Secondary mortgage spreads are down a massive 20bps+ on the week, with most of that move happening this morning.

What's happening? The mortgage market is undergoing a structural repricing following the directive for Fannie & Freddie to deploy $200B into MBS.

Let's dig in a bit in the 🧵 The $200B figure is massive relative to GSE capital. For context, Fannie and Freddie have a combined accumulated net worth of ~$173B as of late 2025.

By directing a $200B build-up, the administration is effectively deploying the entirety of the capital cushion built up over the last six years to support the secondary market.

Pretty notable upward revisions to 2Q25 real GDP growth this morning: up 50bps to 3.8% from 3.3% prior.

All of the upward revision was due to stronger than previously reported Consumer spending on of Services, Business Investment and a modest bump to Government consumption.

More details in the 🧵 Looking at the revised series, here's contributions to real GDP growth over time, showing all of the slowdown occurred in Q1, with exports and inventories driving most of the swing.

After spiking to a new post-pandemic high due to fraudulent claims in Texas, initial jobless claims have plunged back below their 3y average (222k) to 218k.

Meanwhile, continuing claims also ticked down (1,926k vs 1,928k the week before) but remained near post-pandemic highs.

Some details in the 🧵 After one of the highest weekly increases in jobless claims in a while, we now have had outsized back-to-back weekly declines...

The morning's MBA mortgage application report revealed something we haven't seen since the early days of the pandemic...

Mortgage refinance applications jumped 58% w/w last week as the 30-year fixed rate mortgage fell to the lowest level since last September.

This also marks the first week post-pandemic where mortgage refi activity climbed back above its pre-COVID norm.

Some more details in the 🧵 Mortgage purchase application activity was much less exciting...

Applications inched higher, but this continued the recent uptrend that has been underway since earlier this summer.

Well, well, well...

After sitting on the backburner for some time, jobless claims are back in the headlines with the highest weekly print since the pandemic.

Initial jobless claims jumped by 32k to 263k during the week ending Sept 6.

Let's see what's going on in the 🧵 Let's start with how big of a weekly increase this was.

We've only seen a handful of jumps in the 30k range post-pandemic.

The Aug PPI declined -0.1%, softer than expected (0.3%) although PPI excluding food, energy & trade was in-line with expectations at 0.3%.

What does this mean?

Core goods prices are still rising at an above trend pace, while broader price pressures eased.

Details in the 🧵 Let's look at Goods Less Food And Energy, what I was referring to as "Core Goods."

Prices for core goods were up 0.32% in Aug, which is well above trend despite stepping down slightly from July.

How will recent job growth look after today's Current Employment Statistics (CES) preliminary benchmark revisions?

Glad you asked.

Here's a look at monthly job growth if we include the revised data and carry forward that monthly pace of negative revisions through August.

Sector-level details in the 🧵 Here's a look at job growth over the prior 4 months, with sector-level revisions incorporated.

Bigly disappointing jobs report this morning...

Where to begin?

How about the fact that the economy outside of health care has been a drag on growth over the past 3 months.

Many more interesting takeaways in the 🧵 Here's the same data, but with the breakdown of health care jobs (grey) vs all other industries.

The July Job Openings and Labor Turnover Survey (JOLTS) reveals the details underlying the recent sharp deceleration in net hiring activity.

It's pretty straightforward: hiring has downshifted and separations have turned higher in recent months.

Clearly, if these recent trends were to continue, net job growth would turn negative in short order.

More details on the underlying trends in the🧵 Let's look under the hood at which regions are driving the recent downshift.

Since net hiring (total hires less separations) peaked in May at 259k on a 3m avg basis, job growth has slowed most in the Midwest (-93k), Northeast (-45k), and West (-40k) with a more modest slowdown in the South (-16k).

Challenger released its August job cuts report this morning and it showed a 13% y/y increase in layoff announcements.

While I usually provide context to downplay headline figures, in this case it's the opposite...

Last Aug is a tough benchmark, when layoffs were already 81% above the pre-COVID norm, so the fact we're up 13% y/y from that elevated level means we're now 105% above the pre-COVID norm for Aug, up from 98% in July.

Details in the 🧵 On an absolute basis, announced job cuts were ~44k above normal for August, with most of the lift coming from the east (35.2k above normal), followed by the West (17.1k), with the South and Midwest both below their pre-COVID norm, -3.9k and -4.3k, respectively.

July retail sales came in a tad lighter than expected at 0.5% m/m (consensus 0.6%) but June was revised up to 0.9% from 0.6%.

Meanwhile, control group sales (which are a direct input to GDP) beat with a 0.5% gain (cons. 0.4%) and June was also revised up to 0.8% from 0.5% prior.

On the surface: steady and solid consumer momentum.

Under the hood: a rising share of sales growth is being “paid for” by inflation.

Details in the 🧵 My read: although nominal control group growth has remained “solid” in the mid-single digits, real (inflation adjusted) control group growth has cooled notably from robust growth in ’24 (peak of almost 7% q/q saar) to just a 1% quarterly annualized pace in July.

The PCE control-group deflator has firmed considerably over the course of 2025, so prices are doing more of the lifting.

Volumes ≠ what the headline suggests.

One of the big surprises in today's jobs report was the contraction in government payrolls.

Consensus expected total job growth of 104k, of which 100k would be private jobs - implying growth of 4k for government payrolls.

Instead, the government sector lost -10k jobs, thanks to a -14k decline in Federal workers (non-USPS).

This shouldn't have been a big surprise...

I'll explain quickly in the 🧵 There has been a clear rebound in initial claims by federal employees for unemployment insurance, which surged higher in July.

This coincides with the reference week for the jobs report, so economists should have been forecasting a notable drag from federal layoffs this month.

