June JOLTS report: deceleration all around (including the bad stuff)

 

 - by New Deal democrat

The theme of the JOLTS report for June was “continued deceleration,” but no particular cause for concern. As we’ll see below, that’s because the “bad” metrics declined just as must as the “good” ones did. 



To start with, job openings (blue in the graph below), a soft statistic that is polluted by imaginary, permanent, and trolling listings, declined -46,000, or -0.6% from an upwardly revised May reading  to 8.184 million (vs. a pre-pandemic peak of 7.594 million). Actual hires (red) declined -314,000, or -5.6% to a new post-pandemic low of 5.341 million (vs. a pre-pandemic peak of 6.0 million). Voluntary quits (gold) declined -121,000, or -3.6% from downwardly revised near-post 2020 lows in April 3.282 million, the lowest rate in three years. The last two, as you can see In the below graph below, are sharp declines. Note all values are normed to a level of 100 as of just before the pandemic:

Hires are now down -10.9% from their level just before the pandemic, and quits are down -5.2%.

But the reason this month’s air-pocket isn’t particularly concerning is that the exact same thing happened with layoffs and discharges (blue in the graph below), which declined -180,000, or -10.7% (!) to 1.654 million, their lowest level since late 2022, and roughly 25% below their typical level in the 10 years before the pandemic:

The more leading weekly initial jobless claims (red), which have increased signficantly in the past several months, suggest that layoffs and discharges may increase as well, although the former have probably been affected by unresolved seasonality, so take this with an extra grain of salt.

Finally, the quits rate for June was unchanged from a -0.1% downwardly revised May at 2.1%, again a post-pandemic low. As I have noted for a number of months now, the quits rate (blue in the graph below) tends to lead average hourly earnings (red, right scale), this suggests that the deceleration in nominal wage growth may continue also slowly:

My big concern over the past year has been if a further deceleration in wage growth were to coincide with an upturn in inflation, because that would likely cause a decline in real consumer income and spending. If both are abating, then the net impact remains a positive for the economy.

Repeat home sales were benign in May, forecast continued downtrend in shelter CPI in months ahead

 

 - by New Deal democrat

First, a brief administrative note: I am traveling this week, so posting is going to be sporadic and delayed. I’ll get to this morning’s JOLTS report later today or tomorrow morning.

With that out of the way, let’s take a look at repeat home sales prices.

To reiterate my focus, in the housing data I am looking at any movement towards rebalancing between new and existing home sales. As to existing home sales, wethis means increasing inventories and more stable or even slightly declining prices. We did see another increase in inventory last week. In the repeat sales index, I am looking for signs that price increases might be abating. 

And that is what was shown this morning. The monthly comparisons were unchanged in the slightly leading FHFA index, and comparable to the last 6 months in the Case Shiller national index. Since the YoY comparisons are against 0.6% and 0.7% increases monthly last year, the YoY% increases also show deceleration.

The unchanged reading in the FHFA (purple below) is tied with January and March for the lowest change since August 2022. For Case Shiller (blue) it is near the low end of recent monthly changes, and the last 6 months in general have been the lowest since February 2023:

On a YoY basis, the FHFA index is up 5.7%, the lowest since last August. The Case Shiller’s YoY increase is the lowest since last December:

Again, the FHFA tends to lead the Case Shiller index by a month or two, so the direction is good.

Becase the house price indexes lead the shelter component of the CPI (red above) by 12-18 months, this means we can expect continued deceleration in that very important component of consumer prices as well.

This means that Owners Equivalent Rent, which is 25% of the entire CPI, should continue to trend towards 3% YoY increases in the months ahead.

This is a good report which should give the Fed more reason to be comfortable beginning to cut interest rates.

Weekly Indicators for July 22 - 26 at Seeking Alpha

 

 - by New Deal democrat

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

The high frequency data, like the personal income and spending report, continue to show a strong consumer. Some of the long term negatives have also gotten “less bad” as well.

As usual, clicking over and reading will bring you up to the virtual moment as to the data, and reward me a little bit for organizing it all for you.

Personal income, spending, and prices: consumer remains strong, inflation close to 2% target no matter how you measure it

 

 - by New Deal democrat

I am on the road today, so I will have to keep this brief.

In June nominal personal income rose 0.3%, and spending rose 0.2%. Since PCE inflation rose less than 0.1%, real income rose 0.2% and real spending rose 0.1%.

