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.

Seeing a lot of excitement about the strength in personal income growth through April (+0.8% m/m, sa).

The details of the report should temper that enthusiasm.

While growth in employee compensation and small business owner incomes were solid through April, the recent surge in income has come from transfer receipts (i.e. payments to individuals from the government and businesses).

More detail on what's behind the recent surge in the 🧵 Here's another way of looking at the contribution to monthly personal income growth... a smoothed 3-month average of the contribution.

Here, you can clearly see the surge in the red line, reflecting the tailwind to income growth coming from transfer receipts.

Another inflation report, another downside miss with tariffs still MIA...

Or were they?

April Producer Price Index (PPI) plunged by -0.5% m/m, the worst monthly decline since the early days of the pandemic.

Let's dig into what happened in the 🧵 The drag in April came almost entirely from Final Demand for Services (-46bps of the -47bps headline figure), while Core Goods (ex Food & Energy) added 8bps to final demand PPI inflation.

So, maybe tariffs weren't missing after all, if goods prices rose while services prices were falling?

April headline CPI inflation came in slightly below expectations (0.22% m/m vs 0.26% consensus) and core CPI was also a bit lighter than expected (0.24% vs 0.27%).

Where are all those tariff-price shocks?

Are egg prices fixed?

Details on what’s going on beneath the hood in the 🧵 First, a look at the wider-than-unusual range of estimates from my peers...

Many, but not all, were expecting some tariff impacts to start showing up more meaningfully in April.

Consumer sentiment--as measured by UMICH--continues to plunge.

UMICH Sentiment prelim Mar '25 ⬇️ to 57.9 (63 consensus) from 64.7 in Feb, current conditions ⬇️to 63.5 (64.4 cons) from 65.7, and Expectations ⬇️ to 54.2 (63 cons) from 64.

Year ahead inflation expectations pop to 4.9% (4.3% cons) from 4.3%, while 5-year ahead expectations also jumped to 3.9% (3.4% cons) from 3.5%.

Democrats are more concerned about inflation than any point since the pandemic, while Republicans expect outright deflation in the year ahead...

More notable details in the 🧵 Here's a look at the 5-year ahead inflation expectations by political affiliation...

As I've noted before - the key metric to watch in these types of surveys are the independents.

Politics obviously distort how reality is perceived and how one views the outlook.

Choose your fighter... just make sure it's the same as the Fed's!

PCE Supercore cooled to 0.22% m/m in Jan from 0.38% in Dec, while CPI Supercore spiked to 0.76% in Jan from 0.2%.

Some details on why the two measures diverged in the 🧵

*Supercore is Services ex Energy & Housing First of all, the PCE and CPI are constructed differently and measure some of the same categories differently.

The CPI in an input to the PCE index, along with PPI data.

This is clear looking at the delta between the key categories within Supercore for CPI and PCE.

I’m getting a lot of questions about how DOGE layoffs will show up in the labor market data.

So, here’s a quick 🧵

https://twitter.com/econ_parker/status/1892596901104537674

1) Federal Employees in Jobless Claims Data

Laid-off federal employees are eligible for Unemployment Compensation for Federal Employees (UCFE), administered by states on behalf of the federal government.

These claims are reported in the Department of Labor's (DoL) weekly jobless claims report as a separate line item. dol.gov/ui/data.pdf

However, those accepting Voluntary Separation Incentive Payments (VSIP), commonly known as buyouts, are typically ineligible for unemployment benefits, as these separations are voluntary.

Similar to all the excitement about the "mass wave of homes flooding the market" in DC in response to DOGE, context (and data) matters on the job market impact...

Read on for implications for Federal employment in the🧵

https://twitter.com/PeterBerezinBCA/status/1891295010638725273

If I zoom in on that chart above, it certainly looks a lot scarier...

So much for the one-way train to reacceleration...

January Retail sales missed bigly, slamming the brakes on the reacceleration narrative.

