by Calculated Risk on 1/05/2026 10:00:00 AM

(Posted with permission). The ISM manufacturing index indicated contraction. The PMI® was at 47.9% in December, down from 48.2% in November. The employment index was at 44.9%, up from 44.0% the previous month, and the new orders index was at 47.7%, up from 47.4%.

From ISM: Manufacturing PMI® at 47.9% December 2025 ISM® Manufacturing PMI® Report

Economic activity in the manufacturing sector contracted in December for the 10th consecutive month, following a two-month expansion preceded by 26 straight months of contraction, say the nation’s supply executives in the latest ISM® Manufacturing PMI® Report.

The report was issued today by Susan Spence, MBA, Chair of the Institute for Supply Management® (ISM®) Manufacturing Business Survey Committee.

“The Manufacturing PMI® registered 47.9 percent in December, a 0.3-percentage point decrease compared to the reading of 48.2 percent in November and the lowest reading of 2025. The overall economy continued in expansion for the 68th month after one month of contraction in April 2020. (A Manufacturing PMI® above 42.3 percent, over a period of time, generally indicates an expansion of the overall economy.) The New Orders Index contracted for a fourth straight month in December following one month of growth; the figure of 47.7 percent is 0.3 percentage point higher than the 47.4 percent recorded in November. The December reading of the Production Index (51 percent) is 0.4 percentage point lower than November’s figure of 51.4 percent. The Prices Index remained in expansion (or ‘increasing’ territory), registering 58.5 percent, the same as November’s reading. The Backlog of Orders Index registered 45.8 percent, up 1.8 percentage points compared to the 44 percent recorded in November. The Employment Index registered 44.9 percent, up 0.9 percentage point from November’s figure of 44 percent.
emphasis added

This suggests manufacturing contracted for the tenth consecutive month in December.  This was below the consensus forecast, and employment was very weak and prices very strong.

by Calculated Risk on 1/05/2026 08:11:00 AM

Altos reports that active single-family inventory was down 2.2% week-over-week.  

Note that Inventory usually bottoms seasonally in January or February.

The first graph shows the seasonal pattern for active single-family inventory since 2015.

Click on graph for larger image.

The red line is for 2025.  The black line is for 2019.  

Inventory was up 13.3% compared to the same week in 2025 (last week it was up 13.1%), and down 6.0% compared to the same week in 2019 (last week it was down 11.8%). 

Inventory started 2026 down almost 12% compared to 2019.  

This second inventory graph is courtesy of Altos Research.

As of January 2nd, inventory was at 720 thousand (7-day average), compared to 736 thousand the prior week.  

Mike Simonsen discusses this data and much more regularly on YouTube

by Calculated Risk on 1/04/2026 06:13:00 PM

Weekend:
• Schedule for Week of January 4, 2026

Monday:
• Early, Light vehicle sales for December. The consensus is for 15.5 million SAAR in December, down from 15.6 million SAAR in November (Seasonally Adjusted Annual Rate).

• At 10:00 AM ET, ISM Manufacturing Index for December.  The consensus is for 48.3%, up from 48.2%.

From CNBC: Pre-Market Data and Bloomberg futures S&P 500 and DOW futures are mostly unchanged (fair value).

Oil prices were moxed over the last week with WTI futures at $57.32 per barrel and Brent at $60.75 per barrel. A year ago, WTI was at $75, and Brent was at $77 - so WTI oil prices are down about 24% year-over-year.

Here is a graph from Gasbuddy.com for nationwide gasoline prices. Nationally prices are at $2.77 per gallon. A year ago, prices were at $3.04 per gallon, so gasoline prices are down $0.27 year-over-year.

by Calculated Risk on 1/04/2026 08:12:00 AM

Here is another update on lumber prices.

NOTE: The CME group discontinued the Random Length Lumber Futures contract on May 16, 2023.  I switched to a physically-delivered Lumber Futures contract that was started in August 2022.  Unfortunately, this impacts long term price comparisons since the new contract was priced about 24% higher than the old random length contract for the period when both contracts were available.

This graph shows CME random length framing futures through August 2022 (blue), and the new physically-delivered Lumber Futures (LBR) contract starting in August 2022 (Red).

On January 2, 2026, LBR was at $534.00 per 1,000 board feet, down 1.6% from a year ago.

Click on graph for larger image.

There is somewhat of a seasonal demand for lumber, and lumber prices frequently peak in the first half of the year.

The pickup in early 2018 was due to the Trump lumber tariffs in 2017.  There were huge increases during the pandemic due to a combination of supply constraints and a pickup in housing starts.  

