Weekly Indicators for January 12 - 16 at Seeking Alpha

 

 - by New Deal democrat

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

With the yield curve close to completely normal and mortgage rates at or near 3 year lows, and the housing market reacting to those, the longer range picture is improving.

But what is going to drive (in more ways than one) the immediate future is that gas prices are at the lowest they have been in almost 5 years:

 https://fred.stlouisfed.org/graph/fredgraph.png?g=1QC7I&height=490 

This is similar to, although much smaller than, the big unwind of prices in 2022 that created a positive supply shock saving the economy from recession. 

As usual, clicking over and reading will bring you up to the virtual moment as to the state of the economy, and reward me just a little bit for collecting and organizing the data for you.

Industrial production sets new post-pandemic high in December - but mainly due to utilities

 

 - by New Deal democrat

Industrial production is much less central to the US economic picture than it was before the “China shock,” but it remains an important if diminished economic indicator, particularly since the month it has peaked in the past has typically been the month the NBER has chosen as the economic cycle peak.

In December, headline industrial production (blue in the graph linked to below) rose 0.4%, with previous months revised higher 0.2% on net, establishing a new post-pandemic high, although it remains -1.3% below its 2018 all-time high.  Manufacturing production (red) increased 0.2%, and prior months were also revised higher by 0.2%, but it remained slightly below its September 2025 post-pandemic high:

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

The difference between the two is mainly due to utility production, which rose 2.6% for the month, and was higher by 2.3% YoY. And all of 2025 on average set new all-time records for production, most likely driven by AI data center needs:

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

Despite the influence of utility production, this was a positive report, adding to the evidence we have seen in durable goods orders and regional Fed manufacturing reports in the past few months indicating that manufacturing production in particular has been improving. This in turn is most likely due to the lack of new tariff gyrations, and producers having found a modus operandi to deal with the effects of previously imposed tariffs.

That being said, the next comprehensive report on personal income and spending will be crucial to determining whether the autumn lull or downturn in important coincident economic data ended after the end of the government shutdown or not.

Important scenes from the (recessonary?) December jobs report; was July a cycle peak?

 

 - by New Deal democrat

Last Friday I summarized the jobs report as “show[ing] a contracting jobs market in all important metrics except the headlines (which, for the record, were positive).  …[A]lmost] all of the important leading metrics … were negative, [including the] goods-producing sectors - manufacturing, construction (including residential construction), and temporary jobs - declined, as did the goods-producing sector as a whole. [And] “…[To] 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. [In short,] This is a jobs report which is ringing the alarms for imminent recession.” 

Let me elaborate on that with several important graphs as linked to below.

Since last April, the total number of jobs in the economy (pending benchmark revisions) has grown by a whopping 93,000. That’s under 12,000 per month! On a YoY basis, total jobs have increased only 0.4%. Going all the way back to WW2, only once has YoY job growth decelerated to such a paltry level (in July 1952) without there being a recession:

  https://fred.stlouisfed.org/graph/fredgraph.png?g=1Qx7s&height=490 

Indeed, with only one exception during WW2 (1944), by the time job growth has decelerated this much, a recession had already begun.

Goods-producing jobs have always led the way. These peaked in April, and have declined by -90,000 since. They are now down YoY -0.3%. Only three times since WW2 - in 1952, 1967, and 1986 - have there been such declines without a recession, and in all cases where there was, with the same exception of 1944, the recession had already begun:

 https://fred.stlouisfed.org/graph/fredgraph.png?g=1Qx93&height=490 

A similar situation obtains for aggregate hours worked by nonsupervisory personnel. These are up only 0.7%. This series started in the early 1960s. With the exception of 1967 and single months during 1986 and 1996, before the pandemic such paltry increases had always meant recession:

 https://fred.stlouisfed.org/graph/fredgraph.png?g=1Qxa8&height=490 

To be fair, since the pandemic there have been 6 equivalent or worse YoY comparisons without a recession occuring.

Next, let’s compare all three of the above series. What I want to show you in this link is the order in which the declines have typically occurred:

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

Historically, the pattern has been: first, goods-producing jobs turn negative YoY (red); then aggregate hours worked (gold); and finally total employment (blue). Interestingly, 2025 has been somewhat unique in that YoY hours worked have held up better than total employment - but the pattern will not be broken if hours decline more precipitously from here than jobs. As noted above, YoY goods producing jobs have already turned negative.

