by Calculated Risk on 4/05/2025 07:19:00 PM

I am going on "recession watch" for only the 4th time in the 20+ years that I've been writing this blog. In December 2022 I went on "recession watch", but I noted "My sense is growth will stay sluggish in 2023, but the economy will avoid recession."  And the economy did avoid recession!

The other two times were in early 2007 (housing bust / financial crisis), and in March 2020 (pandemic). And I correctly called a recession.

Mostly I've made fun of the persistent recession callers!

Now I'm concerned about tariff policy impacting the economy.  Usually fiscal, executive and trade policy decisions wouldn't lead to an immediate recession, but these tariffs are a huge blunder.   There have been other unforced errors - like cutting basic research spending - but that is more of a long-term issue.

As an aside: Imagine a tech company announcing they were going to cut spending by eliminating R&D.  Their stock would plummet.  That is what the U.S. has done with some of the DOGE cuts.  

Some analysts have started forecasting a recession later this year due to the tariffs. For example, from Yahoo Finance: JPMorgan becomes the first Wall Street bank to forecast a US recession following Trump's tariffs

JPMorgan believes the US economy will enter a recession in the back half of 2025 as the impact of President Trump tariffs takes hold in the economy.

The firm's chief US economist Michael Feroli sees a two-quarter recession occurring in the back half of 2025 as GDP contracts by 1% in the third quarter of the year and by 0.5% in the fourth quarter. For the full-year 2025, Feroli's team projects GDP will fall by 0.3%.
...
Feroli added that a "recession in economic activity" will push the unemployment rate up to 5.3%.

I'm not sure how to estimate the economic damage caused by these tariffs. And they might just go away (no one knows).  There are also boycotts of U.S. goods and less international tourism based on both the tariffs and the inflammatory rhetoric of the new administration.  

On the other hand, the U.S. economy is very resilient and was on solid footing at the beginning of the year.

So, although I'm on "recession watch", I'm not currently predicting a recession.

These two Economist covers capture the rapid change over the last 6 months. The first is from October 2024.

Click on graph for larger image.

Just after the election, Fed Chair Powell said, "The recent performance of our economy has been remarkably good, by far the best of any major economy in the world." 

And in December, Powell said the US economy is the "envy of other large economies around the world".

The 2nd cover is the current edition.  "Ruination Day".  Ouch.

Mostly I'll be watching my favorite model for business cycle forecasting that uses new home sales (also housing starts and residential investment).

I'll also be watching the yield curve, vehicle sales, heavy truck sales and weekly unemployment claims - amoung other indicators.

To conclude: I'm now on recession watch, but I'm not predicting a recession.

Weekly Schedule

by Calculated Risk on 4/05/2025 02:11:00 PM

At the Calculated Risk Real Estate Newsletter this week:

Click on graph for larger image.

• FHFA’s National Mortgage Database: Outstanding Mortgage Rates, LTV and Credit Scores

• Moody's: Q1 2025 Apartment Vacancy Rate Highest Since 2010; Office Vacancy Rate at Record High

• Freddie Mac House Price Index Increased in February; Up 3.4% Year-over-year

• Asking Rents Mostly Unchanged Year-over-year

This is usually published 4 to 6 times a week and provides more in-depth analysis of the housing market.

by Calculated Risk on 4/05/2025 08:11:00 AM

The key economic report this week is March CPI.

----- Monday, April 7th -----
No major economic releases scheduled.

----- Tuesday, April 8th -----
6:00 AM ET: NFIB Small Business Optimism Index for March.

----- Wednesday, April 9th -----
7:00 AM ET: The Mortgage Bankers Association (MBA) will release the results for the mortgage purchase applications index.

2:00 PM: FOMC Minutes, Meeting of March 18-19

----- Thursday, April 10th -----
8:30 AM: The initial weekly unemployment claims report will be released. The consensus is for 225 initial claims up from 219 thousand last week.

8:30 AM: The Consumer Price Index for March from the BLS. The consensus is for 0.1% increase in CPI (up 2.6% YoY) and a 0.3% increase in core CPI (up 3.0% YoY).

----- Friday, April 11th -----
8:30 AM: The Producer Price Index for March from the BLS. The consensus is for a 0.2% increase in PPI, and a 0.3% increase in core PPI.

10:00 AM: University of Michigan's Consumer sentiment index (Preliminary for April).

by Calculated Risk on 4/04/2025 07:56:00 PM

Note: Mortgage rates are from MortgageNewsDaily.com and are for top tier scenarios.

For deaths, I'm currently using 4 weeks ago for "now", since the most recent three weeks will be revised significantly.