Now, even with the tariffs, prices are mostly unchanged year-over-year suggesting weak demand for framing lumber.

by Calculated Risk on 1/03/2026 02:11:00 PM

At the Calculated Risk Real Estate Newsletter this week:

Click on graph for larger image.

• Case-Shiller: National House Price Index Up 1.4% year-over-year in October

• FHFA’s Q3 National Mortgage Database: Outstanding Mortgage Rates, LTV and Credit Scores

• Freddie Mac House Price Index Up 1.0% Year-over-Year in November

• Inflation Adjusted House Prices 2.7% Below 2022 Peak

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

by Calculated Risk on 1/03/2026 08:11:00 AM

The key reports this week are the December employment report and Housing Starts for September and October.

Other key indicators include the November Trade Deficit, November Job Openings, December ISM Manufacturing and December Vehicle Sales.

----- Monday, January 5th -----
Early: Light vehicle sales for December.

The consensus is for 15.5 million SAAR in December, down from 15.6 million SAAR in November (Seasonally Adjusted Annual Rate).

This graph shows light vehicle sales since the BEA started keeping data in 1967. 

The dashed line is the current sales rate.

10:00 AM: ISM Manufacturing Index for December.  The consensus is for 48.3%, up from 48.2%.

----- Tuesday, January 6th -----
No major economic releases scheduled.

----- Wednesday, January 7th -----
7:00 AM ET: The Mortgage Bankers Association (MBA) will release the results for the mortgage purchase applications index. This will be two weeks of data.

8:15 AM: The ADP Employment Report for December. This report is for private payrolls only (no government). The consensus is for 50,000, up from -32,000 jobs added in November.

10:00 AM ET: Job Openings and Labor Turnover Survey for November from the BLS.

This graph shows job openings (black line), hires (dark blue), Layoff, Discharges and other (red column), and Quits (light blue column) from the JOLTS.

Jobs openings increased in October to 7.67 million from 7.66 million in September.

10:00 AM: the ISM Services Index for December.

----- Thursday, January 8th -----
8:30 AM: Trade Balance report for November from the Census Bureau.

This graph shows the U.S. trade deficit, with and without petroleum, through the most recent report. The blue line is the total deficit, and the black line is the petroleum deficit, and the red line is the trade deficit ex-petroleum products.

The consensus is the trade deficit to be $59.4 billion.  The U.S. trade deficit was at $52.8 billion in September.

8:30 AM: The initial weekly unemployment claims report will be released.  The consensus is for 205K, up from 199K.

----- Friday, January 9th -----
8:30 AM: Employment Report for December.   The consensus is for 55,000 jobs added, and for the unemployment rate to decline to 4.5%.

There were 64,000 jobs added in November, and the unemployment rate was at 4.6%.

This graph shows the jobs added per month since January 2021.

10:00 AM: Housing Starts for September and October.

This graph shows single and total housing starts since 2000.

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

12:00 PM: Q3 Flow of Funds Accounts of the United States from the Federal Reserve.

by Calculated Risk on 1/02/2026 11:12:00 AM

Today, in the Calculated Risk Real Estate Newsletter: Inflation Adjusted House Prices 2.7% Below 2022 Peak

Excerpt:

It has almost 20 years since the housing bubble peak, ancient history for many readers!

In the October Case-Shiller house price index released Tuesday, the seasonally adjusted National Index (SA), was reported as being 78% above the bubble peak. However, in real terms, the National index (SA) is about 9.7% above the bubble peak (and historically there has been an upward slope to real house prices). The composite 20, in real terms, is 1.1% above the bubble peak.
...
People usually graph nominal house prices, but it is also important to look at prices in real terms. As an example, if a house price was $300,000 in January 2010, the price would be $448,000 today adjusted for inflation (49% increase). That is why the second graph below is important - this shows "real" prices.br />
The third graph shows the price-to-rent ratio, and the fourth graph is the affordability index. The last graph shows the 5-year real return based on the Case-Shiller National Index.
...
The second graph shows the same two indexes in real terms (adjusted for inflation using CPI).

In real terms (using CPI), the National index is 2.7% below the recent peak, and the Composite 20 index is 3.0% below the recent peak in 2022.

Both the real National index and the Comp-20 index increased in October. This was the first increase in the real National index has in 10 months.

It has now been 41 months since the real peak in house prices. Typically, after a sharp increase in prices, it takes a number of years for real prices to reach new highs (see House Prices: 7 Years in Purgatory)

There is much more in the article!

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by Calculated Risk on 1/02/2026 08:11:00 AM

Earlier I posted some questions on my blog for next year: Ten Economic Questions for 2026. Some of these questions concern real estate (inventory, house prices, housing starts, new home sales), and I posted thoughts on those in the newsletter (others like GDP and employment will be on this blog).

