Macro4Micro: Economic Indicators

Market Lookback: Confusion Reigns, Dislocation Pours 3-22-26

Market Lookback: The Gulf of Cause and Effect 3-15-26

Housing Starts Jan 2026: Total Starts Up, Completions Up, Permits Down 3-12-26

The US as an Aspiring Emerging Market: Fiscal SNAFU, Political FUBAR 4-6-26

Existing Home Sales March 2026: New Beginnings or New Ends?

Glenn Reynolds, CFA — Wed, 15 Apr 2026 17:25:51 GMT

Existing Home Sales volumes declined by -3.6% MoM and by -1.0% YoY as the bad news for sales volumes continues. The absolute volume level is more like what we saw in the fall of 2023 when mortgage rates peaked in the high 7% range. Oct 2023 saw the Freddie Mac 30Y benchmark hit a cyclical high of 7.8% with a range of other mortgage surveys and 30Y product offerings around 8%. Freddie is currently 6.37%. The median home price increases YoY have not helped the monthly payment math. The March median existing home sales price edged higher YoY to $408.8K
The mix of household variables in this economy have taken a turn for the worse with weak payroll performance and rising inflation that further eats into real wage growth. Consumer sentiment plunged this past month to an all-time low.
While economists can debate recurring inflation risk, there is no question that “purchasing power” for a given “household basket” has taken a beating and discretionary household cash flow feels the price pressure including at the gas pump and in goods pricing broadly with tariffs (see Producer Price Index March 2026: Heater or Curve Ball? 4-14-26, CPI March 2026: The CPI Cycle Could Prove Maddening 4-12-26).

For this month, we moved the historical monthly chart to the top of the commentary as a reminder that the March numbers look more like the late 2023 period when mortgages had peaked (see Existing Home Sales Dec 2023: Rerun of Multi-Decade Low 1-19-24). The 30Y mortgage rates have moved within a 200 bps range since the Oct 2023 peak when Freddie Mac 30Y hit 7.8% and many mortgage offerings were near 8%.

The above chart updates the monthly existing home sales volume across the timeline from Jan 2023 through March 2026. In the interest of visual quality, we deleted the 2022 months when the market was posting 6 million and 5 million handle sales volumes in the first half of that year.

The March 2026 existing home sales number of 3.98 million is an obviously grim number and can be framed against the 3.85 million during the peak mortgage rates in Oct 2023 (see UST Deltas: Elevation Realities 3-29-26). The Freddie Mac 30Y is set on Thursday and posted 6.37% last week. We get an update tomorrow. The Mortgage News Daily Survey 30Y as of the latest close was 6.31%.

The above chart shows the sales volume delta by price tier for March 2026, and we see 4 of the 6 price tiers posting positive growth with only the two lowest price tiers posting declines. That was the same mix of deltas as last week. Note: We use “not seasonally adjusted data” for this chart so it clashes with the declines of overall sales discussed elsewhere in this commentary that use SAAR data (seasonally adjusted annual rate)

The volatility and disruption of the Iran War is undermining the rally we had seen in the mortgage markets with an uptick again in the post-Iran period. After a brief move below the 6.0% line into 5% handle range, the setbacks along the UST curve sent mortgages to 6.31% for the Mortgage News Daily survey as of the latest close. The range has been a tight one, but the recent pop above 6.4% after a brief drop below 6.0% reminds us that high oil prices are something the UST curve and the FOMC do not like. That is true of the bond market broadly. The current rates are still a relief from the 6.6% handles of March 2025 a year ago.

For existing home sales, the monthly payment math is still not working well for those looking to cash out, move up, or simply relocate. Expectations for a bull flattener in the UST market that would translate into low to mid 5% mortgage rates have been thwarted so far as we cover in other commentaries.

The three Fed cuts in the fall of 2025 (-75 bps) followed 3 actions (50, 25, 25) in the fall of 2024, in turn translated into UST curve steepening along the way. Back in the fall of 2024, the UST rally along the curve saw mortgage rates right around today’s level after easing. At that time, the 10Y UST dropped down to around 3.6% (current 4.27%) and mortgages were around 6.0% (current 6.3%). That Sept 2024 rally soon gave way to a steepening and tough road for mortgages into 2025 and now 2026.

Those expecting the 10Y UST to follow fed funds lower have been relatively disappointed since the easing cycle got underway, so the latest debates on how FOMC actions will play out under Warsh do not come with a sense of automatic bull flattening and lower mortgage rates.

Trump was also back on the rage fest today threatening to fire Powell and not supportive of dropping Pirro’s investigation (which Trump demanded). The theory on who could get dropped into a senior Fed role besides Warsh has included Miran, who never met a cut (or multiple cuts) he did not like. The effects of Iran as the dominant variable and the politics of rate bias have left the FedWatch handicapping all over the place in recent weeks as we have covered along the way.

The Iran oil spike and all the knock-on effects for CPI and PCE inflation that will come with energy pressure could make for a lot of frustration in the White House. We have seen the odds of cuts evaporate and hikes rise before falling back. As we go to print, if we look at the rate odds for the Oct 2026 meeting we see 80.3% chance of no change, 17.2% of 1 cut, and 1.3% odds of 1 hike. Looking back to 1 month ago, those October meeting odds of no action stood at 50.1% and the odds of 1 cut at 37.5%.

The above chart shows the geographic mix of volumes and details on price mix by region. The South is the main event in single family volumes whether new or existing at almost 47%.

For the bar chart, we break out the mix for each region by price tier. For example, the South shows almost 51% of its existing home sales volume in the $250K to $500K range and almost 19% of its sales in the $100K to $250K bucket.

The high cost of homes in the West (notably California) is clear enough just by glancing at the bar chart with over 16% at prices over $1 million. The second highest in the $1 million club is the Northeast at over 9%.

We see a major concentration across the regions in the $250K to $500K although the $100K to $250K bracket for the Midwest stands at over 31%. The West shows a high share of 28.5% in the $500 to $750K bracket, which again underscores how expensive the West region price tags remain in national context.

The map explains what states are in each Census region. There is a very wide range of home price profiles in the West and Midwest states.

Inventory for total existing homes ticked slightly higher MoM (as revised) to 1.36 million units for +3.0% MoM and +2.3% higher YoY. Current inventory is well below longer term medians including 2.06 million for the post-1998 median. The median from Jan 2011 (homebuilding low) to current times is 1.67 million. In other words, existing home sales inventory remains extremely low even if the level is materially higher than the stunning low of 850K of Feb 2022 ahead of the end of ZIRP and start of the tightening cycle in March 2022.

The existing home inventory balance had shown a steady rise off the sub-1 million lows of 2022. Inventory had risen to the 1.3 million handle range in 2024 before dipping back down to a recent low of 1.14 million to close out 2024. We bounced off those numbers in 2025 to get back above 1.5 million handles before the recent move lower to 1.2 and 1.3 million handles.

The above two-sided chart updates the trend line in total existing home sales vs. new single family homes. We had been operating without new home sales data from the Census Bureau since the shutdown. We now have January 2025 numbers for new and March for existing. Feb 2026 new home sales data is expected to be released on April 23.

The above chart breaks out the timeline for existing single family alone of 3.63 million vs. total existing home sales of 3.98 million. The 3.98 million for total is well below the long-term median (from Jan 1999) of 5.22 million. The total of 3.63 million for single family is well below the long-term median of 4.63 million.

Existing single family was -3.5% sequentially and -0.3% YoY (SAAR). The lower line is ex-condo/ex-coops. We saw 350K in condo and coop sales in March 2026, down from 380K YoY and down from 370K MoM.

The above chart updates the median price for existing single-family homes at $412.4K after June 2025 hit a record $438.6K. The median price in March 2026 is dramatically above the $308K level back in Jan 2021 and $277K in Dec 2019 when mortgage rates were in a different zip code and closer to 3.7% for 30Y Freddie Mac.

The above chart shows another angle on the sales mix across the price tiers. We just lift the numbers off the monthly handout for single family homes released by the NAR each month. The NAR totals add up to over 100% but the message is clear enough. Higher price homes and wealthier buyers have had a better time.

The $250K to $750K range as two tiers add up to almost 2/3 of the market with the $100K to $250K showing a big share in some of the Midwest states as detailed in an earlier chart. We also looked at the growth trends for each tier earlier. Lower price tiers declined while the top 4 tiers rose. The lower price tiers are more on the cusp of where affordability and mortgage eligibility could be strained at 6% handle mortgage rates.

Market Commentary: Asset Returns 4-12-26

CPI March 2026: The CPI Cycle Could Prove Maddening 4-12-26

4Q25 GDP: More Adverse Revisions in the Golden Year 4-9-26

Employment Situation March 2026 4-4-26

Payroll Focus: ADP Highlights March 2026 4-1-26

JOLTS Feb 2026: Openings Down, Hires Down, Layoffs Up 3-31-26

Market Commentary: Asset Returns 3-30-26

Market Lookback: Confusion Reigns, Dislocation Pours 3-22-26

Industrial Production Feb 2026: Capacity Utilization 3-16-26

Market Lookback: The Gulf of Cause and Effect 3-15-26

Housing Starts Jan 2026: Total Starts Up, Completions Up, Permits Down 3-12-26

Employment Situation March 2026

Glenn Reynolds, CFA — Sat, 04 Apr 2026 17:43:09 GMT

Fireside chats ain’t what they used to be.

With a confusing, repetitive, and internally inconsistent speech after demanding network time, the Trump Iran game plan remains in a state of confusion for those planning fixed investment and payroll decisions. WTI ended the week at a “post-Iran” high. That sets the tone for FOMC planning with decent jobs numbers as the Fed frames the inflation vs. payroll trade-off. The UST curve rallied during the week after a period of rising. The moving parts remain in flux.
The good news is that this past week brought solid March payroll numbers on Friday after earlier constructive ADP numbers. JOLTs have time lags, and those were less reassuring (see Payroll Focus: ADP Highlights March 2026 4-1-26, JOLTS Feb 2026: Openings Down, Hires Down, Layoffs Up 3-31-26).
The Establishment Survey posted a payroll increase of 178K, which is the highest since Dec 2024 and the first month in Trump 2.0 that exceeded the median monthly adds from Jan 2009 through March 2026. Services accounted for +143K of the increase with Goods at +43K and Government -8K. In contrast to the ADP report, BLS’ Manufacturing posted a positive number for March at +15K for a YoY tally down by -29K vs. March 2025. Fed 2026 payroll adds were revised lower to -133K while Jan 2026 was revised higher to +160K as confusion is the theme for FOMC handicapping.
The Household Data shows a decline in total employed in March 2026 from Feb 2026 of -64K and a decline of -661K YoY vs. Feb 2025. The ranks of the unemployed declined by -332K from Feb 2026 but total unemployed rose by 107K vs. March 2025. The net effect relative to the workforce is a tick down in the unemployment rate to 4.26%, which would be considered full employment in past cycles. The March 2026 U-6 ticked higher sequentially to +8.0% from 7.9% in Feb 2026 and 7.9% YoY vs. March 2025. It is hard for the FOMC to get too nervous over that 4.3% rate with oil at a cyclical high and the inflation side of the mandate still in the lead.

The monthly payroll adds/declines chart above starts in March 2022 with the end of ZIRP and the start of the tightening cycle. The bar chart tells an objective data story. The +178K for March 2026 drove the U-3 rate lower to 4.3% or back to the January 2026 level from 4.4% in Feb 2026.

The numbers in 2025 and 2026 include the only negative deltas on the chart with 6 months in the red during Trump 2.0. Furthermore, the 2025-2026 months were all below the post-Jan 2009 median of 176K until March 2026 edged above it.

That long-term median period includes a slice of the longest recession since the Great Depression, so it is not a high bar to clear. Those payroll numbers from Jan 2025 to March 2026 offer no bragging rights. Health Care and Social Assistance (89.9K) + Leisure and Hospitality (44.0K) comprised 133.9K of the job additions tally. We would tag those as low multiplier effect sectors.

The above chart plots the running job adds/declines since Jan 2009 against the unemployment rate, which ticked lower MoM to 4.3% from 4.4%. In the chart, we isolate the worst months of the COVID dislocations in the box for better visuals to capture the other periods.

The 4.3% U-3 is below the long-term median of 4.9%. The 4.3% is still a solid number across the cycles. Payroll has been struggling somewhat in relative terms, but history is kind to 4.3%. If the 2025-2026 frame of reference is 2024 (not a good jobs year) then the 2025-2026 numbers are not so bad. If we compare it to the 2022-2023 period, the current job adds run rates are grim.

As a reminder, the U-6 metric is defined with the numerator as “total unemployed + persons marginally attached to the labor force + total employed part time for economic reasons.” The denominator is “civilian labor force + workers marginally attached to the labor force.”

The current 8.0% is a tick lower from 7.9 % in Feb but is well above the 6% handles seen in spring of 2023. The U-6 is still below the median from 1994 of +9.3%, which notably includes the post-crisis shock and the longest recession since the Great Depression.

The time series above updates the U-6 minus U-3 differential as a measure of relative employment quality and to flag risks of major dislocations in large swaths of the economy (think oil patch collapse in the late 1980s, tech bubble imploding into a weak 2001-2003, financial services and automotive meltdown in 2009).

The current 3.7% differential is below the long-term median of 4.0%. The job ranks are still vulnerable now with the Iran war effects flowing into hiring decisions, industry fundamentals, and FOMC policy planning.

Many questions will be getting answers with respect to how tariffs and the oil spike will flow into hiring, investment, working capital cycles, new capacity planning. The wide range of potential outcomes is clear enough in that “boots on the ground” cannot be ruled out until those boots and bodies return home.