Finally with regard to the employment report, real aggegate nonsupervisory payrolls did decline in December from a record high in November:

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

These had grown only 0.3% from March through September, but jumped 0.5% higher as of November, due to a strong 0.7% nominal advance in payrolls, plus the kludged CPI numbers for those months, that added only 0.2%. Had shelter been more accurately calculated in that CPI report, it is likely that real aggregate payrolls would only have advanced 0.2% or even 0.1% instead of 0.5%. So while it is fair to say that this metric is not recessionary through December, a more accurate reading for the past 9 months may be closer to flat.

Which brings me to a link to one final graph, which is the most updated values for the 4 most important series the NBER takes into account when calculating recessions: payrolls, industrial production, real income less government transfers, and real manufacturing and trade sales, all of which have been normed to 100 as of July. The graph also included nominal total business sales for reasons I will describe below:

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

Note that several of the series have not been updated beyond September or October. The point is, only two of the series - payrolls and real personal income - have exceeded their readings in July, both in September, and both by only 0.1%. Further, since total business sales declined in both September and October, and they do not take inflation into account, it is almost certain that real manufacturing and trade sales did so as well.

In other words, there may have been at least a small cycle peak in July, with at least a shallow downturn during the autumn, and in particular during the government shutdown. Whether if so it was pronounced enough, or will last long enough, to qualify as a recession  (pending revisions!) is completely unkown. But the leading metrics in the December employment report are not auspicious.

Jobless claims continue to be very positive, near multi-decade lows

 

 - by New Deal democrat

First, usually the week following the employment report is very quiet, and I put up “scenes from the report” with some important graphs. With all the releases catching up on old data this week, I haven’t done that; but because jobless claims are the only significant data this morning, I intend to put up a very important update on those “scenes” later this morning.

With that out of the way, let’s take our usual look at new and continuing jobless claims. I’ve noted a couple of times lately that there has been a “regime shift” from the end of last June towards lower YoY numbers. And that very much continued in this morning’s data.

Initial claims declined -9,000 last week to 198,000. Aside from a few weeks in the past 3+ years, there have been no numbers under 200,000 since the end of the 1960s! The four week average also declined -6,500 to 205,000. Similarly, aside from the last 3 years, 2018 and 2019, this is the lowest number in over 50 years. Finally, with the typical one week delay, continuing claims declined -19,000 to 1.884 million:

. 

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

There is a significant caveat, in that as shown in the graph linked to above, this is *very* similar to the post-pandemic unresolved seasonality we have seen in the past few years, notably exactly two years ago. 

All that being said, as usual it is the YoY comparisons that are more important for forecasting purposes. In that regard, initial claims were down -8.5% and the four week average down -3.5%. Only continuing claims remained higher, at 1.8%:

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

The analysis remains that *very* few people are getting laid off (possibly some of this is due to immigrants in some industries either quitting or getting deported), but those who are laid off are having a more difficult time finding new jobs. I’ll have more to say about that later this morning.

Finally, although I won’t bother with a link to a graph this week, the lower numbers portend a decline in the unemployment rate in the next several months. One year ago the unemployment rate was averaging 4.1%-4.2%, vs. the 4.4% in the December report, so I am expecting at least a small further decline ahead.

The bottom line is that jobless claims continue to forecast a growing economy in the months ahead.

December existing homes sales add evidence to the “green shoots” thesis for sales, while inventory still has a long ways to go

 

 - by New Deal democrat

Although the government shutdown is long over, the most recent government housing updates have been for October, I.e., two months stale. Thus the NAR’s existing home sales report has temporarily become among our best look at housing sales, prices, and inventorythe housing market. 

As per my context all this year, after the Fed began hiking rates in 2022, mortgage rates also rapidly rose from 3% to the 6%-7% range, where they have remained ever since. Since sales follow mortgage interest rates, existing home sales rapidly declined to 4.0 million annualized, and have remained in that range, generally +/-0.20 million for the past 3.5+ years. Since September, mortgage rates have been at the bottom of their 3+ year range, and in December existing home sales predictably reacted, breaking out of that range to the upside, at 4.35 million units annualized, the highest number since March 2023:

https://tradingeconomics.com/united-states/existing-home-sales 

In the past several years I have been looking for the new and existing homes markets to rebalance. Existing home inventory has been removed from the market for over 10 years (likely due in part to absentee rental owners buying increasing chunks of inventory), and really accelerated during the pandemic. This caused an acute shortage of houses for sale, which in turn led to bidding wars among buyers and a spike in prices.

