’s update of real personal income and spending normed to 100 since the onset of the pandemic (as are all other graphs below except for the personal saving rate):

Typically real spending on goods declines before recessions, while real spending on services has increased throughout all but the most severe of them. In May real spending on goods declined by -0.6%, while that for services - the sole relative “bright” spot in this morning’s report - was unchanged:

Further, ant least one important historical recession model posits that evidence that spending on durable turns down before spending on non-durable goods. This month both were abysmal, as the former metric turned down by -1.8%, and the latter by -0.3%:

While on a YoY basis none of the above metrics have broken a trend, it is noteworthy that all of them show a sharp slowdown in growth since last December, from a meager 0.1% increase in real spending on services to a sharp -0.9% decline in spending on durable goods. Some of this can be put down to the effects of front-running earlier this year, but if the trend continues that could indicate a real turning point.

Next let’s take a look at the personal saving rate. Generally, as expansions continue, consumers become more aggressive with their purchasing, and then more cautious immediately in advance of (and partially the cause of) recessions. In May this declined -0.4% to 4.5%, but still well above its low of 3.5% last December:

Again, there’s no indicated break in trend, although it is important to note that such a rate remains below any reading below 1999, and the average between 2000 and 2019 was 5% (not shown).

Finally, there are several important coincident indicators used by the NBER in recession dating in this report.

The first is real personal income less government transfer payments. This declined -0.1%:

The second is real manufacturing and trade sales, which are calculated with a one month delay. In April they declined -0.4%:

Again, neither of them show a clear break in trend, although by the time such a break would be apparent, almost by definition a recession would have already begun.

Last month I concluded that “because of the tariff situation, forecasting based on this report is particularly fraught. What we can say is that the consumer portion of the US economy remained in expansion through April”, and that it would be important to see if the initial evidence of an end to consumer front-running of tariffs would be continued or amplified in May.

This morning we got a clear answer, as the report showed ample evidence of payback, as consumers cut back on spending of almost all sorts, and even spending on services turned flat. Perhaps more concerningly, real incomes declined, even after we account for transfer payments like Social Security. As I wrote above, whether this might mark an actual turning point vs. simple payback for the front-running of tariffs earlier this year will have to wait on another month or two of data. For now, the important point is that in May all of the leading and coincident indicators of personal finance turned down.

Jobless claims indicate employment market continues to weaken, but still not recessionary

 

 - by New Deal democrat

Jobless claims continue to tell us two things: (1) the jobs market continues to slowly weaken, but (2) it is not recessionary.

This week I’ve changed my graphing scheme slightly, to emphasize the less noisy four week moving average of initial claims, to better show the residual post-COVID seasonality, and to put the recent increase in continuing claims in better context.

With that said, initial claims declined last week by -10.000 to 236,000, and the four week average declined -750 to 245,000. With the typical one week delay, continuing claims rose another 37,000 to 1.974 million, its highest level in almost 3.5 years (see extreme left in graph below):

Also note that beginning with the end of 2022, we have seen a pattern where initial claims rise into the summer, then fall back into the winter, a pattern which has continued this year so far.

This residual seasonality makes the YoY% comparisons, which are more important for forecasting purposes, all the more salient.So measured, initial claims are up 1.3%, the four week average up 4.3%, and continuing claims up 7.0%:

This is well within the trend of the YoY comparisons averaging 5.0% +/-5% which we have seen since last October.

Finally, since the 4th of July is Friday next week, the June employment report will be released Thursday, which means this will be our last advance look at what jobless claims are suggesting about the unemployment rate. Here is the YoY% change in both measures of claims as well as that of the unemployment rate:

This suggests about a 4% (percent of a percent) increase in the unemployment rate YoY in the next several months.

Since the unemployment rate was 4.1% last June, rising to 4.2% for several months thereafter, this suggests that the unemployment rate is likely to rise to 4.3% or possibly even 4.4% in the next several months:

We’ll find out a week from today. In the meantime, the message - expecially from continuing claims - is that while new jobs are harder to find, layoffs are not increasing that significantly. Remember that my model requires a 10% YoY increase in jobless claims just for a recession “watch,” let alone a “warning.”

May new home sales decline, but prices firm, more evidence suggesting rebalancing

 

 - by New Deal democrat



This morning gives us the last of our three measures of home sales, prices, and inventory, new home sales. These are the most important of the three because while they are very noisy and heavily revised, they are the most leading of all housing metrics, and so they can tell us about the underlying upward or downward pressure on the economy going forward one year or more. Additionally, the construction of new homes has a much bigger impact than the sale of existing homes. 

In May, new home sales declined 99,000 to 623,000. April’s initial number of 743,000, which had been a 3 year high, was revised downward by -21,000. In the below graph I also show single family permits (red, right scale), which lag slightly but are much less noisy:

Both have until now been rangebound. New home sales this month were close to the bottom of that range, while permits made a new 2 year low. 

Over the same 2.5 year period of time, prices also stalled, and then began a very slow deflation on the order of -1% -5% YoY. In absolute terms that trend continued last month. While the median price of a new single family home increased 15,200 to $426,600 in May, that is average compared with the last 2.5 years:

On the other hand, this was the second highest YoY% increase in the median price of new homes in the past 2 years, up 8.1%, suggesting that the deflating trend may be ending. The below graph compares the one month and quarterly average of the YoY% change in new homes compared with the YoY% change in the FHFA and Case Shiller Indices, which were reported yesterday:

. 