Escalation and “take the oil”

A material escalation would be about a lot more than the US and would hit Europe and Asia especially hard. It would not take much creativity to figure out how China (Taiwan) and Russia (Ukraine, Baltics) could react to exploit such chaos. Then the global cycle nerves begin anew.

The “take the oil” mantra from Trump by the end of the week implies massive manpower demand, military resources, budget bleeding (and UST supply) and unpredictable escalation of the conflict. That means even more problems from oil prices and supplier chain dislocations. That would necessarily hit payroll and economic growth.

Tariffs are still near the top of the risk checklist…

Reshoring has been very slow as the manufacturing payroll trends imply. We are seeing major plans to relocate automotive OEM capacity back to the US, and that should attract more supplier chain capex. The auto supplier to OEM chain will be a focal point in the upcoming USMCA review process with Canada and Mexico. Autos is only one small piece of the manufacturing picture despite all the headlines.

In contrast to autos, the idea of a major new aluminum smelter in the US will not happen based on economics and the timeline to build one. Low-cost power is essential for such smelting activities, and data centers would be happy to pay a multiple of what an aluminum smelter would see as cost effective. There are a lot of stories along the manufacturing chains with some good and plenty bad. For now, manufacturing payrolls are “net bad.”

Some of the risk issues get swept up in immigration and deportation numbers, but the analysis always comes back to the number of workers with paychecks. Employers will be making decisions to mitigate the tariff damage with tariff cost mitigation strategies (e.g., layoffs) if they are not passing along the cost in prices or want to limit the scale of price increases to customers.

The AI wildcard in manpower needs sees a lot of speculation in the manufacturing sectors but even more so in Services payrolls. That has been evident in some recent stock volatility across SaaS-based business services leaders.

There is no hiding from the need for economic reactions along the supplier-to-customer ecosystem. Someone always pays – including those “paying” with layoffs in tariff cost mitigation decisions.

The above chart updates total payroll vs. the unemployment rate. The trend needle has not moved much in 2026. More bodies with more paychecks are always a good thing. The trick from here is how the consumer deploys that paycheck and whether the zero-sum realities of household budgets undercut spending. The need for defensive spending habits in light of impaired household discretionary cash flow could become a bigger headwind in the aftermath of the Iran fallout.

As noted in the bullets at the top, the total employed in March 2026 moved lower from Feb 2026 by -64K and show a decline of -661K YoY vs. Feb 2025. That flunks the “more bodies, more paychecks” rule.

The above chart updates the total payroll number vs. job openings. JOLTS data analysis had been slowly recovering from the shutdown, and is now back into the lineup with its usual 1-month lag (see JOLTS Feb 2026: Openings Down, Hires Down, Layoffs Up 3-31-26).

Management teams have a lot of moving parts to factor into planning whether quantitative or qualitative. The final IEEPA decision from SCOTUS came in against Trump, but he was prepared to start slapping on tariffs under Section 122, 232, and 301. Notably, Section 301 tariffs (“fair trade”) are underway and are topics for other days. They will create more trade partner strife.

The trade flows have been looked at in many past commentaries (see Meanwhile…Back in Economics and Tariffs 3-2-26, US Trade with the World: Import-Export Mix 2-25-26). The latest trade disruptions from the Gulf and the related supply chain problems (oil, LNG, helium, aluminum, etc.) have been getting a lot of headline time. The disruption could get much worse via the Red Sea if the Iran War escalates and the Houthis pile on. There are also the contingent threats of Iraqi Shiite militia. The FOMC and the market both have much to digest.

The fallout in consumer spending from health care premium increases now are joined by energy price stress and $4 regular gasoline. Home heating oil bills could get much worse later in the year if this lasts.

The retrenchments in SNAP spending and eligibility criteria challenges promise household stress and could signal trouble ahead in the lower part of the “K” household mix. Trump’s latest budget plan offers little relief to the lower part of the K recovery and in fact piles on with cuts to many programs.

Inflation reports had generally brought good news relative to expectations given the scale of the forward threat from tariffs and lagging effects to be seen across working capital cycles. That said, the inflation creep and affordability strain has clearly been in evidence and taking a toll on inflation across select product groups. PCE inflation and CPI will see a lot of pressure as Iran effects and material costs roll in on top of tariff-based pricing decisions that have been slow to unfold.

Tariffs will stay in the thick of the pricing pressure battle, and industries such as autos are likely to see more upward price pressure after a year of relative caution by OEMs to protect their customer base and dealer network. The OEMs had wanted to move cautiously with Trump (which by itself is a sad comment on how free markets have suffered under this administration). Now we will be adding much higher energy inflation from gasoline to go with the very high electricity CPI metrics and utility piped gas inflation.

The overall economic impact of tariffs had been far less than feared given the reality that most trade partners backed down in 2025. That could change in 2026 with many more battles on the table such as a threatened embargo of Spain that would pull in the EU (Anti-Coercion bazooka?) and the USMCA review.

The breakdown of relationships with the EU, the #1 trade partner with the US, have dramatically worsened with Iran and Trump’s increasingly ugly rhetoric and behavior with allies. It is getting weird with insults tossed at Macron’s wife. That is just strange.

The USMCA review will inevitably create a lot of tension with Canada despite the US goods trade surplus the US posts ex-crude oil. Trump needs a cheat sheet on who are the best export markets with around 3 dozen states seeing Canada as the #1 export market.

The fertilizer sector is under stress right now on Gulf supply problems, and Canada is a critical part of that supply. With Qatar facing stress in the fertilizer shipment barriers right now, the Canadian position in potash might be worth keeping in mind. The synthetic crude oil supplies from Canada also offer high diesel yields for refiners that could be critical right now in tempering the rate of increase in freight costs since that flows into food and goods.

JOLTS Feb 2026: Openings Down, Hires Down, Layoffs Up 3-31-26

Market Commentary: Asset Returns 3-30-26

Market Lookback: Confusion Reigns, Dislocation Pours 3-22-26

Producer Price Index Feb 2026: Getting Warmer 3-18-26

Industrial Production Feb 2026: Capacity Utilization 3-16-26

Market Lookback: The Gulf of Cause and Effect 3-15-26

PCE Inflation Jan 2026: Personal Income & Outlays 3-13-26

Housing Starts Jan 2026: Total Starts Up, Completions Up, Permits Down 3-12-26

Employment Situation Feb 2026: Payrolls Get Ugly 3-8-26

Payroll Focus: ADP Highlights March 2026

Glenn Reynolds, CFA — Wed, 01 Apr 2026 17:59:41 GMT

With a AAA national average regular gasoline price of $4.06 today (+36% in 1 month) and food feeling broad inflationary pressures, ADPs release showing real wage growth and more jobs will be a good signal if it can be sustained. The ADP wage growth numbers included +4.5% for “job stayers” and +6.6% for “job-changers.”
The ADP private sector jobs numbers were constructive at +62K on the back of a solid growth rate in the South (+101K) while the Northeast (-29K) and Midwest (-26K) were both in negative range with modest positive growth in the West (+26K).
The half empty view is Manufacturing jobs were down by -11K with Construction (+30K) and Natural Resources/Mining (+11K) carrying the ball for the Goods sector (+30K). The market is still waiting for those tariff-driven manufacturing jobs. JOLTS also raises question on manufacturing jobs (see JOLTS Feb 2026: Openings Down, Hires Down, Layoffs Up 3-31-26).
We see some good news in the small business job count with the small establishment tier of 1-19 employees at +112K. Overall, Services comprised 32K of the 62K total with Goods at +30K.

The UST rally this week combined the tailwinds of hope for “peace breaking out” in Iran with all the very unpredictable moving parts that come with that scenario. History will not be kind to those who think they can predict the behavior of Trump while Iran’s reactions come with the wildcard of religious fanaticism and rage at the saturation bombing. Iran’s unpredictability comes with the innate capacity to endure suffering and holding the line against the “Great Satan” and infidels.

We are not sure day-to-day misinformation helps ease the challenges of interpreting Trump or Iran, but the jobs mandate for the FOMC is still waffling as investors juggle their assessment of energy-driven cost pressures flowing into inflation and the payroll risks. The scale of the supplier chain disruptions and multiplier effects make the opening of Hormuz the overriding X factor for inflation and cyclical scenarios, but those play out at a lag.

In the meantime, we have new, pending (and immediate) threats of attacks on tech companies (18 companies) and their operations in the Gulf. Iran has one eye on the stock market also. A fresh round of back and forth could see Trump pull the plug and tell the rest of the world “all yours.”

Then there is Houthis risk and the vulnerability of oil and freight to Red Sea attacks. Even Shiite militias in Iraq get invoked by those making risk checklists. Those factors can work their way into roll-your-own scenarios for global and regional cyclical pressures, cost threats, and how that all plays into stagflation risk.

With WTI at just under $100 as we go to print, the good news is that the US has plenty of oil and gas, so this is not the late 1973 backdrop or 1979. Both saw stagflation follow. That lack of comparison to the Arab Oil Embargo period in the US is not the case for Asia, who face threats that take us back to our memory of odd-even license plate gasoline rationing of early 1974. We were ringside for that one. Europe, the #1 trade partner for the US, is also in a bind even if not as severe as Asia.

Consumers drive economies, and the challenges to household discretionary cash flow will roll into both domestic growth and trade. Whether the pressure will pick up on US employment and reshape FOMC monetary policy remains part of a wider range of outcomes. Iran is part of the cart-and-horse handicapping by the Fed in our view. It is not chicken and egg since Iran remains the main event.

We get the full March payroll numbers on Good Friday.

JOLTS Feb 2026: Openings Down, Hires Down, Layoffs Up

Glenn Reynolds, CFA — Tue, 31 Mar 2026 19:54:04 GMT

No joy in jobsville. Still waiting for those manufacturing jobs.

An almost 500K decline in sequential Hires is the main metric, but we see a decline in Job Openings in Feb 2026 of -358K with a rise in layoffs of a more manageable 61K.
The Feb activity largely predates Iran (bombing started Feb 28) and related shock waves across energy and supplier chains, so the March payroll data to be released on Friday will offer some more timely context.
The consumer spending swing factor from Iran could be more concentrated in Leisure and Hospitality payrolls in coming periods after a -213K decline in openings for that sector from Jan to Feb 2026. With health care premiums soaring, mortgage rates just under 6.5% after this week’s rally, retail gasoline materially higher, CPI lines very mixed, and consumer inflation expectations rising, it is fair to say economic growth faces a cloud after such a poor 4Q25 (see GDP 4Q25 Second Estimate: Sharp Move Lower 3-13-26).
Manufacturing is always a focal point in the context of the tariff story lines from the White House, but manufacturing hires MoM were down by -24K YoY even if only down by -4K sequentially from Jan 2026. Layoffs in manufacturing were down by -21K MoM in a signal of some stabilization before the Iran mess. Sequential job opening trends posted -71K in Manufacturing from Jan 2026 but with +39K YoY. The manufacturing openings are supposed to be higher under the tariff theory.

The above time series plots job openings across the timeline from 2007 to current. The sharp, downward trends from the end of ZIRP and start of the tightening cycle in March 2022 show little to celebrate. The high of 12.2 million off the lows of 4.6 million at the peak of the COVID panic are pretty dramatic, but recent periods are sot. Opening are at least running above the long-term median (5.92 million). The 5% decline YoY in job openings in Feb 2026 is bad news no matter how you slice it.

The above-median openings number comes in a market where secular growth and demographics need more job openings. That is especially the case to justify the tariff strategy. The strains on affordability in so many end markets since COVID (housing, health care, autos) combined with the threat of even more inflation tied to the Iran mess means even more jobs and higher salaries will be even more crucial.

The conversations will continue to focus on how many new job openings can be avoided through the deployment of AI tools and technology. The tariff cost mitigation strategies also do not help in budgeting for higher headcount.

The above chart plots Hires vs. Layoff/Discharges on a SAAR basis. Note: we remove the COVID numbers from several charts to support the visual value for “normal” periods. We comment on COVID history at the end of the note.

Hires declined by -498K sequentially from Jan 2026 while layoffs/discharges rose by 61K. The hires YoY declined by -387K or by 7.4%. No joy there in an expanding economy even if annual GDP growth of 2.1% lagged 2024’s 2.8% (just don’t tell Hassett). The numbers clearly signal negative payroll trends.

The biggest MoM decline in Hires occurred in Leisure and Hospitality at -185K with Professional and Business Services at -154K. The biggest increase in layoffs was Retail at +72K.

The above chart updates the ratio of Hires to Layoffs/Discharges. The relationship stands at 2.82, below the long-term median of 2.91 from 2007. The post-2007 period includes the effects of longest recession since the Great Depression (Dec 2007 – June 2009) followed by the longest expansion in history from June 2009 to COVID (Feb 2020).

The above chart plots Hires vs. Total Separations on a SAAR basis. Separations include Quits, Layoffs/Discharges, and “Other Separations.” Total Separations moved lower by -173K in Feb 2026 and were down by -314K YoY.

We typically do not find “Total Separations” particularly interesting as a multi-line net number. Much of the decline in Separations can be attributed to a -153K MoM decline in “Quits.” One theory is that trend signals lower confidence in finding a job on the other side of quitting.

The Hires minus Total Separations differential is plotted above. We recently had some major revisions. As covered above, the sharp decline in Hires is the main event. Separations also had a decline on lower Quits.

The net number above has moved notably lower in recent months and is in the negative range now. The differential is starkly below the long-term median of +175K.

