Macro4Micro: Economic Indicators

Personal Income & Outlays May 2026: Bad Inflation, Balanced Spending 6-26-26

New Home Sales May 2026: Weak Volumes, Stable(ish) Prices 6-25-26

Trade Deficits: The Moving Parts and Macro Goals Matter Most 6-24-26

The FOMC Dance: Will Warsh and Trump Find a Rhythm? 6-17-26

Housing Starts May 2026: Weaker for both Single Family and Multifamily 6-16-26

Geopolitical risk: Trump’s Nuclear Saber Rattling? 6-14-26

The Fall of CBS 6-3-26

Industrial Production June 2026: Sideways Syndrome

Glenn Reynolds, CFA — Sat, 18 Jul 2026 23:29:22 GMT

Despite the temptation to extrapolate from AI and high related capex to a broader industrial boom and the “Golden Age” for manufacturing pitched by the White House, the numbers just are not there with capacity utilization in manufacturing below 2022, 2023 and 2024 levels.
On the other side of the partisan ledger, there is no sign of the vaunted “collapse” often cited as caused by Trump policy critics. Industrial production is steady even if manufacturing capacity utilization of 75.7% is well below the longer term median of 78.4% (post-1967). Capacity utilization is below shorter timeline medians of numerous prior cycles with 76% and 77% handles.
The theme is “steady as she goes” in another boring set of IP numbers in June. Total industrial production ticked higher MoM by +0.1% but up +1.1% from a weak set of June 2025 numbers. That said, the June 2026 capacity utilization of 75.7% is slightly ahead of June 2025 at 75.6%. That remains below the 1972-2025 average of 78.2%. We last saw 78% handles for a quarter in 2023 and a 77% handle in 2024 (back when Trump says the country was “dead”).

The above chart is somewhat of a regular replay of the history of the industrial production cycles across time from 1967 through today. We have covered much of this in the past, but we roll the historical recap forward for convenience. We get new readers and students all the time, so we use it as a mini history. For those used to this history, I added some new angles in this version but otherwise you can skip to the next chart.

Here’s a topical summary of the history sections:

A look at the top down utilization numbers…
A brief cyclical lookback on replay…
Bring on the tech boom and excess…
The credit crisis arrived in the summer of 2007 and peaked in late 2008…
COVID, ZIRP, and a license to print risk…
Time for the new age transition to AI plus some old school crises…

As an “old guy” who covered such industries as autos and steel credits back in the 1980s (and worked on a few audits of resources and energy companies), we have seen plenty of cyclical stress and secular shifts. I came of working age in the first stagflation wave and oil spikes of the 70s and early 1980s, and much of the “old and new” is evident these days. Cyclical change and secular trends always get mixed in, and the evolution (or collapse) of industries is not new. The manufacturing sector is wrestling with the tariff waves in a world with global supplier chains. Oil spikes are not new.

For June, the “business equipment” line of industrial production is doing quite well at +5.4% with “information processing” up by +8.2% in June YoY. Consumer durables are down YoY with the exception of the “home electronics” line (Table 1 of the release). Defense and space equipment is up by +6.5% but construction supplies only +1.5%. Within Industry groups, “computer and electronics” was +9.2% YoY. Overall, durables manufacturing in industrial production was +3.2% and nondurables was -1.1%.

A look at the top down utilization numbers…

The capacity utilization trends are covered in the charts below, but it is always good to keep in mind that there are two moving parts: capacity growth and the rate of utilization. Over/under expansion relative to demand can shape pricing power (e.g. semiconductors on a global scale).

The current 75.7% for total manufacturing utilization is well below the long-term median of 78.5% and below the post-COVID median of 76.2%. The industrial production and capacity utilization numbers are among many metrics that take the label of “greatest economy in history” off the table. Whether GDP growth or payroll trends, the current economy is a bottom quartile economy when the growth of the 1980s and 1990s are factored in (see Presidential GDP Dance Off: Clinton vs. Trump 7-27-24, Presidential GDP Dance Off: Reagan vs. Trump 7-27-24).

The wildcard for this current cycle is the scale of the fixed investment that is now ramping up around the AI ecosystem. The multiplier effects cut across the full array of products and services and extend across many major trade partners with Taiwan at the top of the list (see Taiwan: Stakes are High, US Awareness is Low 5-17-26, US-Taiwan Trade: Risks Behind the Curtain 2-1-26).

The consumer sector and PCE have been unimpressive, but fixed investment is now soaring (see GDP 1Q26 Final: PCE Growth Plunge 6-25-26). If you like comparing numbers (not a Washington thing) as opposed to spewing partisan adjectives, Trump 1.0 did not even frame up all that well vs. Carter and Biden – let alone the 1980s and 1990s (Gut Checking Trump GDP Record 3-5-25, Trump’s “Greatest Economy in History”: Not Even Close 3-5-25). Trump 2.0 is off to a slow start on GDP growth and payroll additions pale in comparison relative to the earlier glory years of the 80s under Reagan and the 90s under Clinton. That clear conclusion requires more numbers and less adjectives than we hear today.

A brief cyclical lookback on replay…

The pace of industry restructuring was notably the case in the 1980-1982 double dip as well as the recession of late 1973 to early 1975 when the Arab Oil Embargo set off chain reactions that turned the post-1973 period into an ebb-and-flow of macro nightmares for inflation and the consumer. Currency trends and labor costs were going through major changes across many years.

The May 1975 low of 71.6% followed the first bout of severe stagflation 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. The themes from Middle East wars or OPEC clashes (Iran vs. Iraq in the 1980s, Iraq vs. Kuwait/US in 1990) are being revisited today. There is room for conflict to get much worse with a wide range of potential geopolitical outcomes.

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. That takes some of the edge off the “greatest economy in history” hype.

Bring on the tech boom and excess…

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 rolled in. The Utilities and Power sectors and Telecom capex all took a beating in that time frame.

We recently saw a market commentary comparing and contrasting the tech bubble of the 1999-2002 swing with today’s valuations in the AI ecosystem. That writer had referred to the tech bubble of 1999 as NOT a case of balance sheet pressures as his theory was simply about valuation metrics. We are not sure which tech bubble he was referring to during 1999 but he missed 2 of the 3 letters in “TMT”. He was using internet stocks as his focus. The internet stock bubble was very different from the debt-fueled telecom (T) and media (M) credit cycle and market implosion.

The telecom-related, debt-funded capex and balance sheet stress of 2000-2002 was ugly with many cash flow bleeders heading to chapter 11 and distressed debt restructuring that also brought industry consolidation. The credit stress was much higher and the counterparty credit quality was much worse in 2000-2002 than what we see today. That does not change the fact that 2026-2027 will remain highly dependent on raising much more debt to “finish the job” that is being built into revenue growth and earnings models. That is anything but assured. If the debt markets balk, the stock valuations will see a lot of pain.

The credit crisis arrived in the summer of 2007 and peaked in late 2008…

The next crisis in the manufacturing sector plotted above came with the post-credit crisis low of 63.4% at the recession trough in June 2009. Mortgages and derivative excess caused a very real systemic panic and deep risk aversion from the Lehman Sept 2008 period and well into 2009. Banks and brokers collapsed and the whole Ghostbuster scenario (“cats and dogs living together”) started to play out. Fears of cascading counterparty collapses rose as did worries around mass credit contraction hitting a broad swath of businesses. That in turn led to bailouts by the UST and protracted action by the Fed (see Wild Transition Year: The Chaos of 2007 11-1-22).

That period in late 2008 and into 2009 was famous for the bankruptcy and bailout of GM and Chrysler and how that reverberated across supplier chains from materials to components. TARP and late 2008 had already hooked up the “bailout infusion.” The credit contraction threat was very real, and the recovery in payrolls was slow to unfold with the consumer hammered by housing sector pain (Autos: War Stories & Anecdotes 9-22-23).

COVID, ZIRP, and a license to print risk…

COVID edged out the June 2009 utilization bottom with a record low of 62.6 in April 2020 and a wild 2-month recession. That pandemic period saw ZIRP, supply-demand imbalances and later the Russian invasion of Ukraine and ensuing oil spike that set off inflation and a tightening cycle that still did not trigger a 2022 recession. The Fed should get some credit for navigating that timeline even if late to the party.

In the context of manufacturing, the ZIRP brought a wave of refinancing and extension of liabilities, low cost of capital encouraging investment and pent-up demand that rewarded rebounding inventories and capex. Consumer financing was cheap and captive finance companies had credit that the finance sector was ready and willing to offer.

Time for the new age transition to AI plus some old school crises…

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. Material costs (notably petrochemicals, base metals), operating costs for companies, and consumer discretionary household cash flow headwinds make for a tricky set of moving parts shaped by erratic geopolitical decisions.

The AI upside as well as the fallout and related fears is a new variable in the mix that cuts across both the services and goods sectors. What AI will mean for productivity improvement vs. payroll contraction will be an ongoing test of theories. Even if AI proves true to the valuation promises and brings a “revolution” to the economy, many will also pay the price.

Revolution is a term often associated with a body count (even if jobs and not KIA). We have been getting a taste in the recent SaaS services panic. Those SaaS services markets consume a lot of goods and have a lot of employees. Total paychecks drive PCE, which is 68% of GDP.

The above table breaks out the high-level groupings with total industry and total manufacturing posting a mix of positive and negative variances in June 2026. We include a “delta column” on the right.

Mining and Utilities moved higher for the month, and the rational expectation is that utilities will see more capacity added and more demand. The data center and power supply issue is more pressing and getting more political by the day in an area where there has been working class bipartisan anger around the side effects of such projects on power costs and water threats among other issues. That controversy has spread to Canada where we are seeing more legislative and regulatory battles around the data center capacity plans.

It may be local on a center-by-center basis, but it will find its way into an assessment of data center adequacy at some point for growth, AI ecosystem valuations, revenue models, and cost structures. Any sense of faltering optimism around volumes (e.g. international restrictions on AI), pricing power, regulatory backlash, or political risks (elections have consequences, etc.) could roil valuations.

We see Durables and Nondurables as the main events to track, and durables showed some aggregate weakness this month, ticking slightly lower as a group. The durables sector is especially important with all of the supplier-to-OEM multiplier effects of tariffs and oil spikes. Some industries will lose and some will win.

The IEEPA SCOTUS setbacks and recent attempts by Trump to counterattack by “creatively” using existing tariff legislation is struggling in the courts. Trump goes to “Plan B” and “Plan C” in his attempts to cut Congress out of the tariff decisions. He is hanging his hat on Section 301 and has invoked “forced labor” rules as a loophole. He recently threatened France with triple digit wine tariffs even without IEEPA. He seems to forget the EU works as a bloc. He also threatened Canada over wildfire smoke even as the USMCA is up for review.

Looking back from 2025 into early 2026, we see Manufacturing in a relatively narrow range and the same for Durables. Tariffs have not moved the production needle much 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 actions in other costs or pricing.

Those tariff impacts will only play out over time across working capital cycles. Pricing decisions are more likely to come at a lag given the White House pressures, so there is a lot more to play out in 2026 earnings seasons and in company color ahead of FY 2027 when midterm results will be in hand.

The inflation story has turned into a negative variable for the macro picture in 2026. The “good news, bad news” aspect of a resilient industrial sector is that higher input costs can lead to the exercise of pricing power that flows into inflation. That beats the stagflation alternative but will keep life challenging for the FOMC and “Team Warsh” (if he can assemble a supportive voting team).

The Iran effects eased up in June and now are heading back in a negative direction in July. “War is hell” but it is also very unpredictable for macro effects.

The above table breaks out the details for the top 5 Durables lines and the two largest Nondurables lines. We include the capacity utilization deltas in the column on the right. We see more negative moves across all the major durables industries with 4 of 5 lower. “Motor Vehicles and Parts” moved higher. The two major Nondurables lines were split with Chemicals down and Food, Beverage and Tobacco slightly higher.

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 severely undermined by tariffs and are now facing supply chain headwinds from the Iran War energy effects and the related supply-demand imbalances.

The “AI story” and what it all means for productivity and headcount will be a big part of the risk analysis ahead. The natural outcome will be less jobs in a service intensive economy such as the US. The irony is that the most immediate impact on jobs has been in tech, but that payroll retrenchment can easily spread.

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 75.7%. The fact that the current capacity utilization is below numerous recession averages posted on the right side of the chart also scoffs at the recurring “Golden Age” and “hottest country” rhetoric.

In the context of the tariff priorities and reshoring ambitions, the slack capacity implied by the chart in historical context underscores that the analysis is a lot more complicated than just “build more plants” and “keep tariffs high” to force reshoring. That is a story told on an industry-by-industry basis. It gets into themes around pricing power, cost structures and sourcing risks (tariffs, etc.). These days the topical questions revolve around “AI winners and losers” in productivity and the relative ability to adjust and engage in tariff cost mitigation strategies.

The multiplier effects are important, but the relocation of supplier chains and OEM assembly relocation and retooling is by definition very slow to unfold given intrinsic lag times, tooling equipment, and contracts in place. It is a slow and painful process battling against the reality of automation and downsizing in some industries.

Manufacturing jobs edged slightly higher in June 2026 on a MoM basis by +3K but remains lower YoY by -38K (see Employment Situation June 2026: Back to a Crawl 7-2-26, JOLTS May 2026: Openings Flat, Hires Down, Layoffs Up 7-1-26). If we look back to the end of 2024 (Dec 2024), manufacturing jobs are lower in June 2026 by -160K. If we go back to Dec 2023 vs. June 2026, the decline in manufacturing jobs is -312K lower now with most of that in durables. That is not something to brag about. These numbers are all sitting in the BLS releases. Hassett or Bessent might want to take a peek as they toss around qualitative praise of themselves.

There is also the fact that the cost of relocation has risen with all the tariff effects for materials, components, and qualified labor. Autos are the main relocation stories, but that is generally going to be tied to existing infrastructure and not a strategy of all-new greenfield plants.

In the end, many companies can just wait for Trump to “move on” and revisit plans later. For autos, the attack on investment in EV related manufacturing has undermined some projects completed, in process, or in the concept stage. Fear of trade wars also can slow roll some reshoring and onshoring ideas.

The issues around the USMCA review and its fate effectively make planning much more difficult if not impossible to do with clear economic certainty on trade rules. Trump’s signaling that he may terminate the USMCA entirely regardless of any legal interpretations on whether his sole-actor decision is even legal. That adds more drama to a policymaking framework that does not lack controversy in the best of times.

