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.

September and October housing construction consistent with government shutdown recession, but also the possibility of “green shoots”

 

 - by New Deal democrat

On Friday housing permits, starts, and units under construction were finally reported for the first time in four months, since September’s report for August. The bad news is that the report only updated through October, so we are still two months behind. The very qualified good news is that, since housing is a long leading indicator, even with this lag the report still gives us insight into where the economy is likely to go in the next eight months.

 

When I last updated this information in September, I wrote that “a puzzling relationship this year has been that the housing data has been classically recessionary for a number of months, and yet the economy has not rolled over.” That May no longer be true, in that the government shutdown may have caused at least a brief economic contraction, but we won’t know that - even even if it was probable - until real sales and consumption are updated for last autumn later this month.

So let’s start by reiterating the basics: mortgage rates lead sales, which in turn lead prices, which in turn lead inventory.

Mortgage rates have fluctuated in a range between just over 6% to 7.6% in the past 3+ years (red, left scale in the graph linked to below), and housing permits have similar been rangebound between 1.330 and 1.620 million annualized (blue, right scale) over that same period:

 https://fred.stlouisfed.org/graph/fredgraph.png?g=1Qnx7&height=490 

In the past several months, interest rates have been near the bottom of their range, and permits responded in September and October by increasing from their August post-pandemic low. 

In more detail, total permits increased 82,000 to 1.412 million during that two month period. Single family permits, which convey the clearer signal, increased 18,000 to 876,000. Meanwhile the much noisier and slightly lagging housing starts declined -45,000 to 1.246 million units, their lowest number since the pandemic:

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

The decline in starts is unsurprising, since permits made their post-pandemic low in August, and as stated above, starts tend to follow within several months.

Even with these gains, permits and starts remain in territory below their peaks sufficient to be consistent with a recession. On the other hand, all three measures are down less than -10% YoY, where in the past it has taken a more severe decline of greater than -10% to be consistent with with a recession:

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

Let’s turn next to the number of housing units under construction. As I have written many times in the past several years, it is the best “real” measure of the economic impact of housing (blue in the graphs below). In September and October they remained almost exactly unchanged from their post-pandemic low in August, up only 2,000 units, but still down -23% from their peak:

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

The above graph shows how they have followed single family permits (red), as expected. More often than not in the past by the time a decline in units under construction had declined by as much as they did in August - and September and October - a recession had already begun. The only two exceptions were the late 1980s, where the pre-recession decline was -28.2%, and 2007, where the pre-recession decline was -25.6%. 

Now let’s update housing units under construction with the typical final shoes to drop before recessions, houses for sale (gold) and residential construction employment (red), in comparison with units under construction, all normed to 100 as of their respective post-pandemic peaks. Both the number of employees in residential construction and new one family homes for sale peaked in March and have declined almost uniformly since:

 https://fred.stlouisfed.org/graph/fredgraph.png?g=1QnB4&height=490 

On a YoY basis, with the exception of 1974 and the COVID recession, houses for sale and (once available) employment in residential construction had turned down YoY before the recessions had begun:

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

 

As of their last update for August, houses for sale were still higher by 4.0% YoY, but as of last Friday’s employment report for December, residential construction employment is now down -0.1%. 

In September I concluded that August’s report was “very much recessionary, although in some YoY comparisons, I would expect further damage before the actual onset of one. But that could easily occur within the next four to six months.” Indeed, per my last paragraph above, to the extent available, some of that has already happened. Additionally, as I pointed out several weeks ago, employment, industrial production, and real manufacturing and trade sales, as of their last reports, were all below their respective spring and summer peaks. On the other hand, the fact that permits did rebound for two months and units under construction did not decline further argues for the possibility of a bottom in the housing market and the proverbial “green shoots.”

The big missing piece remains real personal spending, and we won’t know anything about that even for autumn until later this month.

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.

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.

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%: 

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

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.

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:

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

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:

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

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:

 https://fred.stlouisfed.org/graph/fredgraph.png?g=1QbU7&height=490 

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.

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:

 https://fred.stlouisfed.org/graph/fredgraph.png?g=1QbR3&height=490 

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%:

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

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.

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):

 https://tradingeconomics.com/united-states/non-manufacturing-pmi 

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

 https://tradingeconomics.com/united-states/ism-non-manufacturing-new-orders 

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

 https://tradingeconomics.com/united-states/ism-non-manufacturing-employment 

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:

 https://tradingeconomics.com/united-states/ism-non-manufacturing-prices 

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.

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(!):

 https://fred.stlouisfed.org/graph/?g=1Q82G 

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):

 https://fred.stlouisfed.org/graph/fredgraph.png?g=1Q85S&height=490 

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.

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:

 https://fred.stlouisfed.org/graph/?g=1PzJV 

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:

 https://fred.stlouisfed.org/graph/?g=1Q3cZ 

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: 

 https://fred.stlouisfed.org/graph/?g=1Q3ea 

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.