The time series for Total Quits as a % of Separations (SAAR basis) was 59.8%, slightly above the long-term median of 57.9%. The classic “Quits Rate” is measured by Total Quits as a % Total Employment, and that metric moved slightly lower on the month to +1.9%, down from 2.0%. The Quits rate is also down slightly YoY from 2.0% to 1.9%.

The bottom line on the JOLTS numbers is that it was one that UST bulls might grasp onto for hopes of easing improving and the same for the long-suffering bull flattener advocates. The oil price wildcard has plenty of history, but this scale has more in common with the Iranian crisis if 1979.

While the US is a powerhouse in energy (oil, natural gas, and LNG) and has Canada as a neighbor (as badly as Trump treats them) and largest oil importer into the US by far, that backdrop takes useful comparisons to 1974 off the table. The Arab Oil Embargo of late 1973 and “odd-even license plate” rationing in the recession is being experienced by many nations at this point. Just not the US. That impacts global growth. Asia is especially vulnerable.

NOTE ON COVID DISTORTIONS

The Hires vs. Separations time series make for interesting numbers but tough charts to plot visually given how much the spike in Separations/Hiring during COVID distorted the numbers from March 2020 to June 2020. The swings literally were off the charts. For presentation purposes, we adjust the charts above to exclude the raw data for those months to get a better vantage point on somewhat more normal times. Compared to COVID, the credit crisis seems “normal” in terms of the job count moves.

For disclosure purposes, Separations across March 2020 (16.3 million), April 2020 (11.6 million), May (4.7 million), and June (5.2 million) were running against Hires in March (5.2 million), April (4.0 million), May (8.1 mi/lion), and June (7.4 ml/lion). We remove those from the charts to get better scale visuals on the periods that precede and follow as the market saw 50-year lows in unemployment in 2022. Wild swings were had by all as industries saw shutdowns and layoffs in the COVID recession. The long-term medians from 2007 to 2022 for Hires and Separations were very close.

Almost 28 million Separations combined in March-April 2020 was a brutal reminder of that period.

Market Lookback: Confusion Reigns, Dislocation Pours 3-22-26

Producer Price Index Feb 2026: Getting Warmer 3-18-26

Industrial Production Feb 2026: Capacity Utilization 3-16-26

Market Lookback: The Gulf of Cause and Effect 3-15-26

PCE Inflation Jan 2026: Personal Income & Outlays 3-13-26

Housing Starts Jan 2026: Total Starts Up, Completions Up, Permits Down 3-12-26

Employment Situation Feb 2026: Payrolls Get Ugly 3-8-26

New Homes Sales Jan 2026: The Nays Carry

Glenn Reynolds, CFA — Thu, 19 Mar 2026 20:21:11 GMT

High and dry. Looking for some traffic.

Weak new homes sales in total and across all regions MoM add to the poor macro themes that come with Iran fallout, tariff noise, recent upward pressure on mortgage rates, a weak 4Q25 GDP report (negative residential investment) and the realities of a wide range of potential outcomes that can curb confidence and promote big ticket defensiveness on the part of potential homebuyers.
Supplier chain disruptions will raise costs for builders and are set against a backdrop that is more likely to pressure mortgage rates higher with the 10Y UST stubborn and the FOMC easing odds shifting toward no fed cuts. As of now (3-19-26), the odds are materially against any FOMC cuts for the remainder of the Fed meetings in 2026. That is quite a swing.
New home sales saw Average selling prices down sequentially to $400.5K, which is the lowest since July and down YoY from $429.6K. Inventories were flat MoM on a “not seasonally adjusted” basis and ticked slightly higher MoM on a SAAR basis. Inventory mix shows “homes under construction” substantially lower YoY and “completed home” inventory higher YoY.

The above chart updates the new single family home sales time series from 1963, and the current 587K (SAAR) is a grim number in the context of 2025 as well as long-term medians. That is especially the case in light of record demographic need. The shortfall in supply of affordable housing is a recurring theme even if favorable housing demand profiles are still a secular trend.

The policy responses from Democrats and now the GOP have been and remain completely inadequate. In fact, the latest proposals are bad for homebuilder costs (tariffs and labor migration/deportation), have kept mortgages higher (massive deficits), and temper consumer risk-taking (Iran effects). The proposed policy restrictions in legislation on build-to-rent misses the point on housing needs and ignores the immediacy of the supply limits for a house to live in (rent or own) and the consumer choice issues. Supply of housing stock is supposed to be the priority, but the political scramble is to do “anything.” That is a topic for another day.

As we look back to the peak of the housing bubble, we see 1389K in July 2005 or 2.4x the Jan 2026 volume. The COVID panic buying and relocation spree in Aug 2020 of 1016K was a wild period for new home sales and home starts in a ZIRP market with very low mortgage rates. For Jan 2026, the 587K is weaker than any 2025 numbers with the next lowest over the LTM period at 627K in May 2025.

The sequential move lower of -17.6% for total sales was ugly. We saw all 4 regions with negative MoM variances with the #1 South region at -8.1% MoM and -8.8% YoY while the West as the #2 market posted a sequential decrease of -21.6% MoM and -28.7% YoY. The Midwest posted a brutal -33.9% MoM but a solid +18.0% YoY. The tiny Northeast market was -44.7% MoM and flat at 0% YoY.

The above two-sided chart shows the sales pattern for the new home sales line since 2000 vs. the median prices, which weighed in at $400.5K for Jan 2026, above the $397.3K low in July 2025 but down from $419.2K in Dec 2025.

The fact that home prices had trended materially higher across the post-COVID cycle is old news, but the sensitivity of monthly payments is married more to mortgage rates as a critical variable in monthly payments. This current softening of prices does not fix the problem with rates rising and existing home sales supply weak overall given the mortgage refi barriers and how that flows into total supply options (see Existing Home Sales Feb 2026 3-10-26).

Mortgages have been stubbornly high but saw some very brief relief with the Freddie Mac 30Y moving into the 5% range before the recent sharp reversal. Mortgage rates remain the primary driver of weaker volumes in the lower price tiers in both new and existing home sales. A wildcard as we move into 2026 will be homebuyer confidence and cyclical consumer sentiment around “pulling the trigger” while seeing such material uncertainties (Iran war, tariffs, payroll anxiety) as we roll into the peak home selling season.

The above chart updates the running median price trends. Builder fears of higher material and supplier chain costs and now the Iran fallout will keep homebuilders defensive in their pricing strategies. Gross margins were softening in 2025 and will continue to soften into 2026. Many are posting margins still above pre-COVID levels even if down sharply from abnormal margin peaks in 2022. The trend line remains negative.

The above chart gives a different visual angle on the median new home sales prices from early 2022. That is a lot of $400K handles with some sub-$400K outliers. The current $400.5K can shift with regional mix as well as home price tiers and related supply issues. The affordability question is still intertwined with the monthly payment pressures from mortgages. It is about more than price.

The time series above updates the new single family home sales across the cycles since 1973 for the #1 and #2 regions of the South and the West. These two regions are around 84% of total single family home sales volumes for Jan 2026.

As noted earlier, the 362K for the South in Jan 2026 posted a sequential decline of -8.1% from Dec 2025 and is down by -8.8% YoY. The West at 127 is 22% of the total volumes vs. 62% for the South. For the month, the West was -21.6% sequentially and -28.7% YoY.

The smaller Midwest region and tiny Northeast region account for 12% and 4%, respectively, of new home sales in Jan 2026. The Midwest was down by -33.9% MoM but +18.0% YoY. The Northeast was -44.7% MoM and a flat 0% YoY.

Industrial Production Feb 2026: Capacity Utilization 3-16-26

Market Lookback: The Gulf of Cause and Effect 3-15-26

Market Commentary: Asset Returns 3-15-26

PCE Inflation Jan 2026: Personal Income & Outlays 3-13-26

Housing Starts Jan 2026: Total Starts Up, Completions Up, Permits Down 3-12-26

Employment Situation Feb 2026: Payrolls Get Ugly 3-8-26

Producer Price Index Feb 2026: Getting Warmer

Glenn Reynolds, CFA — Wed, 18 Mar 2026 20:57:28 GMT

Throw some more line items on the fire…

We look at some key line items in a PPI release that never lacks for a massive wave of data to review from broad categories in Table 1 to adjusted and very granular line items in Table 2. Services remain a headache with Final Demand Services at 3.8% and 68% of the Final Demand-weighting while Final Demand Goods were more muted at +2.5% despite a sharp MoM rise from Jan to Feb.
Table 2 offers a wide range of commodity groupings including food to metals with some eyepoppers such as +48.0% in “fresh and dry vegetables” and +34.4% in ‘nonferrous metals.” Some of these trends were in evidence in CPI and PCE data (see PCE Inflation Jan 2026: Personal Income & Outlays 3-13-26, CPI Feb 2026: It’s Making You Wait… 3-12-26).
Food and energy will be the ones to watch with Food facing multiple pressures from Iran fallout in their production chain and other major factors that will be hitting inputs (shipping, labor, tariffs, etc.). PPI lines in this release show “roasted coffee” at +25.8%, “beef and veal” at +13.0%, fish/shellfish at +12.2%, and confectionery end products of +8.2%. On a bright note, Eggs PPI is down by -80.4% after Trump cured the Avian Flu.
Final Demand Energy PPI posted -0.7% YoY and Final Demand Food stood at -0.3% YoY. Both of these supportive deflation lines clearly look vulnerable to disruptions and notably in oil and gas markets, fertilizer, and transport cost pressures as we look ahead to the rest of 2026.
With the FOMC unchanged on fed funds today, FedWatch odds looking more like late fall timing on cuts. Inflation appears set to rise on energy, food, and goods as tariff pricing decisions weigh in. Warsh will be greeted with unfriendly numbers barring very favorable developments in Iran and on the tariff decision front that are hard to confidently handicap. Payroll weakness may help the easing crowd, but more than a single cut would mean the inflation metrics are moving lower and the markets getting great news on productivity.

The above March 2022 chart updates the total Final Demand PPI from Nov 2010 to Feb 2026 with the latest Final Demand reading at +3.4% YoY. We see the sharp move higher in the post-COVID rebound running into widespread supply-demand imbalances into a March 2022 peak. For those who remember the obscene inflationary effects from commodities to used cars, there was a more complicated array of forces weighing in than political spin would suggest. We look at that policy-intensive period in detail in our PCE updates (see PCE Inflation Jan 2026: Personal Income & Outlays 3-13-26).

The late February 2022 invasion of Ukraine was a key driver of an oil and gas spike that has some relevance to today. We often highlight how Trump never mentions Putin as a major factor in the inflation picture (only Biden and Powell). The Final Demand PPI for Energy in March 2022 spiked to +36.7% (data source: the original March 2022 PPI release). At that time, Gasoline hit 59.9% PPI YoY with diesel at 63.8%, home heating oil at 105.9%, LPG PPI over 91%, and “residential natural gas” at +22.8%.

Such moves in energy flow into goods and services across a range of time lags depending on price strategies, working capital cycles and regulatory actions. We look back at the 2022 experience as a reminder of what kind of chaos can unfold along the PPI chain as weeks go by in an oil and gas shock.

The above table breaks out some of the high-level lines we like to watch from Table 1 of the PPI release. We also do the usual “following the scrolling finger” approach in Table 1 and Table 2 under the “Unadjusted 12-month % change” column.

When you flag those YoY numbers, then next step is flagging the highest YoY numbers and looking for outlier months vs. steady high patterns. The trend line of PPI pressure requires a look at recent months to see if the bad news is evident in 2026. We will be getting some of that pressure in the March 2026 PPI numbers as the Iran War unfolds.

In recent months, we see Services posting 3 consecutive high months. Goods posted a high MoM in Feb of +1.1% and so did Final Demand Foods at +2.4% and Energy MoM at +2.3%.

Market Lookback: The Gulf of Cause and Effect 3-15-26

Market Commentary: Asset Returns 3-15-26

PCE Inflation Jan 2026: Personal Income & Outlays 3-13-26

Housing Starts Jan 2026: Total Starts Up, Completions Up, Permits Down 3-12-26

Employment Situation Feb 2026: Payrolls Get Ugly 3-8-26

2025 Spread Walks and Multicycle Return Histories 1-5-26

Annual Return Differentials: HY vs. IG Across the Cycles 1-3-26

Total Return Quilt Across Asset Classes 2008-2025 1-2-26

Cyclical Histories: Will Facts Be in Vogue in 2026? 1-2-26

Industrial Production Feb 2026: Capacity Utilization

Glenn Reynolds, CFA — Tue, 17 Mar 2026 00:51:38 GMT

Industrial production in Feb 2026 was up +1.4% YoY but slightly positive MoM at +0.2%. Capacity utilization for total manufacturing was flat MoM at 75.6%, which is well below the long-term median of +78.2%.
In the context of recent quarters, manufacturing capacity utilization was ahead of 4Q25 but slightly below 3Q25 and flat to 2Q25. Durables was running slightly ahead of 2025 run rates.
Strong MoM moves in “Motor Vehicles and Parts” as well as “Electrical Equipment, Appliances and Components” sent good signals in Durables while “Machinery” faded.

The above time series updates the long-term history of manufacturing capacity utilization since 1967. We see the material swings across expansion booms and busts. That includes the aftermath of some highly damaging oil spikes as capacity utilization later plunged. There was a lot more structural changes underway in those cycles than just oil and gas price pressures.

The May 1975 low of 71.6% was just as the economy was coming out of the late 1973 to early 1975 recession that unfolded after the Arab Oil Embargo. The 1980-1982 double dip recession came after the 1979 inflation spike took off with the Iranian oil crisis. Capacity utilization saw a 68.7 low in Dec 1982 as the economy was just coming off the recession trough. The first Gulf War came after the August 1990 invasion of Kuwait with capacity utilization hitting a low in March 1991 at 77.2, which is above where capacity utilization stands now in 2026.