While Dec '24 was revised up, January's decline more than offset those revisions.

The big loser was online sales, but nearly all control group categories declined in Jan after all posting solid gains in Dec.

More details in the 🧵 How bad was the miss?

Well, it was nearly a 5 sigma event for control group retail sales based on the economists surveyed by Bloomberg.

The high estimate was 1.0% from Capital Economics, while Richard Moody at Regions bank was closest with a -0.2% estimate.

Softer than expected Nov PCE inflation print (0.128% vs 0.15% consensus) due to:

1⃣ Other Services contracted by -0.33% vs 0.25% gain in Oct (-2.7bps drag in Nov vs 2.1bps contribution in Oct): -4.8bps deceleration

2⃣ Portfolio Management Fees contracting by -0.6% m/m vs a 2.7% gain in Oct (slight drag in Nov vs 4.1bps contribution in Oct): -4.2bps deceleration

3⃣ Housing & Utilities inflation decelerated sharply to 0.21% m/m from 0.44% in Oct (3.7bps contribution to monthly headline vs 7.8bps in Oct): -4.1bps deceleration

Details in the 🧵 Nov Core PCE inflation also softer than expected (0.115% vs 0.13% consensus) due to the same factors highlighted above as all of the items listed at the top go into core services.

Quick thoughts on jobless claims: I still advise waiting until we're clear of holiday distortions to get a clear read.

With Veteran's Day & Thanksgiving now behind us, Christmas and New Years aren't far behind and will bring continued volatility.

A quick breakdown of why in the 🧵 As a reminder, here's a look at the dates that holidays have been / will be observed in recent years, along with which week each holiday falls.

Veterans Day swings between the 45th and 46th week, while Thanksgiving swings between the 47th and 48th week.

Thus, it is difficult to get any strong read on the trend in claims data during the next few weeks.

Before I get into the details of this morning's jobless claims data, I want to highlight an important caveat to the data for the next few weeks: holidays create significant distortions to weekly data in mid-late November and into early December.

We have two holidays (Veterans Day & Thanksgiving) within a couple weeks of each other that shift year-to-year. How businesses manage staff through those shifting holidays makes seasonally adjusting the data even more complicated than it already is.

So, I wouldn't read too much into the beat on initial claims (213k vs 220k cons & 219k prior) and miss on continuing claims (1,908k vs 1,880k cons & 1,872k prior).

Looking at the week-to-week swings in the non-seasonally adjusted initial claims data below, you can see that there are notable variations year-to-year.

Much more in the 🧵 Here's a look at the dates holidays have been / will be observed in recent years, along with which week each holiday falls.

Veterans Day swings between the 45th and 46th week, while Thanksgiving swings between the 47th and 48th week.

Thus, it is difficult to get any strong read on the trend in claims data during the next few weeks.

Was Hurricane Milton behind the 10bps increase in the unemployment rate?

No. Most of the hurricane impact on the household survey shows up in the number of *employed* workers who were either 1) not at work due to bad weather or 2) worked part-time instead of full-time because of bad weather.

In October, there were 512k in the first category and 1.41m in the second category, for a total of 1.92m workers impacted by bad weather.

Compared with the typical bad weather impacts for October, these figures were ~400k and 1m, respectively for a total of 1.4m more workers impacted by bad weather than is normal for the month.

A brief 🧵with some more thoughts on the weather impacts Back in July, many thought Hurricane Beryl drove up the unemployment rate via a spike in job losers on temporary layoff.

That wasn't the case then, and it isn't the case in October.

In fact, temporary layoffs put downward pressure (-3bps) on the unemployment rate in October.

https://x.com/Econ_Parker/status/1822713256382706088

Hope everyone enjoyed the refi wave!

It completely vanished during the week ending October 11th after a sharp two-week spike following the Fed's rate cut announcement as mortgage rates have now surged back to 6.52% according to the MBA's Weekly Mortgage Application Survey - the highest level since early August.