Since spending on services tends to rise even during recessions, the more important component to focus on is real spending on goods. This rose 0.2% to its highest level ever except for last December:

As indicated above, PCE inflation was also subdued. The core measure rose 0.2%. On a YoY basis, PCE inflation is 2.5%, and core PCE inflation is 2.6%:

Both of these are at their lowest levels since the pandemic.

Finally, with the usual one month delay, real manufacturing and trade sales rose sharply, by 0.9%, also to their highest level ever except for last December:

The two big takeaways from this month’s report are that the consumer remains strong, and inflation, no matter how you measure it, is close to the Fed’s 2% target. Again, if that is indeed a target rather than a ceiling, the Fed has no reason not to proceed with at least several small interest rate cuts.

Coincident real GDP metric is good, but leading indicators from the GDP report are not: is the Fed listening?

 

 - by New Deal democrat

Real GDP grew 0.7% in Q2, or a 2.8% annualized rate, a perfectly good number in line with the past three years:

Probably even more importantly, the GDP deflator increased 0.6% for the quarter, or at an annualized rate of 2.3%. As the below graph shows, this is a perfectly normal rate going back to the start of the Millennium:

In other words, if 2% inflation is a target and not a ceiling, the Fed need not wait any further before starting to trim interest rates lower.

And the long leading indicators contained within the GDP report ought to give them more reason to cut, because both declined slightly.

First, private fixed residential investment as a share of GDP, a proxy for the housing market, declined slightly both in nominal (blue) and real (red) comparisons:

This doesn’t scream recession, but the generally flat trend of the past several years (with the supply chain tailwind now gone) at very least suggests lackluster growth ahead.

Secondly, real deflated proprietor’s income, a proxy for corporate profits (which won’t be reported for another month, also declined, by -0.4%:

Business profitability is also not providing any help to the economic outlook for 2025.

Continued resilient real consumer income and spending is keeping the economy growing. But the power sources for that engine are not providing any more juice. 

Again, not recessionary, but more evidence that the Fed should start to lower rates now.

Jobless claims hold their ground against the most challenging comparisons of last summer

 

 - by New Deal democrat

This week completed the most challenging YoY comparisons with last summer. Recall that I suspect there may be some unresolved post-pandemic seasonality in these numbers, as this year’s increase starting in late spring has been close to a mirror image of last year’s increase. So if there is some real new weakness in jobless claims, the last three weeks were the most likely times it would show up.

And the result this week was not too bad. Initial claims declined -10,000 to 235,000. The four week average increased 250 to 235,500. With the typical one week delay, continuing claims declined -9,000 to 1.851 million:

More importantly, on a YoY basis weekly claims were up a slight 1.7% (4,000), and the four week average was unchanged. Continuing claims were up 4.9%, still close to their recent YoY low comparisons:

This is a neutral result compared with the most challenging comparisons of last summer. Specifically, it does not suggest a recession in the near future.

Finally, looking ahead to next week’s unemployment rate for July, we see that the monthly numbers were about equal to June’s but higher than earlier this year:

This suggests some further upward pressure on the unemployment rate in coming months (recalling that the big wave of immigration in the last several years is almost certainly distorting that comparison upward). It’s possible the “Sahm rule” will be triggered as a result, but recall that the comparison rate for that rule is also going to increase 0.1% this month as well.

7%+ mortgages weigh on new home sales, while prices continue slight downtrend, and inventory uptrend

 - by New Deal democrat

Now that we have new as well as existing home sales, let’s take a little more extended look at the housing sector.

Let me start by reiterating the big picture: mortgage rates lead sales, which in turn lead prices. Further, new home sales are the most leading of all housing metrics, but they are noisy and heavily revised. The much less noisy single family permits lag them slightly. Finally, we are looking for relative normalization between the new and existing home sectors, which would mean *relatively* more existing vs. new home sales, firming in new home vs. existing home prices, and more inventory growth in existing homes vs. new homes. 

Only the third of these made progress in June.