The age of tech and credit excess in the late 1990s brought some new swoons with 71.8 in Nov 2001 after the TMT meltdown and HY default wave. Then came the post-credit crisis low of 63.4 at the recession trough in June 2009. COVID edged that one out with a record low of 62.6 in April 2020.

As we detail below in the recession histories, the idea of what is low or high capacity utilization in the context of corporate sector profitability is not as direct as one might think. Breakeven volumes, cost structures and pricing power are key drivers. The tariff excess as a core Trump policy only makes that unit cost analysis more complicated as we head into a new round of energy related cost pressures in 2026.

The above table breaks out the high-level groupings with total industry and total manufacturing flat. Mining ticked up and Utilities down for the month. We see Durables and Nondurables as the main events to track and especially the Durables sectors with all of its supplier chain to OEM multiplier effects.

Looking back from 2025 into early 2026, we see Manufacturing in a narrow range and the same for Durables. Tariffs have not moved the production needle much at all so far, but that does not tell the profitability story on the tariff cost impact. Most people (outside the White House) know that buyers/importers write the check for the tariff, so that implies a higher breakeven volume or some offsetting action on other costs or pricing. Those impacts will only play out over time across working capital cycles.

The above table breaks out the details for the top 5 Durables lines and the two largest Nondurables lines. We see a mixed picture across these major industries with only Motor Vehicles and Parts making a notable move higher and Machinery lower. We see 3 of 5 Durables lines tick lower and the two major Nondurables lines were a split decision. Chemicals rose and Food & Beverage declined.

The above table updates the capacity utilization history for expansions and recessions. As we routinely discuss, the ability of companies to generate solid profits at lower capacity utilization in today’s markets relative to past cycles is tied to both automation and the evolution of low-cost global supplier chains. Low-cost supplier chains are getting undermined by tariffs, so the demands to improve efficiency as tariff mitigation measures need to be monitored. The “AI story” and what it all means for productivity and headcount will be a big part of that theme.

The above chart details economic expansion and recession averages and lines them up by height as a frame of reference. We see the current level on the left at 75.6%.

In the context of the tariff priorities and reshoring ambitions, the slack capacity implied by the chart underscores the analysis is a lot more complicated than just “build more plants.” That is a story told on an industry-by-industry basis. The multiplier effects are important but the relocation of supplier chains and OEM relocation is very slow to unfold. Autos are the main relocation stories, but that is generally to existing infrastructure and not new greenfield plants.

Market Commentary: Asset Returns 3-15-26

PCE Inflation Jan 2026: Personal Income & Outlays 3-13-26

Housing Starts Jan 2026: Total Starts Up, Completions Up, Permits Down 3-12-26

Employment Situation Feb 2026: Payrolls Get Ugly 3-8-26

2025 Spread Walks and Multicycle Return Histories 1-5-26

Annual Return Differentials: HY vs. IG Across the Cycles 1-3-26

Total Return Quilt Across Asset Classes 2008-2025 1-2-26

Cyclical Histories: Will Facts Be in Vogue in 2026? 1-2-26

Housing Starts Jan 2026: Total Starts Up, Completions Up, Permits Down

Glenn Reynolds, CFA — Thu, 12 Mar 2026 19:39:40 GMT

The shortage of affordable homes remains a secular reality.

The Jan 2026 new residential construction numbers were set against a backdrop of decent consumer spending and more optimism around mortgage rates and the UST curve in January. The world has changed a lot since then.
For Jan 2026, starts rose by +7.2% MoM and YoY by +9.5%. However, single family starts were -2.8% MoM and -6.5% YoY. Total permits declined by -5.4% MoM and -5.8% YoY. Single family permits were -0.9% MoM and -11.6% Y0Y.
Privately owned completions were up by +4.8% MoM but down by -7.5% YoY. Single family completions were down by -1.0% MoM and down by -3.3% YoY.
Multifamily starts posted big numbers at +29.1% MoM and +56.9% YoY, and these headline numbers masked some of the relative weakness of single family in the total starts numbers.

The single family home starts time series shows a wild ride across the cycles. However, the current volumes are low when considering the intrinsically high demand for housing tied to demographics. The headwind has been affordability with the main swing factor there being the monthly payment burden (see Home Starts Dec 2025: Wrapping a Weak 2025 2-18-26).

Home prices have clearly soared since COVID, but mortgage rates drive the monthly payment burden more than price. As of last night close, the Mortgage News Daily Survey posted 6.24% 30Y, which marks a setback after the recent drop into the 5% handle range. The Iran backdrop and dramatic swings in oil ($96 handle as we go to print) has put some pressure on the 10Y UST that drives the 30Y mortgage.

The yield curve damage after the onset of the 2022 tightening cycle and inflation with ensuing volatility drove a 200 bps Hi-Lo range for 30Y mortgages since the fall of 2023 through early 2026. The struggle continues and the FOMC handicapping on rate cuts has turned in an unfavorable direction. As we go to print, the odds of a June cut has plunged per FedWatch. The odds of “unchanged” fed funds after the June Fed meeting is up to over 77% from under 38% a month ago. The odds also favor “no cut” for the July and Sept Fed meetings.

We need to keep in mind that 100 bps of easing in late 2024 saw a major mortgage rally initially before the market saw a bear steepener unfold into 2025 (see The Curve 12-15-25). So that bull UST flattener to bring down mortgage rates did not play out for long. That steepening sent mortgages higher again after Sept 2024 even if well below the 2023 mortgage peak.

The current run rates for new home volumes remain weak in multi-cycle context despite the recurring theme of inadequate supply for what should be exceptional demand. For now, affordability struggles trump demand. The Iran turmoil could now add a new round of lower cyclical confidence and concerns around payroll trends (job safety and buyer confidence).

As noted in the bullets, permits are in a fade, but single family starts were also weak in relative terms with the total starts numbers pumped up by a massive increase in multifamily (detailed further below).

The above chart plots total permits and total starts on a Not Seasonally Adjusted (NSA) basis. NSA is viewed as closer to what is going on in the trenches without the SAAR model assumptions. For January 2026, we see NSA total permits notably lower (-10.7%) YoY and single family permits down by -15.3% YoY. For MoM, total permits were down by -15.4% with single family permits down -2.7% MoM.

For total starts and single family starts on an NSA basis, we see total starts up by +3.8% MoM and single family NSA starts lower by -6.3% MoM.

The above plots the single family starts by region (NSA). On a MoM basis, the critical South region (totals 54% of total NSA starts) was higher by +10.1% MoM and by +15.6% YoY. The West as the #2 market was down MoM by -6.9%. The Midwest region MoM was down by 31% with the small Northeast market +40% MoM. The YoY NSA starts were mixed with the South higher and West lower among the big two regions. The Midwest was lower YoY and Northeast higher YoY.

The above chart updates running multifamily starts. At +524K (SAAR), Jan 2026 rose by +29.1% MoM and by 56.9% YoY. The 524K is well above the long-term median of 339K, above the median from Jan 2009 to current (347K), and above the median from 2000 to 2008 (296K). Jan 2026 even exceeded the median of the 1960s boom (487K).

The 1960s was a period of explosive growth for multifamily with the back end of the baby boom, the postwar rise of urbanization, and the high racial migration from the south to the north.

The above chart updates Multifamily permits (SAAR). The 453K in Jan 2026 multifamily permits declined by -13.4% MoM but rose by +8.9% YoY.

Employment Situation Feb 2026: Payrolls Get Ugly 3-8-26

PCE Income & Outlays Dec 2025: Inflation Reversal? 2-20-26

4Q25 GDP (Advance Est.): Less Distortion This Time 2-20-26

Industrial Production Jan 2026: Capacity Utilization Trends 2-19-26

Home Starts Dec 2025: Wrapping a Weak 2025 2-18-26

Market Lookback 2-17-26

CPI Jan 2026: Reassuring Numbers, Missing Pieces 2-13-26

2025 Spread Walks and Multicycle Return Histories 1-5-26

Annual Return Differentials: HY vs. IG Across the Cycles 1-3-26

Total Return Quilt Across Asset Classes 2008-2025 1-2-26

Cyclical Histories: Will Facts Be in Vogue in 2026? 1-2-26

Existing Home Sales Feb 2026

Glenn Reynolds, CFA — Wed, 11 Mar 2026 02:25:58 GMT

Total existing home sales and Single family home sales both posted modest increases MoM but were down YoY. Coops/condos sales were lower MoM and YoY.
The market saw yet another YoY price increase (32 straight YoY increases) and a MoM increase in median prices for existing and single family. Coop/Condo prices were down both MoM and higher YoY.
Across the 6 price tiers we reviewed, the top 4 price range tiers increased and the bottom two price tiers declined. Rising inventory and rising prices have been an odd combination.

The above chart shows the sales volume delta by price tier for Feb 2026, and we see 4 of the 6 price tiers posting positive growth with only the two lowest price tiers posting declines.

The volatility and disruption of the Iran war is undermining the rally we had seen in the mortgage markets with a slight uptick again. After a brief move below the 6.0% line into 5% handle range, the setbacks on the UST curve sent mortgages to 6.09% for the Mortgage News Daily survey as of the latest close. The range has been a tight one.

Mortgage rates have been stubborn all year and they are hovering on average in the low 6% area. The Freddie Mac 30Y set on Thursdays (6.0% on 3-5-26) is still material relief from the 6.63% of one year ago for Freddie Mac. This week brings the CPI and PCE inflation reports for some new “pre-Iran” reads on where inflation was setting up before the impact of the oil and gas spike started flowing into the system. Even with today’s oil price around $83 (WTI) as we go to print, that is still up by $15 per barrel from the pre-bombing period.

The three Fed cuts in the fall of 2025 (-75 bps) followed 3 actions (50, 25, 25) in the fall of 2024, in turn translated into UST curve steepening along the way. Back in the fall of 2024, the UST rally along the curve saw mortgage rates right around today’s level after easing while the 10Y UST dropped down to around 3.6% (current 4.15%) and mortgages near 6.0%. That Sept 2024 rally soon gave way to a steepening and tough road for mortgages into 2025 and now 2026.

The Iran oil spike and all the knock-on effects for CPI and PCE inflation that will come with energy pressure could make for a lot of frustration in the White House. The chance of an easing in June per FedWatch has plunged over the past month with the odds of “no action” rising to +60.8% as we go to print from 24.8% 1 month ago.

The above chart shows the geographic mix of volumes and details on price mix by region. The South is the main event in single family volumes whether new or existing at over 46%.

For the bar chart, we break out the mix for each region by price tier. For example, the South shows over 50% (50.8%) of its existing home sales volume in the $250k to $500K range and 16% of its sales in the $500 to $750K bucket.

The high cost of homes in the West (notably California) is clear enough just by glancing at the bar chart with over 15% at prices over $1 million. The second highest in the $1 million club is the Northeast at almost 9%.

We see a big concentration in the $250K to $500K although the $100K to $250K bracket for the Midwest stands at over 33%. The map explains what states are in each Census region. There is a very wide range of home price profiles in the West and Midwest states.

Inventory for total existing homes ticked slightly higher MoM (as revised) to 1.29 million units for +2.4% MoM and +4.9% higher YoY. Current inventory is well below longer term medians including 2.065 million for the post-1998 median. The median from Jan 2011 (homebuilding low) to current times is 1.675 million. In other words, existing home sales inventory remains extremely low even if the level is materially higher than the stunning low of 850K of Feb 2022 ahead of the end of ZIRP in March 2022.

The above two-sided chart updates the trend line in total existing home sales vs. new single family homes. We had been operating without new home sales data from the Census Bureau since the shutdown, but we now have some updates (Note: the Jan 13, 2026 release from the Census covers through Oct 2025). The Census is very slow to catch up. From what we see on the Census site, the January 2026 new home sales should be updated March 19. As we have covered in our homebuilding commentaries, new home sales continue to struggle along with new residential construction (starts to be released this week).

The above chart breaks out the timeline for existing single family alone of 3.73 million vs. total existing home sales of 4.09 million, which is well below the long-term median (from Jan 1999) of 5.22 million for total existing homes. Existing single family was +2.5% sequentially and -1.1% YoY (SAAR). The lower line is ex-condo/ex-coops. We saw 360K in condo and coop sales in Feb 2026, down from 380K YoY and down from 380K MoM.

The above chart updates the median price for existing single-family homes at $401.8K after June 2025 hit a record $438.6K. The median price in Feb 2026 is dramatically above the $308K level back in Jan 2021 and $277K in Dec 2019 when mortgage rates were in a different zip code.

The current existing home sales volume is a long way from the mid-6 and high 5 million handles of 2021 and then into early 2022 when many homeowners had refinanced and new buyers locked in low mortgages. ZIRP ended in March 2022 and then the UST migration began and dragged mortgages to highs in 2023.

The Feb 2026 total of 4.09 million is near the May 2020 COVID trough of 4.07. We had a few sub-4 million handles along the way as noted in the chart, so the 2023-2026 period has been brutal for real estate brokers.

The above chart shows another angle on the sales mix across the price tiers. We just lift the numbers off the monthly handout for single family homes released by the NAR each month. It adds up over 100% but the message is clear enough. Higher price homes and buyers have had a better time.

The $250K to $750 range as two tiers add up to almost 2/3 of the market with the $100 to $250 showing a big share in some of the Midwest states as detailed in an earlier chart. We also looked at the growth trends for each tier in the first chart. Lower price tiers declined while the top 4 tiers rose. The lower price tiers are more on the cusp of where affordability and mortgage eligibility could be strained at 6% mortgage rates.

