by Calculated Risk on 6/11/2025 08:30:00 AM

From the BLS:

The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.1 percent on a seasonally adjusted basis in May, after rising 0.2 percent in April, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all items index increased 2.4 percent before seasonal adjustment.

The index for shelter rose 0.3 percent in May and was the primary factor in the all items monthly increase. The food index increased 0.3 percent as both of its major components, the index for food at home and the index for food away from home also rose 0.3 percent in May. In contrast, the energy index declined 1.0 percent in May as the gasoline index fell over the month.

The index for all items less food and energy rose 0.1 percent in May, following a 0.2-percent increase in April. Indexes that increased over the month include medical care, motor vehicle insurance, household furnishings and operations, personal care, and education. The indexes for airline fares, used cars and trucks, new vehicles, and apparel were among the major indexes that decreased in May.

The all items index rose 2.4 percent for the 12 months ending May, after rising 2.3 percent over the 12 months ending April. The all items less food and energy index rose 2.8 percent over the last 12 months. The energy index decreased 3.5 percent for the 12 months ending May. The food index increased 2.9 percent over the last year.
emphasis added

The change in CPI was slightly below expectations. I'll post a graph later today after the Cleveland Fed releases the median and trimmed-mean CPI.

Weekly Schedule

by Calculated Risk on 6/11/2025 07:00:00 AM

From the MBA: Mortgage Applications Increase in Latest MBA Weekly Survey

Mortgage applications increased 12.5 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending June 6, 2025. Last week’s results included an adjustment for the Memorial Day holiday.

The Market Composite Index, a measure of mortgage loan application volume, increased 12.5 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index increased 23 percent compared with the previous week. The Refinance Index increased 16 percent from the previous week and was 28 percent higher than the same week one year ago. The seasonally adjusted Purchase Index increased 10 percent from one week earlier. The unadjusted Purchase Index increased 20 percent compared with the previous week and was 20 percent higher than the same week one year ago.

“Coming out of the Memorial Day holiday, mortgage applications increased to the highest level in over a month, driven by growth in both purchase and refinance applications. Treasury rates saw some movement during the week, which resulted in additional opportunities for borrowers,” said Joel Kan, MBA’s Vice President and Deputy Chief Economist. “The rate for 15-year fixed rate loans and FHA loans saw declines last week, while the 30-year fixed rate was largely unchanged. Purchase applications were 20 percent ahead of last year’s pace, continuing to show strength compared to a year ago. Despite ongoing uncertainty surrounding the economy, homebuyers seem to be taking advantage of loosening housing inventory in certain markets.”
...
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($806,500 or less) increased to 6.93 percent from 6.92 percent, with points decreasing to 0.64 from 0.66 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans.
emphasis added

Click on graph for larger image.

The first graph shows the MBA mortgage purchase index.

According to the MBA, purchase activity is up 20% year-over-year unadjusted. 

Red is a four-week average (blue is weekly).  

Purchase application activity is still depressed, but above the lows of October 2023 and is 13% above the lowest levels during the housing bust.  

The second graph shows the refinance index since 1990.

The refinance index increased but remained very low.

by Calculated Risk on 6/10/2025 07:45:00 PM

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

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

• At 8:30 AM, The Consumer Price Index for May from the BLS. The consensus is for 0.2% increase in CPI (up 2.5% YoY), and a 0.3% increase in core CPI (up 2.9% YoY).

by Calculated Risk on 6/10/2025 02:44:00 PM

Note: I've received a number of requests to post this again.  So here is another update of tracking employment during Presidential terms.  We frequently use Presidential terms as time markers - we could use Speaker of the House, Fed Chair, or any other marker.

Important: There are many differences between these periods. Overall employment was smaller in the '80s, however the participation rate was increasing in the '80s (younger population and women joining the labor force), and the participation rate is generally declining now.  But these graphs give an overview of employment changes.

The first graph shows the change in private sector payroll jobs from when each president took office until the end of their term(s). Presidents Carter, George H.W. Bush, and Biden only served one term.

Mr. G.W. Bush (red) took office following the bursting of the stock market bubble and left during the bursting of the housing bubble. Mr. Obama (dark blue) took office during the financial crisis and great recession. There was also a significant recession in the early '80s right after Mr. Reagan (dark red) took office.

There was a recession towards the end of President G.H.W. Bush (light purple) term, and Mr. Clinton (light blue) served for eight years without a recession.   There was a pandemic related recession in 2020.