CPI June 2026: Eye of the Storm? 7-14-26

Market Commentary: Asset Returns 7-12-26

Existing Home Sales June 2026: The Stall is On 7-11-26

Happy 250th Birthday America 7-3-26

Employment Situation June 2026: Back to a Crawl 7-2-26

JOLTS May 2026: Openings Flat, Hires Down, Layoffs Up 7-1-26

Music to Ponder: Hope Rising or Blood Simmering? 6-30-26

The Election Gambit: Economic Risk and Policy Uncertainty 6-29-26

Personal Income & Outlays May 2026: Bad Inflation, Balanced Spending 6-26-26

New Home Sales May 2026: Weak Volumes, Stable(ish) Prices 6-25-26

Trade Deficits: The Moving Parts and Macro Goals Matter Most 6-24-26

The FOMC Dance: Will Warsh and Trump Find a Rhythm? 6-17-26

Housing Starts May 2026: Weaker for both Single Family and Multifamily 6-16-26

Geopolitical risk: Trump’s Nuclear Saber Rattling? 6-14-26

The Fall of CBS 6-3-26

Existing Home Sales June 2026: The Stall is On

Glenn Reynolds, CFA — Sat, 11 Jul 2026 16:54:57 GMT

A major stall in existing home sales remains the order of the day with existing sales volumes at -2.4% MoM but +2.8% YoY. Existing home sales are mired in the low 4 million handle range at 4.09 million vs. 4.19 million in May 2026 and 3.98 million in June 2025 when numbers looked more like 2023 when mortgage rates were even higher. The median price hit a record high for total existing homes ($440,600) and single family ($446,400) as prices keep affordability strained even as inventory ticked lower.
Negative real wage growth is not helping the housing sector story line at the macro level. The cost of the household goods and services basket relative to consumer cash flow is a different challenge than the inflation debate (recurring price increases). The affordability headlines often prompt semantic exercises from economists and policy makers on inflation vs. one-time moves, but the purchasing power problem remains in place for consumers even if headline CPI and PCE price indexes get under control. For now, the current 4% handles for CPI and PCE are grim (see Personal Income & Outlays May 2026: Bad Inflation, Balanced Spending 6-26-26, CPI May 2026: The 4% Rubicon 6-10-26).
The inflation anxiety will necessarily remain high and unpredictable with the setbacks in Iran and renewed problems for the Strait of Hormuz supply bottlenecks (oil, LNG, aluminum and various materials side effects including copper, etc.). We get CPI and PPI updates this week along with Housing Starts and Industrial Production, so the cyclical color will offer some fresh visibility at the same time the wave of bank earnings is streaming out and 2H26 guidance will be getting digested. The earnings expectations are bullish so the inflation handicapping will heat up with it.
As of Saturday morning, the FOMC odds remain grim according to FedWatch CME models. The odds of 1 cut by the Dec 2026 FOMC meeting date are 0% while the odds of 4 hikes are higher than that at +1.6% with the odds of unchanged at 14.6%. With respect to the hike odds, we see 1 hike at 37.8%, 2 hikes at 33.7%, 3 hikes at 12.3%. The 30Y mortgage rate stood at 6.64% as of late Friday per the Mortgage News Daily survey. The new Thursday Freddie Mac benchmark was set at 6.49%, up from 6.43% last week and down from 6.72% last year at this time.

The above chart details existing home sales SAAR run rates by month from January 2023 to June 2026 with 4.09 million in June 2026, down from 4.19 million in May 2026. As a frame of reference, in 2022 the market was posting 6 million and 5 million handle sales volumes in the first half of that year.

The recent existing home sales totals 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 rate has 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 shows the sales volume delta by price tier for June 2026, and we see 5 of the 6 price tiers posting positive growth with only the lowest price tier posting a decline. Note: We use “not seasonally adjusted data” for this chart.

For existing home sales, the monthly payment math is still unfavorable 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 crushed at this point for 2026 after major setbacks for that same scenario in 2025.

As noted in the bullet points at the top of the commentary, the market is pricing in 0% chance of Fed easing, and it is a very challenging leap of faith to see any probability of the conditions for easing getting better from here given steady payrolls and rising inflation. The Iran setbacks along with sustained inflation pressures do not offer much hope for a sharp move lower in the 10Y UST, which in turn dictates moves in 30Y mortgage rates.

An easing scenario would require a macro backdrop that hits payrolls and homebuyer confidence to make the FOMC take such action. That would require a radical event at this point. Such a move by the Fed could also drive a UST steepener subject to the underlying reasons used by the FOMC.

The oil spike and price swings since Iran plus the documented inflation pressures will make life a challenge for Warsh. The years of “repricing of the household basket” under Biden and again under Trump has made life a struggle for many and now we are looking at negative real wage growth.

We read a comment in Housingwire that highlighted slower home price growth vs. wages, but the funding costs (mortgages) and broader expense base that comes with home ownership and relocating undermines such a household budget assessment. The cash-in, cash-out analysis still says home ownership is mired in an affordability crisis in terms of the cost of ownership when considering financing and operating costs.

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% of total volumes.

For the bar chart, we break out the mix for each region by price tier. For example, the South shows almost 50% of its existing home sales volume in the $250K to $500K range and almost 17% 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 17% at prices over $1 million. The second highest in the $1 million club is the Northeast at over 12%.

We see a major concentration across the regions in the $250K to $500K although the $100K to $250K bracket for the Midwest stands at almost 27%. The West shows a high share of 28% 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 lower MoM to 1.56 million units for -0.6% MoM and +1.3% higher YoY. Current inventory is well below longer term medians including 2.08 million for the post-1998 median. The median from Jan 2011 (homebuilding low) to current times is 1.75 million. In other words, existing home sales inventory remains 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 and then back to current levels above 1.5 million.

The above two-sided chart updates the trend line in total existing home sales vs. new single family homes. After some material disruptions in the data updates during the shutdown, the new home sales data is current again (see New Home Sales May 2026: Weak Volumes, Stable(ish) Prices 6-25-26). It’s clear that both are low in historical context. Notable exception is the post bubble housing crisis.

The above chart breaks out the timeline for June existing single family only of 3.73 million vs. total existing home sales of 4.09 million. The 4.09 million total is well below the long-term median (from Jan 1999) of 5.2 million. The total of 3.73 million for single family is well below the long-term median of 4.63 million.

Existing single family growth was -2.4% sequentially and +3.3% YoY (SAAR). The lower line is ex-condo/ex-coops. We saw 360K in condo and coop sales in June 2026, down from 370K YoY and down from 370K MoM.

The above chart updates the median price for existing single-family homes at $446.4K (vs. $440.6K for total existing). That is above the June 2025 level of $438.6K. The median price in June 2026 is at an all-time high and dramatically above the $308K level back in Jan 2021 and $277K in Dec 2019. Mortgage rates were in a different zip code in Jan 2021 were below 3%.

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. Higher price homes and wealthier buyers have had a better time across this cycle. The “K recovery” certainly applies in housing given the mortgage pressure on monthly payments.

This pattern feeds the dynamic of builders targeting higher price homes vs. starter homes. Meanwhile, the funding costs of a home purchase (new or existing) are a deterrent to “move-up” sales by existing homeowners facing much higher refinancing costs if they are sitting on 3% and 4% handle mortgages. That remains a major headwind for existing home sales volumes.

The $250K to $750K range is comprised of two tiers that 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 looked at the growth trends for each tier earlier. The lowest price tier saw volumes decline while the top 5 tiers rose. The lower price tiers are more on the cusp of where affordability and mortgage eligibility could be strained at 6.6% area handle mortgage rates (based on Friday’s close in the Mortgage News Daily survey).

The existing home sales trends make for overall unfavorable news for the housing sector in terms of volumes and prices.

See also:

Market Commentary: Asset Returns 7-5-26

Happy 250th Birthday America 7-3-26

Employment Situation June 2026: Back to a Crawl 7-2-26

JOLTS May 2026: Openings Flat, Hires Down, Layoffs Up 7-1-26

Music to Ponder: Hope Rising or Blood Simmering? 6-30-26

The Election Gambit: Economic Risk and Policy Uncertainty 6-29-26

Personal Income & Outlays May 2026: Bad Inflation, Balanced Spending 6-26-26

New Home Sales May 2026: Weak Volumes, Stable(ish) Prices 6-25-26

Trade Deficits: The Moving Parts and Macro Goals Matter Most 6-24-26

The FOMC Dance: Will Warsh and Trump Find a Rhythm? 6-17-26

Housing Starts May 2026: Weaker for both Single Family and Multifamily 6-16-26

Industrial Production May 2026: Steady, Balanced Utilization Levels 6-15-26

Geopolitical risk: Trump’s Nuclear Saber Rattling? 6-14-26

Producer Price Index May 2026: Too Many “Since 2022” References 6-11-26

Employment May 2026: Big Rebound, Low Multiplier Bias 6-5-26

The Fall of CBS 6-3-26

Employment Situation June 2026: Back to a Crawl

Glenn Reynolds, CFA — Thu, 02 Jul 2026 21:31:06 GMT

Please just take care of the main risk first…

A weak job adds total of 57K for June showed a major sequential decline from stronger May and April numbers. Both May and April posted material negative revisions totaling -74K with April -31K (+179K to +148K) and May at -43K (+172K to +129K). The unemployment rate ticked lower to 4.2% on the Household Survey numbers that showed a decline in the number of bodies employed and unemployed alongside a decline in the labor force.
The Goods payroll only rose by +10K while Services rose by 39K and Government by 8K. The focal point of Manufacturing was only +3K with Durables +6K and Nondurables -3K. Among headline industry groups under the Goods heading, Construction was +11K on the back of +14.1K in “Nonresidential specialty trade contractors” more than offsetting -5.7K declines in “Residential specialty trade contractors.” In a reminder that capital intensity is different than labor intensity, the needle barely moved on “Computer and electronic product manufacturing” of +1.5K. “Motor vehicles and parts” declined by -3.9K, “Machinery” was +0.4K. There is a tendency to forget secular declines in some sectors and product groups and the process of reallocation of payrolls to other areas of manufacturing. The numbers do not support the tariff promises on jobs to this point.
Services payrolls ruled the delta payroll numbers and notably the “Big 2” of “Health care and social assistance” (+46.6K) and “Leisure and hospitality” (-61K) with -54.6K in “Accommodation and Food Services.” That “leisure” number is hard to explain to start the summer. Retail trade was -7.5K, and that one is easier to explain with many retailers getting hammered by tariffs and weaker consumers with PCE plunging in 1Q26 (see GDP 1Q26 Final: PCE Growth Plunge).
For the unemployment rate math, it is always worth a look at the numerator and denominator in the Household Survey. We see a decline of -213K unemployed for a total of 7,094K and a 4.2% unemployment rate (7.094 unemployed/169.36mn labor force). The number of total employed declined by -507K to 162.26 million. The labor force declined by -720K. In other words, everything was shrinking.
The average hourly earnings increase of 3.5% is not stacking up well vs. the 4% headline inflation numbers for both CPI and PCE in May (see Personal Income & Outlays May 2026: Bad Inflation, Balanced Spending 6-26-26, CPI May 2026: The 4% Rubicon 6-10-26). The 1Q26 GDP release posted a headline PCE price index for 1Q26 at +4.6% while the core PCE price index for 1Q26 was +4.4% (see GDP 1Q26 Final: PCE Growth Plunge 6-25-26). The story remains ugly for real earnings.

The JOLTS openings as detailed earlier this week show plenty of openings waiting to get filled as we move into the summer (see JOLTS May 2026: Openings Flat, Hires Down, Layoffs Up 7-1-26). That said, the good news only becomes a reality when the “paycheck count” rises. Hires have not been as robust. In looking at “job openings” the variable of when the opening might get filled looms. There is always the question of what major variables will speed up staffing (tariffs and USMCA risk? Iran fallout and getting the MOU in effect? Fed policy, clarity? etc.).

One can make qualitative assessments on the mix of occupations reporting increases in payrolls, but the reported number at least still meets the “MO jobs, MO money” rule to support consumer spending volumes. Now the question is “How much money is left for discretionary spending after the effects of inflation and lower real wages?”

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 2025-2026 period is not impressive. The same for 2024.

The payroll addition numbers in 2025 and 2026 include the only negative deltas on the chart since March 2022 with 6 months in the red during Trump 2.0. That long-term median of +162K includes a slice of the longest recession since the Great Depression, so it is not a high bar to clear. Since the Jan 2025 inauguration, Trump has exceeded the post-Jan 2009 median in a single month after the April and May 2026 revisions.

A glance back at the 2022 numbers offers a reminder of what a high rate of job adds looks like. Of course, the labor backdrop and immigration issues change the overriding variables.

The above chart plots the running job adds/declines since Jan 2009 against the unemployment rate, which at 4.2% would be considered full employment in past cycles. In the chart, we isolate the worst months of the COVID dislocations in the box for better visuals to capture the other periods.

The 4.2% U-3 is below the long-term median from Jan 2009 of 4.9%. Payroll has been struggling somewhat in relative terms, but history is very kind to 4.2%. If the 2025-2026 frame of reference for payroll additions is 2024 (not a good jobs year) then the 2025-2026 numbers are solid (not great). If we compare 2025-2026 monthly adds to the 2022-2023 period, the current job add run rates are weak.

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 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 U-6 is the structural underemployment metric that is always useful to watch. To start 2025, the U-6 rose sharply in Feb 2025 to 8.0% from 7.5% in Jan 2025. The U-6 jumped to 8.7% in Nov 2025 from 8.1% in Sept 2025.

The current 7.9% marks a decline from 8.1% in May and 8.2% in April. That is good news. The U-6 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, and 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 easing but still flowing into hiring decisions and anxiety around where energy costs and raw materials go from here as working capital cost inputs get absorbed. The feedstock costs have been ugly until the recent adjustments in more than just oil. Iran is looking good to get settled, but “it ain’t over ‘til it’s over.”

Industry fundamentals (notably on the demand side) and FOMC policy planning remain a complicated handicapping exercise. The recent rising rate of job adds was clearly favorable but do feature some of the occupations in services where major swings come easily and multiplier effects are limited. The AI wildcard will remain a critical X-factor for where payrolls head in Services especially.

Just because there is record capex and fixed investment does not mean it will necessarily translate into higher payrolls. That is a flawed assumption and varies by industry. Even in tech, software and SaaS-based services companies have taken a beating for a reason even if the sell-off is excessive and exaggerated.

There is also the issue of tariff burdens and what “tariff mitigation measures” get taken in headcounts from tech to natural resources and how that flows into industrials and manufacturing. The trade-off of capital and labor is still alive and well with negative real wage growth not helping.

The trick from here is how the consumer deploys their paychecks and whether the zero-sum realities of household budgets undercut spending. The PCE line in the GDP accounts is a critical driver of growth and negative real wage growth. In reality, this is a soft leading indicator for spending or wage demand pressure.