Three months ago I wrote that “because mortgage rates have risen somewhat in the past few months (from 6.67% to 7.10%, I expect this range in new home sales to continue, with a slight downward bias in the immediate months ahead.” That is what has happened in the three months since. Mortgage rates (red in the graph below, right scale) remain elevated (over 7% on average in May) compared with earlier this year, so downward pressure has been placed on new home sales:

Specifically, in June new home sales declined another -4,000 to 617,000 annualized, with only a slight revision to May. This is on par with new home sales late last year when rates were also above 7%.

As expected, the much less noisy, but slightly less leading single family housing permits (red, right scale), have turned down with a slight delay as well:

Prices (brown) continued to rise after sales declined, and have since declined themselves slightly as well (if there were more combined new and existing home inventory, we would expect a steeper decline in prices):

On a YoY basis (red), in June the median price for a new home was almost exactly unchanged (down -0.1%):

But the slight downward trend over the past 12+ months remains intact.

Finally, inventory always lags sales, and this continued to climb to its highest all-time level except for the peak of the 2000s housing bubble:

For comparison, yesterday we saw that sales of existing homes remained near their 5 year lows, while inventory (not seasonally adjusted) rose to a three year high, and prices continued to rise YoY, but at a slower pace. Here is the graph of existing home inventories (not seasonally adjusted) for comparison:

Mortgage rates over 7% have thus continued to be an obstacle to normalization. Sales of both new and existing homes remain near five year lows. Prices of existing homes continue to rise faster than for new homes. Inventory for both new and existing homes is increasing, but the latter is increasing - from an extremely low post-pandemic level in 2022 - faster than the former, 23.3% vs. 11.2% YoY.

To sum up, there is still a long way to go on the journey to a normal housing market. I expect existing home inventory to continue to rise sharply until prices stop rising faster than prices for new homes. Meanwhile sales for both will continue their existing flat to slowly decreasing trend until mortgage rates are significantly lower.

Existing home market inventory and prices move slowly towards normalization, while sales remain punk

 

 - by New Deal democrat

Since existing home sales are less important for economic purposes, and especially with new home sales being reported tomorrow morning, I will keep this brief.

What we are looking for is rebalancing in the housing market. For that to happen, we want the inventory of existing homes to increase, prices to stabilize, and sales to gradually pick up.

In June we got two out of three.

The inventory of homes for sale increased to 1.32 M. This series is not seasonally adjusted, so we look YoY, and there we find that this is the highest inventory for June since 2020:

Meanwhile the YoY% gain in prices was 4.1%. This metric is also not seasonally adjusted, and there we got the lowest YoY% increase since last December:

But sales of existing home declined 0.22 M annualized in June to 3.89 M. This is at the bottom of its range in the past 12 months, and reflects the increase in mortgage rates several months ago:

So, inventory is increasing, and prices are increasing at a slower pace, but sales are not picking up at all, at least not with the mortgage rates of 7% we saw several months ago.

I’ll compare with the situation as to new houses tomorrow.

How restrictive are real interest rates?

 

 - by New Deal democrat

Over the weekend Harvard econ professor Jason Furman suggested that the Fed funds rate is not very restrictive:

“As inflation has come down the real Federal funds rate has risen and is now the most restrictive it has been this cycle, a point that Austin Goolsbee has emphasized a number of times. … That is not the way I would look at it. The rates that matter for the economy are long rates. and expected inflation over, say, the next decade has not changed that much. So the real mortgage rate, for example, is restrictive but not increasingly so.”

Let’s take a look.

First, here is the historical look at the real Fed funds rate, i.e., the nominal rate minus the YoY inflation rate. Since it is currently just under 2.4% higher than inflation, I subtract that so the current rate shows at the zero line below:

Indeed the current real Fed funds rate is the most restrictive since just before the Great Recession. Beyond that, it is also more restrictive than during most of the 1960s and 1970s. Only during the 1980s and the latter part of the 1990s was it consistently higher. We’ll circle back to this further below.

Also, note that interest rates -not so  coincidentally - were only as restrictive or more restrictive than their current levels shortly before recessions during the 1960s and 1970s, as well as the 2000s.

But what about compared with longer rates?  Here is the same graph, again normed to zero at its current readings for the real 10 year treasury rate (blue), real 5 year Treasury rate (gold), and real 2 year Treasury rate (red) since the turn of the Millennium:

The two year real rate is almost as restrictive as the real Fed funds rate over this nearly 25 year period. Further, while the 5 and 10 year real rates are *relatively* less restrictive, they are still more restrictive than at almost any time in the past 10 years, and about average for the 15 years before that.