See also:

Employment Situation Feb 2026: Payrolls Get Ugly 3-8-26

PCE Income & Outlays Dec 2025: Inflation Reversal? 2-20-26

4Q25 GDP (Advance Est.): Less Distortion This Time 2-20-26

Industrial Production Jan 2026: Capacity Utilization Trends 2-19-26

Home Starts Dec 2025: Wrapping a Weak 2025 2-18-26

Market Lookback 2-17-26

CPI Jan 2026: Reassuring Numbers, Missing Pieces 2-13-26

2025 Spread Walks and Multicycle Return Histories 1-5-26

Annual Return Differentials: HY vs. IG Across the Cycles 1-3-26

Total Return Quilt Across Asset Classes 2008-2025 1-2-26

Cyclical Histories: Will Facts Be in Vogue in 2026? 1-2-26

Payrolls Feb 2026: Into the Weeds

Glenn Reynolds, CFA — Sun, 08 Mar 2026 18:28:29 GMT

February payrolls declined by -92K, and the fear is this could mark an inflection point as headwinds pick up and the risk checklist grows globally and in the US. The Feb 2026 print effectively erases gains from a solid January and continues mediocre labor market growth across 2025. While Feb payroll was distorted by 31K of idled healthcare workers due to a strike, it still leaves a -61K decline that in tandem with the -69K downward revisions to December and January reflect a cooling trend.
With the caveat of the strike distortion, the private payroll contraction of -86K is the worst since December 2020. Overall, we see this as a possible transition to further labor reduction, especially given some high-profile layoff headlines. This aligns with where we have seen fragility in past reports with the disruptive forces across AI implementation still in early stages.
As we look across the mix, leisure & hospitality (-27K) and healthcare and social assistance (-19 K) were the major disappointments. Combined with declines in both construction (-11K) and manufacturing (-12K), this release points to where there are both cyclical and noncyclical engines that are off to a slow start in 2026. The weakness has regularly been a problem for manufacturing, but it is now hitting services also.
The FOMC calculus gets complicated with another spike in geopolitical risk and potential inflation pressures across a range of line items with gasoline at the top of the list. That impact is highlighted almost daily in retail gasoline price trends. Retail prices at the pump are up almost 16% higher ($2.98 to $3.45) in only a week through March 8 per AAA.
Inflation will necessarily rise into the later spring due to the immediate oil price action while the specter of a weakening labor market will give both sides of the FOMC “ease vs. no action” debate getting fresh talking points. We get CPI and PCE inflation this coming week, and that will not include the effects of these latest changes. We also will be curious to see if the measurement practices of the BLS evolve and give a hint of the health insurance premium increases that did not show up in the last set of numbers (see CPI Jan 2026: Reassuring Numbers, Missing Pieces 2-13-26). That is a topic for another day.

The above covers the MoM changes for February and the -92K contraction above is broken out among the major groups seen in Table B-1 of the payroll reports (Establishment data). Though previous reports have often seen headline numbers give cover to how payrolls has shown weak breadth, we have maintained that the composition of gains in 2025 was overly reliant on healthcare job adds. The labor market was much more fragile than it appeared. With this month seeing contraction in healthcare (even if with strike distortions), we can see the limited underlying breadth in a weak February.

Even incorporating the distortion from the noted -31K worker strike affecting the healthcare sector, adding that back still amounts to a significant loss of momentum in the healthcare sector overall. That will put downward pressure on overall labor market growth as the three-month moving average moves down to just +6K.

As we look forward, the labor market overall faces fresh potential pressures as the Iran story and effective closure of the Strait of Hormuz will heighten risk in the consumer and small business sector and potentially undermine some budgeting decisions for larger companies.

While these events do not influence the February data, the headwinds arrive as the domestic labor market appears to be reaching an inflection point. The prospect of sustained high oil prices (above $90 as we go to print) alongside a new round of tariff-driven uncertainty points to further challenges to properly handicapping the direction of consumers, capex, and monetary policy risks.

Into the Weeds…

The above chart provides the high-level breakdown across private vs. public and services vs. goods-producing. This month’s contraction sees no growth in any of the line items listed above. The consistent growth of the private sector was challenged in February.

The manufacturing payroll mix is shown above. The durables payrolls are fairly mixed across a -4K contraction and better than nondurables, which was down -8K. We focus on the durables details above with the contraction on the month generally weighted more heavily toward transportation even if mixed across some other areas.

Manufacturing is a key barometer of the effectiveness of tariff policy across the last year. Given the desire to catalyze a manufacturing renaissance or at least a reshoring wave of critical industries, declines in payroll growth for the majority of these industries across the LTM period into 2026 bodes poorly for successful policy execution.

We have written in the past about how steel and aluminum tariffs alongside broader unilateral tariffs are not likely to drive the volume of growth intended. So far, the results above do not come as much of a surprise.

Nondurable goods manufacturing payrolls continue a contractionary slide in February as the long-term secular decline across these industries continues to show. There are some key areas to watch for the upcoming month across petrol, coal, and chemicals where we expect outsized economic impacts due to oil price spikes. Chemicals is a major industry and employer, but petroleum and coal products are more about political clout than job numbers.

As opposed to manufacturing, construction has been a brighter spot. Recent periods show more differentiation across residential and nonresidential sectors, and this month sees that continue. The potential for sustained high interest rates with inflation could bring some setbacks in the very bullish tech-centric capex expectations and data center activity. Revision to bullish valuation models will be something to watch with all the Iran fallout.

A major theme driving construction as a bright spot has been AI-related capex, though the many billions in spending plans or commitments has little to show in terms of the employment data. We see that a large part of AI capex and spending are tied to imported tech products that drive this perceived gap. The bridge between AI capex narratives and construction labor growth is a trend we will continue to track. Data centers can only be built so fast and plans face material lags.

Services payrolls above have been the core driver of growth. In February, we see several major industries with weakening payrolls including leisure & hospitality (-27K), educational services (-16K), healthcare (-19K), transportation & warehousing (-11K) and information (-11K) on the month.

Declines in these areas point to lower discretionary economic activity. Another hit to the household wallet could come in the form of an oil price shock that could further exacerbate some of those spending declines. That goes beyond filling up the tank of the personal car and gets into surcharges on all goods at delivery.

As a reminder, personal consumption expenditures (PCE) is 68% of GDP. We get the second estimate of 4Q25 GDP this week. We could see the above services numbers in time providing possible early signs of AI displacement (or more generic tech) bringing layoff activity and signaling growing vulnerability to AI disruption. It is still early in that game.

Stripping out distortions to the healthcare line this month still leaves questions around labor market health. Adding back the 31K strike distortion in February health care still only comes to 12K growth, which is well below the 56K average across the LTM period. This was a sector that was the lion’s share of private sector growth last year. Even if there is a minor distortion, when stripping out that distortion the health care line still shows signs of a slowdown and that bodes poorly for 2026 labor market growth.

Finally, the government lines above show a continued bleed in Federal payrolls. Across the last year of layoffs and shutdown activity, the actions have led to payroll volatility. We’ve often netted out government changes to get a clearer picture on the larger economy. That said, retrenchment and payroll weakness could continue to flow into the GDP lines and spending across the economy. It is as simple as “bodies without paychecks.”

The February data points to a labor market starting to exhibit some of the structural fragility that we’ve noted across the past year. The headline was weighed down by strike distortions, but it is challenging to be optimistic with weak private hiring while rolling into an oil shock with the potential for further geopolitical noise in the near-term. Next month will be particularly telling to test the resilience of the services growth engine. We will see in the spring if Feb 2026 becomes an inflection point or there is room to bounce back.

Employment Situation Feb 2026: Payrolls Get Ugly

Glenn Reynolds, CFA — Sun, 08 Mar 2026 17:47:52 GMT

It’s all in how you deliver the message. Or does down really mean down?

The Friday payroll release was obviously grim so it took a back seat to sorting through all the moving parts of the headlines out to the Middle East and Iran that keep adding new elements of risk with the expectation of more problems to come.
The raw numbers tell the story. The Establishment Survey shows a decline of -92K. The Household Data shows a decline in total employed in Feb 2026 from January 2026 of -185K and a decline of -426K YoY vs. Feb 2025. The ranks of the unemployed rose by 203K from Jan 2026 and by 467K vs. Feb 2025. Even Kevin Hassett and Scott Bessent cannot paint a smiley face on Feb 2026 payroll numbers (try as they may).
Manufacturing jobs declined again with both Durables and Nondurables down. Goods-producing payrolls overall were down with Construction also down. Private services producing payroll was down by -61K (with Health Care distortions) and the usually reliable Leisure and Hospitality down. We will look at the occupational deltas in a separate commentary. Government was also down for the month.
Even with Iran dominating the headlines and driving more upward revisions in estimates on inflation, the payroll numbers will matter a great deal as the election year plods along with higher inflation, lower payrolls, and more household discretionary strain from gasoline and fuel costs that will pile onto high electricity and piped utility gas inflation. The Golden Age is on hold despite strong demand from The Ballroom.

The monthly payroll adds/declines chart above starts in March 2022 with the end of ZIRP and start of the tightening cycle. The bar chart tells an objective data story. The -92K for Feb 2026 drove the U-3 rate higher to 4.4% from 4.3% in January.

The numbers in 2025 and 2026 include the only negative deltas on the chart with 6 months in the red. Furthermore, the 2025-2026 months are all below the post-Jan 2009 median of 183K. That long-term median period includes a slice of the longest recession since the Great Depression, so it is not a high bar to clear. Those payroll numbers from Jan 2025 to Feb 2026 offer no bragging rights.

The above chart plots the running job adds/declines since Jan 2009 against the unemployment rate, which ticked higher MoM to 4.4% from 4.3%. In the chart, we isolate the worst months of the COVID dislocations in the box for better visuals to capture the other periods. The 4.4% U-3 is still below the long-term median of 5.0%. In past cycles, the 4.4% number would be considered full employment, so that is still a solid number across the cycles. Payroll has been struggling somewhat in relative terms, but history is kind to 4.4%. If the 2025-2026 frame of reference is 2024 (not a good jobs year) then the 2025-2026 numbers are not so bad. If we compare it to the 2022-2023 period, the current numbers are grim.

The above chart updates the time series for the U-3 unemployment rate and U-6 structural underemployment rate across the years from 1994. As noted, the current U-3 rate ticked higher to 4.4% from 4.3%. The Feb 2026 U-3 is 2 ticks higher YoY from 4.2% in Feb 2025.

The current 7.9 % is well above the 6% handles seen in spring of 2023 but is now at least declining again. The U-6 is still below the median from 1994 of +9.3%, which notably includes the post-crisis shock and the longest recession since the Great Depression.

The current 3.5% differential is below the long-term median of 4.0%. The job ranks are still vulnerable now with the Iran war effects just kicking into gear. That comes after a mixed, weak period where tariffs are still getting worked out in terms of hiring and firing decisions.

Many questions will be getting answers with respect to how tariffs will flow into working capital cycles and new capacity planning. The IEEPA SCOTUS decision raises some new inputs to absorb as Team Trump rolls in new tariffs. We also have the energy spike dislocation that will bring more inflation pressures. What that means for interest rates along the curve from the short duration FOMC action is an open item. Short duration UST flows into working capital and consumer durables funding while the longer end drives mortgage rates.

Reshoring has been very slow as the construction and manufacturing payroll trends imply. We are seeing major plans to relocate automotive OEM capacity back to the US, and that should attract more supplier chain capex. The auto supplier to OEM chain will be a focal point in the upcoming USMCA review process with Canada and Mexico. Autos is only one small piece of the manufacturing picture despite all the headlines.

The AI wildcard in manpower needs sees a lot of speculation in the manufacturing sectors but even more so in Services payroll speculation. That has been evident in some recent stock volatility across SaaS-based business services leaders.

The above chart updates total payroll vs. the unemployment rate. More bodies with more paychecks are always a good thing. The trick from here is how the consumer deploys that paycheck and whether the zero-sum realities of household budgets undercut spending. The need for defensive spending habits in light of impaired household discretionary cash flow could become a bigger headwind in the aftermath of the Iran fallout.

We see the ranks of employed in Feb 2026 decline by -185K MoM in the Household Survey. That decline YoY was -426K. That trend now is telling a deteriorating employment story. The ranks of the unemployed rose by +203K MoM in the Household Survey and rose by +467K YoY. The -92K payroll numbers in Nonfarm Payroll in the Establishment Data is also clearly negative.

The above chart updates the total payroll number vs. job openings. JOLTS data analysis is still recovering from the shutdown, and the Jan 2026 JOLTS data gets released this coming week. The Dec 2025 Job Openings data was down by almost 1 million (966K) from Dec 2024 to 6.54 million. On a constructive note, Manufacturing job openings were essentially flat as was Durables.

Management teams have a lot of moving parts to factor into planning whether quantitative or qualitative. The final IEEPA decision from SCOTUS came in against Trump, but he was prepared to start slapping on tariffs under Section 122, 232, and 301. Those are topics for other days and have been looked at in the many past commentaries (see Meanwhile…Back in Economics and Tariffs 3-2-26, US Trade with the World: Import-Export Mix 2-25-26).

The fallout in consumer spending from health care premium increases and retrenchments in SNAP spending and eligibility criteria could signal trouble ahead in the lower part of the “K” household mix. Now we add in the Iran setbacks and energy cost pain and cyclical pressures that will come with those effects. We get the Personal Income and Outlays data this week. The Iran effects come later.