That PCE growth represents 68% of GDP and has been a worrisome trend in 2026 (see GDP 1Q26 Final: PCE Growth Plunge 6-25-26). You never hear the talking heads in the White House (notably Hassett) discuss the weak PCE growth that is well below what we saw in 2024 when it was near 4.0% for the last few quarters (back when the country was “dead” per Trump). Numbers are objective, but the adjective-heavy crowd avoids them.

The above chart updates the total payroll numbers vs. job openings. JOLTS data had been recovering with job openings solid (see JOLTS May 2026: Openings Flat, Hires Down, Layoffs Up 7-1-26). Management teams have a lot of moving parts to factor into planning whether quantitative or qualitative before they fill the openings.

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. That continues given Trump’s priority of maximizing tariff revenue no matter how contrived and specious the grounds. My personal favorite remains the Section 232 national security tariffs for upholstered furniture. The needs for a good cushion are critical to US defense (!?).

The next leg of the tariff process is well underway on Section 301 tariffs with more tariffs being set on the basis of inadequate measures by trade partners to protect against “forced labor.” Trump’s deep concerns for the oppressed workers of the world is a new focal point. Those tariff actions will create more trade partner strife with the EU and Asia. The “labor” grounds were used to be in compliance with legislation that allows the White House to set the tariffs.

The USMCA is up for review as of this week, and that is already starting out ugly with Trump recently bringing out his “51^st state” trash talking even as MAGA stokes the fires for Alberta secession. Trump has already stated it will be renegotiated or terminated. His view on the US “needing nothing from Canada” is belied by facts, the private sector purchasing histories, and in some cases the resource demand requirements. Not to get biblical, but fertilizer without potash is tricky (like “bricks without straw”?).

Meanwhile, the EU diplomatic setbacks and trade relations have been downright ugly and got worse after Iran. NATO appears to be in the crosshairs. Trump has threatened 100% tariffs in recent days to retaliate against any taxes on digital services. Trump lost his one remaining friend in Italy’s Meloni recently. The “other dictator wannabe” (Orban) was given his walking papers.

The trade flows have been looked at in many past commentaries (see Trade Deficits: The Moving Parts and Macro Goals Matter Most 6-24-26, Meanwhile…Back in Economics and Tariffs 3-2-26, US Trade with the World: Import-Export Mix 2-25-26). The US has a goods trade surplus with Canada ex-oil. Canada is also the leading export market for almost 3 dozen US states. Those states, including every central and norther swing state, might have something to say about that…perhaps in midterm elections.

The big worry back in March was fear of stagflation – something not seen since the 1980-1982 double dip under Volcker. That has subsided in recent weeks despite the ugly inflation numbers. It would take a massive setback in US-Iran escalation risks to change that.

The headlines around multiple supplier chains have been covered in other research, but fertilizer was one that aims directly at food while oil aims at just about everything from the gas pump to delivery costs, raw materials, and leisure and travel (airfare).

The Strait of Hormuz disruption headlines highlighted the threat to semiconductor production while some customers could see IT budgets slammed. The tech valuations will remain subject to second-guessing, but it would take a lot to go wrong to derail impressive tech investment trends. Taiwan is arguably more important than Iran on that front. For Taiwan, the priority is don’t piss off China and their one China policy (see Taiwan: Stakes are High, US Awareness is Low 5-17-26, US-Taiwan Trade: Risks Behind the Curtain 2-1-26, Taiwan: Tariffs and “What is an ally?” 7-20-25).

With so many bad headlines in private credit, the idea of financial stress and the need to be cautious on spending/capex will be an issue to be played out. That means the consumer sector is likely to be facing more risk ahead even with these balanced payroll numbers. Inflation and the lowest savings rate since the inflation peak of 2022 is a metric that needs to be watched over the summer and into the fall.

The overall economic impact of tariffs has been far less than feared given the reality that most trade partners backed down in 2025. That still could change in 2026 with the latest wave of Section 301 attacks on supplier chains and trading partners. There is always the chance that Trump might push Canada and Mexico too far and the same for the EU.

Music to Ponder: Hope Rising or Blood Simmering? 6-30-26

The Election Gambit: Economic Risk and Policy Uncertainty 6-29-26

Market Commentary: Asset Returns 6-28-26

Personal Income & Outlays May 2026: Bad Inflation, Balanced Spending 6-26-26

New Home Sales May 2026: Weak Volumes, Stable(ish) Prices 6-25-26

Trade Deficits: The Moving Parts and Macro Goals Matter Most 6-24-26

Market Commentary: Asset Returns 6-21-26

The FOMC Dance: Will Warsh and Trump Find a Rhythm? 6-17-26

Housing Starts May 2026: Weaker for both Single Family and Multifamily 6-16-26

Industrial Production May 2026: Steady, Balanced Utilization Levels 6-15-26

Geopolitical risk: Trump’s Nuclear Saber Rattling? 6-14-26

Producer Price Index May 2026: Too Many “Since 2022” References 6-11-26

Employment May 2026: Big Rebound, Low Multiplier Bias 6-5-26

The Fall of CBS 6-3-26

JOLTS May 2026: Openings Flat, Hires Down, Layoffs Up

Glenn Reynolds, CFA — Wed, 01 Jul 2026 20:36:47 GMT

Ok, but when can I start?!

The JOLTS numbers come at a 1-month lag, and the small moves overall do not signal much to rattle the steady-as she-goes mediocre payroll trend that dovetails with a +98K set of ADP numbers released today. The overall trend in the 2026 numbers shows resilience even if unimpressive in post-COVID cyclical context. The numbers beat the weak 2025 performance. Tomorrow brings the full June payroll report.
The JOLTS lines for May show job openings barely budged at +9K MoM to 7.59 million, which is +3.9% vs. May 2025. Hires were down -45K to 5.17 million, which was down by -3.0% YoY. Layoffs were up by 41K in May MoM to 1.71 million which is +2.2% YoY. Quits were up by 22K with the Quits rate flat at 1.9%.
A good exercise in JOLTS is watching the occupation lines and notably for signs of openings and job expansion in the Manufacturing disciplines. Those numbers test the theory on tariffs being a policy that would bolster payroll and investment in durables and nondurables. So far, we see some signals in JOLTS with Manufacturing openings up by 6.6% in May vs. April 2026 but up even more by 32% YoY.
The real answer on jobs (vs. unfilled openings) comes in the monthly payroll counts that measure actual headcount net of all other moving parts. We get that tomorrow. The ADP numbers released today with +98K in private sector adds were only +2K for Goods while posting +96K for services.
From a FOMC policy standpoint, the jobs numbers this week are forecasted to be reasonable (FactSet cites a 100K median estimate ahead of the number) after a bad month for inflation metrics and constant back and forth on oil. On Iran, it is easy enough to find aggressive calls for sharply lower oil or in contrast renewed escalation against Iran by the US. The oil market as we go to print shows WTI just above $68. The CME FedWatch odds as of midday still see 0% chance of 1 cut by the Dec 2026 FOMC meeting set against 39.1% odds of 1 hike, 33.2% of 2 hikes, and 10.9% for 3 hikes. The odds of “no change” are now only 16.4%. That is not pretty.

The above time series plots job openings across the timeline from 2007 to current. May 2026 was a mild month after a busier April. The high of 12.2 million off the lows of 4.6 million at the peak of the COVID panic are dramatic. Recent periods had been soft before the April 2026 bounce of +731K back to 7.6 million. Openings are running well above the long-term median (5.94 million).

The total increase in job openings in May of +9K was underwhelming and included a -115K decline in “Health care and social assistance.” In contrast, “Leisure and hospitality” posted a +95K increase. Each month we can see major moves in these lines, which have been dominant drivers of monthly payroll trends. It is a safe statement that these lines are not major macro multiplier effect lines (even if a job and paycheck are always a good thing for the economy).

The Manufacturing openings, which are important signals on the long-desired goal of rebuilding and reshoring, posted some constructive openings numbers of +33K for Manufacturing with +20K for Durables and +13K for Nondurables. Durables are +6.0% MoM and +29.7% YoY. Nondurables were +8.0% from April and +36.7% YoY. That manufacturing job openings trend was a good sign, but the net filling of jobs will require those numbers to flow into the payroll lines. Hires in May for Manufacturing were -1K. Durables were +5K and Nondurables were -6K.

Employers will need to “pull the trigger” and the fate of the Iran MOU and the USMCA could play into those decisions.

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 -45K, which is much lower than the decline posted in April of -320K. Layoffs/discharges rose by +41K in May after April saw a MoM layoff decline of -217K from March. The hires YoY declined by -158K or by -3.0%. Layoffs YoY rose by 37K or by 2.2%.

While we are in an expanding economy, the annual GDP growth of 2.1% in 2025 had lagged 2024’s 2.8%. The 1Q26 GDP growth rate was boosted in the final numbers to 2.1% GDP growth, but PCE growth remains in the tank for both Goods and Services (see GDP 1Q26 Final: PCE Growth Plunge 6-25-26).

The above chart updates the ratio of Hires to Layoffs/Discharges. The relationship stands at 3.03x, above the long-term median of 2.92x from 2007. The post-2007 period includes the effects of the longest recession since the Great Depression (Dec 2007 – June 2009) followed by the longest expansion in history from June 2009 to COVID (Feb 2020), which brought a very brief 2-month recession wrapped around a wild swing in pandemic employment.

The above chart plots Hires vs. Total Separations on a SAAR basis. Separations include Quits, Layoffs/Discharges, and “Other Separations.” Total Separations rose by +63K vs. April 2026 and were lower by -187K YoY. We typically do not find “Total Separations” particularly interesting as a multi-line net number.

The small rise in Separations MoM includes a small increase in layoffs of +41K combined with a small increase in “Quits” of 22K. One theory is that quits signal relative confidence in finding a job on the other side of quitting. Quits are down by -222K YoY. The confidence factor is not looking good.

The Hires minus Total Separations differential is plotted above. The small decline in Hires in May of -45K came after a bigger decline in hires of -320K in April vs. March.

The net number above has moved notably lower in recent months and dipped into the negative range in Feb 2026 before bouncing back into positive range in March and April. The differential of 69K is below the long-term median of +174K.

The time series for Total Quits as a % of Separations (SAAR basis) was 60.1%, slightly above the long-term median of 58.1%. The classic “Quits Rate” is measured by Total Quits as a % Total Employment, and that metric was unchanged on the month at +1.9%, flat to April 2026. The Quits rate is also down YoY from 2.1%.

The bottom line…

The JOLTS numbers for May cannot be used by UST bulls to make a case for easing, which is pretty much impossible now anyway unless you are Hassett and threw out your fact and concept book.

The long-suffering bull flattener advocates who were worried about oil are less worried for now, but the Iran deal is by no means printed. There are rumblings this week of fresh escalation, and that is hard to ignore just as it is hard to embrace. In addition, the effects of the massive oil and refined products inventory drawdown are not clear yet this summer with the China X factor on when it might start restocking more aggressively.

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 million), and June (7.4 million). 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 experienced 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 as a brutal reminder of that period.

The Election Gambit: Economic Risk and Policy Uncertainty 6-29-26

Market Commentary: Asset Returns 6-28-26

Personal Income & Outlays May 2026: Bad Inflation, Balanced Spending 6-26-26

New Home Sales May 2026: Weak Volumes, Stable(ish) Prices 6-25-26

Trade Deficits: The Moving Parts and Macro Goals Matter Most 6-24-26

Market Commentary: Asset Returns 6-21-26

The FOMC Dance: Will Warsh and Trump Find a Rhythm? 6-17-26

Housing Starts May 2026: Weaker for both Single Family and Multifamily 6-16-26

Industrial Production May 2026: Steady, Balanced Utilization Levels 6-15-26

Geopolitical risk: Trump’s Nuclear Saber Rattling? 6-14-26

Producer Price Index May 2026: Too Many “Since 2022” References 6-11-26

Employment May 2026: Big Rebound, Low Multiplier Bias 6-5-26

The Fall of CBS 6-3-26

New Home Sales May 2026: Weak Volumes, Stable(ish) Prices

Glenn Reynolds, CFA — Fri, 26 Jun 2026 02:53:02 GMT

The top-down macro picture for new home sales still shows weakness, mortgage rates are high and buyer confidence is low. The derailed housing legislation this past week was more for political value than a material near term catalyst, but homebuilders saw a rally regardless with KBH earnings offering some guidance reassurance even with YoY margins lower.
The single family new home sales trends in May posted -7.3% MoM and -6.8% YoY. The results show both the South region (60% of sales volume) and the West (20% of total) down MoM and YoY. The Midwest (14% of total) was positive MoM but down YoY with the small Northeast market (6% of total) in the positive range. The median sales price of $424.9K shows the stubborn and resilient home price backdrop with an increase MoM from April’s $416.5K and $424.8K in May 2025.
The free cash flow generation strength of homebuilders did not escape the notice of Berkshire Hathaway (BRK) when it acquired Taylor Morrison. BRK also owns a major real estate brokerage leader with HomeServices of America. We have seen Japanese building companies acquiring major US builders/suppliers such as M.D.C. Holdings and Tri Pointe. The US is in a weak part of the housing cycle but with a favorable secular outlook.
The builders are at a crossroads at this point where mortgages are in part tied to oil and yield curve steepening risk while inflation trends see many equity players looking past the current slowdown and the 6.5% mortgage rates. The seasonal peak will pass by quickly. A big question is “Will inflation threats ease? (see Producer Price Index May 2026: Too Many “Since 2022” References 6-11-26, CPI May 2026: The 4% Rubicon 6-10-26).

The above chart updates the new single family home sales series from 1963, and the current 580K (SAAR) is only slightly better than the grim Jan 2026 number (576K revised). The 580K is the second worst number over the past year with only Jan 2026 worse. The volumes are below the long-term median but materially below the 1980s/1990s.

The median of 989K in the housing boom/bust cycle from 2001-2009 is almost 70% higher. As we look back to the peak of the housing bubble, we see 1389K in July 2005 at well over 2x the May 2026 volume. The COVID panic buying and relocation spree in Aug 2020 saw sales of 1036K as a wild period for new home sales and home starts in a ZIRP market with very low mortgage rates.

The above chart plots the share of total home sales (new + existing) that were captured by the “new home” builders. We see the share is now at 12.2% vs. the long-term median of 11.6%. When inventory is scarce, the right home at the right price wins. The challenge overall for new home sales has been mixed for builders by region. Major homebuilders generally continue to report gross margin compression in 2026 and guide to similar expectations for the year.

The market edge favors builders vs. existing home sales (note: existing is still the vast majority of sales volume). The homebuilder has the ability to use incentives and financing support (see Existing Home Sales May 2026: Slow Rise Despite Rates 6-11-26).