Here is the same graph for the period of the 1960s through 1990s for which data is available:

Longer term real rates are less restrictive than at almost any point in the 1980s and 1990s, but about average for the 1960s and more restrictive than most of the 1970s.

So the conclusion is that longer term real rates are generally more restrictive than at most times in the past 25 years, and about average for the last 40 years of the 20th century.

Which isn’t that helpful.

For forecasting purposes, there are two more important points.

1. The ECRI method that uses nominal long term bond rates as one of their four indicators that goes into their ”long leading index” does not make use of the yield curve. Rather, it asks whether long rates are higher or lower than they have been previously in the expansion. We know that rates are higher than they were before 2023, but have been roughly flat since then.

2. Now let’s circle back to the 1980s and 1990s. What was important during both of those very long expansions is that rates, although high in both nominal and real terms, *trended lower.* For example, here are mortgage rates in the 1980s and 1990s:

One of my top-line forecasting systems is based on the fundamentals of consumer behavior. Consumers can get more money to spend via higher real wages. Or an asset, like stocks or real estate equity, can appreciate in value and be cashed in. Or the interest rates servicing those loans can go sufficiently lower to allow for refinancing, thus freeing up more cash for spending.

In the 1980s and 1990s, interest rates, especially mortgage rates, very frequently made new lows. Thus even those in real terms rates were restrictive, they were *less* restrictive generally than one or two years before. Consumers refinanced, and spent the freed-up cash. It was only when no new rates were established for 3 years, and other assets stopped appreciating, that recessions occurred.

Currently we have higher real rates than at almost any time in the past 10+ years, at a level of restrictiveness equivalent to before recessions in the 1960s, 1970s, and 2000s, and long term rates that have not made new lows in 3 years.

In other words, the refinancing spigot has been shut off. If stock prices, real estate prices, and real wages stop appreciating - which they very importantly have *not* at the moment - the economy is very vulnerable to a turndown.

Weekly Indicators for July 15 - 19 at Seeking Alpha

 

 - by New Deal democrat

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

While several of the monthly updates I’ve discussed here in the past week have tiptoed in the direction of yellow caution flags, that’s not apparent at all in the high frequency data that is updated every week, much of which comes from private sources.

In fact, this week for the first time in a long time, not a single coincident indicators was negative. A majority were positive, and the rest neutral.

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

Jobless claims join other data series inching in the direction of yellow caution territory

 

 - by New Deal democrat

Ever since jobless claims started higher in May, I’ve cautioned that I suspected that unresolved seasonality may be at play. We are now at the point where claims were at their low points for all last summer. In other words, last week through next weeks are the acid test for that hypothesis. Last week the news was good. This week it was more mixed.

Initial jobless claims rose 20,000 to 243,000, while the four week moving average rose 1,000 to 234,750. Continuing claims, with the usual one week delay, rose 20,000 to 1.867 million, the highest level since December 2021. I’ve needed to expand the graph below from its usual 2 year time period in order to show that:

On the YoY basis that is more important for forecasting purposes, initial claims were higher for the first time since early May, up 5.2%. But the less noisy four week average remained lower by -1.1%. Continuing claims were 4.5% higher, still within the lower end of their recent range:

There is an additional seasonal complicating factor this week, in that July 4 fell during different counting weeks last year vs. this year. For the combined 2 week period, initial claims were only 1,500, or 0.6%, higher than last year, at 233,000 vs. 231,500.

This is a very mixed signal, and seems likely to resolve higher YoY next week. The continuing uptrend in continuing claims in particular absolutely speaks to relative weakness in the labor market relative to one and two years ago.

Which brings me to the update of the “Sahm rule” forecast. As I have written numerous times, for over 50 years initial claims have led the unemployment rate. This year that has not been the case, as the unemployment rate has trended higher despite a downturn in initial claims during the first four months of this year. The likely reason is a surge of working age immigrants in the last two years, some of whom are having a more difficult time finding employment. Since they are in the labor force but have not previously held jobs, they are not filing for unemployment benefits.

With that lead-in, here is the updated graph through mid-July:

Both initial and continuing claims suggest that there will be upward pressure on the unemployment rate in the next few months. Since it is already at 4.1%, this suggests a significant chance that it will trigger the “Sahm rule,” although note that the comparison point, of the lowest 3 month average during the past 12 months, will also be moving higher. Because the likely trigger is immigration, however, as I have previously written the economy is likely to be nevertheless expanding - in other words, if triggered it is likely to be a false positive.