First, here is a table for private sector jobs for each term. (Blue for Democrats, Red for Republicans)

Term	Private Sector Jobs Added (000s)
Biden	14,327
Clinton 1	10,875
Clinton 2	10,104
Obama 2	9,924
Reagan 2	9,351
Carter	9,039
Reagan 1	5,363
Obama 1	1,889
GHW Bush	1,507
Trump 2	5071
GW Bush 2	453
GW Bush 1	-822
Trump 1	-2,178
1Through 4 months

Click on graph for larger image.

The first graph is for private employment only.

Private sector employment increased by 9,039,000 under President Carter (dashed green), by 14,714,000 under President Reagan (dark red), 1,507,000 under President G.H.W. Bush (light purple), 20,979,000 under President Clinton (light blue), lost 369,000 under President G.W. Bush, and gained 11,813,000 under President Obama (dark dashed blue).  During President Trump's terms (Orange), the economy has lost 1,671,000 private sector jobs.

 A big difference between the presidencies has been public sector employment.  Note: the bumps in public sector employment due to the decennial Census in 1980, 1990, 2000, 2010 and 2020. 

The public sector grew during Mr. Carter's term (up 1,304,000), during Mr. Reagan's terms (up 1,414,000), during Mr. G.H.W. Bush's term (up 1,127,000), during Mr. Clinton's terms (up 1,934,000), and during Mr. G.W. Bush's terms (up 1,744,000 jobs).  However, the public sector declined significantly while Mr. Obama was in office (down 263,000 jobs).  During Mr. Trump's terms, the economy lost 536,000 public sector jobs (mostly teachers during the pandemic).

And a table for public sector jobs. Public sector jobs increased have increased the most during Biden's term (mostly state and local employment), ahead of the number during Reagan's 2nd term.  Public sector jobs declined the most during Obama's first term.

Term	Public Sector Jobs Added (000s)
Biden	1,813
Reagan 2	1,438
Carter	1,304
Clinton 2	1,242
GHW Bush	1,127
GW Bush 1	900
GW Bush 2	844
Clinton 1	692
Obama 2	447
Trump 2	11
Reagan 1	-24
Trump 1	-537
Obama 1	-710
1Through 4 months

by Calculated Risk on 6/10/2025 11:55:00 AM

The Consumer Price Index for May is scheduled to be released tomorrow. The consensus is for a 0.2% increase in CPI, and a 0.3% increase in core CPI.  The consensus is for CPI to be up 2.5% year-over-year (YoY), and core CPI to be up 2.9% YoY.

From Goldman Sachs economists:

We expect a 0.25% increase in May core CPI (vs. +0.3% consensus), corresponding to a year-over-year rate of 2.89% (vs. +2.9% consensus). We expect a 0.17% increase in headline CPI (vs. +0.2% consensus), reflecting higher food prices (+0.4%) and but sharply lower energy prices (-1.2%). ...

Going forward, the impact of tariffs will likely provide a somewhat larger boost to monthly inflation, and we expect monthly core CPI inflation of around 0.35% over the next few months. Our forecast reflects a sharp acceleration in most core goods categories but limited impact on core services inflation, at least in the near term. Aside from tariff effects, we expect underlying trend inflation to fall further this year, reflecting shrinking contributions from the auto, housing rental, and labor markets. We expect year-over-year core CPI inflation of +3.5% and core PCE inflation of +3.6% in December 2025.

From BofA:

For the May CPI report, we forecast headline CPI rose by 0.2% m/m (0.16% unrounded) which would push the y/y rate up a tenth to 2.4%. Core inflation, meanwhile, likely will print at a firm 0.2% m/m (0.24% unrounded). This would result in the y/y rate increasing from 2.8% to 2.9%. We expect to see more signs of tariffs driving prices higher, but favorable seasonal factors for autos and declines in certain services categories will keep a lid on the top line inflation numbers.

Note that month-to-month inflation was soft in May and June 2024.

Click on graph for larger image.

This graph shows the month-to-month change in both headline and core inflation since January 2024.

The circled area is the change for last May and June when inflation was soft. So even somewhat benign readings over the next two months will push up year-over-year inflation. Then the tariff related inflation will start to kick in.

by Calculated Risk on 6/10/2025 08:23:00 AM

Today, in the Calculated Risk Real Estate Newsletter: Part 2: Current State of the Housing Market; Overview for mid-June 2025

A brief excerpt:

Yesterday, in Part 1: Current State of the Housing Market; Overview for mid-June 2025 I reviewed home inventory, housing starts and sales. I noted that the key story right now for existing homes is that inventory is increasing sharply, and sales are essentially flat compared to last year. That means prices will be under pressure (although there will not be a huge wave of distressed sales). And there are significant regional differences too.