Inflation reports had generally brought good news relative to expectations given the scale of the forward threat from tariffs and lagging effects to be seen across working capital cycles. That said, the inflation creep and affordability strain is clearly in evidence and taking a toll on inflation across select product groups. PCE inflation has been rising (see PCE Income & Outlays Dec 2025: Inflation Reversal? 2-20-26). We get CPI this coming week. We get fresh PCE data also.

Tariffs will stay in the thick of the pricing pressure battle, and industries such as autos are likely to see more upward price pressure after a year of relative caution by OEMs to protect their customer base and dealer network. The OEMs also wanted to move cautiously with Trump (which by itself is a sad comment on how far free markets have suffered under this administration). Now we will be adding much higher energy inflation from gasoline to go with the very high electricity CPI metrics and utility piped gas inflation.

The overall economic impact is far less than feared given the reality that most trade partners backed down in 2025. That could change in 2026 with many more battles on the table such as a threatened embargo of Spain that would pull in the EU (Anti-Coercion bazooka?) and the USMCA review.

The USMCA review will inevitably create a lot of tension with Canada despite the US goods trade surplus ex-crude oil. Trump needs a cheat sheet on who are the best export markets with around 3 dozen states seeing Canada as the #1 export market. With Qatar facing stress in the fertilizer sector right now, the Canadian position in potash might be worth keeping in mind.

New Home Sales Dec 2025: Fresh Game Clock

Glenn Reynolds, CFA — Sat, 21 Feb 2026 17:08:26 GMT

Need a lift in 2026.

The combination of affordability challenges and supply constraints left new single family homes sales for calendar 2025 down by -1.1% nationally on a not seasonally adjusted basis with Dec 2025 ending the year down by -1.7% MoM on a SAAR basis and +3.8% for Dec 2025 YoY.
The supply of homes for sale at Dec 2025 were down by -2.7% MoM and -3.5% YoY for Dec 2025 vs. Dec 2024.
The median sales price in Dec 2025 of $414.4K was +4.2% MoM but down by -2.0% from Dec 2024.
The South region is still the main event on volume share at 61% of total share of NSA 2025 volumes as the South saw a minimal increase of +0.4% in 2025. The West was the #2 market and posted -4.9% NSA with the Midwest at #3 and +1.7%, and the small Northeast market generated -7.7% in sales volumes for the year.

The above chart updates the new single family sales time series from 1963, and the current 745K SAAR is a small sequential move lower of -1.7% for Dec 2025. We saw 2 of 4 regions with negative MoM variances with the leading South region at -6.7% MoM and -1.1% YoY while the West posted a sequential increase of +9.0% MoM and +1.8% YoY. The Midwest posted a very strong +31.7% MoM and +30.1% YoY. The tiny Northeast market was -37.3% MoM and +12.1% YoY.

The above two-sided chart shows the sales pattern for the new home sales line since 2000 vs. the median prices, which weighed in at $414.4K for Dec 2025, up from $397.6K in Nov 2025 but down from $423K in Dec 2024.

The fact that prices had trended materially higher across the post-COVID cycle is old news, but the sensitivity of monthly payments is married more to mortgage rates as a critical variable in monthly payments.

Mortgages have been stubbornly high but are starting to see some relief with the Freddie Mac 30Y (set each Thursday) migrating to the low 6% range from the mid 6% range in the late summer. Mortgage rates remain the primary driver of weaker volumes in the lower price tiers in both new and existing home sales (see Existing Home Sales Jan 2026 2-12-26).

For the largest share of the housing market in the mid-price tiers, the combination of lower prices and in some cases sustained incentives along with cost challenges from tariffs was part of a pattern of gross margin erosion in 2025. Each builder has distinctive geographic mix shifts to consider when framing their ASP trends.

The above chart updates the running median price trends. Builder fears of higher material and supplier chain costs are not going to do much to relieve homebuilders in their pricing strategies with gross margins softening in 2025 and into 2026. That said, most are posting margins still above pre-COVID levels even if down sharply from abnormal margin peaks in 2022.

The homebuilders downplay the tariff problem on earnings calls and let the NAHB trade group do their talking for them. The bottom line is lumber, materials, appliances, etc., will bring lower margins or challenge price decision or both. The early signals are margins taking the hit. The SCOTUS IEEPA actions of this past week will not help much given the heavy use of Section 232 on materials (lumber, steel, aluminum, etc.). Immigration policy is also not helping on labor pools.

The above chart gives a different visual angle on the median new home sales prices from early 2022. That is a lot of $400K handles with some sub-$400K outliers such as Nov 2025. The current $414.4K can shift with regional mix as well as home price tiers and related supply issues. The affordability question is still intertwined with the monthly payment pressures from mortgages. It is about more than price.

The time series above updates the new single family home sales across the cycles since 1973 for the #1 and #2 regions of the South and the West. These two regions are around 81% of total single family sales volumes.

The 430K for the South is around 58% of the total of all single family new home sales (SAAR basis) and posted a sequential decline of -6.7% from Nov 2025 and is down by -1.1% YoY. The West at 170K is 23% of the total. For the month, the West was +9.0% sequentially and +1.8% YoY.

The smaller Midwest region and tiny Northeast region account for 14% and 5%, respectively, of new home sales in Dec 2025. The Midwest was up +31.7% MoM and +30.1% YoY. Northeast was -37.3% MoM and +12.1% YoY.

4Q25 GDP (Advance Est.): Less Distortion This Time 2-20-26

Industrial Production Jan 2026: Capacity Utilization Trends 2-19-26

Home Starts Dec 2025: Wrapping a Weak 2025 2-18-26

Market Lookback 2-17-26

Market Commentary: Asset Returns 2-16-26

CPI Jan 2026: Reassuring Numbers, Missing Pieces 2-13-26

Payrolls Jan 2026: Into the Weeds 2-11-26

Employment Jan 2026: Good Headline, So-So Mix 2-11-26

Switzerland-US Trade: A Deficit that Glitters 2-3-26

Mexico Trade: Gearing up for More Trade Trouble? 1-27-26

Policy Mud on the Wall: Consumer Debt, Residential Mortgages 1-15-26

2025 Spread Walks and Multicycle Return Histories 1-5-26

Annual Return Differentials: HY vs. IG Across the Cycles 1-3-26

Total Return Quilt Across Asset Classes 2008-2025 1-2-26

Cyclical Histories: Will Facts Be in Vogue in 2026? 1-2-26

Industrial Production Jan 2026: Capacity Utilization Trends

Glenn Reynolds, CFA — Fri, 20 Feb 2026 03:14:43 GMT

The combination of durable goods orders for Dec 2025 and industrial production for Jan 2026 made for a respectable close to 2025 and start to 1Q26.
Industrial production rose in Jan 2026 while capacity utilization ticked higher for total manufacturing, durables, and nondurables. Mining barely moved (ticked slightly lower) but utilities reached a recent high and comfortably ahead of 2025 and late 2024.
Durable goods orders for Dec 2025 were mixed after recent struggles. Defense was healthy but Transportation was weak. Core capital goods (“Nondefense capital goods ex-aircraft”) rose as well.
The big decline in nondefense aircraft and parts tended to dominate headlines but a wide cross section of durables at least is not flashing yellow in manufacturing taken in tandem with industrial production overall.
Relative optimism is in part tied to the incentive from the tax bill contributing tailwinds, ongoing tech and related infrastructure capex, and defense investment. The lines show more signs of firming across durables lines in industrial production.

The above table frames the long-term history of capacity utilization from 1967. The current capacity utilization level for manufacturing of 75.6% is below the July 2009 to Jan 2020 cycle median (vs. average) of 76.1%. The current level is below the post-TMT cycle through Nov 2007 of 77.7% (note: the credit crisis recession started in Dec 2007).

A material leg down in manufacturing from here requires a massive macro event such as COVID or the systemic bank crisis that also crushed the Auto OEMs and supplier chain. The 1980-1982 stagflationary double dip also shows up across the times series on the “worst of” decline in manufacturing utilization. That would take a lot to go very wrong.

The good news is that the US economy is larger, more diverse, and more service-intensive than ever with much lower levels of cyclicality. The tariffs are tied to the fact that the shift to services and global sourcing went too far. That has been the topic for years now.

Recapturing that manufacturing capacity will be no small task since such an outcome will need companies to have confidence that policies will remain stable and predictable to analyze project economics and capital budgeting risks. If there is one certainty in the world after 2025, it is that tariffs are a constant negotiation and will change at will and at whim. That does not encourage long-term capex commitments.

The above table breaks out the trends from the headline level for Total Industry and Total Manufacturing and across the major subsector groupings. We break out the deltas in the right column. All rose except Mining, which barely moved lower.

We tend to focus on the moving parts of Durables and Nondurables, but Utilities will be getting a lot more focus in 2026 and beyond given the inflation spikes in Electricity and Utilities (Piped) Gas. The Dec 2025 moves in Cap Ute were mild for Manufacturing.

The above table updates the top 5 Durables subsectors and the two largest in Nondurables. Durables saw all move higher except Aerospace. Chemicals rose but Food, beverage and tobacco had a mild fade.

The above table updates the capacity utilization history for expansions and recessions. The ability of more companies to generate solid profits at lower capacity utilization in today’s markets vs. past cycles is tied in part to automation and in part to the development of low-cost supplier chains. Low-cost supplier chains are getting dramatically undermined by tariffs, so the demands to improve efficiency will now be more pressing. Offsetting some unit cost pressures with the “AI story” comes with “pros and cons” as we have seen play out on the screen in recent weeks.

The above chart details economic expansion and recession averages and lines them up by height as a frame of reference. We see the current level on the left at 75.6%. As noted in the prior chart, what has been striking after the credit crisis and protracted recession that followed was that US manufacturing could be so profitable at capacity utilization rates that were below numerous prior recessions.

Low-cost global sourcing was the rage in some industries (notably autos) in the US as well as in Europe. That process had been ongoing for years (e.g., component and finished goods assembly in tech from laptops to semis and integrated tech systems in the pan-Asia chain). That “lower breakeven” plan is now “toast” with the tariffs. The oft-stated theory is that supplier chains will rapidly return to the US or come to the US for the first time. That is a long-term hope. That will take years when a lot can happen on the policy front.

The theories on reshoring or onshoring combines a level of optimism with a disdain for the concept of “time lags” and willingness of companies to make substantial multiyear capital outlays when the tariffs could be one election away from material revisions. The problem with emergency declarations to enact so many tariffs is that the “next guy” can simply say – in whole or in part – that “the emergency is over.”

Market Lookback 2-17-26

Market Commentary: Asset Returns 2-16-26

CPI Jan 2026: Reassuring Numbers, Missing Pieces 2-13-26

Payrolls Jan 2026: Into the Weeds 2-11-26

Employment Jan 2026: Good Headline, So-So Mix 2-11-26

Switzerland-US Trade: A Deficit that Glitters 2-3-26

Mexico Trade: Gearing up for More Trade Trouble? 1-27-26

PCE Income & Outlays Nov 2025: Resilient Consumer, Higher Inflation 1-24-26

Policy Mud on the Wall: Consumer Debt, Residential Mortgages 1-15-26

2025 Spread Walks and Multicycle Return Histories 1-5-26

Annual Return Differentials: HY vs. IG Across the Cycles 1-3-26

Total Return Quilt Across Asset Classes 2008-2025 1-2-26

Cyclical Histories: Will Facts Be in Vogue in 2026? 1-2-26

2025 trade Deficits: Reality vs. Rhetoric

Glenn Reynolds, CFA — Thu, 19 Feb 2026 22:22:49 GMT

Didn’t these guys hear about the tariffs?

The trade deficits for 2025 weigh in with a record high goods deficit as we have been seeing along the way (see Trade Deficits: Math Challenge 1-30-26).
We doubt that the massive gap will cause much reassessment by White House tariff policy architects, but the potential or shifts in supplier chain capacity and reshoring plans as well as cost mitigation and pricing strategies will get a raft of new inputs soon enough.
Just ahead is the USMCA reviews and higher levels of tension with the EU, which covers the top 3 trade partners.
If predictability is a key component of capital budgeting decisions and if exemptions are the flies in the ointment for planning, then 2025 was a major setback on multiple fronts for the efficacy of the tariff game plan.

The above chart updates the running history of goods trade deficits. We looked at these issues in a recent commentary (see Trade Deficits: Math Challenge 1-30-26), but the above charts weighs in with the December 2025 and full calendar year numbers.

We will not beat the dead horse too much on how tariffs work in reality and in fact after so many regular demonstrations of double-talk and the avalanche of pure fabrications. The buyer/importer “writes the check” for the tariffs, so it was always a challenge to hear Trump say that he “collected hundred of billions from selling countries.” You don’t hear that as much these days since it is blatantly false.

The trends in the trade deficit balance into 2025 calls into question the main goal of reducing that deficit, which Trump calls a subsidy and “rip off” – as opposed to a free market decision by rational buyers with specific goals and reasons for making the purchase.

The deficit trend also offers a reminder that assumptions are not easy to make around the response to the policy. Decision-makers were hard at work in a very challenging year for markets adapting to tariffs and making purchases and planning cost and pricing actions. Managers had to take action from the seller to the buyer/importer or across the tiers of supplier chains to the finished goods customer.

The fact is not an opinion as to who write the check – the importer/the buyer – but the biggest “variables” are around whether the seller cut prices, the buyer took out costs to mitigate the impact, ate the costs (reduced margin), or passed the cost along in price. In terms of capex decisions and capacity investments, those will unfold over years. Doing nothing and framing up the landscape and trade risks (USMCA review, EU trade war risk etc.) is an option for many.