Note: "Effective May 1, 2024, hospitals are no longer required to report COVID-19 hospital admissions, hospital capacity, or hospital occupancy data."  So, I'm no longer tracking hospitalizations.

COVID Metrics
	Now	Week Ago	Goal
Deaths per Week	576	655	≤3501
1my goals to stop weekly posts. 🚩 Increasing number weekly for Deaths. ✅ Goal met.

Click on graph for larger image.

This graph shows the weekly (columns) number of deaths reported since Jan 2023.

Although weekly deaths met the original goal to stop posting in June 2023 (low of 314 deaths), I've continued to post since deaths are above the goal again - and I'll continue to post until weekly deaths are once again below the goal.

Weekly deaths are now decreasing following the winter pickup and just under double the low of last June.

And here is a graph I'm following concerning COVID in wastewater as of April 3rd:

This appears to be a leading indicator for COVID hospitalizations and deaths.  This has generally been moving down.

Nationally COVID in wastewater is "Low", down from "Moderate" two weeks ago according to the CDC.   

by Calculated Risk on 4/04/2025 02:36:00 PM

Today, in the Real Estate Newsletter: Asking Rents Mostly Unchanged Year-over-year

Brief excerpt:

Another monthly update on rents.

Tracking rents is important for understanding the dynamics of the housing market. Slower household formation and increased supply (more multi-family completions) has kept asking rents under pressure. ...

Apartment List: Asking Rent Growth -0.4% Year-over-year ...

On the supply side of the rental market, our national vacancy index now sits at 6.9 percent, the highest reading in the history of that monthly data series, which goes back to the start of 2017. After a historic tightening in 2021, multifamily occupancy has been slowly but consistently easing for over three years amid an influx of new inventory. 2024 saw the most new apartment completions since the mid-1980s, and with 750 thousand units still in the construction pipeline, the supply boom has runway to continue this year.

Realtor.com: 19th Consecutive Month with Year-over-year Decline in Rents

The median asking rent across the 50 largest metropolitan areas in the United States fell again in February, to $1,691. This marks 19 months in a row in which rent has fallen year over year, this time by 0.9% from February 2024.

This is much more in the article.

by Calculated Risk on 4/04/2025 01:12:00 PM

From BofA:

Since our last publication, our 1Q GDP tracking is up from 0.1% q/q saar to 0.4% q/q saar. [Apr 4th estimate]
emphasis added

From Goldman:

We left our Q1 GDP tracking estimate unchanged at +0.3% (quarter-over-quarter annualized). [Apr 3rd estimate]

And from the Atlanta Fed: GDPNow

The GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the first quarter of 2025 is -2.8 percent on April 3, up from -3.7 percent on April 1. The alternative model forecast, which adjusts for imports and exports of gold as described here, is -0.8 percent. [Apr 3rd estimate]

by Calculated Risk on 4/04/2025 11:25:00 AM

From Fed Chair Jerome Powell: Economic Outlook. Excerpt:

Turning to monetary policy, we face a highly uncertain outlook with elevated risks of both higher unemployment and higher inflation. The new Administration is in the process of implementing substantial policy changes in four distinct areas: trade, immigration, fiscal policy, and regulation. Our monetary policy stance is well positioned to deal with the risks and uncertainties we face as we gain a better understanding of the policy changes and their likely effects on the economy. It is not our role to comment on those policies. Rather, we make an assessment of their likely effects, observe the behavior of the economy, and set monetary policy in a way that best achieves our dual-mandate goals.

We have stressed that it will be very difficult to assess the likely economic effects of higher tariffs until there is greater certainty about the details, such as what will be tariffed, at what level and for what duration, and the extent of retaliation from our trading partners. While uncertainty remains elevated, it is now becoming clear that the tariff increases will be significantly larger than expected. The same is likely to be true of the economic effects, which will include higher inflation and slower growth. The size and duration of these effects remain uncertain. While tariffs are highly likely to generate at least a temporary rise in inflation, it is also possible that the effects could be more persistent. Avoiding that outcome would depend on keeping longer-term inflation expectations well anchored, on the size of the effects, and on how long it takes for them to pass through fully to prices. Our obligation is to keep longer-term inflation expectations well anchored and to make certain that a one-time increase in the price level does not become an ongoing inflation problem.
emphasis added

by Calculated Risk on 4/04/2025 09:14:00 AM

The headline jobs number in the March employment report was above expectations, however, January and February payrolls were revised down by 48,000 combined.   The participation rate increased, the employment population ratio was unchanged, and the unemployment rate increased to 4.2%.

Earlier: March Employment Report: 228 thousand Jobs, 4.2% Unemployment Rate

Prime (25 to 54 Years Old) Participation

Since the overall participation rate is impacted by both cyclical (recession) and demographic (aging population, younger people staying in school) reasons, here is the employment-population ratio for the key working age group: 25 to 54 years old.