I'm adding some thoughts and predictions for each question.

Here is a review of the Ten Economic Questions for 2025.

1) Economic growth: Economic growth was probably close to 2% Q4-over-Q4 in 2025. The FOMC is expecting growth of 2.1% to 2.5% Q4-over-Q4 in 2026. How much will the economy grow in 2026?  Will there be a recession in 2026?

A year ago, I argued that "Looking at 2025, a recession is mostly off the table."  I did go on recession watch during 2025 due to the tariffs, but I noted I wasn't forecasting a recession. 

Even though job growth will likely be sluggish in 2026, fiscal policy will be supportive of economic growth and there will be some boost from a rebound from the government shutdown.  So,  I think a recession in 2026 is very unlikely.  Of course there are always exogenous events such as another pandemic, super volcanoes, a major meteor strike or even nuclear war.  

It is possible that we will see a pull back in AI and data center investing, and that might negatively impact growth, but that would likely be a 2027 story.   It is very likely that many of the tariffs will be ruled illegal (they clearly are illegal), but the Administration has other tools to enact tariffs (more economic uncertainty). 

I've expressed concern about unregulated or poorly regulated areas of finance leading to another financial crisis, but that takes a few years to happen.

Here is a table of the annual change in real GDP since 2005. Note: This table includes both annual change and Q4 over the previous Q4 (two slightly different measures).     

Real GDP Growth
Year	Annual GDP	Q4 / Q4
2005	3.5%	3.0%
2006	2.8%	2.6%
2007	2.0%	2.1%
2008	0.1%	-2.5%
2009	-2.6%	0.1%
2010	2.7%	2.8%
2011	1.6%	1.5%
2012	2.3%	1.6%
2013	2.1%	3.0%
2014	2.5%	2.7%
2015	2.9%	2.1%
2016	1.8%	2.2%
2017	2.5%	3.0%
2018	3.0%	2.1%
2019	2.6%	3.4%
2020	-2.1%	-0.9%
2021	6.2%	5.8%
2022	2.5%	1.3%
2023	2.9%	3.4%
2024	2.8%	2.4%
20251	2.1%	2.1%
1 2025 estimate

  

Real GDP growth is a combination of labor force growth and productivity.  

Productivity varies and is difficult to predict, but the labor force growth will likely be sluggish in 2026.  So, my guess is that real annual GDP growth will be less than the FOMC expects, perhaps close to 2%.

Here are the Ten Economic Questions for 2026 and a few predictions:

• Question #1 for 2026: How much will the economy grow in 2026? Will there be a recession in 2026?

• Question #2 for 2026:  How much will job growth slow in 2026? Or will the economy lose jobs?

• Question #3 for 2026: What will the unemployment rate be in December 2026?

• Question #4 for 2026: What will the participation rate be in December 2026?

• Question #5 for 2026: What will the YoY core inflation rate be in December 2026?

• Question #6 for 2026: What will the Fed Funds rate be in December 2026?

• Question #7 for 2026: How much will wages increase in 2026?

• Question #8 for 2026: How much will Residential investment change in 2026? How about housing starts and new home sales in 2026?

• Question #9 for 2026: What will happen with house prices in 2026?

• Question #10 for 2026: Will inventory increase further in 2026?

by Calculated Risk on 1/01/2026 02:36:00 PM

Earlier I posted some questions on my blog for next year: Ten Economic Questions for 2026. Some of these questions concern real estate (inventory, house prices, housing starts, new home sales), and I posted thoughts on those in the newsletter (others like GDP and employment will be on this blog).

I'm adding some thoughts and predictions for each question.

Here is a review of the Ten Economic Questions for 2025.

2) Employment: Through November 2025, the economy added 610 thousand jobs in 2025.   How many jobs will be added in 2026?  Or will the economy lose jobs?

Last year, I wrote about 2025:

"So, my forecast is for gains of around 1.0 million jobs in 2025.  This will probably be the slowest job growth since 2010 (excluding the 2020 pandemic job losses)."

That was a little optimistic - excluding the pandemic and the great recession - 2025 saw the fewest jobs added since 2003.  Ouch.

For review, here is a table of the annual change in total nonfarm, private and public sector payrolls jobs since 1997.  