Not a pretty jobs report today...

I think this one chart sums up what's wrong with anyone pointing to unemployment as a sign the labor market is "solid."

If not for collapsing labor force participation since April, unemployment would've climbed to 4.9% today instead of 4.25%.

A lot to unpack in the 🧵 The labor force participation rate has dropped from a recent peak of 62.8% back in Nov '23 to 62.2% in July '25.

The pace of that decline accelerated sharply in May and has continued through July.

If not for the recent drop in the participation rate, unemployment would be meaningfully higher.

With this morning's PCE report in hand, we can circle back to see how my control group price index model performed...

A quick thread on implications for control group retail sales 🧵

https://twitter.com/Econ_Parker/status/1945849492575518728

Given the upward revisions to May PCE and modest upside surprise for core inflation, control group inflation accelerated to 0.46% m/m in June, above my 0.38% model estimate and up from 0.31% in May.

This was the hottest monthly print for control group inflation outside the pandemic in over 20 years.

2Q25 GDP came in hotter than expected (3% vs 2.6% consensus).

But don’t be fooled by the headline...

Final sales to private domestic purchasers - the cleanest read of underlying demand - rose just 1.07% in Q2.

That’s the weakest since 4Q22 and a notable downshift from ~2.5% growth in 2024.

Let's dig in🧵 Headline GDP was flattered by a snap back in net exports as frontloading of imports to get ahead of tariffs in Q1 left a void in Q2.

The trade war is likely to cause continued distortions, to a lesser degree, over the remainder of 2025.

So, stripping out the noise, the domestic demand engine is clearly losing steam.

June Retail Sales beat expectations up 0.6% m/m (0.1% consensus), with Control Group (which feeds directly into GDP) also up 0.5% vs expectations for a 0.3% gain.

Very solid figures in nominal terms, but it's important to note that core goods inflation has picked up in recent months.

So, to understand if consumers are really ramping up spending or simply keeping up with higher prices, we need to adjust for inflation.

The trend is clear: consumers have been spending less and less in real (inflation-adjusted) terms over the course of 2025 as goods inflation has accelerated.

Some details in the 🧵 including a simple model for how much inflation has picked up for the Control Group. Here's a look at the simple model I used to estimate the PCE Control Group price index, which leverages CPI and PPI price indexes that correspond to Control Group spending categories like appliances, furniture / furnishing, construction materials, consumer electronics, recreational goods.

As I've noted in my recent posts regarding the CPI & PPI reports, prices for many of these goods have accelerated notably in recent months and the model picks this up nicely.

About that "no evidence of inflation" from tariffs...

If you know where to look, it seems pretty clear that inflationary pressures are building in the product categories most exposed to tariffs.

Case in point from today's June CPI report: Household Furnishings & Supplies, which saw prices jump nearly 1% m/m in June.

This was the sharpest monthly increase since the peak of the pandemic-driven inflation in early '22.

More evidence in the 🧵 Looking at the categories flagged as being most exposed to tariffs by two Fed staff economists earlier this year, you'll see a lot of the products in the Household Furnishings & Supplies category on this list 👇

https://x.com/Econ_Parker/status/1922290381292487033

UMich Consumer Sentiment jumped to 60.5 in June (prelim), a rebound from May's 52.2 which was its lowest level since 2022.

This is the first monthly gain for UMICH Consumer Sentiment in half a year and well above consensus expectations (53.6).

The rebound was broad-based across sentiment measures.

Is this a turning point in consumer moods or just a "relief rally"?

More in the 🧵 As noted at the top, there was a widespread rebound, with consumers' assessment of Current Economic Conditions and Expectations both rising, by a respective 4.8 and 10.5 points.

Despite the bounce, the current level is still below the prior 6m and 12m averages.

May PPI was softer than expected (+0.13% vs 0.22% consensus), but that doesn't mean tariff impacts aren't percolating.

PPI ex Food & Energy was also soft (+0.14% vs 0.28% cons) as PPI Services was particularly soft (+0.11% m/m) despite the rebound in trade margins.

Details on what's going on under the hood and what it all means for the Fed's preferred inflation measure (PCE) in the🧵 Two things worth noting before going further:

1) April was revised up to a less drastic downturn in producer prices (-0.24 vs -0.47%)

2) Tariffs aren’t included in PPI calculations directly

▪ PPI measures domestic producer prices; customs duties on imports are excluded

▪ But higher import costs can pass through via input prices and substitution effects

Layoffs are steady at an uncomfortably elevated level near the upper end of recent years' range, but the number of people continuing to file claims is climbing sharply.

How does this make sense?

• Jobless claims were unchanged vs the prior week at 248k (242k consensus), but something else is worth taking note of...

• Continuing claims jumped over 50k to 1.95m (1.91m cons), the highest non-pandemic level since 2018.

More details in the 🧵 First, how can the unemployed population (i.e. continuing claims) rise without a corresponding rise in initial jobless claims?

This is a symptom of a cooling labor market, where people struggle to secure a new job after losing their old job.

May CPI came in much cooler than expected:

• Headline: +0.08% m/m (vs. +0.2% consensus)
• Core: +0.13% m/m (vs. +0.3%)

Was it just eggs?

Is disinflation holding stronger than feared?

And where are the tariffs?

Let's unpack it in the🧵 Let’s start with the contributions to monthly headline CPI:

• Core Services: +10bps vs +18bps prior
• Food: +4bps vs -1bp prior
• Core Goods: -1bp vs +1bp prior
• Energy: -6bps vs +4bps prior

👉 Most of the downshift came from core services cooling (-8bps) and a reversal in energy (-10bps), which shaved off 18bps combined.