Given the mortgage rate headwinds undermining volume in the existing home sales market whether “golden handcuffs” or a challenging monthly payment bar to clear for many, the shortage of existing housing inventory at economic all-in costs (price and mortgage rates) has been a recurring drag in that side of the home sales tally. In new home sales, the gap between the expectations of the seller and buyer is easier to bridge through the incentive programs or the ability to offer variations in home design and specs to make a transaction work.

D.R. Horton as the #1 US homebuilder offers a useful microcosm of the new home challenges (see D.R. Horton: Financial Powerhouse Despite Cyclical Softening 5-20-26). The 6% handle mortgage rates have been a struggle and had moved briefly as high as 6.75% before easing back to the current 6.5%.

The new home sales volumes are softer even if that can vary by region and product tier. On the other hand, the prices posted this month looked to be in a stall which is modestly out of line with some of the color we hear from major builders on prices with KB Homes and Lennar. Those two bellwethers posted lower prices for the recent quarter. Average Selling Prices at the builder level come with the asterisk of product mix and region. The builders face the reality that incentives are still a material part of the builders’ selling strategies.

The mid 6% handle mortgage rates are not offering relief on monthly payment pressures and affordability and leave some marginal buyers on the wrong side of the divide. This week saw 30Y mortgage rates in the 6.5% area (Mortgage News Daily).

The 10Y UST is the key benchmark for the direction of 30Y mortgages and that has been moving in the wrong direction YTD. The oil wildcard could ease pressure on the longer end but the CPI, PCE and PPI inflation metrics – including this week for PCE and the 1Q26 quarter 4% handle PCE inflation – are still showing sustained inflation pressure (see GDP 1Q26 Final: PCE Growth Plunge 6-25-26).

As noted above, the move higher to $424.9K in May 2026 rose off the $416.5K April price. Lower average selling prices were seen in the first and second quarters for a sampling of major builders as well as in the new home sales releases. The trend could be explained in part as a matter of geographic mix given the South’s lower ASP mix, but the “South” by itself has a very wide range as well. Meanwhile, the West rose with its traditionally higher ASP mix which can shift around California share.

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 $424.9 K posted is well above the $393.1K in March.

The price metrics 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. The 350K for the South is around 60% of the total of all single-family new home sales (SAAR) and marks a sequential decline of -4.1% from April 2026 and is down by -5.4% YoY. The West at 117K is 20% of the total. For the month, the West was down by -26.9% sequentially and by -17.0% YoY.

The timeline for new home sales for the smaller Midwest and much smaller Northeast market is detailed above. The Midwest (14% of total) was +16.2% sequentially and -3.7% YoY. The Northeast market (6% of total) was +3.0% sequentially and +17.2% YoY.

Trade Deficits: The Moving Parts and Macro Goals Matter Most 6-24-26

Market Commentary: Asset Returns 6-21-26

The FOMC Dance: Will Warsh and Trump Find a Rhythm? 6-17-26

Housing Starts May 2026: Weaker for both Single Family and Multifamily 6-16-26

Industrial Production May 2026: Steady, Balanced Utilization Levels 6-15-26

Geopolitical risk: Trump’s Nuclear Saber Rattling? 6-14-26

Producer Price Index May 2026: Too Many “Since 2022” References 6-11-26

Employment May 2026: Big Rebound, Low Multiplier Bias 6-5-26

The Fall of CBS 6-3-26

New Home Sales April 2026: Slow Start to Spring 5-28-26

PCE Inflation: Income and Outlays April 2026 5-28-26

GDP 1Q26 Second Estimate: Shrunk in the Dryer 5-28-26

D.R. Horton: Financial Powerhouse Despite Cyclical Softening 5-20-26

Housing Starts May 2026: Weaker for both Single Family and Multifamily

Glenn Reynolds, CFA — Wed, 17 Jun 2026 01:00:30 GMT

The soft housing season continues with total starts down by -15.4% MoM and -8.7% YoY. Multifamily was down by -41.6% MoM and -12.3% YoY. Single family was milder with a -1.9% decline MoM and -6.7% YoY.
The critical South (58% of single family starts) and West (20% of single family) and #2 market in the West were both down MoM and YoY. The smaller Midwest and Northeast markets were both up MoM. We already saw a slow start to spring in new home sales, and the planning process from here is not backed up by an optimistic tone from the builders (see New Home Sales April 2026: Slow Start to Spring 5-28-26).
Mortgage rates remain a drag in housing affordability and a strain on monthly payment math as 6.6% mortgage rates reflected the unsettled post-Iran UST curve dynamics at a time when consumer confidence was in the doldrums, PCE growth in the GDP accounts had faded to 1.4%, and the household savings rate had plunged. Residential investment in 1Q26 posted a -6.2% contraction (see GDP 1Q26 Second Estimate: Shrunk in the Dryer 5-28-26, PCE Inflation: Income and Outlays April 2026 5-28-26).
This week brings the first Warsh FOMC meeting on Wednesday with mid-6% mortgage rates waiting for the prevailing winds to shift with the Iran “deal in process.” The UST market is not favoring easing through the Dec 2026 FOMC meeting with FedWatch easing odds of 1 cut at 0% as we go to print. In contrast, the odds of 1 hike are at +42.7% followed by 40.6% probability for unchanged. Even 2 hikes post odds of 14.7% and 3 hikes at 1.9%. Warsh may not offer much relief without the votes.

The above chart offers a clear reminder of the wild single family residential construction cycles across the decades. With favorable demographics for housing demand, the current starts run rate of 882K is still well below the long-term median and below all the timeline medians posted above except for the “crisis to current” timeline starting in Jan 2009 at 829K.

The current backdrop includes mortgage rate pressures on the affordability of monthly payments that are not likely to get much better from here in the peak housing season. That comes after seeing mortgage rates flirt very briefly with crossing below the 6.0% line in Feb 26, just before the Iran War. This past week hit the 6.75% area before the modest rally of the UST curve to 6.54% per Mortgage News Daily.

Single family starts were soft in relative terms vs. headline total starts dragged down by a grim month for 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 May 2026, we see NSA total permits down by -4.2% and single family permits down by -6.8% YoY. For MoM, total permits were -6.6% with single family permits down by -6.9% MoM.

For total starts and single family starts on an NSA basis, we see total starts down by -15.8% MoM and single family NSA starts lower by -1.2% MoM.

The above plots the single family starts by region (NSA). On a MoM basis, the critical South region (totals over 49% of total NSA starts and over 55% of single family starts) was down slightly in single family by -1.2% MoM and down by -7.0% YoY. The West as the #2 single family market (20% of total) was down MoM by -4.7%. The Midwest region MoM in single family was +16.1% with the small Northeast market at +22.9% MoM. The YoY NSA starts were mixed with the South and West both lower among the big two regions. The Midwest and Northeast were both higher.

The above chart updates running multifamily starts. At +284K (SAAR), May 2026 declined by -41.6% MoM and by -12.3% YoY. The 284K is well below the long-term median of 339K, below the median from Jan 2009 to current (345K), and below the median from 2000 to 2008 (296K).

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 all part of the multifamily tailwinds. Immigration also played an important role.

The above chart updates Multifamily permits (SAAR). The 474K in May 2026 multifamily permits declined by -3.5% MoM and was up by +3.0% YoY.

Market Commentary: Asset Returns 6-14-26

Geopolitical risk: Trump’s Nuclear Saber Rattling? 6-14-26

Producer Price Index May 2026: Too Many “Since 2022” References 6-11-26

Employment May 2026: Big Rebound, Low Multiplier Bias 6-5-26

The Fall of CBS 6-3-26

New Home Sales April 2026: Slow Start to Spring 5-28-26

PCE Inflation: Income and Outlays April 2026 5-28-26

GDP 1Q26 Second Estimate: Shrunk in the Dryer 5-28-26

D.R. Horton: Financial Powerhouse Despite Cyclical Softening 5-20-26

Industrial Production May 2026: Steady, Balanced Utilization Levels

Glenn Reynolds, CFA — Mon, 15 Jun 2026 23:14:05 GMT

Now if manufacturing would only add more jobs (still lower YoY)…

The industrial production and capacity utilization trends offered some cyclical reassurance by showing the capex boom seen in the GDP lines and resilience in the consumer durables sector (16M handle light vehicle expectations in 2026) has offered macro support. The overall mix of factors has helped ease some of the recurring and justified worries around the consumer (see GDP 1Q26 Second Estimate: Shrunk in the Dryer 5-28-26).
The +1.4% PCE growth in 1Q26 (through 2^nd estimate), plunging savings rates (see PCE Inflation: Income and Outlays April 2026 5-28-26), and eroding credit card metrics will keep macro watchers on edge. PCE remains around 68% of GDP and we get the final estimate for 1Q26 next week.
The collective battering of tariffs on the durables sector cost structures and post-Iran energy cost hammering from industrials to households reminds everyone that it takes an “awful lot of awful” to drive a contraction. The capex cycles and well-known appetites of the US consumer “to consume” is hard to derail even with unsound (incoherent?) trade policies and top-down political instability.
Inflation has been the main consumer worry, and the deal getting to the finish line is more important than Trump selling the story that it is a better deal than Obama’s (good luck) even before tabulating the damage on so many fronts.
The best news in the industrial production mix was that the durables sectors we routinely detail in the charts ticked higher sequentially – even if minimal in some cases.

As an “old guy” who covered such industries as autos and steel credits back in the 1980s (and worked on a few audits of resources and energy companies) and came of working age in the first stagflation wave and oil spikes of the 70s and early 1980s, we see much of the “old and new” these days to consider. Cyclical change and secular trends always get mixed in, and the evolution (or collapse) of industries is not new.

The current 75.7% for total manufacturing is well below the long-term median of 78.5% and below the post-COVID median of 76.2%. The industrial production and capacity utilization numbers are among many metrics that take the label of “greatest economy in history” off the table right now. Whether GDP growth or payroll trends, the current economy is a bottom quartile economy when the growth of the 1980s and 1990s are factored in (see Presidential GDP Dance Off: Clinton vs. Trump 7-27-24, Presidential GDP Dance Off: Reagan vs. Trump 7-27-24).

The consumer sector and PCE have been unimpressive, but fixed investment is now soaring (see 1Q26 GDP Advance Estimate: Consumer Fade, Investment Boom 4-30-26). If you like comparing numbers (not a Washington thing) as opposed to spewing partisan adjectives, Trump 1.0 did not even frame up all that well vs. Carter and Biden – let alone the 1980s and 1990s (Gut Checking Trump GDP Record 3-5-25, Trump’s “Greatest Economy in History”: Not Even Close 3-5-25). Trump 2.0 is off to a slow start on GDP growth and payroll additions relative to the earlier glory years of the 80s and 90s.

A brief cyclical lookback on replay…

Bring on the tech boom and excess…

Then came the post-credit crisis low of 63.4% at the recession trough in June 2009. Mortgages and derivative excess caused a very real systemic panic and deep risk aversion from the Lehman Sept 2008 period and well into 2009. That period was famous for the bankruptcy and bailout of GM and Chrysler and how that reverberated across supplier chains from materials to components. The credit contraction was very real, and the recovery in payrolls was slow to unfold with the consumer hammered by housing sector pain.

Time for the new age transition to AI plus some old school crises…

As we detail below in the recession histories, the idea of what is low or high for 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 of profits. 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. Material costs, operating costs for companies, and consumer discretionary household cash flow headwinds make for a tricky set of moving parts shaped by erratic geopolitical decisions.

The AI upside as well as the fallout and related fears is also a new variable in the mix that cuts across both the services and goods sectors. What AI will mean for productivity improvement vs. payroll contraction will be an ongoing test of theories. Even if AI proves true to the valuation promises and brings a “revolution” to the economy, many will also pay the price. Revolution is a term often associated with a body count (even if jobs and not KIA). We have been getting a taste in the recent SaaS services panic. Those SaaS services markets consume a lot of goods and have a lot of employees.

The above table breaks out the high-level groupings with total industry and total manufacturing posting a mix of positive and negative variances in May 2026. We include a “delta column” on the right.

Mining and Utilities were mixed for the month, but a rational expectation is that utilities will see more capacity added and more demand. The data center and power supply issue is more pressing and getting more political by the day in an area where there has been working class bipartisan anger around the side effects of such projects on power costs and water threats among other issues. That controversy has spread to Canada.

It may be local on a center-by-center basis, but it will find its way into an assessment of data center adequacy at some point for growth valuations, revenue models, and costs. Any sense of faltering optimism around volumes (e.g. international restrictions on AI), pricing power, and regulatory backlash or political risks (elections have consequences, etc.) could roil valuations.

The IEEPA SCOTUS setbacks and recent attempts by Trump to counterattack by creatively using existing tariff legislation is struggling in the courts. Trump goes to “Plan B” and “Plan C” in his attempts to cut Congress out of the tariff decisions. He is hanging his hat on Section 301. This week he threatened France with triple digit wine tariffs even without IEEPA. He seems to forget the EU works as a bloc.

The inflation story has turned negative for the macro picture in 2026. The “good news, bad news” aspect of a resilient industrial sector is that higher input costs can lead to the exercise of pricing power that flows into inflation. That beats the stagflation alternative but will keep life challenging for the FOMC and “Team Warsh” (if he can assemble a supportive voting team). We get our first taste of Warsh this week.

The above table breaks out the details for the top 5 Durables lines and the two largest Nondurables lines. We include the capacity utilization deltas in the column on the right. We see positive moves across all the major durables industries presented with “Fabricated Metals” and “Motor Vehicles and Parts” making the more notable moves. The two major Nondurables lines were both lower with Chemicals down by more than Food, Beverage and Tobacco.

Low-cost supplier chains are getting undermined by tariffs and are now facing supply chain headwinds from the Iran War energy effects and the supply-demand imbalances. The latest round of news on a “deal” will ease some worries along the supplier to customer chain, but there are always lags while more tariffs are rolling in.

The multiplier effects are important, but the relocation of supplier chains and OEM assembly relocation and retooling is by definition very slow to unfold given intrinsic lag times, tooling equipment, and contracts in place. Manufacturing jobs edged slightly higher this month on a MoM basis but remain lower YoY (see Employment May 2026: Big Rebound, Low Multiplier Bias 6-5-26).

