I sent off a yellow flare on the housing market in a post a couple of weeks ago, but I now think a red flare is more appropriate. Home sales, homebuilding, and even house prices are set to slump unless mortgage rates decline materially from their current near 7% soon. That, however, seems unlikely.

Another sign of a softer job market is rising unemployment insurance claims. Continuining claims are up, and signaling a slump in hiring. Initial claims are also up as of late. Anything north of their current near 250k per week would suggest layoffs are rising, and the job market is stalling.

The more I cogitate on the May jobs report, released last Friday by the BLS, the more uncomfortable I get about the economy’s prospects. There are a bunch of reasons why (listen to this week’s Inside Economics podcast), but high on the list is the sharp drop-off in labor force growth.

A high and rising number of American households are under mounting financial stress. That’s the message in the April delinquency rate data we calculate based on all the credit files in the country from the credit bureau Equifax.

The Trump administration’s policies are set to severely diminish the economy, not only for the next few months but for years. The administration’s trade war is undermining the global safe-haven status of the U.S., which has provided incalculable benefits, including our economy’s exceptionalism. 🧵

Global businesses are now signaling recession. This is according to Moody’s weekly survey of businesses we’ve conducted for over 20 years. President Trump’s shocking hike in U.S. tariffs and China's tit-for-tat response crushed global business sentiment last week. 🧵

Leading Indicator #2 -the FHA mortgage delinquency rate. This isn’t common on leading economic indicator lists but it may be a proverbial canary in the coal mine in the current context. FHA borrowers have low to moderate incomes, with a median income of 75k a year, and most are 1st time homebuyers.

Leading indicator #1 – Conference Board survey of consumer confidence.

The economy appears to be gagging on the uncertainty created by the haphazard economic policymaking happening in DC. Retail sales, manufacturing production, real consumer spending, home sales and most telling, consumer confidence, are all down meaningfully in the past month or two.

With the stock market on its back heels the past couple of trading days, it is worth noting how important the well-to-do (those who own the bulk of stocks) have been to driving consumer spending and, by extension, the broader economy.

What is surprising is the jump in the survey’s uncertainty index, which measures the number of survey responses that are “don’t know” and “uncertain.” In the most recent survey, the index was the highest it has been in the survey’s long history, save for a couple of months leading up the election.

The developing trade war will result in higher inflation and interest rates, as well as diminished economic growth. And it is unclear to what end. My analysis on the potential economic fallout: www.economy.com/getfile?q=BF...

Jim Parrott and I put out a piece on the importance of the GSEs’ implicit government guarantee upon their release from conservatorship, and the challenge that will pose for the Trump administration. Available here: www.economy.com/getfile?q=D6...

The US and Chinese economies are fast de-coupling. That’s the clear story told by this starburst chart, which shows the trade flows between industries across countries in 1996, 2018 and 2023.

While not proof, this chart strongly suggests that more foreign immigrants results in more new businesses. This is intuitive, as immigrants are by definition risk-takers. It takes guts to move to another country in search of opportunity.

The economy is highly vulnerable to a sell-off in the stock market. Growth is being powered by consumer spending, and more specifically by the spending of the very well-to-do. 🧵

The US economy’s post-pandemic performance stands out as the best among major economies – growth since the pandemic is greater than its pre-pandemic trend. China’s economy was the first to recover from the pandemic shutdowns but has been sluggish since. The European economy has lagged even more.

We dove into the economics of inflation with Joe Hazell, LSE on the latest #InsideEconomics. We tackle it all from the pre-pandemic stability to the recent inflationary surge, and what the Trump administration’s policies might mean for the future. Listen here: podcasts.apple.com/us/podcast/m...