Change in Payroll Jobs per Year (000s)
	Total, Nonfarm	Private	Public
1997	3,406	3,211	195
1998	3,046	2,733	313
1999	3,188	2,727	461
2000	1,933	1,669	264
2001	-1,733	-2,284	551
2002	-518	-751	233
2003	124	166	-42
2004	2,040	1,893	147
2005	2,529	2,343	186
2006	2,091	1,882	209
2007	1,146	858	288
2008	-3,548	-3,728	180
2009	-5,039	-4,965	-74
2010	1,022	1,238	-216
2011	2,058	2,370	-312
2012	2,186	2,253	-67
2013	2,299	2,366	-67
2014	2,991	2,864	127
2015	2,7173	2,563	150
2016	2,331	2,124	207
2017	2,115	2,035	80
2018	2,286	2,159	127
2019	1,986	1,771	215
2020	-9,274	-8,199	-1,048
2021	7,233	6,837	396
2022	4,555	4,256	299
2023	2,594	1,860	734
2024	2,012	1,559	453
2025	6101	7661	-1561
111 Months through November.

The bad news is the job market has stalled.  The BLS noted in December:

"Total nonfarm payroll employment ... has shown little net change since April."

Fed Chair Powell noted at the recent FOMC press conference that the economy might have lost an average of 20,000 jobs per month over that period.

Click on graph for larger image.

And more bad news - for job growth - is that the labor force will grow slowly in 2026!

This graph shows the jobs added per month since January 2021.  

It appears that population growth will be slow in 2026 (births minus deaths plus net immigration) and the overall participation rate will decline due to demographics.  That suggests that labor force will grow slowly.  My sense is the economy will not lose jobs in 2026, but it is possible.

So, my forecast is for gains of around 0.6 to 1.0 million jobs in 2026.  This might be an even slower year for job growth than 2025!   

Here are the Ten Economic Questions for 2026 and a few predictions:

• Question #1 for 2026: How much will the economy grow in 2026? Will there be a recession in 2026?

• Question #2 for 2026:  How much will job growth slow in 2026? Or will the economy lose jobs?

• Question #3 for 2026: What will the unemployment rate be in December 2026?

• Question #4 for 2026: What will the participation rate be in December 2026?

• Question #5 for 2026: What will the YoY core inflation rate be in December 2026?

• Question #6 for 2026: What will the Fed Funds rate be in December 2026?

• Question #7 for 2026: How much will wages increase in 2026?

• Question #8 for 2026: How much will Residential investment change in 2026? How about housing starts and new home sales in 2026?

• Question #9 for 2026: What will happen with house prices in 2026?

• Question #10 for 2026: Will inventory increase further in 2026?

by Calculated Risk on 1/01/2026 09:11:00 AM

Earlier I posted some questions on my blog for next year: Ten Economic Questions for 2026. Some of these questions concern real estate (inventory, house prices, housing starts, new home sales), and I posted thoughts on those in the newsletter (others like GDP and employment will be on this blog).

I'm adding some thoughts and predictions for each question.

Here is a review of the Ten Economic Questions for 2025.

3) Unemployment Rate: The unemployment rate was at 4.6% in November, up from 4.2% in November 2024.   Currently the FOMC is projecting the unemployment rate will decrease to the 4.3% to 4.4% range in Q4 2026.  What will the unemployment rate be in December 2026?

Click on graph for larger image.

The unemployment rate is from the household survey (CPS), and the rate increased in November to 4.6%, up from 4.2% in November 2024.  An unemployment rate of 4.6% over the next few months might suggest an employment recession according to the Sahm rule.

Forecasting the unemployment rate includes forecasts for economic and payroll growth, and also for changes in the participation rate (previous question).

"Uncertainty" was the key economic word for 2025, and probably for 2026 too.  There is significant uncertainty in the labor market with signs of weak hiring and concerns that AI will impact job growth.  Sometimes an employment recession continues as some employed individuals become cautious.  At the same time, we should see some economic boost from fiscal policy in 2026.

It appears that the participation rate will decline in 2026 based on demographics and that population growth will be slow due to less net migration.  That suggests that the labor force will grow slowly in 2026. So even if job growth stays slow in 2026 (next question), the unemployment rate might stabilize or even decline.

However, my guess is the unemployment rate will be in the mid-to-high 4% range in December 2026.  

Here are the Ten Economic Questions for 2026 and a few predictions:

• Question #1 for 2026: How much will the economy grow in 2026? Will there be a recession in 2026?

• Question #2 for 2026:  How much will job growth slow in 2026? Or will the economy lose jobs?

• Question #3 for 2026: What will the unemployment rate be in December 2026?

• Question #4 for 2026: What will the participation rate be in December 2026?

• Question #5 for 2026: What will the YoY core inflation rate be in December 2026?

• Question #6 for 2026: What will the Fed Funds rate be in December 2026?

• Question #7 for 2026: How much will wages increase in 2026?

• Question #8 for 2026: How much will Residential investment change in 2026? How about housing starts and new home sales in 2026?

• Question #9 for 2026: What will happen with house prices in 2026?

• Question #10 for 2026: Will inventory increase further in 2026?