Geopolitical risk: Trump’s Nuclear Saber Rattling? 6-14-26

Producer Price Index May 2026: Too Many “Since 2022” References 6-11-26

Employment May 2026: Big Rebound, Low Multiplier Bias 6-5-26

The Fall of CBS 6-3-26

New Home Sales April 2026: Slow Start to Spring 5-28-26

PCE Inflation: Income and Outlays April 2026 5-28-26

GDP 1Q26 Second Estimate: Shrunk in the Dryer 5-28-26

Housing Starts April 2026: Soft Starts in Single Family 5-22-26

D.R. Horton: Financial Powerhouse Despite Cyclical Softening 5-20-26

Existing Home Sales May 2026: Slow Rise Despite Rates

Glenn Reynolds, CFA — Fri, 12 Jun 2026 03:47:11 GMT

The spring season is bringing modest increases for May MoM and YoY. Inventory rose and median prices were higher YoY at $429.3K for total existing home sales and $434.3K for single family. The NAR cites improved YoY affordability indexes across all four regions.
The UST curve has not been friendly at around 6.6% mortgage rates, and curve dynamics are still working against lower rates with odds heavily favoring 1 hike or no action with negligible odds of easing at this point. More oil price increases or inflation pressure in a US-Iran escalation would put further upward pressure on longer rates and mortgages.
As we go to print, Trump says a deal is done, but that has become a punchline at this point. If it happens there could be some mortgage relief. The debates among industry experts on the lingering effects in the physical markets even with a “real truce” and open Strait are on balance still flagging a lot of oil and refined product price risk into the summer.

The above chart details existing home sales SAAR run rates by month from January 2023 to May 2026 at 4.17 million, up from 4.04 million. As a frame of reference, in 2022 market was posting 6 million and 5 million handle sales volumes in the first half of that year.

The early read on peak selling season ahead is off to a guarded start with mid-6% handle 30Y mortgage rates remaining a headwind, and the consumer sector shaky and less confident this year than last spring as inflation and payroll anxiety remain factors in 2026.

The recent 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 modest move in existing home sales is set against a fairly grim set of numbers from the CPI and PPI releases (see Producer Price Index May 2026: Too Many “Since 2022” References 6-11-26, CPI May 2026: The 4% Rubicon 6-10-26). The PPI and CPI headline inflation numbers spell back-to-back trouble even if the markets are not reacting much to the sustained evidence of rising inflation. The new Fed Chair will be somewhat hamstrung by economic reality and the need to convince a committee in the voting process.

The inflation metrics and Iran War fallout remain critical to the consumer story line with savings rates plunging to 2Q22 levels. We see consumers continuing to “show up” as framed in the monthly income and outlays reports (see PCE Inflation: Income and Outlays April 2026 5-28-26), but consumers remain vulnerable as evident in credit card quality metrics and balance trends.

PCE growth rates in the GDP accounts comprise 68% of GDP, and that PCE line has clearly slowed down in the 1Q26 GDP reports at 1.4% in the 2^nd estimate GDP (see GDP 1Q26 Second Estimate: Shrunk in the Dryer 5-28-26). That is weaker, but it is not a contraction.

Trying to handicap UST levels and shapeshifting has been a challenge when we started the year with a lot of focus on easing and the new FOMC regime. Mortgage rates have been a headwind, and gauging what the FOMC might do is important even if the 10Y UST is what drives mortgage rates.

The odds as shown in the FedWatch CME models frame the odds of a single fed fund easing by the FOMC Dec 2026 meeting as well below 1%. By Thursday evening, the odds of 3 hikes (2.9%) are higher than the odds of 1 cut (0.6%). The high odds FOMC scenarios point at 1 hike (42.9%) or no change at 40.2% and 2 hikes at 14.4%. These odds whip around with Iran headlines and inflation and payroll releases.

The above chart shows the sales volume delta by price tier for May 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 month. Note: We use “not seasonally adjusted data” for this chart.

An easing would require a macro backdrop that hits payrolls and homebuyer confidence to make the FOMC move to ease. Such a move by the Fed could also drive a UST steepener subject to the underlying reasons used by the FOMC. The oil spike and price swings since Iran plus the documented inflation pressures will make life a challenge for Warsh. The years of “repricing of the household basket” under Biden and again under Trump has made life a struggle for many and now we are looking at negative real wage growth.

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 around 50% of its existing home sales volume in the $250K to $500K range and over 17% of its sales in the $100K to $250K bucket.

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 28.4%. The West shows a high share of 28.3% 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 higher MoM to 1.55 million units for +3.3% MoM and +0.6% higher YoY. Current inventory is well below longer term medians including 2.08 million for the post-1998 median. The median from Jan 2011 (homebuilding low) to current times is 1.76 million. In other words, existing home sales inventory remains 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 above chart breaks out the timeline for existing single family only of 3.8 million vs. total existing home sales of 4.17 million. The 4.17 million total is well below the long-term median (from Jan 1999) of 5.21 million. The total of 3.8 million for single family is well below the long-term median of 4.63 million.

Existing single family growth was 3.5% sequentially and 3.3% YoY (SAAR). The lower line is ex-condo/ex-coops. We saw 370K in condo and coop sales in May 2026, up from 360K YoY and flat to 370K MoM.

The above chart updates the median price for existing single-family homes at $434.3K (vs. $429.3K total) after June 2025 hit a record $438.6K. The median price in May 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. Higher price homes and wealthier buyers have had a better time across this cycle as the “K recovery” certainly applies in housing given the mortgage pressure on monthly payments.

The $250K to $750K range is comprised of two tiers that 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 6.6% area handle mortgage rates (today’s Mortgage News Daily survey).

Market Commentary: Asset Returns 6-8-26

Employment May 2026: Big Rebound, Low Multiplier Bias 6-5-26

The Fall of CBS 6-3-26

Market Commentary: Asset Returns 5-31-26

New Home Sales April 2026: Slow Start to Spring 5-28-26

PCE Inflation: Income and Outlays April 2026 5-28-26

GDP 1Q26 Second Estimate: Shrunk in the Dryer 5-28-26

Housing Starts April 2026: Soft Starts in Single Family 5-22-26

D.R. Horton: Financial Powerhouse Despite Cyclical Softening 5-20-26

Employment May 2026: Big Rebound, Low Multiplier Bias

Glenn Reynolds, CFA — Fri, 05 Jun 2026 17:13:12 GMT

Not the prime-time economic multiplier effects? OK for now.

The massive “beat” vs. consensus on job adds weighed in at +172K for May. The release includes major upward revisions in March (+29K to +214K) and April (+64K to +179K). The unemployment rate was flat at 4.3%.
The payroll additions are dominated by Leisure and Hospitality at +70K, Local Government at +55K, and Health Care and Social Assistance of +47.2K for a total of over +172K just on those three occupation lines. Those are not in the high “economic multiplier effect” category but more paychecks are intrinsically positive.
“Goods” payroll additions of +28K included +17K in Construction, +7 in Manufacturing, and +4 in “Mining and Logging” (primarily E&P). An important note is that Manufacturing was lower YoY by -46K, which for now means the Golden Age onset for manufacturing has not arrived yet. Services rose by +92K, and Government by +52K for the Establishment Survey total payroll additions of +172K (92 Services + 52 Government + 28 Goods).
The average hourly earnings increase of 3.4% is not stacking up well vs. the 3.8% CPI in April. Real earnings are also looking grim vs. recent PCE inflation numbers including +3.8% headline PCE and core PCE of 3.3% (see PCE Inflation: Income and Outlays April 2026 5-28-26). The 1Q26 GDP release posted a headline PCE price index for 1Q26 at +4.5% while the core PCE price index ticked slightly higher to +4.4% from +4.3% (see GDP 1Q26 Second Estimate: Shrunk in the Dryer 5-28-26). The story is ugly for real earnings.
In the Household Survey, the report details a decline of -66K unemployed for a total of 7,307K (7.31 million) and a 4.3% unemployment rate (7.31 unemployed/170.1 mn labor force). The number of total employed rose by 149K to 162.77 million.

The JOLTS openings as detailed earlier this week show more of those openings getting filled as we move closer to the summer (see JOLTS April 2026: A Modestly Positive Turn 6-2-26). That is good news for the “paycheck count.” One can make qualitative assessments on the mix of occupations reporting increases in payrolls, but the reported number meet the “MO jobs, MO money” rule to support consumer spending volumes.

Consumer sentiment/confidence has been very low, but the material decline in savings rates can mean a range of things with either (or both) a desire to spend or “a need to borrow” on the list (See PCE Inflation: Income and Outlays April 2026 5-28-26). More jobs always help the backdrop. As of now, inflation exceeds wage growth. That is by definition bad.

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 revised +214K for March, revised +179K for April and May print of 172K along with the 4.3% unemployment rate are not only “not easing friendly” for the FOMC but the direction of oil and Iran and Gulf chaos could determine whether the backdrop is “hike friendly.”

As we go to print, the odds of 1 hike by the Dec 2026 FOMC meeting is 43.3% vs. 28.7% for no change. The odds of 2 hikes are up to 22.4%. The odds of 1 cut are +0.8%.

The payroll addition numbers in 2025 and 2026 include the only negative deltas on the chart since March 2022 with 6 months in the red during Trump 2.0. We are now at least seeing some numbers above the post-Jan 2009 median of 170K. That long-term median of +170K includes a slice of the longest recession since the Great Depression, so it is not a high bar to clear.

A glance back at the 2022 numbers offer a reminder of what a high rate of job adds looks like. Of course, the labor backdrop and immigration issues change the overriding variables.

The above chart plots the running job adds/declines since Jan 2009 against the unemployment rate, which at 4.3% would be considered full employment in past cycles. 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 from Jan 2009 of 4.9%. Payroll has been struggling somewhat in relative terms, but history is very kind to 4.3%. If the 2025-2026 frame of reference for payroll additions is 2024 (not a good jobs year) then the 2025-2026 numbers are solid (not great). If we compare 2025-2026 monthly adds to the 2022-2023 period, the current job add run rates are weak.

The above chart updates the time series for the U-3 unemployment rate and U-6 structural underemployment rate across the years from 1994.

The current 8.1% marks a decline from 8.2% in April but an increase from 7.9% YoY vs. May 2025. The U-6 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 current 3.8% differential is just 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. The recent rising rate of adds is clearly favorable but do feature some of the occupations in services where major swings come easily. The AI wildcard will remain a critical X-factor on where payrolls head in Services especially.

The above chart updates total payroll vs. the unemployment rate. The trend needle has not moved much in 2026 and has been in a narrow range. 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 PCE line in the GDP accounts is a critical driver of growth and negative real wage reality a soft leading indicator either on spending or on wage demand pressure.

The above chart updates the total payroll number vs. job openings. JOLTS data had been recovering with banner job openings this past week even though hires were weak. We see some of those openings being filled in the May payrolls (see JOLTS April 2026: A Modestly Positive Turn 6-2-26).

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. That is well underway on Section 301 tariffs with a range of announcements this week. Those tariff actions will create more trade partner strife with the EU and Asia.

The USMCA is up for review and that is already starting out ugly with Trump bringing out his “51^st state” trash talking even as MAGA stokes the fires for Alberta secession. The EU diplomatic setbacks and trade relations are downright ugly at this point after Iran. NATO appears to be in the crosshairs.

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 US has a goods trade surplus with Canada ex-oil. Canada is also the leading export market for almost 3 dozen US states.

The FOMC and the market both have much to digest, and Trump is making it clear to the domestic audience that there is a ceasefire and the “war is over.” This is hard to reconcile with a full blockade (an act of war by international law) and ongoing Iranian actions against both the US and Gulf nations.

The headlines around multiple supplier chains have been covered in other research, but fertilizer is one that aims directly at food while oil aims at just about everything from the gas pump to delivery costs, raw materials, and leisure and travel (airfare). The headlines highlighted the threat to semiconductor production while some customers could see IT budgets slammed. With so many bad headlines in private credit, the idea of financial stress and the need to be cautious on spending/capex will be an issue to be played out. That means the consumer sector is likely to be facing more risk ahead even with these good payroll numbers. Inflation and the lowest savings rate since the inflation peak of 2022 is a metric that needs to be watched over the summer.

The overall economic impact of tariffs had been far less than feared given the reality that most trade partners backed down in 2025. That still could change in 2026 with the latest wave of Section 301 attacks on supplier chains and trading partners.

Market Commentary: Asset Returns 5-31-26

New Home Sales April 2026: Slow Start to Spring 5-28-26

PCE Inflation: Income and Outlays April 2026 5-28-26

GDP 1Q26 Second Estimate: Shrunk in the Dryer 5-28-26

Housing Starts April 2026: Soft Starts in Single Family 5-22-26

D.R. Horton: Financial Powerhouse Despite Cyclical Softening 5-20-26

Taiwan: Stakes are High, US Awareness is Low 5-17-26

Industrial Production April 2026: Bringing a Lift 5-15-26

Existing Home Sales April 2026: Steady or Clinging? 5-14-26

Producer Price Index April 2026: Heat Rising on Cost Inputs 5-13-26

CPI April 2026: 4.1% All Items Less Shelter, 30Y UST 5% 5-12-26

JOLTS April 2026: A Modestly Positive Turn

Glenn Reynolds, CFA — Wed, 03 Jun 2026 01:18:52 GMT

What’s behind door #1 (Iran deal?), #2 (skies-the-limit tech boom?), or #3 (escalation + Houthis + Red Sea?)

The +731K (+10.3%) rise in openings MoM (+7.3% YoY) was dominated by the “Professional and business services” with a +668K increase. Notable declines included “Finance and Insurance” at -135K.
Hires decreased by -419K or by -7.6% and that takes a little luster off the job openings optimism. Manufacturing as a recurring focal point in the new tariff regime saw hires move modestly lower by -20K. Retail trade was lower by -81K and “Transportation, warehousing and utilities” lower by -41K. “Professional and business services” hires were down by -131K , Financial activities down by -30K, “Private education and health services” was down by -67K.
On a positive note, “layoffs and discharges” declined by -192K or by -10.2% MoM and by -6.9% YoY. Retail trade layoffs declined by -88K, “Professional and business services” dropped by -112K. Manufacturing layoffs rose slightly but construction layoffs declined.
A big question from here is where Iran and the consumer cycle go next and what will happen to Services hiring/firing in the age of AI. For now, it is still “low hire/low fire” but job openings offer hope.

The above time series plots job openings across the timeline from 2007 to current. This month brought a very sharp rebound in openings that starts to claw back some of the material downward trends from the end of ZIRP and the start of the tightening cycle in March 2022.

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 had been soft before the April 2026 bounce of +731K back to 7.6 million. Openings are running well above the long-term median (5.92 million).

The 10.6% increase YoY job openings for April 2026 was good news and the questions from here will be how quickly (or not) those translate into actual hiring with the Iran X-factor playing a big role. The AI economic effects in terms of productivity and payroll needs also will be up in the air in a services economy.