In Part 2, I will look at house prices, mortgage rates, rents and more.
...
The Case-Shiller National Index increased 3.4% year-over-year (YoY) in March and will likely be lower year-over-year in the April report compared to March (based on other data).
...
The MoM decrease in the seasonally adjusted (SA) Case-Shiller National Index was at -0.30% (a -3.5% annual rate). This was the first MoM decrease since January 2023.

There is much more in the article.

by Calculated Risk on 6/09/2025 08:07:00 PM

From Matthew Graham at Mortgage News Daily: Mortgage Rates a Hair Lower to Start The Week

As hoped, Friday's big rate spike did not carry additional momentum into the new week. This is occasionally a risk when rates are responding to big surprise in the jobs report, but slightly less of a risk when the other economic data had been weaker. [30 year fixed 6.95%]
emphasis added

Tuesday:
• At 6:00 AM ET, NFIB Small Business Optimism Index for April.

by Calculated Risk on 6/09/2025 04:12:00 PM

The ICE Home Price Index (HPI) is a repeat sales index. ICE reports the median price change of the repeat sales.

From ICE (Intercontinental Exchange):

• Recent data shows home price growth continued to cool, dropping to an annual growth rate of +1.4%, down from an already low +1.6% mid-month.

• On a seasonally adjusted basis, prices fell by -0.01% in the month – the first decline in this metric since 2022.

• In fact, if you back out outliers, such as the Fed rate hikes in 2022 and the COVID shutdown in 2020, this is the first time we’ve seen home prices decline, on an adjusted basis, in any month since 2012.

• Condos were the first to turn, with condo prices now down nearly a full percentage point from the same time last year. Single family residences, on the other hand, are still up a modest +1.7%.

Almost a third (30%) of all major home sales markets have seen prices fall by at least a full percentage point, with 20% falling by 2% and seven markets (Austin, Cape Coral, North Port, San Francisco, Phoenix, San Antonio, and Boise City) falling by more than 5%.

The largest drops from the peak in 2022 have been in Austin (-19.2%), Cape Coral (-12.1%), North Port, Fla. (-10.2%) and San Francisco (-8.3%)

Why is this happening?

Mortgage rates have ticked higher in the wake of recent tariff and government spending announcements, which increased inflationary concerns and decreased the number of Fed rate cuts expected by the market in 2025. Higher rates and moderated demand are allowing inventory levels to build, especially in the western U.S. with 40% of markets now seeing more homes for sale than they averaged from 2017-2019 and another 10% on pace for inventory to ‘normalize’ by the end of the year. Denver now has twice as many homes for sale as it did in the years leading up to the pandemic, with California’s 10 largest markets seeing 40-75% more homes available for sale than at the same time last year.

Andy Walden, head of mortgage and housing market research for ICE, says:

“We continue to see an inflection in the housing market as home-price softening expands beyond the Sunbelt into the West. With inventory levels beginning to normalize across much of the country, prospective homebuyers are finally beginning to see some long-anticipated price relief.”

As ICE mentioned, cities in the South have been leading the way in inventory increases and price declines (especially Florida and Texas). Now the West Coast markets are following.

by Calculated Risk on 6/09/2025 01:49:00 PM

Early in February, I expressed my "increasing concern" about the negative economic impact of "executive / fiscal policy errors", however, I concluded that post by noting that I was not currently on recession watch.

In early April, I went on recession watch, but I'm still not yet predicting a recession for several reasons: the U.S. economy is very resilient and was on solid footing at the beginning of the year, the administration might reverse many of the tariffs (we've seen that before), and Congress might place some checks on the executive branch.  Also, perhaps the tariffs are not enough to topple the economy.

Last month Warren Buffett said:

"We should be looking to trade with the rest of the world, and we should do what we do best, and they should do what they do best ... Trade should not be a weapon.”

In the short term, it is mostly trade policy that will negatively impact the economy.  However, there other aspects of policy that bear watching.

Here is some of the data I'm watching.  

Housing:  Housing is the basis of one of my favorite models for business cycle forecasting.

This graph shows the YoY change in New Home Sales from the Census Bureau.  Currently new home sales (based on 3-month average of NSA data) are up 3% year-over-year.