A one week 5.2% YoY. Increase in new jobless claims is not nearly enough to trigger even a yellow caution flag. For that we would need, at absolute minimum, a 10%+ comparison lasting multiple weeks. Still, together with the combined economically weighted ISM composite index, real retail sales, and housing under construction, we now have a number of significant sectors signaling weakness.

Industrial and manufacturing production close to 10 year+ highs in June

 

 - by New Deal democrat

If the news in housing construction this morning was cautionary, the news on manufacturing and industrial production was very good.

Manufacturing production (red in the graph below) rose 0.4% in June, and is only 0.2% below its post-pandemic high in October 2022. It is also only 1.2% below its highest level since the Great Recession, which was set in September 2018.

The news was even better for total industrial production (blue), which rose 0.6% in June to a new post-pandemic high, and is only 0.1% below its all-time high, also set in September 2018:

In the past, industrial production has been the King of Coincident Indicators, since its peaks and troughs tended to coincide almost exactly with the onset and endings of recessions. That weighting has faded somewhat since the accession of China to the world trading system in 1999 an the wholesale flight of US manufacturing to Asia, generating several false recession signals, most notably in 2015-16. But it is still an  important measure in the economy. 

In other words, while several important leading indicators are getting close to yellow flag cautionary signals, or in one case (real retail spending) already there, this very important coincident indicator signals all clear for the present.

Housing permits and starts stabilize, but construction comes close to generating yellow recession caution signal

 

 - by New Deal democrat

There was good news and bad news in this morning’s report on housing permits, starts, and construction. The good news is that both permits and starts stabilized after last month’s initially reported multi-year lows. The bad news is that single family permits declined further, and even worse the metric best showing the actual economic impact of new housing, building units under construction, declined to a new 2+ year low, only slightly above the level where it gives a recession caution signal. 

Let’s start with the good news.  the longest leading signal in the data - permits (black in the graph below) - rose 47,000 or 3.4% on an annualized basis to 1.446 million. Starts (light blue), which are slightly less leading and much more noisy, rose 39,000 or 3.0% to 1.353 million annualized. Further, last month’s abysmal readings for permits and starts were both revised higher.

Now the bad news. Single family permits, which are the least noisy of all the leading data (red, right scale) declined a further -22,000 or 2.3% to 934,000 units annualized:

In other words, the rebound in permits was all about the much noisier multi-family unit sector (gold in the graph below), which increased sharply but not in any way breaking its general downtrend:

Now let’s turn to the bigger bad news. Ill spare you the long term graph this month, but usually it has taken more than a 10% decline in units under construction to be consistent with a recession. In 1970 and 2001, the declines were less than that. But in the late 1980s and 2000s, it took almost a 25% decline before a recession occurred. 

With this morning's further decline, total units under construction (red, right scale) are now -8.6% below peak (vs. permits, black, left scale):

In the past few months I have commented that I did not expect this decline to exceed the -10% level, mainly because mortgage rates had stabilized, and mortgage rates lead permits and starts, which I also expected to stabilize. While obviously the situation is more dicey, I still believe we are getting close to, if not at, a stabilization point for units under construction, because mortgage rates are only slightly higher than they were one year ago, and depending on how you measure, are either generally flat or Elise in a slight uptrend (red, vs. permits, blue, right scale):

At the moment both single family units and multi-family units under construction are both in downtrends, but I expect single family units in particular to stabilize shortly, since that portion of the market was the first to turn down:

Earlier this month, I wrote that the economically weighted average of the ISM indexes was very close to generating a recession caution yellow flag. Yesterday I wrote that consumer spending as measured by retail sales already warranted such a flag. With this morning’s residential construction report, that sector too has gotten close to generating a yellow caution flag. The next big data I will be watching is whether personal spending on goods follows retail sales into cautionary territory, and whether employment in manufacturing and construction (the latter of which typically shortly lags, but follows, building units under construction), neither of which has turned down, change direction in the next few jobs report.