A rebalancing of the market more than anything would require an increase in inventory at least to pre-COVID levels, and a deceleration of price increases, or even outright decreases. Which means that 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.

The secular decline in inventory reached a nadir in 2022. This series is not seasonally adjusted, so it must be looked at YoY. In December inventory declined sharply, as it does every year, to 1.18 million, exceeding every December level since 2019, when its level was 1.39 million:

 

 https://tradingeconomics.com/united-states/total-housing-inventory 

 

Since inventory was typically in the 1.7 million to 1.9 million range before the pandemic, the chronic shortage still exists, although it is very slowly abating.

For inventory to fully adjust, so must prices. As shown in the below graph, the median price of an existing home rose about 45% between July 2019 and July 2022 and another 5% from there through July of this year, before seasonally declining:

 https://tradingeconomics.com/united-states/single-family-home-prices 

With seasonal adjustments are not made, my rule of thumb is that a peak (or trough) occurs when the YoY% change is less than half of its maximum change in the past 12 months. Here are the comparisons in the past 12 months:

December 6.0%

January 4.8%

February 3.6%

March 2.7%

April 1.8%

May 1.3%

June 2.0%

July 0.2%

August 2.2%

September 2.1%

October 2.1%

November 1.2%

December 1.4%

While YoY price comparisons have crept up since July, they remain well below their past 12 month peak of 6.0%, so the fair conclusion remains that, if we could seasonally adjust, house prices are softer than they were last spring.

My last report on existing homes sales concluded that “the rebalancing of the [new vs. existing housing] market is a long slow slog. Yesterday’s existing home sales report is another data point of very slow progress towards that rebalancing.” The December report adds evidence to the “green shoots” thesis for sales on top of the housing construction and new home sales data we got earlier this week. But the rebalancing remains a long slog, with the pandemic era low inventory almost totally reversed, but yet far below the 2016-18 levels.

Monthly retail sales sharply higher in November, but flagging YoY real sales spell further trouble

 

 - by New Deal democrat

Real retail sales, one of my favorite broad-economy indicators, was updated through November this morning, making only one month stale. This, along with real personal spending, is one of the two most important indicators which have been missing, as we know the jobs and real income have been stagnant, but in terms of important expansion vs. recession metrics, what of sales and purchases?

Let me cut to the chase: in terms of nominal spending, it confirmed the strength we have seen in the weekly Redbook and daily restaurant reservations reports beginning in November. Specifically, in nominal terms retail sales rose 0.6% in November after -0.1% downward revisions for both September and October. In real, inflation adjusted terms, however, the story is different.

Real retail sales are more problematic, in part because there was no number for October, and November’s reading was marred by the shutdown kludge, particularly for shelter. With those important caveats noted, in November real retail sales were higher by 0.3% compared with September, and up 0.6% YoY. The below graph, through September, shows YoY real retail sales (blue) and the similar measure of real spending on goods (gold ), with the most recent reading of each subtracted so that it =0:

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

If you believe, as I do, that the shutdown shelter kludge removed about 0.2% from consumer inflation, that becomes a tiny 0.4% increase YoY, the smallest such gain since October 2024. Also, recall that real personal spending has not been updated yet beyond September.

Going back 75 years, a decline in YoY real retail sales has almost always meant a recession (but both the exception in 2023!). Neither they nor real personal spending on goods are negative as of their last readings,, but real retail sales have decelerated sharply since their YoY peaks in early spring. Should the trend continue, they could be negative YoY in their December or January reports.

Finally, because consumption leads employment, here is the update of YoY real sales (/2 for scale) together with employment (red), updated through the December jobs report:

 https://fred.stlouisfed.org/graph/fredgraph.png?g=1Qtl9&height=490 

[Note that, since I can’t show the November real retail sales “dot,” you’ll just have keep in mind that there was further YoY deceleration] 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.

October new home sales: also pre-recessionary, also with signs of possible “green shoots”

 

 - by New Deal democrat

New home sales were updated for the second time since the shutdown, with data only through October - i.e., stale. The silver lining is that this is a long leading indicator, so it remains of value.