Purchase applications also ticked down on a 4-week average basis vs their pre-COVID norm for the first time since early August.

Much more in the 🧵 Mortgage refinancing demand plunged from its highest level since 2022 back to the level that prevailed the week before the Fed rate cut in Sept.

Refi apps fell -27% w/w to -52% below the pre-COVID norm, matching the pace of applications during the first week of Sept and down sharply from the recent peak of -20% below the pre-COVID average during the week of the Fed rate cut.

The 4-week average also moved lower to -34% from -31% the week before.

Initial claims for unemployment insurance spiked more than expected by 33k to 258k (cons: 230k, Arch: 238k) during the week ending Oct 5.

Meanwhile, continuing claims also surged by 42k to 1,861k during the week ending Sept 28, also well above expectations (cons: 1,830k, Arch: 1,840k).

I estimate Hurricane Helene and furloughs related to the Boeing strike boosted initial claims by 15.7k last week vs the 12k I had penciled in, thus the remaining increase of 17k+ came from states not meaningfully impacted by either transitory factor.

The jump in continuing claims is even more surprising as there was little increase in hurricane-impacted states - it was too early for those to show up in the 9/28 continuing claims data as Helene had just made landfall on 9/27.

Many more details in the 🧵 First, some detail on my estimate of Hurricane Helene's impact.

I used the states called out by the National Weather Service as having significant rainfall associated with the hurricane.

The August Job Openings and Labor Turnover Survey (JOLTS) showed the multi-year cooldown in the labor market continued.

While the pace of hiring typically rises during expansions, this cycle has instead been driven by separations (i.e. quits, layoffs, retirements, etc...) slowing alongside a slower pace of hiring since early 2022.

The growing convergence between the two flows leaves the economy in a relatively fragile state - a further deceleration in hiring or acceleration in layoffs could lead to a quick downshift in job growth, which has already cooled substantially.

In fact, the modest recovery in job growth in August was driven by a sharp contraction in the quits rate, not a pick-up in hiring activity which continued to slow.

More details on the underlying trends in the🧵 Before diving into the national details, I wanted to highlight a key driver of the rebound in implied job growth in 2024: the South.

Over the 6-months ending August, hiring outpaced separations (i.e. net hiring or implied job growth) by an average of 150k in the South, accounting for nearly 2/3 of payroll gains. However, that's down from a recent peak of 245k back in May.

Meanwhile, the Midwest accounted for 50k, while the Northeast contributed 30k, and the West was contributed a modest 10k.

If you thought Powell sounded confident at the Sept FOMC press conference, he sounded even more so during Q&A after his prepared remarks today at the 2024 Annual NABE Meeting.

Biggest Takeaway: "if the economy continues to perform as expected, we're looking at two more rate cuts by year end - both 25bps cuts."

I scratched down some quick notes during the Q&A session - check out my takeaways in the 🧵 Setting the tone for the rest of the discussion, Ellen Zentner asked Powell what's changed since Sept.

He didn't hesitate: Annual NIPA Revisions.

The MBA's Weekly Mortgage Application Survey is finally waking up from its slumber through the week ending September 20th.

However, it's mostly a refinancing story so far: refi applications rocketed higher, as the pool of recent homebuyers with mortgages in-the-money grows every week that mortgage rates drop.

It's not a huge pool - more on that later - but it certainly is an eager pool of recent homebuyers "dating the rate" from the 7-8%+ mortgage rate era.

For a more robust response in mortgage purchase activity, we likely need to get back to rates with a 5-handle. It looks like that could happen before year-end, but I don't expect mortgage rates to remain sustainably below 6% until 2025.

Much more in the 🧵 Mortgage purchase demand inched higher to -39% below the pre-COVID norm during the week ending Sept 20, up slightly from -40% the week before but notably above the level they had previously been stuck at since April (i.e., -45%).

The 4-week average also stepped up to -40.6% from -41.4% the week before.