Hires declined by -419K sequentially from March 2026 while layoffs/discharges declined by -192K. The hires YoY declined by -275K or by 5.1%. While we are in an expanding economy, the annual GDP growth of 2.1% in 2025 had lagged 2024’s 2.8%. The hires rate is still tentative even if the openings are there. Layoffs were down -126K YoY or by -6.9%

The 1Q26 GDP as revised in the second estimate is off to an unimpressive start at 1.6%, which was revised down from +2.0% in the advance estimate (see GDP 1Q26 Second Estimate: Shrunk in the Dryer 5-28-26). That is not much of a tailwind. We get payroll numbers later this week.

The above chart updates the ratio of Hires to Layoffs/Discharges. The relationship stands at 3.02x, above the long-term median of 2.91x from 2007. The post-2007 period includes the effects of the longest recession since the Great Depression (Dec 2007 – June 2009) followed by the longest expansion in history from June 2009 to COVID (Feb 2020), which brought a very brief 2-month recession wrapped around a wild swing in pandemic employment.

The above chart plots Hires vs. Total Separations on a SAAR basis. Separations include Quits, Layoffs/Discharges, and “Other Separations.” Total Separations declined by -399K in April 2026 vs. March 2026 and were lower by -292K YoY.

We typically do not find “Total Separations” particularly interesting as a multi-line net number. The decline in Separations can be attributed to a decline in layoffs as noted earlier and to a -183K MoM decline in “Quits.” One theory is that quits signal relative confidence in finding a job on the other side of quitting. That theory implies some nervousness right now.

The Hires minus Total Separations differential is plotted above. As covered, the decline in Hires is material while Separations declined on lower Layoffs and lower Quits.

The time series for Total Quits as a % of Separations (SAAR basis) was 59.8%, slightly above the long-term median of 58.0%. 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% in March 2026. The Quits rate is also down YoY from 2.0% to 1.9%.

The bottom line on the JOLTS numbers for April is that it was one that UST bulls cannot use to make a case for easing, which is pretty much impossible now anyway unless you are Hassett and threw out your facts and concepts book.

The long-suffering bull flattener advocates who are already worried about oil will remain worried about oil until Iran is cleared up and the effects of the massive inventory drawdown are clear (or not) this summer.

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 million), and June (7.4 million). 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 experienced 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 as a brutal reminder of that period.

See also:

Market Commentary: Asset Returns 5-31-26

New Home Sales April 2026: Slow Start to Spring 5-28-26

PCE Inflation: Income and Outlays April 2026 5-28-26

GDP 1Q26 Second Estimate: Shrunk in the Dryer 5-28-26

Housing Starts April 2026: Soft Starts in Single Family 5-22-26

D.R. Horton: Financial Powerhouse Despite Cyclical Softening 5-20-26

Taiwan: Stakes are High, US Awareness is Low 5-17-26

Industrial Production April 2026: Bringing a Lift 5-15-26

Existing Home Sales April 2026: Steady or Clinging? 5-14-26

Producer Price Index April 2026: Heat Rising on Cost Inputs 5-13-26

CPI April 2026: 4.1% All Items Less Shelter, 30Y UST 5% 5-12-26

New Home Sales April 2026: Slow Start to Spring

Glenn Reynolds, CFA — Fri, 29 May 2026 02:10:19 GMT

The new home sales data show declines on a SAAR basis MoM (-6.2%) and YoY (-11.3%) volume declines even as the spring season is rolling in. The market saw another one of those “higher prices with high inventory” backdrops. Total inventory was up +1.7% MoM and down -2.2% YoY. On a Not Seasonally adjusted basis, the YTD 2026 sales decline stands at -6.5%.
The volumes show 3 of 4 regions down MoM and YoY with only the West higher. The South region at 59% of total sales was down -9.8% MoM and -14.7% YoY. That mix shift by region presumably explains the higher median prices with the pricier West being the region that saw material increases in sales.
The $422.5K median price bucks the trend seen in the 1Q26 reporting season with numerous major builders reporting lower ASPs.

The above chart updates the new single family home sales series from 1963, and the current 622K (SAAR) still marks a healthy rebound relative to the grim Jan 2026 number (576K revised). That said, the 622K is still weak in the context of 2025. The volumes are in the range of the long-term median but well below the 1980s/1990s.

The median of 989K in the housing boom/bust cycle from 2001-2009 is almost 60% higher. As we look back to the peak of the housing bubble, we see 1389K in July 2005 at over 2x the April 2026 volume. The COVID panic buying and relocation spree in Aug 2020 saw sales of 1036K as a wild period for new home sales and home starts in a ZIRP market with very low mortgage rates.

The above chart plots the share of total home sales (new + existing) that were captured by the “new home” builders. We see the share is now at 13.4% vs. the long-term median of 11.6%. When inventory is scarce, the right home at the right price wins. The challenge overall for new home sales has been mixed for builders by region. Major buyers generally report gross margin compression in 2026 and guided to similar expectations.

The market edge favors builders vs. existing home sales (note: existing is still the vast majority of volume). The homebuilder has the ability to use incentives and financing support (see Existing Home Sales April 2026: Steady or Clinging? 5-14-26).

Given the headwinds for volume in the existing home sales market in mortgage refinancing (golden handcuffs,” etc.), the shortage of existing housing inventory at economic all-in costs (price and mortgage rates) has been a recurring drag (see Existing Home Sales March 2026: New Beginnings or New Ends? 4-15-26).

The new home sales volumes are softer overall, and that can vary by region and product tier. On the other hand, the higher prices posted this month are not consistent with some of the color we hear from major builders on prices and narrowing gross margins.

Incentives are still a material part of the builders’ selling strategies, but the bias on ASPs should be downward extrapolating from some of the major builders. For example, the average selling prices in the recent quarter for DR Horton, Lennar, Pulte, and NVR among the biggest names all posted lower average selling prices. The census release points in the other direction for April.

The mid 6% handle mortgage rates are not offering relief on monthly payment pressures and affordability. The past week shows the 6.6% area in surveys as reported by Mortgage News Daily. The 10Y UST is the key benchmark for the direction of 30Y mortgages.

The median price time series above tells a simple story that prices had been under modest pressure after a period of record highs and a long stretch over the $400K threshold with a few dips below the $400K line.

As noted above, the move higher to $422.5K in April 2026 is bucking the trend after $391.1K last month. Lower average selling prices have been seen in the first quarter for a sampling of major builders. The trend could be explained as a matter of geographic mix with the volume declines in such regions as the South with its lower ASP mix. Meanwhile, the West rose with its traditionally higher ASP mix.

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 $422.5K posted a sharp rebound from $391.1K. The price metrics 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. The 370K for the South is around 59% of the total of all single-family new home sales (SAAR) and marks a sequential decline of -9.8% from March 2026 and is down by -14.7% YoY. The West at 159K is 26% of the total. For the month, the West was +18.7% sequentially and +4.6% YoY.

The timeline for new home sales for the smaller Midwest and much smaller Northeast market is detailed above. The Midwest (11% of total) was -25% sequentially and -21.4% YoY. The Northeast market (4% of total) was -12.9% sequentially and -12.9% YoY.

GDP 1Q26 Second Estimate: Shrunk in the Dryer 5-28-26

Market Commentary: Asset Returns 5-26-26

Housing Starts April 2026: Soft Starts in Single Family 5-22-26

D.R. Horton: Financial Powerhouse Despite Cyclical Softening 5-20-26

Taiwan: Stakes are High, US Awareness is Low 5-17-26

Industrial Production April 2026: Bringing a Lift 5-15-26

Existing Home Sales April 2026: Steady or Clinging? 5-14-26

Producer Price Index April 2026: Heat Rising on Cost Inputs 5-13-26

CPI April 2026: 4.1% All Items Less Shelter, 30Y UST 5% 5-12-26

JOLTS March 2026: Openings Down, Hires Up, Layoffs/Discharges Up 5-5-26

Synchrony Financial: Favorable Consumer Credit Signals 4-24-26

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

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

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

Housing Starts April 2026: Soft Starts in Single Family

Glenn Reynolds, CFA — Fri, 22 May 2026 18:36:22 GMT

The headline starts number is mixed across single family vs. multifamily with single family starts declining by -9.0% MoM from March and -2.4% YoY. All four regions saw starts decline MoM. On a “not seasonally adjusted basis,” we see single family YTD at -5.1%.
Multifamily had a good month on starts with +14.3% MoM and +23.3% YoY on a SAAR basis. On a “not seasonally adjusted basis, the YTD change for multifamily is +22.7%. The West region posted a major increase in multifamily YoY with total starts at +49% YoY but only +7.3% YoY in singe family.
Permits were up in total MoM by +5.8% and down slightly YoY at -0.2%. Permits were down -2.6% in single family MoM and -5.5% YoY.
The housing headwinds are only in part about mortgage rates since the 6.51% for Freddie Mac 30Y this week is worse sequentially but is still framed against 6.86% this time last year for that benchmark rate. The Mortgage news Daily survey today is 6.65%.
We looked at industry leader D.R. Horton (DHI) this week as a good bellwether indicator of what is going on in the housing markets. DHI is the perennial #1 in units sold and occasionally the #1 in dollar terms as well (including the most recent quarter). With the lowest average selling prices of the major homebuilders, DHI offers a good angle on the “real world” in homebuilding volumes and prices across regions (see D.R. Horton: Financial Powerhouse Despite Cyclical Softening 5-20-26).

The above chart offers a clear reminder of the wild single family residential construction cycles across the decades. With favorable demographics for housing demand, the current starts run rate of 930K is still well below the long-term median and below all the timeline medians posted. The exception is the current median for the “post-crisis” period (crisis = housing sector bubble, RMBS shock, and near meltdown of the bank system).

The current backdrop includes mortgage rate pressures on the affordability of monthly payments that are likely to get worse from here. That comes after seeing mortgage rates flirt very briefly with crossing below the 6.0% line on Feb 26, just before the Iran War. This past week hit the 6.75% area before the modest rally of the UST curve.

Even if the FOMC shifts its policy back toward easing under Warsh (good luck with that FOMC vote count), the potential for a UST curve steepening would remain a material risk factor as the inflation variables work their way through the system. The bear steepening risk is alive and well as is the case with an upward shift of the curve.

As we go to print today, the “Vegas line” (i.e. FedWatch) shows a 0% chance of a cut by the Dec 2026 FOMC meeting. In a major setback for “easing bulls,” the odds of 1 hike is at 42.5% and now greater than the “no change” odds at 30.7%. For 2 cuts, we see a 21.5% probability. Those odds will jump around but are signaling a drag on the housing sector as Iran effects play out.

As noted in the bullets, single family starts were soft in relative terms vs. headline total starts with multifamily starts rolling along favorably (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 April 2026, we see NSA total permits essentially flat YoY and single family permits down by -5.5% YoY. For MoM, total permits were +7.7% with single family permits up +1.7% MoM.

For total starts and single family starts on an NSA basis, we see total starts up by +5.5% MoM and single family NSA starts lower by -2.5% MoM.

The above plots the single family starts by region (NSA). On a MoM basis, the critical South region (totals almost 49% of total NSA starts and over 57% of single family starts) was down slightly in single family by -1.2% MoM and up by +2.2% YoY. The West as the #2 single family market was down MoM by -15.1%. The Midwest region MoM in single family was +23.1% with the small Northeast market at -13.2% MoM. The YoY NSA starts were mixed with the South and West both higher among the big two regions. The Midwest and Northeast were lower YoY.

The above chart updates running multifamily starts. At +529K (SAAR), April 2026 rose by +14.3% MoM and by +23.3% YoY. The 529K is well above the long-term median of 339K, above the median from Jan 2009 to current (345K), and above the median from 2000 to 2008 (296K). April 2026 even exceeded the median of the 1960s boom (487K).

The above chart updates Multifamily permits (SAAR). The 514K in April 2026 multifamily permits rose by +22.7% MoM and by 11.5% YoY.

The bottom line on home starts as we wade into the peak selling season is that 2026 is shaping up as a mediocre year for homebuilders. This is consistent with the guidance we are getting from the major homebuilders.

Industrial Production April 2026: Bringing a Lift

Glenn Reynolds, CFA — Fri, 15 May 2026 21:40:19 GMT

After some very mixed industrial production and capacity utilization metrics booked in March in the aftermath of the Iran War shock, April sequential trends show a recovery (see Industrial Production March 2026: Mixed Picture, Big Questions Ahead 4-16-26).
We see MoM industrial production move +0.7% higher (+1.4% YoY) for the highest sequential move to date in 2026 and up from -0.3% in March 2026. Across industry categories, Final Products production bounced back to +1.1% from a weak March that saw -0.6% with Business Equipment in April being the best performing category in that mix at +1.5% MoM and +6.0% YoY.
Total Industry and Total Manufacturing capacity utilization moved higher after a soft March overall. Durables capacity utilization moved up along with the largest manufacturing industry groups as most logged YTD highs (including Motor vehicles and parts, Aerospace, Computers and electronic products, and Fabricated metals). Nondurables ticked slightly lower as Utilities rose and Mining was essentially sideways.
The good news of an uptick in manufacturing capacity utilization is tempered by the reality that the long-term average from 1972 is 2.4 points higher, with the shortfall being a common feature across the durables industry groups.
As we have covered in past research (see Industrial Production March 2026: Mixed Picture, Big Questions Ahead 4-16-26), there have been a half dozen recession periods with higher utilization levels than what we see today. The ability to generate acceptable margins at lower utilization rates is part of the breakeven volume story lines and how unit costs (including supplier chain tariff effects) along with pricing and product mix trends unfold across various industries.

The current 75.8% is well below the long-term median of 78.5% and below the post-COVID median of 76.2%. That is one of many metrics that take the label of “greatest economy in history” off the table. Whether GDP growth or payroll trends, the current economy is a bottom quartile economy when the growth of the 1980s and 1990s are factored in (see Presidential GDP Dance Off: Clinton vs. Trump 7-27-24, Presidential GDP Dance Off: Reagan vs. Trump 7-27-24).

The wildcard for this current cycle is the scale of the fixed investment that is now ramping up. The consumer sector and PCE have been unimpressive but fixed investment is now soaring (see 1Q26 GDP Advance Estimate: Consumer Fade, Investment Boom 4-30-26).

If you like comparing numbers (not a Washington thing), Trump 1.0 did not even frame up all that well vs. Carter and Biden – let alone the 1980s and 1990s (Gut Checking Trump GDP Record 3-5-25, Trump’s “Greatest Economy in History”: Not Even Close 3-5-25).