This week we heard the White House and Hassett attack the Fed’s latest tariff study without the Trump tariff architects offering any evidence of anything from their own “research.” That is par for the course since Hassett, Navarro et al have their outcomes written down in advance long before any economic events took place. Those views will not change. It is like election outcomes. Facts don’t matter.

The above chart updates the running import and export timeline behind the record trade deficits. The reality is that both are upward sloping in a growing global economy and growing US economy. When the US grows, the importers still have well established supplier chains intact even if some have faced enormous pressure on the tariff impacts. Rising material costs (notably, steel and aluminum, etc.) still have room to flow along the supplier chains into 2026 as goods manufacturers make decisions on pricing and work with customers.

Currency effects have not been helpful with the dollar weaker and the costs of nondollar goods rising in tandem with tariffs higher (and frequently changing). Back in 2017, when the House tax bill (led by Ryan of Wisconsin and Brady of Texas) wanted to use a 20% border tax “tariff” on imports to take the place of US corporate taxes, they assured the market (with their expert academic witnesses) that the dollar would strengthen so much that it would offset the 20% tariffs. Well, here we are 8 years later with the dollar crushed and tariffs high if erratic. That is a flashback to other days. In those long-ago days, the GOP leaders also used the word “tax” to describe tariffs. That has since been disallowed.

The above chart updates the ranking and moving parts of the top US trade partners. The Big 3 comprised 47% of “total trade” (imports + exports while the Big 4 totaled 54.5%. The mythologies for framing deficits uses different measurement in sections of the Census trade data, but the basic conclusions do not vary.

Mexico is #1 as a nation and #1 in imports. Canada and Mexico are a dead heat in exports, but the value added mix in the Canada list wins. Mexico also has a lot of round-trip US exports that come back across the border as imports. We have covered Taiwan’s rise in more detail separately (see US-Taiwan Trade: Risks Behind the Curtain 2-1-26). Switzerland is also a very distinctive trade story with the role of gold moving in both directions (see Switzerland-US Trade: A Deficit that Glitters 2-3-26).

Other Tariff commentary:

Switzerland-US Trade: A Deficit that Glitters 2-3-26
US-Taiwan Trade: Risks Behind the Curtain 2-1-26
Trade Deficits: Math Challenge 1-30-26
China Trade: Shrinkage Report 1-28-26
Mexico Trade: Gearing up for More Trade Trouble? 1-27-26
Canada-US Trade: Trump Attack N+1 1-25-26
US-Canada Trade: 35% Tariff Warning 7-11-25
India Tariffs: Changing the Music? 7-11-25
Taiwan: Tariffs and “What is an ally?” 7-10-25
Tariff Man Meets Lord Jim 7-8-25
South Korea Tariffs: Just Don’t Hit Back? 7-8-25
Japan: Ally Attack? Risk Free? 7-7-25
US-Vietnam Trade: History has its Moments 7-5-25
US Trade in Goods April 2025: Imports Be Damned 6-5-25
Tariffs: Testing Trade Partner Mettle 6-3-25
US-UK Trade: Small Progress, Big Extrapolation 5-8-25
Tariffs: A Painful Bessent Moment on “Buyer Pays” 5-7-25
Trade: Uphill Battle for Facts and Concepts 5-6-25
Tariffs: Amazon and Canada Add to the Drama 4-29-25
Ships, Fees, Freight & Logistics Pain: More Inflation? 4-18-25
Tariffs, Pauses, and Piling On: Helter Skelter 4-11-25
Tariffs: Some Asian Bystanders Hit in the Crossfire 4-8-25
Tariffs: Diminished Capacity…for Trade Volume that is…4-3-25
Reciprocal Tariff Math: Hocus Pocus 4-3-25
Reciprocal Tariffs: Weird Science Blows up the Lab 4-2-25
Tariffs: Enemies List 3-6-25
US-Mexico Trade: Import/Export Mix for 2024 2-10-25
Aluminum and Steel Tariffs: The Target is Canada 2-10-25
Trade Exposure: US-Canada Import/Export Mix 2024 2-7-25
US Trade with the World: Import and Export Mix 2-6-25
The Trade Picture: Facts to Respect, Topics to Ponder 2-6-25
Tariffs: Questions to Ponder, Part 1 2-2-25
US-Canada: Tariffs Now More than a Negotiating Tactic 1-9-25
Mexico: Tariffs as the Economic Alamo 11-26-24
Tariff: Target Updates – Canada 11-26-24
Trump, Trade, and Tariffs: Northern Exposure, Canada Risk 10-25-24
Trump at Economic Club of Chicago: Thoughts on Autos 10-17-24
Facts Matter: China Syndrome on Trade 9-10-24
Tariffs: Questions that Won’t Get Asked by Debate Moderators 9-10-24
The Debate: The China Deficits and Who Pays the Tariff? 6-29-24
Trade Flows: Deficits, Tariffs, and China Risk 10-11-23

Home Starts Dec 2025: Wrapping a Weak 2025

Glenn Reynolds, CFA — Wed, 18 Feb 2026 21:15:11 GMT

Slower even if steady.

Housing has been an economic drag in the fixed investment accounts of GDP for multiple reasons from the affordability strain tied to price as well as mortgage rates hitting monthly payment levels. Residential construction has posted negative growth through 3Q25, and we will get fresh GDP lines this week for 4Q25 (see 3Q25 GDP: Updated Estimate 1-22-26)
The curve steepening since the fall 2024 easing rally has been a challenge to both homebuilding and new home sales, as well as existing home sales (see Existing Home Sales Jan 2026 2-12-26). The fiscal proposals on housing and policy jawboning has not amounted to much in substance.
Total permits and starts for Dec 2025 and calendar year 2025 are both down from 2024 but ticked up sequentially MoM for Dec 2025 vs. Nov 2025. Single family starts were down -9.0% YoY but up by +4.1% MoM. Multifamily was down by -1.0% YoY but up by +10.1% MoM.
The South region still rules at 59% of total US single family starts and 53% of total US starts. The US total of units under construction was down by -10.5% YoY and for single family down by -8.4% YoY, so the signs are not good at this point.

The single family home starts time series shows a wild ride across the cycles. However, the current volumes are low when considering the intrinsically high demand for housing tied to demographics.

The weakness after the COVID cycle saw prices as a major headwind given the supply-demand imbalances. The yield curve damage with 2022 tightening cycle and inflation with ensuing volatility drove a 200 bps Hi-Lo range for 30Y mortgages since the fall of 2023 through 2025.

We need to keep in mind that 100 bps of easing in late 2024 saw a major mortgage rally initially before the market saw a bear steepener unfold into 2025 (see The Curve 12-15-25). That steepening sent mortgages higher again from Sept 2024 after the 2023 mortgage peak had pulled back. The current run rates for volumes remain weak in multi-cycle context despite the recurring theme of inadequate supply for what should be exceptional demand. For now, affordability struggles trump demand.

The above chart plots total permits and total starts on a Not Seasonally Adjusted (NSA) basis. For December, we see NSA total permits higher (+3.5%) and single family permits down by -6.2%. NSA Annual Year-to-Date permits were -3.6% for total permits and a decline of -7.4% for single family permits. NSA is viewed as closer to what is going on in the trenches without the SAAR model assumptions.

For total starts and single family starts on an NSA basis, we see total starts up slightly at +1.3% MoM and single family lower by -2.2% MoM. The YTD annual 2025 NSA starts number is -0.6% for total starts and down by -6.9% for single family starts for calendar 2025.

The above plots the single family starts by region on an NSA basis. The two largest regions (South and West) were split in the NSA numbers with the South slightly lower and the West higher. The Midwest moved lower as did the small Northeast market.

The above chart updates running multifamily starts. At +402K (SAAR), Dec 2025 rose by +10.1% sequentially and was down by -1.0% YoY. The 402K is still above the long-term median of 339K, above the median from Jan 2009 to current (347K), and above the median from 2000 to 2008 (296K). On an NSA basis (not shown), the YTD multifamily starts level is +18.0%.

The 1960s was a boom period for multifamily with the postwar explosion of urbanization and high racial migration from the south to the north.

The above chart updates Multifamily permits (SAAR). The 515K in Dec 2025 rose by +18.1% MoM and increased by +18.7% YoY. The YTD calendar 2025 change on an NSA basis for multifamily permits (not shown) is +4.3%.

See also:

Market Lookback 2-17-26

Market Commentary: Asset Returns 2-16-26

CPI Jan 2026: Reassuring Numbers, Missing Pieces 2-13-26

Payrolls Jan 2026: Into the Weeds 2-11-26

Employment Jan 2026: Good Headline, So-So Mix 2-11-26

Market Commentary: Asset Returns 2-8-26

Switzerland-US Trade: A Deficit that Glitters 2-3-26

Mexico Trade: Gearing up for More Trade Trouble? 1-27-26

PCE Income & Outlays Nov 2025: Resilient Consumer, Higher Inflation 1-24-26

Industrial Production Dec 2025: CapUte Resilience 1-17-26

Policy Mud on the Wall: Consumer Debt, Residential Mortgages 1-15-26

2025 Spread Walks and Multicycle Return Histories 1-5-26

Annual Return Differentials: HY vs. IG Across the Cycles 1-3-26

Total Return Quilt Across Asset Classes 2008-2025 1-2-26

Cyclical Histories: Will Facts Be in Vogue in 2026? 1-2-26

Market Lookback: Last Call for Unusual Behavior 12-22-25

Existing Home Sales Jan 2026

Glenn Reynolds, CFA — Fri, 13 Feb 2026 00:29:48 GMT

OK. I will settle for a 3BR, 2 bath.

Supply, affordability, mortgage rates, consumer confidence, buy vs. rent economics and a view on forward job risks are part of a big menu of macro variables to weigh.
The reality is that mortgages are sticky and thus feeds the existing supply challenge as sellers balk given what lies on the other side for the seller looking to move up, move on, or cash out.
Volumes were down year over year in all 4 major regions with a decrease MoM in the massive South region as well as in the West and Midwest MoM. Only the very small Northeast market was up sequentially MoM in volumes.
Median existing home sales prices ticked slightly higher yet again YoY to $396.8K. Median prices were up in the Northeast (+5.8%) and Midwest (+2.3%), essentially flat (+0.1%) in the South, and down (-1.4%) in the pricey West region. The West still saw prices north of $600K with the Midwest on the low end at $295.4K. The Northeast weighed in at $505.4K and South at $351.2K.

The above chart shows the sales volume delta by price tier for Jan 2026, and we see 5 of the 6 price tiers posting negative growth with only the $1M+ club slightly higher. We look at this price tier mix from a different angle in the final chart in this collection.

As we discuss in the final chart below, the market share by region appears to have some typos from NAR such as the 41.8% share for the $250K to $500K. That 41.8% market share for that price tier seems too far off the norm (usually around 45%) and the % shares don’t add to 100%. On a positive note, the conclusion on a lousy month does not change.

Mortgage rates have been stubborn as they are hovering in the low 6% area. While those rates are materially lower than the 6.87% of one year ago, the monthly payment math is still not working well for those looking to cash out, move up, or simply relocate. Expectations for a bull flattener in the UST market that would translate into low to mid 5% mortgage rates have been thwarted so far as we cover in other commentaries.

The three Fed cuts in the fall of 2025 (-75 bps) followed 3 actions (50, 25, 25) in the fall of 2024, and that in turn translated into UST curve steepening along the way (6.09% Freddie Mac as of Thursday). Back in the fall of 2024, the UST rally along the curve saw mortgage rates right around today’s level after easing while the 10Y UST dropped down to around 3.6%. That soon gave way to a steepening and tough road for mortgages into 2025 and now 2026.

Those expecting the 10Y UST to follow fed funds lower have been relatively disappointed since the easing cycle got underway, so the latest debates on FOMC actions under Warsh do not come with a sense of automatic bull flattening and lower mortgage rates.

The above chart shows the geographic mix of volumes and details on price mix by region. The South is the main event in single family volumes whether new or existing at over 46%.

For the bar chart, we break out the mix for each region by price tier. For example, the South shows almost 50% (49.6%) of its existing home sales volume in the $250k to $500K range and over 15% of its sales in the $500 to $750K bucket.

The high cost of homes in the West (notably California) is clear enough just by glancing at the bar chart with almost 16% at prices over $1 million. The second highest in the $1 million club is the Northeast at almost 10%. The market share of the $1 million tier started declining recently in a good sign for the tiers below that lofty level.

We see a big concentration in the $250K to $500K although the $100K to $250K bracket for the Midwest stands at over 34%. The map explains what states are in each Census region. There is a very wide range of home price profiles in the West and Midwest states.

Inventory for total existing homes ticked lower MoM (as revised) to 1.22 million units for -0.8% MoM but was still +3.4% higher YoY vs. Jan 2025. Current inventory is well below longer term medians including 2.1 million for the post-1998 median. The median from Jan 2011 (homebuilding lows) to current times is 1.77 million. In other words, existing home sales inventory remains extremely low even if the level is materially higher than the stunning low of 850K of Feb 2022 ahead of the end of ZIRP in March 2022.

The existing home inventory balance had shown a steady rise off the sub-1 million lows of 2022-2023. Inventory had risen to the 1.3 million handle range in 2024 before dipping back down to a recent low of 1.14 million to close out 2024. We bounced off those numbers in 2025 to get back above 1.5 million handles before the recent move lower to 1.2 million handles.

The above two-sided chart updates the trend line in total existing home sales vs. new single family homes. We had been operating without new home sales data from the Census Bureau since the shutdown, but we now have some updates (Note: the latest Jan 13,2026 release from the Census covers through Oct 2025). The Census is very slow to catch up. From what we see on the Census site, the Nov and Dec home sales should be updated next week.