Normally I save inventory for last, but in view of the importance of new homes for sale (red in the linked graph below) in providing housing’s final pre-recession signal, here is that number compared with new houses sold (blue, right scale):

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

For sale inventory was unchanged month over month, and only up 1.7% YoY. As I wrote yesterday, once that has gone negative YoY, it has typically signaled the imminence of a recession. In that regard, if inventory simply has remains unchanged through December, it will have turned negative YoY.

The silver lining is that, like housing permits, actual single family home sales turned higher in September and October, down only -0.1% monthly in the latter month, but higher by 1.8% YoY suggesting that lower mortgage rates may be laying the groundwork for a recovery. As per usual, I caution that this series is very noisy and heavily revised.

Finally, as I typically note, prices follow sales with a lag, and that continued to be true as the median price for a new home was down -8.0% YoY:

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

Note that this series is not seasonally adjusted; hence the focus on the YoY change.

In short, much like housing permits, starts, and units under construction, this stale data looks very pre-recessionary, but also with some signs of “green shoots” thereafter.

December consumer inflation: a return to pre-shutdown trends and still affected by the shutdown shelter kludge

 

 - by New Deal democrat

We finally got our first “regular” CPI report since September this morning. Caution is still warranted, however, because the October-November kludge is still present in the base from which December’s monthly change was calculated. But the bottom line is that the series’ all reverted to their pre-shutdown trend, with the headline number up 0.3% and core inflation up 0.2%, but also with the shelter kludge still affecting the headline YoY comparisons of 2.7% and 2.6% respectively. 

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 2.4%:

  https://fred.stlouisfed.org/graph/fredgraph.png?g=1QqD9&height=490 

The good news is that CPI less shelter decreased -0.2% in December,  and CPI ex shelter was the lowest since July, suggestion significant *disinflation.* Notably the previous uptrend in non-shelter inflation and a smaller but notable increase in headline inflation, with no deceleration in the past 12 months flat YoY core inflation, was clearly broken by the shutdown kludge. If shelter had increased its previous 0.3% monthly during those two months, both headline and core consumer inflation would be over 3%. 

Nevertheless, shelter inflation has decelerated YoY per the latest measure, down to a 3.2% increase, with rent up 2.9% and Owner’s Equivalent Rent up 3.2%, the lowest increase since September 2021 except for last month’s kludge:

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

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 (red). YoY home price increases are near or at multi-year lows, each at roughly 1.5%, and shelter inflation has followed. The graph linked to below includes several years before Covid to show that this is well within its 3.2%-3.6% range during the latter part of the last expansion:

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

Needless to say, this is not only good news, but because of the leading/lagging relationship, we can expect further deceleration in the shelter component of inflation during this year.

Another bright spot is that gas prices declined -0.5% for the month, resulting in a -3.4% YoY decline, which is welcome news to consumers:

 https://fred.stlouisfed.org/graph/fredgraph.png?g=1QqH9&height=490 

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

First, new car prices continue to be largely unchanged, flat for the month and up only 0.3% YoY, while used car prices reversed their shutdown increase, declining -1.1% in December and up only 1.6% YoY. The graph linked to below shows the post-pandemic trend by norming both series to 100 as of just before the pandemic:

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

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 included several minor irritants including non-alcoholic beverages and tobacco, as well as fuel oil. Another recent problem child for inflation has been transportation services, mainly vehicle parts and repairs as well as insurance. Of these, only repairs and maintenance are still problematic, as while declining -1.3% for the month, they remain higher YoY by 5.4%:

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

Finally, electricity prices have also become a significant problem, likely a side effect of the building of massive data centers for AI generation. These declined -0.1% in December, but on a YoY basis are up 6.7%, the highest increase since 2008 except for the shutdown kludge and the immediate post-pandemic inflation:

 https://fred.stlouisfed.org/graph/fredgraph.png?g=1QqJ6&height=490 

As I wrote last month, this has already created a backlash, and I expect that backlash to intensify.

In summary, on a monthly basis December consumer inflation was relatively tame, with shelter cost increases slowly abating and only a few other problem children. I would continue to treat both headline and core YOY numbers with extra caution, since they both remain affected by the situation with shutdown shelter kludge. More likely YoY inflation is roughly steady in the 3% range, above the Fed’s target and with employment growth dead in the water.