Before 2018 (not shown), typically the series moved in tandem. Since then, as you can see, with the exception of 2021-22, the median price of existing homes has increased substantially more than that of new homes. For a rebalancing to occur, these should start to converge - and that may be happening.

Finally, after a slight decline in April, the inventory of homes for sale rose 7,000 to 507,000, another post-pandemic high:

This is significant because in the past recessions have happened after not just sales decline, but the inventory of new homes for sale (red, right scale) - which also consistently lag - also decline (as builders pull back:

To summarize, new home sales, while weak in May are not signaling recession, and in fact the relative firmness in prices this month, compared with the continued deceleration of price increases in existing homes, is most consistent with an ongoing rebalancing of the market.

Repeat home sales through April confirm housing market is well on its way to rebalancing

 

 - by New Deal democrat

Yesterday the existing home sales report showed continued deceleration in YoY price increases to 1.3%, along with an increase in inventory of houses for sale, indicative of the ongoing rebalancing of the housing market. This morning’s repeat home sales reports from the FHFA and S&P Case Shiller strongly confirmed that deceleration and ongoing rebalancing.

On a seasonally adjusted basis, in the three month average through April, both the Case-Shiller national index (light blue in the graphs below) as well as the FHFA purchase only index (dark blue) showed a declines of -0.4%, the steepest such declines since the summer of 2023:

On a YoY basis, price gains in both indexes not only continued to decelerate, at 2.7% for the Case Shiller index, and 3.0% for the FHFA index; but these were the lowest YoY% increases since 2012 for both indexes excluding 7 months in 2023 for the Case Shiller index:

These are of a piece with yesterday’s very low YoY% gains in prices in the existing home sales report:

(Graph by Calculated Risk)

Further, because house prices lead the measure of shelter inflation in the CPI, specifically Owners Equivalent Rent by 12-18 months, here is the same graph as above (/2 for scale) plus Owners’ Equivalent Rent from the CPI YoY (red):

As I wrote last month, the last time the Case-Shiller and FHFA Indexes were in this range YoY (2019), Owners Equivalent rent gradually declined in the 12-24 months thereafter to the +2% YoY level.

All of this is good news, showing that the existing vs. new homes market is well on its way to rebalancing, and that we can expect further good news in the very large shelter component of the CPI in the months ahead; with the sole - significant - exception of the effects of tariffs.

May existing home sales show prices stabilizing, inventory continuing to increase towards its historical range

 

 - by New Deal democrat

The first part of this week is all about more housing data. This morning started out with  existing home sales, which although they typically constitute about 90% of all sales are the least important for forecasting purposes, since the main thing that happens is only a change in ownership, and therefore they have much less economic impact than new home sales.

And this month the level of sales themselves was far less important than what the median price for an existing home and inventory are telling us about the ongoing rebalancing of the housing market.

Sales of existing homes, just like new homes, have been rangebound for the past 2 years, in reaction to mortgage rates remaining in the 6%-7% range. In May they remained within that range, increasing 0.8% to 4.03 million annualized on a seasonally adjusted basis (although on a YoY basis there was a slight -0.7% decline). The below graph shows the last 10 years, showing both the immediate post-COVID surge and the low but rangebound trend since:

But as I wrote above, prices and inventory were more important this month. 

Let’s start with inventory. As I have pointed out repeatedly, the secular decline in inventory began well before onset of the pandemic, reaching a nadir in 2022. Unlike sales, this series is not seasonally adjusted, so it must be looked at YoY, and in May inventory continued to climb, to 1.540 million units, a 20.3% YoY increase, and only 1,000 units lower than May 2020 (May data not shown):

Nevertheless inventory is still below its pre-2014 levels, which typically were in the 1.7 million to 1.9 million range, which means that although it is lessening the chronic shortage still exists.

Finally, let’s look at prices. Builders of new homes are much more able to respond to market pressures, and - leaving the effects of tariffs on building materials aside - this has continued to make new homes relatively much more attractive than the constricted existing homes market, which has had strong upward pricing pressures right through the end of last year.

There was already strong evidence that this upward pricing pressure was abating. And this month added yet more such evidence. Like inventory, this data is not seasonally adjusted and so must be looked at YoY, as in the graph below of the last 10 years (May data not shown):

In the immediate aftermath of the pandemic in 2021-22, prices increased as much as 15% or more YoY. After the Fed started its sharp hiking regimen, prices briefly turned negative YoY in early 2023, with a YoY low of -3.0% in May of that year. Thereafter comparisons accelerated almost relentlessly to a YoY peak of 5.8% in May of 2024, before decelerating to 2.9% in September.

Here are the comparisons since:

October 4.0%

November 4.7%

December 6.0%

January 4.8%

February 3.6%

March 2.7%

April 1.8%

In May this deceleration continued, with a YoY% gain of 1.3%, the lowest such gain since earnly 2023.

In summary, this month’s existing home sales report tells us that the rebalancing of the housing market is continuing. Although seasonally adjusted sales remain rangebound, price increases have abated dramatically, and inventory is increasing at a big YoY clip. Although inventory is still low by historical standards, it is possible that by July’s report it could reach the 1.7 million level, i.e. the bottom of its pre-2014 historical range.