The above chart breaks out the timeline for existing single family alone of 3.53 million vs. total existing home sales of 3.91 million, which is well below the long-term median (from Jan 1999) of 5.23 million for total existing homes. Existing single family was -9.0% sequentially and -4.3% YoY (SAAR). The lower line is ex-condo/ex-coops. We saw 380K in condo and coop sales in Jan 2026, down from 400K YoY in Jan 2025 and down from 390K in Dec 2025.

The above chart updates the median price for existing single-family homes at $400.3 K after June 2025 hit a record $438.6K. The median price in Jan 2026 is dramatically above the $308K level back in Jan 2021 and $277K in Dec 2019 when mortgage rates were in a different zip code.

The above chart updates the monthly existing home sales across the timeline from Jan 2023 through Jan 2026. In the interest of visual quality, we had to delete the 2022 months when the market was posting 6 million and 5 million handle sales volumes in the first half of that year. The current existing home sales volume is a long way from the mid-6 and high 5 million handles of 2021 and then into early 2022 when many homeowners had refinanced and new buyers locked in low mortgages. ZIRP ended in March 2022 and then the UST migration began and dragged mortgages to highs in 2023.

The Jan 2026 total of 3.91 million is back below the May 2020 COVID trough of 4.07. We had a few more sub-4 million handles along the way as noted in the chart, so the 2023-2026 period has been brutal for real estate brokers.

The above chart has some data quality issues as we revisit the topical area addressed earlier on the existing home sales deltas by price tier. The largest tier is the $250K to $500K at typically around 45% of sales volumes. That tier was listed at 41.8% above in the chart release earlier. We assume that there will be some corrections since the total is below 100%.

Employment Jan 2026: Good Headline, So-So Mix 2-11-26

Market Commentary: Asset Returns 2-8-26

Switzerland-US Trade: A Deficit that Glitters 2-3-26

Market Commentary: Asset Returns 2-1-26

Mexico Trade: Gearing up for More Trade Trouble? 1-27-26

PCE Income & Outlays Nov 2025: Resilient Consumer, Higher Inflation 1-24-26

Industrial Production Dec 2025: CapUte Resilience 1-17-26

Policy Mud on the Wall: Consumer Debt, Residential Mortgages 1-15-26

CPI Dec 2025: Sideways Calms Nerves – For Now 1-13-26

2025 Spread Walks and Multicycle Return Histories 1-5-26

Annual Return Differentials: HY vs. IG Across the Cycles 1-3-26

Total Return Quilt Across Asset Classes 2008-2025 1-2-26

Cyclical Histories: Will Facts Be in Vogue in 2026? 1-2-26

Market Lookback: Last Call for Unusual Behavior 12-22-25

Payrolls Jan 2026: Into the Weeds

Glenn Reynolds, CFA — Wed, 11 Feb 2026 19:23:50 GMT

Nonfarm payrolls rose +130K to start the new year as private payrolls surged +172K, offset by -42K in government. Gains broadened out across services and goods producing sectors but healthcare remains a dominant driver contributing +124K adds this month.
The annual benchmark revisions show that 2025 job growth was materially weaker at +15K average monthly payrolls gains vs. the pre-revision +49K number. We had already seen fragility in the labor market prior to the revisions given the quickly narrowing breadth and reliance on healthcare adds and this supports that deterioration. These annual downward revisions used to get a lot of commentary from Trump when they happened under Biden but the commentary is lighter this time.
The bright side from today’s report against the backdrop of revisions is that the most recent prints are trending back towards positive. The three-month average rebounded to +73K for headline and that improves when focusing on private payrolls to a +103K three-month average. It is another report that gives just enough mixed signals to keep kicking the can down the road on where the labor market is going.

The above shows the January MoM employment change across a broader range of drivers with some stronger signals of private-sector momentum. The breadth still has not meaningfully improved from previous months, but the composition is more encouraging in this morning’s print.

Healthcare and social assistance is again the largest contributor at +124K, but this month sees both construction (+33K) and durable goods (+9K) providing strong relative growth. A mild bounce back this month for the manufacturing lines is positive for the broader economic picture and might be meaningful given policy actions in 2025 to stimulate these industries. The market will need to see more months of sustained positive payroll additions in manufacturing. The YoY trend remains deeply negative. This could be a start.

Weakness this month was concentrated in Government payrolls (-42K) with its drivers disconnected from the broader labor market. Aside from that, we see financial activities (-22K) and information (-12K) with material declines. Information has been in a mild contraction across the past 3 years as motion picture and publishing industries have seen headcounts shrink.

As we look at this report, the positive takeaway is the composition across services and goods growing as signals where there could be some footing to gain momentum in the labor market. There is still outsized narrow concentration but some services lines are loosening up.

We remain cautious given the outlook for possible job displacement from AI and similar tools as adoption rates are quite impressive. The stabilizing signal from today’s report is likely once again overstated with downward revisions becoming the norm. We will wait for upcoming releases to see if private labor market momentum is maintained as 2026 progresses.

Into the weeds…

The above chart provides the big split across private vs. public and services vs. goods-producing. The Private services category remains the primary driver of job growth in the US, while goods-producing rebounded to start 2026 after only construction had been positive last year. Government continues to see payrolls contract with this month negative across both Federal and State payrolls.

The manufacturing payroll mix is shown above. We see generally positive results leading to +5K higher this month split across +9K durables and -4K nondurables. We focus on the durables details above with growth in January spread across most areas though with transportation equipment leading the pack at +5K.

Given the policy focus on reshoring manufacturing this past year, seeing growth to start 2026 is encouraging, but the revisions now show where there is a larger hole to climb from to start a manufacturing renaissance. At least for now the bleeding might be slowing and there might be at least some stabilization for now.

Nondurable manufacturing activity posted a typical mixed bag of results skewed towards declines. The above lines are not the growth engine of the manufacturing base, but there are some key support sectors to watch like petrol, chemicals, and plastics. These continue to be declining sectors across the manufacturing base and likely to continue to weigh on manufacturing payroll growth.

The revisions released this morning show a more benign construction growth picture for 2025. That being said, the January surge of +33K is a positive signal for nonresidential projects where capital spending for data infrastructure projects remains intact. Given the large investment commitments of major tech firms, we see this as the closest bridge between AI capex narratives and labor stabilization within the payrolls print.

Services payroll numbers are still the core of the report from a gains perspective. Healthcare and Social Assistance is the major driver again at +124K with a much more mixed read across other lines. We have discussed where we think the narrow concentration of gains leaves a much more fragile labor market than the headline suggests. This latest print still supports that view even with slightly positive signals in manufacturing.

Finally, the Government lines above continue the bleed from public payrolls with this month seeing -42K. Federal payrolls made up -34K of the decline but this month also sees State at -18K, with Local a +10K offset. Government remains a drag on the aggregate numbers and the practical way to look at recent reports is to exclude these government lines. The cyclical signals are elsewhere as government lines will be volatile across layoffs and shutdown drama. That said, government retrenchment in payroll will flow into GDP lines depending on government consumption and investment. Many of the people are gone and more than a few department and agencies gutted or shutdown.

Employment Jan 2026: Good Headline, So-So Mix

Glenn Reynolds, CFA — Wed, 11 Feb 2026 19:00:46 GMT

The jobs just keep coming…

With mixed payroll color from Challenger and ADP, the BLS weighed in with a solid +130K adds in the Establishment Survey. The Household Survey posted a sequential MoM increase in the employed ranks of +528K and lower Unemployed count of -141K as the civilian labor force grew by 387K.
Manufacturing at least generated a positive number at +5K but moved lower by -83K YoY. Durable Goods rose by 9K but was down by -49K YoY vs. Jan 2025. Nondurable goods ticked slightly lower by -4K MoM. Within the “goods producing” category, construction rose by +33K with “nonresidential specialty trade contractors” the main mover at +25.1K of the +33K.
The tariff-driven reshoring theme for manufacturing will take time and lag under the best of circumstances, but the net growth numbers are hard to find across the two-way traffic of the occupation lines.
In services, we saw “financial activities” decline by -22K and “transportation and warehousing” down by -11.2K with “professional and business services” offsetting that with +34K.
Healthcare and social assistance rose by +123.5K as the services mix still leads the payroll numbers with an intrinsically lower level of economic multiplier effects. Leisure and hospitality weighed in at only +1K as “arts, entertainment, and recreation” faded by -15.6K and “accommodation” at -10.6K. “Food services and drinking places” were +27.8K. Old age and infirmities remain key drivers in payroll counts (The trick is paying for health care or making decisions on other cuts).
Government moved lower by -42K with Federal at -34K and State at -18K and Local at +10K.

The monthly payroll adds/declines chart above starts in March 2022 with the end of ZIRP and start of the tightening cycle. The bar chart tells an objective data story. The 130K for Jan 2026 is a solid number by 2025 standards. That said, the numbers in 2025 include the only 3 negative deltas on the chart. Furthermore, the 2025 months are all below the post-Jan 2009 median of 188K. That period includes a slice of the longest recession since the Great Depression. Those payroll numbers from Jan 2025 to Jan 2026 offer little room for an end zone dance (or a Golden Age spike) celebrating the jobs score.

The above chart plots the running job adds/declines since Jan 2009 against the unemployment rate, which ticked lower to 4.3% from 4.4% in December. In the chart, we isolate the worst months of the COVID dislocations in the box for better visuals to capture the other periods. The 4.3% U-3 is still below the long-term median of 5.0%. In past cycles, the 4.3% number would be considered full employment. Payroll has been struggling somewhat in relative terms, but history is kind to 4.3%.

The above chart updates the time series for the U-3 unemployment rate and U-6 structural underemployment rate across the years from 1994. As noted, the current U-3 rate ticked lower to 4.3% for Jan 2026 from +4.4% in December 2025. The Jan 2026 unemployment rate is up from 4.0% in Jan 2025 so the YoY trend is unfavorable.

The U-6 is the structural underemployment metric that is always useful to watch. The U-6 jumped to 8.7% in Nov 2025 from 8.1% in Sept 2025. To start 2025, the U-6 rose sharply in Feb 2025 to 8.0% from 7.5% in Jan 2025. The current 8.0 % is well above the 6% handles seen in spring of 2023 but is now at least declining again. The U-6 is still below the median from 1994 of +9.3%, which notably includes the post-crisis shock and the longest recession since the Great Depression.

The time series above updates the U-6 minus U-3 differential as a measure of relative employment quality and to flag risks of major dislocations in large swaths of the economy (think oil patch collapse in the late 1980s, tech bubble imploding 2001-2003, financial services and automotive meltdown in 2009).

The current 3.7% differential is back below the long-term median of 4.0%. The job ranks are still vulnerable now but are also in a mixed period where tariffs are still getting worked out with trade partners and the courts.

Many questions will get answers with respect to how tariffs will flow into working capital cycles and new capacity planning. For example, we are seeing major plans to relocate automotive OEM capacity back to the US. That should attract more supplier chain capex. The auto supplier to OEM chain will be a focal point in the upcoming USMCA review process.

In contrast, the idea of a major new aluminum smelter in the US will not happen based on economics and the timeline to build one. Low-cost power is essential for such smelting activities and data centers would be happy to pay a multiple of what an aluminum smelter would see as cost effective. There are a lot of stories along the manufacturing chains with some good and plenty bad. For now, manufacturing payrolls are “net bad.”

Some of the risk issues get swept up in immigration and deportation numbers, but the analysis always comes back to the number of workers with paychecks. Employers will be making decisions to mitigate the tariff damage if they are not passing along the cost in prices or want to limit the scale of the price increase to customers.

There is no hiding from the need for economic reactions along the supplier to customer ecosystem. Someone always pays – including those “paying” with layoffs in tariff cost mitigation decisions.

We see the ranks of employed in Jan 2026 grow by 528K in the Household Survey. That tells a good story. The +130K in Nonfarm Payroll in the Establishment Data is at least moving sharply in a better direction as detailed in an earlier chart.

The above chart updates the total payroll number vs. job openings. JOLTS data analysis is still recovering from the shutdown, but we saw Challenger data and ADP numbers painting very guarded payroll color. The Dec 2025 Job Opening data was down by almost 1 million (966K) from Dec 2024 to 6.54 million. On a constructive note, Manufacturing job openings were essentially flat as was Durables.

Management teams have a lot of moving parts to factor into planning whether quantitative or qualitative. The final IEEPA decision from SCOTUS is ahead. The fallout in consumer spending from health care premium increases and retrenchments in SNAP spending and eligibility criteria could signal trouble ahead in the lower part of the “K” household mix.

For some (notably retail and many small businesses), the tariff threat can be existential. The cash drain in “writing the tariff check” and the hit to earnings from the expense line can impair trade credit and fuel bank credit problems for small businesses that are the backbone of payroll counts in the US.

The payroll impact has already been showing up in below-median payroll additions in 2025-2026. As noted in the chart at the top of the commentary, negative payroll months stand out in a time series where the White House had been touting the greatest first year in Presidential History. We now have a full year of payroll data, and the numbers are suboptimal.

The overall economic impact is far less than feared given the reality that most trade partners backed down. That said, inflation effects are showing up in the data with more to come this week (see CPI Dec 2025: Sideways Calms Nerves – For Now 1-13-26, PCE Income & Outlays Nov 2025: Resilient Consumer, Higher Inflation 1-24-26)

Market Commentary: Asset Returns 2-8-26

Switzerland-US Trade: A Deficit that Glitters 2-3-26

Market Commentary: Asset Returns 2-1-26

Mexico Trade: Gearing up for More Trade Trouble? 1-27-26

PCE Income & Outlays Nov 2025: Resilient Consumer, Higher Inflation 1-24-26