Usually when the YoY change in New Home Sales falls about 20%, a recession will follow.  An exception for this data series was the mid '60s when the Vietnam buildup kept the economy out of recession.   Another exception was in late 2021 - we saw a significant YoY decline in new home sales related to the pandemic and the surge in new home sales in the second half of 2020.  I ignored that downturn as a pandemic distortion.  Also note that the sharp decline in 2010 was related to the housing tax credit policy in 2009 - and was just a continuation of the housing bust.

The YoY change in new home sales in late 2022 and early 2023 suggested a possible recession.  But as I noted earlier, I was able to look past the pandemic distortion and was able to predict a pickup in new home sales due to the low level of existing home inventory and because homebuilders could offer mortgage incentives that would somewhat offset the sharp increase in mortgage rates.

There are no special circumstances now, and if this measure falls to off 20% a recession seems likely.

Yield Curve: The yield curve is a commonly used leading indicator.  I dismissed it when the yield curve inverted in 2019 and again in 2022. Both times dismissing the yield curve was correct (the recession in 2020 was obviously due to the pandemic, so we will never know if the yield curve failed to predict a recession in 2019).

Here is a graph of 10-Year Treasury Constant Maturity Minus 2-Year Treasury Constant Maturity from FRED since 1976.

 

The yield curve reverted to normal last year and is currently positive at 0.47.  If this inverts, this might suggest a recession is coming.

Click here for interactive graph at FRED.

Heavy Truck (and Vehicle Sales): Another indicator I like to use is heavy truck sales.  This graph shows heavy truck sales since 1967 using data from the BEA. The dashed line is the May 2025 seasonally adjusted annual sales rate (SAAR). Note: "Heavy trucks - trucks more than 14,000 pounds gross vehicle weight."

Heavy truck sales were at 446 thousand SAAR in May, down from 457 thousand in April, and down 7.9% from 484 thousand SAAR in May 2024. 

Usually, heavy truck sales decline sharply prior to a recession and sales were OK in May.  

And light vehicle sales were ok in May after surging in March and April as buyers rushed to beat the tariffs.

This graph shows light vehicle sales since the BEA started keeping data in 1967.   This is more of a concurrent indicator than heavy trucks. 

Light vehicle sales in May (15.65 million SAAR) were down 9.4% from April, and down 1.1% from May 2024.

Unemployment: Two other concurrent indicators are the unemployment rate (using the "Sahm Rule") and weekly unemployment claims.

Here is a graph of the Sahm rule from FRED since 1959.

The Sahm Rule was at 0.27 in May. 

 If this increases to 0.5 it will suggest a possible recession.

And weekly unemployment claims always rise sharply at the beginning of a recession (other events - like hurricane Katrina - can cause a temporary spike in weekly claims).

As I noted earlier, 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 current administration.  

None of these indicators are suggesting a recession.  For now, I'll focus on the leading indicators (especially housing) and I'll update this post monthly while I'm on recession watch.  

by Calculated Risk on 6/09/2025 10:25:00 AM

Today, in the Calculated Risk Real Estate Newsletter: Part 1: Current State of the Housing Market; Overview for mid-June 2025

A brief excerpt:

This 2-part overview for mid-June provides a snapshot of the current housing market.

First, a quote from Toll Brothers CEO Douglas Yearley Jr.:

“The spring selling season, which is really a winter selling season, is when most new homes are sold in this country. It's mid January until the end of April, and the reason for that is most people want to move into their new home for the next school year. So you [homebuilders] better get [the buyer] under contract and get it going in February, March, April, to have it completed by the school year. That's what provides for our business. And this was not a good spring.
emphasis added”

It was not a “good Spring” for new homebuilders, but it wasn’t horrible. However, homebuilders have a growing number of completed homes for sales, a larger than normal number of unsold homes under construction and are competing with more existing home inventory.

And the key stories for existing homes are that inventory is increasing sharply, and sales are essentially flat compared to last year (and sales in 2024 were the lowest since 1995). That means prices will be under pressure ...

Realtor.com reports in the May 2025 Monthly Housing Market Trends Report that new listings were up 7.2% year-over-year in May. And active listings were up 31.5% year-over-year.

Homebuyers found more options in May, as the number of actively listed homes rose 31.5% compared to the same time last year. This builds on April’s 30.6% increase and marks the 19th consecutive month of year-over-year inventory gains. The number of homes for sale topped 1 million for the first time since Winter 2019 and exceeded 2020 levels for the second month in a row, a key pandemic recovery benchmark. Still, inventory remains 14.4% below typical 2017–2019 levels, though May’s gains indicate the market is closing the gap at an accelerating pace.

There is much more in the article.