The 25 to 54 years old participation rate decreased in March to 83.3% from 83.5% in February.

The 25 to 54 employment population ratio decreased to 80.4% from 80.5% the previous month.

Both are down from the recent peaks, but still near the highest level this millennium.

Average Hourly Wages

The graph shows the nominal year-over-year change in "Average Hourly Earnings" for all private employees from the Current Employment Statistics (CES).  

There was a huge increase at the beginning of the pandemic as lower paid employees were let go, and then the pandemic related spike reversed a year later.

Wage growth has trended down after peaking at 5.9% YoY in March 2022 and was at 3.8% YoY in March.   

Part Time for Economic Reasons

From the BLS report:

"The number of people employed part time for economic reasons, at 4.8 million, changed little in March. These individuals would have preferred full-time employment but were working part time because their hours had been reduced or they were unable to find full-time jobs"

The number of persons working part time for economic reasons decreased in March to 4.78 million from 4.94 million in February.  This is above the pre-pandemic levels.

These workers are included in the alternate measure of labor underutilization (U-6) that decreased to 7.9% from 8.0% in the previous month. This is down from the record high in April 2020 of 22.9% and up from the lowest level on record (seasonally adjusted) in December 2022 (6.6%). (This series started in 1994). This measure is above the 7.0% level in February 2020 (pre-pandemic).

Unemployed over 26 Weeks

This graph shows the number of workers unemployed for 27 weeks or more.

According to the BLS, there are 1.46 million workers who have been unemployed for more than 26 weeks and still want a job, up from 1.44 million the previous month.

This is down from post-pandemic high of 4.171 million, and up from the recent low of 1.056 million.

This is above pre-pandemic levels.

Job Streak

Through March 2025, the employment report indicated positive job growth for 51 consecutive months, putting the current streak in 2nd place of the longest job streaks in US history (since 1939).  

Headline Jobs, Top 10 Streaks
	Year Ended	Streak, Months
1	2020	113
2	Current, N/A	511
3	1990	48
4	2007	46
5	1979	45
6 tie	1943	33
6 tie	1986	33
6 tie	2000	33
9	1967	29
10	1995	25
1Currrent Streak

Summary:

The headline jobs number in the March employment report was above expectations, however, January and February payrolls were revised down by 48,000 combined.   The participation rate increased, the employment population ratio was unchanged, and the unemployment rate increased to 4.2%.

This was a solid employment report.

by Calculated Risk on 4/04/2025 08:30:00 AM

From the BLS: Employment Situation

Total nonfarm payroll employment rose by 228,000 in March, and the unemployment rate changed little at 4.2 percent, the U.S. Bureau of Labor Statistics reported today. Job gains occurred in health care, in social assistance, and in transportation and warehousing. Employment also increased in retail trade, partially reflecting the return of workers from a strike. Federal government employment declined.
...
The change in total nonfarm payroll employment for January was revised down by 14,000, from +125,000 to +111,000, and the change for February was revised down by 34,000, from +151,000 to +117,000. With these revisions, employment in January and February combined is 48,000 lower than previously reported.
emphasis added

Click on graph for larger image.

The first graph shows the jobs added per month since January 2021.

Total payrolls increased by 228 thousand in March.  Private payrolls increased by 209 thousand, and public payrolls increased 19 thousand (Federal payrolls decreased 4 thousand).

Payrolls for January and February were revised down by 48 thousand, combined.

The second graph shows the year-over-year change in total non-farm employment since 1968.

In March, the year-over-year change was 1.88 million jobs.  Employment was up solidly year-over-year.

The third graph shows the employment population ratio and the participation rate.

The Labor Force Participation Rate increased to 62.5% in March, from 62.4% in February. This is the percentage of the working age population in the labor force.

The Employment-Population ratio was unchanged at 59.9% from 59.9% in February (blue line).

I'll post the 25 to 54 age group employment-population ratio graph later.

The fourth graph shows the unemployment rate.

The unemployment rate increased to 4.2% in March from 4.1% in February.

This was above consensus expectations; however, January and February payrolls were revised down by 48,000 combined.  

I'll have more later ...

by Calculated Risk on 4/03/2025 08:08:00 PM

Note: Mortgage rates are from MortgageNewsDaily.com and are for top tier scenarios.

Friday:
• At 8:30 AM ET, Employment Report for March.   The consensus is for 135,000 jobs added, and for the unemployment rate to be unchanged at 4.1%.

• At 11:25 AM, Speech, Fed Chair Jerome Powell, Economic Outlook, At the Society for Advancing Business Editing and Writing (SABEW) Annual Conference, Arlington, Virginia