A brief cyclical lookback on replay…

The chart shows the material swings across expansion booms and busts. That includes the aftermath of some highly damaging oil spikes that brought on cyclical weakness and later saw capacity utilization plunge. There were a lot more structural changes underway in those cycles than just oil and gas price pressures. That was notably the case in the 1980-1982 double dip as well as the recession of late 1973 to early 1975 when the Arab Oil Embargo set off chain reactions that turned the post-1973 period into an ebb-and-flow of macro nightmares for inflation and the consumer.

The May 1975 low of 71.6% was the first bout of severe stagflation 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 comfortably 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 rolled in. The Utilities and Power sector and Telecom capex all took a beating in that time frame.

Then came the post-credit crisis low of 63.4% at the recession trough in June 2009. Mortgages and derivative excess caused a very real systemic panic and deep risk aversion from the Lehman Sept 2008 period and well into 2009. That period was famous for the bankruptcy and bailout of GM and Chrysler. The credit contraction was very real, and the recovery in payrolls was slow to unfold with the consumer hammered by housing sector pain.

COVID edged out the June 2009 utilization bottom with a record low of 62.6 in April 2020 and a 2-month recession. That pandemic period saw ZIRP, supply-demand imbalances and later the Russian invasion of Ukraine and ensuing oil spike that set off inflation and a tightening cycle that still did not trigger a 2022 recession.

The AI fallout and related fears is also a new variable in the mix that cuts across both the services and goods sectors. What AI will mean for productivity improvement vs. payroll fallout will be an ongoing test of theories. Even if AI proves true to the valuation promises and brings a “revolution” of the economy, many will also pay the price. We have been getting a taste in the recent SaaS services panic. Those markets consume a lot of goods.

The above table breaks out the high-level groupings with total industry and total manufacturing posting favorable variances in April 2026. We include a “delta column” on the right. Mining and Utilities were mixed for the month, but a rational expectation is that utilities will see more capacity added and more demand.

We see Durables and Nondurables as the main events to track, and durables showed notable strength this month. The durables sector is especially important with all of the supplier-to-OEM multiplier effects. That also is the sector more meaningfully tagged by the Trump tariff policies. The IEEPA setbacks and recent attempts by Trump to counterattack by creatively using existing tariff legislation is struggling in the courts also as Trump goes to “Plan B” in his attempts to cut Congress out of the tariff decisions.

Looking back from 2025 into early 2026, we see Manufacturing in a relatively 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. Pricing decisions were more likely to come at a lag given the White House pressures, so there is a lot more to play out in 2026 earnings seasons and company color.

The inflation story has turned negative for the macro picture at this point (see Producer Price Index April 2026: Heat Rising on Cost Inputs 5-13-26, CPI April 2026: 4.1% All Items Less Shelter, 30Y UST 5% 5-12-26). The “good news, bad news” aspect of a resilient industrial sector is that higher input costs can lead to the exercise of pricing power that flows into inflation. That beats the stagflation alternative but will keep life challenging for the FOMC and “Team Warsh” (if he can assemble a supportive voting team).

The above table breaks out the details for the top 5 Durables lines and the two largest Nondurables lines. We include the capacity utilization deltas in the column on the right. We see positive moves across these major durables industries with Motor Vehicles and Parts and Aerospace making notable moves. The two major Nondurable lines were mixed with Chemicals lower and Food & Beverage higher.

The consumer story and the corporate sector capex optimism will be important to watch in coming weeks and months as guidance gets updated and the Iran fallout starts to flow into strategies from global players to small and midsized enterprises. The PPI numbers released this past week were daunting.

Low-cost supplier chains are getting undermined by tariffs and are now facing supply chain headwinds from the Iran War energy effects and the supply-demand imbalances. The demands to improve efficiency as tariff mitigation measures need to be monitored. We are also seeing important low-cost suppliers in the Gulf outside of oil and gas roiling some industries (e.g. aluminum).

The “AI story” and what it all means for productivity and headcount will be a big part of that theme. The natural outcome will be less jobs in a service intensive economy such as the US. The irony is that most immediate impacts on jobs has been in tech, but that can easily spread.

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 75.8%. The fact that the current capacity utilization is below numerous recession averages posted on the right side of the chart also scoffs at the recurring “Golden Age” and “hottest country” rhetoric.

In the context of the tariff priorities and reshoring ambitions, the slack capacity implied by the chart underscores that the analysis is a lot more complicated than just “build more plants” and “keep tariffs high” to force reshoring. 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 by definition very slow to unfold given intrinsic lag times, tooling equipment and contracts in place. Manufacturing jobs were lower this month – not higher – on a MoM basis and even worse YoY (see Employment Situation: April 2026 5-8-26).

There is also the fact that the cost of relocation has also risen with all the tariff effects for materials, components, and qualified labor. Autos are the main relocation stories, but that is generally going to be tied to existing infrastructure and not a strategy of all-new greenfield plants. In the end, many companies can just wait for Trump to “move on.”

Producer Price Index April 2026: Heat Rising on Cost Inputs 5-13-26

CPI April 2026: 4.1% All Items Less Shelter, 30Y UST 5% 5-12-26

Market Commentary: Asset Returns 5-10-26

JOLTS March 2026: Openings Down, Hires Up, Layoffs/Discharges Up 5-5-26

New Home Sales March 2026: Favorable Volume, Weaker Prices 5-5-26

PCE Inflation, Income & Outlays March 2026: Inflation Anxiety Level? 5-3-26

1Q26 GDP Advance Estimate: Consumer Fade, Investment Boom 4-30-26

Synchrony Financial: Favorable Consumer Credit Signals 4-24-26

Industrial Production March 2026: Mixed Picture, Big Questions Ahead 4-16-26

Existing Home Sales March 2026: New Beginnings or New Ends? 4-15-26

Producer Price Index March 2026: Heater or Curve Ball? 4-14-26

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

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

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

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

Existing Home Sales April 2026: Steady or Clinging?

Glenn Reynolds, CFA — Thu, 14 May 2026 17:35:13 GMT

The mortgage rate backdrop with 30Y rates closer to 6.6% than 6.5% at last night’s close brings a combination of monthly payment pressures and an uncertain economic outlook for many households.
The low 4 million rates on existing home sales are going sideways in 2026 with April’s 4.02 million staying within a tight band reflecting stretched affordability for those at the margins. Mortgage eligibility is a hurdle for many with median existing home prices continuing to rise.
In theory, new homes and homebuilders with a wide range of incentives and financing tools have the edge, but new homes are a much smaller share of the housing market than existing units.
The CPI and PPI news this past week is not bringing good omens for mortgages with an oil price spike still tied to an uncertain timeline with the Strait of Hormuz shut and some very damaging lag effects ahead. The plunge in global oil inventory promises sustained supply stress. Caution around spiraling oil prices is one variable that has become gospel to the Fed after the experience of 1973-1975 and the double dip stagflation of 1980-1982 following the Iranian oil crisis of 1979.

The above chart details existing home sales SAAR run rates by month from January 2023 to April 2026, which was essentially flat to March. The more-or-less sideways move in existing home sales this week was not as interesting as the CPI and PPI details (see Producer Price Index April 2026: Heat Rising on Cost Inputs 5-13-26, CPI April 2026: 4.1% All Items Less Shelter, 30Y UST 5% 5-12-26). Those two metrics spell trouble even if the markets are not reacting much and even rising in equities.

Consumers getting dented and rising input costs matter to home sales volumes and the ability of the existing home sales buyer to get a mortgage while paying higher prices. With new home prices lower across many of the builders and incentives readily available, existing homes sales face some competition (see New Home Sales March 2026: Favorable Volume, Weaker Prices 5-5-26).

The inflation metrics and Iran War fallout remain important in terms of what it means for UST and mortgage yields and consumer (and homebuyer) confidence. Trying to handicap UST levels and shapeshifting has been a challenge when we started the year with a lot of focus on easing and the new FOMC regime. Mortgage rates have been a headwind, and gauging what the FOMC might do is important even if the 10Y UST is what drives mortgage rates.

We moved the historical monthly chart to the top of the commentary as a reminder that the recent 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%.

In the interest of visual quality, we 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 early read on peak selling season ahead is off to a guarded start with mid-6% handle 30Y mortgage rates remaining a headwind, and the consumer sector shaky and less confident this year than last spring as inflation and payroll anxiety remain factors in 2026.

The April 2026 existing home sales number of 4.02 million 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 Thursdays. We got an update today with the rate barely moving to 6.36% from 6.37% last week. One year ago, the Freddie rate was 6.81%. The Mortgage News Daily Survey 30Y, which is a different mix than the Freddie survey, posted a close of 6.57%.

The above chart shows the sales volume delta by price tier for April 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 month. Note: We use “not seasonally adjusted data” for this chart.

The volatility and disruption of the Iran War has undermined the earlier UST rally we had seen in the mortgage markets with an uptick again in the post-Iran period. The range had been a tight one, but the recent pop above 6.5% after an earlier, 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.

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. It is a very challenging leap of faith to see that probability getting better from here. That would require a macro backdrop that hits payrolls and homebuyer confidence to make the FOMC move to aggressively ease. Such a move by the Fed could also drive a UST steepener subject to the underlying reasons used by the FOMC. The oil spike and inflation pressures will make life a challenge for Warsh.

The three Fed cuts in the fall of 2025 (-75 bps) followed 3 actions (-50, -25, -25) in the fall of 2024. That 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 fall. At that time, the 10Y UST dropped down to around 3.6% (current 4.45%) and mortgages were around 6.0% (currently over 6.5%). 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 had 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. If anything, FedWatch odds favor hikes over easing for the forward 1-year. The highest probabilities favor no change (see Producer Price Index April 2026: Heat Rising on Cost Inputs 5-13-26).

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 50% of its existing home sales volume in the $250K to $500K range and over 18% 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 10%.

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 30%. The West shows a high share of 28% 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 higher MoM (as revised) to 1.47million units for +5.8% MoM and +1.4% 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 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 above chart breaks out the timeline for existing single family alone of 3.64 million vs. total existing home sales of 4.02 million. The 4.02 million total is well below the long-term median (from Jan 1999) of 5.22 million. The total of 3.64 million for single family is well below the long-term median of 4.63 million.

Existing single family growth was 0% sequentially and -0.3% YoY (SAAR). The lower line is ex-condo/ex-coops. We saw 380K in condo and coop sales in April 2026, up from 370K YoY and up from 370K MoM.

The above chart updates the median price for existing single-family homes at $422.3K (vs. $417.7K total) after June 2025 hit a record $438.6K. The median price in April 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.

CPI April 2026: 4.1% All Items Less Shelter, 30Y UST 5% 5-12-26

Market Commentary: Asset Returns 5-10-26

JOLTS March 2026: Openings Down, Hires Up, Layoffs/Discharges Up 5-5-26

New Home Sales March 2026: Favorable Volume, Weaker Prices 5-5-26

PCE Inflation, Income & Outlays March 2026: Inflation Anxiety Level? 5-3-26

1Q26 GDP Advance Estimate: Consumer Fade, Investment Boom 4-30-26

Synchrony Financial: Favorable Consumer Credit Signals 4-24-26

Industrial Production March 2026: Mixed Picture, Big Questions Ahead 4-16-26

Existing Home Sales March 2026: New Beginnings or New Ends? 4-15-26

Producer Price Index March 2026: Heater or Curve Ball? 4-14-26

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

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

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

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

JOLTS March 2026: Openings Down, Hires Up, Layoffs/Discharges Up 5-5-26

Employment Situation: April 2026

Glenn Reynolds, CFA — Sat, 09 May 2026 02:06:07 GMT

Technically, it is still a ceasefire.

The better-than-expected payrolls in the Establishment Data show a status quo waiting game for higher value-added and multiplier effect industries that are at the core of the Trump tariff strategy. Manufacturing was down again MoM and even more in the negative delta range YoY.
The payroll additions show a services-heavy concentration posting a +113K MoM increase with goods-producing at +10K and government at -8K, adding up to the +115K payroll adds in April. The fact that Manufacturing was -66K YoY with both durables and nondurables lower does not send great signals that the golden age of reshoring or onshoring is at hand.
Looking back over the trailing year, total additions to total payroll of +251K YoY is materially lower than the additions to the “health care and social assistance” line, where over +656K were added YoY. If we add in the “leisure and hospitality” payroll additions of +142K, that means those two lines alone (health care + leisure) are 3x the total additions to payroll YoY.
In the Household Survey, the report details an additional +134K unemployed for a total of 7.37 million and a 4.3% unemployment rate (7.37 unemployed/170 mn labor force). The number employed declined by -226K to 162.6 million.
The average hourly earnings increase of 3.6% is not stacking up well vs. the 3.3% CPI in March (April CPI release this coming week).Real earnings are looking even worse vs. PCE inflation of 3.5% for March (3.2% Core) and 4.5% for headline PCE for 1Q26 (4.3% Core PCE).

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 +185K as revised for March and +115K for April along with the 4.3% unemployment rate are not “easing friendly” for the FOMC and especially with inflation rising. This coming week we get April CPI and PPI.

The numbers in 2025 and 2026 above 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 170K until March 2026 when it moved above the median with +185K. April’s +115K is back below it.

That long-term median of +170K includes a slice of the longest recession since the Great Depression, so it is not a high bar to clear.

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

The current 8.2% marks an increase from 8.0% in March and 7.9% in Feb and 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 3.9% differential is just 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, and 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.

There is every reason to assume that Trump desperately wants to extricate himself and US troops from the currently untenable stalemate. That in theory would send oil prices dramatically lower. That could also arm Warsh to fulfill his FOMC easing bias if he can convince a very skeptical Fed voting group. Another bad CPI and PPI print next week will not help the situation.

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 April 2026 moved lower from March 2026 by -226K and show a decline of -1.28 million YoY vs. April 2025 (household survey). 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 March 2026: Openings Down, Hires Up, Layoffs/Discharges Up 5-5-26).

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. They will create more trade partner strife. Trump just faced more setbacks in court this week, but his pledge is to get tariff revenue even higher than it was.

The USMCA review is up for midyear while the EU diplomatic setbacks and trade relations are downright ugly at this point. 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, and Trump is making it clear to the domestic audience that there is a ceasefire and the “war is over.” This is hard to reconcile with a full blockade (an act of war by international law) and recurring bombing threats that do not lack for extremist, violent rhetoric.

The fallout in consumer spending from health care premium increases now are joined by energy price stress and $4.55+ regular gasoline (per AAA as of 5-8-26) as peak driving season approaches in the summer. Home heating oil bills could get much worse later in the year if the crisis has lag effects and remains a challenge.

The retrenchments in SNAP spending and eligibility criteria challenge 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. Health care costs are rising alongside myriad CPI lines and borrowing costs.

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 just changed in dramatic fashion and threatens to get worse on Iran War effects (see PCE Inflation, Income & Outlays March 2026: Inflation Anxiety Level? 5-3-26).