The yellow caution flag on retail consumption is up

 

 - by New Deal democrat

Retail sales declined -0.1% in June, but since consumer inflation also declined -0.1%, real retail sales were unchanged for the month. There was an upward revision to May which helped out the comparisons slightly, but for the entire first half of this year real retail sales have been treading water at a level below last year. The below graph is normed to 100 as of right before the pandemic, and shows the similar measure of real personal consumption of goods (light blue) as well:

There’s been a general slight downtrend in real retail sales ever since the burst of pandemic stimulus spending in early 2021, that fortunately has not been confirmed by the broader measure of real personal spending on goods. On the other hand, real personal consumption of goods has also been lower all this year so far from its peak last December.

We are also down -0.7% YoY:

Although I won’t bother with the historical graph this time around, I’ve note previously In the entire history of real retail sales going back 75 years, much more often than not such downturns foreshadowed a recession within half a year.

Last month I wrote that “the negative YoY retail sales for four of the first five months of this year [ ] is now a real concern, although it has not been confirmed by the similar metric of real personal spending on goods.”

I also said that “Since we are now over three years past the last pandemic stimulus, I suspect real retail sales are also giving a more accurate signal for employment (red in the graph below) in the months ahead, as they did for decades before the pandemic [Here’s the updated graph for this month]:

“Consumption has historically led employment, and this suggests weaker monthly employment reports in the months ahead.” 

It’s worth noting that in the graph above, real personal spending on goos is also lower YoY than payroll employment. It’s also worth recalling that there is good reason to believe that the payroll employment gains of 225,000-300,000 one year ago are likely to be revised significantly lower in view of the poor QCEW comprehensive census for the last two quarters of 2023.

My concluding remark last month was that, especially in view of the relatively poor numbers since the start of this year, real retail sales had to be regarded as raising a caution flag for the economy. That is if anything even more true this month, with an additional month of data, especially where an important component of the economically weighted ISM indexes released at the beginning of this month showed contraction in June.

The yellow flag is up. We’ll get important information about both the manufacturing and construction sectors tomorrow.

The inverted Treasury yield curve: we are in uncharted territory

 

 - by New Deal democrat

We passed a significant anniversary last week: the spread for the 10 year minus 2 year Treasury has been inverted for over 2 years (blue in the graph below). The 2 year minus 3 month Treasury spread has also been inverted for 20 months (red):

Why is this significant? Because neither spread has been inverted for as long as they have at present without a recession having already started. In fact in a few case the recession has been close to ending, or even already ended!

The closest case was when the 10 year minus 2 year spread inverted at the start of 2006. A recession did not start until 23 months later. 

What happens now? There is no good historical analogy. We are in uncharted terrritory.

As I have pointed out a number of times in years past, the yield curve is not infallible. There was a significant yield curve inversion in 1966-67 without a recession occurring. On the other hand, there were no yield curve inversions at all between 1933 and 1960, and yet there were 6 recessions during that time, including the very deep 1938 recession:

Since the Fed began to more actively manipulate the Fed funds rate in the 1950s, typically a 2% or greater increase in the rate within a year has triggered a recession (graph below subtracts 2% so that a 2% YoY increase shows at the zero line):

There were two false positives (1984 and 1994) and one false negative (2000, when a 1.75% increase in the Fed funds rate over 12 months preceded a recession).

Needless to say, the very aggressive Fed funds rate hikes of 2022 did not trigger a recession in the 2 years since. 

In the case of 1938, it is thought that a very deep fiscal retrenchment was the main trigger for that recession. In the case of 1966, LBJ’s aggressive “guns and butter” fiscal spending kept the economy stimulated enough to avoid a recession (blue line below, showing Federal spending YoY):

And in 2022-23, the unspooling of pandemic-related supply chain bottlenecks more than outweighed interest rate tightening (as shown by the red line below, in which commodity prices declined on average almost 10% during that time):

It just goes to show that no metric is infallible. 

As for what happens now that both the stimulus spending and supply chain unspooling are done, there are two realistic possibilities:

 1. Because interest rates remain very elevated compared to before 2022, their constricting effect has just been delayed.

 2. Because interest rates are even with or below where they were when the supply chain unspooling ended, they are no longer restrictive relative to that period, so the economy should continue on trend.

As I said above, we are in uncharted territory. There is no on point historical analogue. That’s why I am watching the leading sectors of manufacturing and construction so closely this year. We’ll get updates on both of them for June later this week.