The headlines around multiple supplier chains have been more than amply covered but fertilizer is one that aims directly at food while oil aims at just about everything from the gas pump to delivery costs, raw materials, and leisure and travel (airfare). The headlines highlight the threat to semiconductor production while customers could see IT budgets slammed. So that means the consumer sector and tech market both have their share of risks.

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 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.

Trump is back again talking about “taking money in” when he talks about his threatened increase of EU tariffs. The buyer writes the check. It is not “money taken in.” It is money transferred within the US. He has even gone so far as to accuse SCOTUS and their IEEPA decision as allowing sellers and selling nations to get refunds. It was in one of his “Truth” Social rants, and he may have forgotten it by his next Big Mac. “Refunds to sellers” is just the flip side of his “seller pays” nonsense. Refunds go to US based importers.

Stay tuned for EU trade and USMCA review fallout.

Market Commentary: Asset Returns 5-4-26

PCE Inflation, Income & Outlays March 2026: Inflation Anxiety Level? 5-3-26

1Q26 GDP Advance Estimate: Consumer Fade, Investment Boom 4-30-26

Market Commentary: Asset Returns 4-26-26

Synchrony Financial: Favorable Consumer Credit Signals 4-24-26

Industrial Production March 2026: Mixed Picture, Big Questions Ahead 4-16-26

Existing Home Sales March 2026: New Beginnings or New Ends? 4-15-26

Producer Price Index March 2026: Heater or Curve Ball? 4-14-26

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

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

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

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

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

New Homes Sales Jan 2026: The Nays Carry 3-19-26

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

PCE Inflation, Income & Outlays March 2026: Inflation Anxiety Level? 5-3-26

New Home Sales March 2026: Favorable Volume, Weaker Prices

Glenn Reynolds, CFA — Wed, 06 May 2026 01:13:48 GMT

New home sales are generating an uphill rally with volumes higher sequentially and YoY but prices are softening. The lower prices saw the new home sales median price break below the $400K line to $387.
The critical South region at 65% of total sales (SAAR basis) did the heavy lifting at +8.1% YoY for March 2026. We see 3 of 4 regions up YoY with the West down by -12.7% YoY for a national level increase of +3.3%. That includes the Midwest at +11.8% and Northeast at +3.8%.
Sequentially from Feb 2026, the higher and lower mix by region was a split decision with the South higher (+11.1%) from Feb along with the tiny Northeast market (+80%). The West was -3.5% and Midwest at -5.0%.
Median price for March 2026 was $387.4K vs. $409K in Feb 2026 and YoY was down from $412.9K. As frames of reference, calendar 2025 posted a median price of $417.4K and 2024 at $420.3K.

The above chart updates the new single family home sales series from 1963, and the current 682K (SAAR) marks a healthy rebound relative to the grim Jan 2026 number (583K) but still weak in the context of 2H25. The volumes now are in the zone of the 1980s/1990s median but well below the median of the housing boom/bust cycle from 2001-2009 as noted in the chart.

As we look back to the peak of the housing bubble, we see 1389K in July 2005 or 2x the March 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 March 2026, the 682K is stronger than less than half the 2025 months.

The above chart plots the share of total home sales (new + existing) that were captured by the “new home” builders. We see the share is now at 14.6% vs. the long-term median of 11.6%. When inventory is scarce, the right home at the right price wins. That has favored builders. That is especially the case with financing incentives. Given the hurdles to exit in the existing home sales market in mortgage refinancing (“golden handcuffs,” etc.) that we routinely discuss in our housing commentary, the shortage of existing housing inventory at economic all-in costs remains a major headwind for existing home sales (see Existing Home Sales March 2026: New Beginnings or New Ends? 4-15-26).

The volumes are steady, but the weaker prices are consistent with some of the color we hear from major builders on prices and narrowing gross margins with incentives still a material part of their selling strategies. The two giants of the homebuilders (DR Horton and Lennar) are both seeing material gross margin pressure from their earlier cyclical peaks. The 6% handle mortgage rates are not offering relief on monthly payments and affordability with the past week showing 6.5% handle surveys as reported by Mortgage News Daily.

The median price time series above tells a simple story that prices are under pressure after a period of record highs and a long stretch over the $400K threshold with a few dips below the $400K line.

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 $387.4K is a sign of the pressure on housing. The price metrics 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. The 441K for the South is around 65% of the total of all single family new home sales (SAAR) and marks a sequential rise of +11.1% from Feb 2026 and is up by 8.1% YoY. The West at 138K is 20% of the total. For the month, the West was -3.5% sequentially and -12.7% YoY.

The timeline for new home sales for the smaller Midwest and much smaller Northeast market is detailed above. The Midwest (over 11% of total) was +5.0% sequentially and +11.8% YoY. The Northeast market (4% of total) was +80% sequentially and +3.8% YoY.

Market Commentary: Asset Returns 5-4-26

1Q26 GDP Advance Estimate: Consumer Fade, Investment Boom 4-30-26

Market Commentary: Asset Returns 4-26-26

Synchrony Financial: Favorable Consumer Credit Signals 4-24-26

Industrial Production March 2026: Mixed Picture, Big Questions Ahead 4-16-26

Existing Home Sales March 2026: New Beginnings or New Ends? 4-15-26

Producer Price Index March 2026: Heater or Curve Ball? 4-14-26

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

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

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

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

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

New Homes Sales Jan 2026: The Nays Carry 3-19-26

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

PCE Inflation, Income & Outlays March 2026: Inflation Anxiety Level? 5-3-26

JOLTS March 2026: Openings Down, Hires Up, Layoffs/Discharges Up

Glenn Reynolds, CFA — Tue, 05 May 2026 23:14:59 GMT

Tough payroll battles in JOLTS in 2026. March is a draw.

JOLTS saw a +655K increase in hires for March vs. Feb 2026 and +221K incremental hires YoY vs. March 2025. Professional and Business Services, Accommodation/Food, and Transportation, Warehousing and Utilities shared the leaderboard in terms of increased Hires. Manufacturing was only up by 28K sequentially in that 655K total but manufacturing was essentially flat YoY.
Job Openings tailed off by -56K sequentially from Feb 2026 and declined by -86K YoY vs. March 2025 with the biggest decline of -318K in Professional and Business Services. Manufacturing was only 19K higher sequentially but was +73K higher YoY in what could be a good sign if the openings get filled with all the Iran macro noise, the energy spike, and fear of rising rates.
Layoffs were up sequentially by +153K and up by 272K YoY with Professional and Business Services rising the most. Construction and Manufacturing were only down slightly in layoffs.

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 soft. Openings are at least running above the long-term median (5.92 million) with high 6 million handle prints. The 1.2% decline YoY job openings for March 2026 and less than 1% sequentially is not moving the needle much at all considering so many companies are in new budget years and staring at some material moving parts in the macro picture.

The conversations will continue to focus on how many new job openings can be avoided through the deployment of AI tools and technology. As we have been seeing at Meta and Amazon of late, the downsizing of major tech payrolls are also underway to fund capex and streamline costs. That AI fallout is also spreading to the SaaS-based services providers whose stocks have been getting slaughtered (see Market Commentary: Asset Returns 5-4-26). Many of the services providers are worried about their business models. Meanwhile, the tariff cost mitigation strategies also do not help in budgeting for higher headcount.

Hires rose by +655K sequentially from Feb 2026 while layoffs/discharges rose by 153K. The hires YoY rose by 221K or by 4.1%. While we are in an expanding economy, the annual GDP growth of 2.1% lagged 2024’s 2.8% while the 1Q26 GDP is off to a better start vs. the weak 4Q25 numbers (see 1Q26 GDP Advance Estimate: Consumer Fade, Investment Boom 4-30-26, 4Q25 GDP: More Adverse Revisions in the Golden Year 4-9-26).

The above chart updates the ratio of Hires to Layoffs/Discharges. The relationship stands at 2.97x, above the long-term median of 2.91x from 2007. The post-2007 period includes the effects of the longest recession since the Great Depression (Dec 2007 – June 2009) followed by the longest expansion in history from June 2009 to COVID (Feb 2020), which brought a very brief 2-month recession wrapped around a wild swing in pandemic employment.

The above chart plots Hires vs. Total Separations on a SAAR basis. Separations include Quits, Layoffs/Discharges, and “Other Separations.” Total Separations moved higher by +356K in March 2026 vs. Feb 2026 and were higher by 90K YoY.

We typically do not find “Total Separations” particularly interesting as a multi-line net number. The increase in Separations can be attributed to a rise in layoffs as noted earlier and to a 125K increase in “Quits.” One theory is quits signal relative 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 rise in Hires was the main event in this month’s JOLTS report. Separations increased on higher layoffs and higher Quits.

The net number above has moved notably lower in recent months and dipped into the negative range in Feb 2026 before bouncing back into positive range in March. The differential is now on top of the long-term median of +175K.

The time series for Total Quits as a % of Separations (SAAR basis) was 59.0%, slightly above the long-term median of 58.0%. The classic “Quits Rate” is measured by Total Quits as a % Total Employment, and that metric moved slightly higher on the month to +2.0%, up from 1.9% in Feb 2026. The Quits rate is also down YoY from 2.2% to 2.0%.

The bottom line on the JOLTS numbers for March is that it was one that UST bulls cannot grasp onto for hopes of easing and the same for the long-suffering bull flattener advocates who are already worried about oil.

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) with Canada the 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 million), and June (7.4 million). 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 experienced 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 as a brutal reminder of that period.

See also:

Market Commentary: Asset Returns 5-4-26

1Q26 GDP Advance Estimate: Consumer Fade, Investment Boom 4-30-26

Market Commentary: Asset Returns 4-26-26

Synchrony Financial: Favorable Consumer Credit Signals 4-24-26

Industrial Production March 2026: Mixed Picture, Big Questions Ahead 4-16-26

Existing Home Sales March 2026: New Beginnings or New Ends? 4-15-26

Producer Price Index March 2026: Heater or Curve Ball? 4-14-26

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

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

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

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

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

New Homes Sales Jan 2026: The Nays Carry 3-19-26

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

Industrial Production March 2026: Mixed Picture, Big Questions Ahead

Glenn Reynolds, CFA — Thu, 16 Apr 2026 18:57:43 GMT

Automotive chain sputtering a bit with EV upheaval and tariffs

The modest decline in Industrial Production saw a -0.5% drop, but 1Q26 grew at +2.4% ahead of the March fade. Capacity Utilization ticked slightly lower for March in Manufacturing, Durables, and Nondurables.
Manufacturing capacity utilization for 1Q26 ticked up from 4Q25 but was below 3Q25 as the industrial sector waffles. Manufacturing is struggling to show a clear trend in the midst of tariff pressures and the Iran War fallout. We have seen inflation in goods and some pricing power, so we know the demand side has not taken too much pain yet. Earnings expectations broadly for 1Q26 are also solid.
The market saw more notable sequential MoM weakness for Capacity Utilization in Mining and Utilities. The YoY numbers for Utilities come with the asterisk of +4.0% capacity growth while Mining capacity shrunk by -0.5%.
With respect to Industrial Production trends across Manufacturing “Market Groups,” we see Consumer Durables down by -3.4% YoY for March with Automotive products at -5.6% YoY. Business equipment showed strength at +4.6% YoY while Defense and Space Equipment posted +3.2%
Across “Industry Groups” (vs. “Market Groups”), “Aerospace and miscellaneous transportation equipment” generated a +6.2% increase with “Computer and electronics, electrical equipment, appliances, components” at +3.6%.

The above chart updates the running capacity utilization for manufacturing since 1967. The current 75.3% is well below the long-term median of 78.5% and below the post-COVID median of 76.3%. That is one of many metrics that take the label of “greatest economy in history” off the table.

We see the material swings across expansion booms and busts. That includes the aftermath of some highly damaging oil spikes that brought on cyclical weakness and later saw capacity utilization plunge. There were a lot more structural changes underway in those cycles than just oil and gas price pressures. That was notably the case in the 1980-1982 double dip as well as the recession of late 1973 to early 1975 when the Arab Oil Embargo set off chain reactions that turned the post-1973 period into an ebb-and-flow of macro nightmares for inflation and the consumer.

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 comfortably above where capacity utilization stands now in 2026.

Then came the post-credit crisis low of 63.4% at the recession trough in June 2009. Mortgages and derivative excess caused a very real systemic panic and deep risk aversion from the Lehman Sept 2008 period and well into 2009. That period was famous for the bankruptcy and bailout of GM and Chrysler. The credit contraction was very real, and the recovery in payrolls was slow to unfold with the consumer hammered by housing sector pain.

The above table breaks out the high-level groupings with total industry and total manufacturing declining. We include a “delta column” on the right. Mining and Utilities were down sharply for the month. We see Durables and Nondurables as the main events to track, and both are down. The Durables sector is especially important with all of the supplier-to-OEM multiplier effects. That also is the sector more meaningfully tagged by the Trump tariff policies.

The above table breaks out the details for the top 5 Durables lines and the two largest Nondurables lines. We include the capacity utilization deltas in the column on the right. We see a mixed picture across these major industries with only Motor Vehicles and Parts making a notable move lower. We see 2 of 5 Durables lines tick lower with Machinery slightly lower and Motor Vehicles and Parts taking a bigger hit. The two major Nondurables lines also declined with Chemicals and Food & Beverage.

Low-cost supplier chains are getting undermined by tariffs, so the demands to improve efficiency as tariff mitigation measures need to be monitored. We are also seeing some important low-cost suppliers in the Gulf, and that area is essentially in a multi-tiered blockade. The “AI story” and what it all means for productivity and headcount will be a big part of that theme.

The weakness in the dollar is not going to help supplier chain costs from offshore, and a weaker dollar has the effect of inflating the tariff cost in dollar terms depending on the import nation.

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 75.3%. The fact that the current capacity utilization is below numerous recession averages posted on the right side of the chart also scoffs at the recurring “Golden Age” and “hottest country” rhetoric.

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” and “keep tariffs high” to force reshoring. That is a story told on an industry-by-industry basis, and the weakness seen in auto sector production and utilization numbers is a sea level example of where an industry has arguably been hit the hardest by tariffs.

The multiplier effects are important, but the relocation of supplier chains and OEM relocation is by definition very slow to unfold given intrinsic lag times, tooling equipment and contracts in place. There is also the fact that the cost of relocation has also risen with all the tariff effects for materials, components, and qualified labor. Autos are the main relocation stories, but that is generally going to be tied to existing infrastructure and not a strategy of all-new greenfield plants. In the end, many companies can just wait for Trump to “move on.”

Producer Price Index March 2026: Heater or Curve Ball? 4-14-26

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

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

Market Commentary: Asset Returns 3-30-26