Geopolitical and oil market volatility aside, this was a quiet week for economic data releases.

Monday

Oil Stuff

Oil prices, as mentioned above, have rebounded from last Friday’s lows and are back above $106/barrel as of this writing.

Gas prices fell to $4.18/gallon during the week ending April 20^th, though they appear to be rising again according to more real time data. Diesel prices also fell during the same week but at $5.40/gallon are still punishingly high.

There’s been a slight increase in traffic through the Strait of Hormuz, but nowhere near what needs to happen to alleviate pressure on oil markets.

TSA Checkpoint Travel Numbers

Air travel volumes have been below year-ago levels for more than a week. There’s still a chance that this just has to do with the timing of spring break, but given rising air fares and broader uncertainty, it wouldn’t be surprising if travel stays subdued over the next several weeks.

Tuesday

ADP Pulse Employment Data

Hiring picked up in late March and early April, according to this preliminary data from ADP. While this isn’t the most authoritative data source, it’s very plausible that job growth is accelerating.

Pending Home Sales

Pending home sales, which are supposed to give us an idea of what actual home sales will look like a month or two down the road, rose in February. That said, sales were down in January due to weather and likely fell again in March due to higher mortgage rates. Don’t put too much weight on this.

Retail Sales

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Of course, the Strait was supposed to reopen following the previous ceasefire agreement and didn’t, though markets certainly seem more optimistic this time around.

Monday

Existing Home Sales

Sales of existing homes (i.e., not newly built) fell 3.6% in March and were 1.0% lower than in March 2025. Blame mortgage rates.

Oil Stuff

Oil prices are falling off a cliff due to the alleged reopening of the Strait of Hormuz. That’s good news, because gas prices were unchanged during the week ending April 13^th, with the average at a still-punishingly-high $4.25/gallon. Diesel prices fell slightly but at $5.61/gallon are still up more than $2.00/gallon since the start of the year.

Going forward, this is the critical chart to watch.

Even if the Strait reopens and traffic through the Strait rebounds as quickly as it fell, we’ve still lost hundreds of millions of barrels of oil production due to the closure. That’s going to affect fuel prices for some time.

Tuesday

Producer Price Index

Prices received by U.S. producers rose sharply in March, but that had a lot to do with higher oil prices. Core prices (exclude food and energy) actually increased at a slower rate. While that’s mildly encouraging, higher energy prices will eventually translate into higher other prices, and the inflation outlook is not great at the moment.

NFIB Small Business Optimism Index

This measure of small business owner confidence fell in March and is at its lowest level since April 2025. That’s due to higher oil prices, which “spooked consumers and owners alike.”

TSA Checkpoint Travel Numbers

Well, air travel volumes slipped back below year-ago levels as of the week ending April 15^th. That could be because of the timing of Spring Break, or it could be because of the way higher jet fuel prices are pushing up airfares.

Wednesday

The Beige Book

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The bad news: your car can’t run on eggs, and the gas component of the consumer price index posted its largest monthly increase since at least the start of the data series in 1967.

Monday

ISM Services PMI

The U.S. service sector expanded for the 21^st straight month in March, according to this survey of industry managers. The bad news is that prices increased sharply, providing yet another sign that inflation is picking up.

Oil Stuff

Oil prices fell sharply following reports of a “ceasefire” and “reopening of the Strait of Hormuz.” We use quotes there because at least two sides of the conflict have yet to cease firing and, as of Friday, the number of ships passing through the Strait has actually decreased. The best thing we can say about the situation is that no civilizations have died.

Gas prices keep rising despite the two-week pause, with the average up to $4.25/gallon during the week ending April 6^th. Diesel prices have risen even faster, up to $5.64/gallon, more than $2.00/gallon more expensive than at the start of the year.

Tuesday

Durable Goods Orders

New orders for durable goods (things that last at least three years) fell for the third straight month, but that’s mostly due to the volatile transportation equipment category (think airplanes). Even without excluding transportation, though, orders were 8.1% higher during the first two months of 2026 than during the same stretch of 2025. Not bad!

TSA Checkpoint Travel Numbers

The rising cost of jet fuel hasn’t hurt U.S. air travel. Not yet, anyway. The number of people passing through TSA security remains up about 2.0% on a year-ago basis over the past week.

Wednesday

Fed Meeting Minutes

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This is referred to as a healthcare hiring boom, but traditional healthcare employment has risen at just a modest (doctor and dentist offices) to healthy (hospitals) pace over the past few years.

No, it’s the growing elderly population that’s driving (hopefully not at night) this rapid job growth.

The Senior Care Surge

Nearly half of those 1.7 million new jobs are in just two industries: nursing care facilities and services for the elderly and persons with disabilities. Those segments now employ an incredible 6.4 million people, and since the start of the pandemic, they’ve accounted for about 1 in every 7 new jobs.

This isn’t surprising. There are a lot of Baby Boomers. It will take a lot of labor to care for them.

Funding also plays a role here. The federal government spends roughly a quadrillion dollars on seniors every year, and that’s only a slight exaggeration. In 2025, federal outlays totaled $43,700 per retiree (65+) and just $4,300 per child/young adult.

If that fact is giving you mental health problems, well, good news.

Unpacking the Therapy Data

Employment at nonphysician therapy offices is up a staggering 146% since the start of the pandemic. The industry now has over 300,000 employees, about 10,000 more than in the entire state of Wyoming.

Employment growth at psychiatry offices has been a little slower—med school takes time and limits graduates—but is still up more than 50% since the start of 2020.

The driving force here is pretty clear: therapy is in. 60 million American adults received mental health treatments in 2024, a 50% increase from 2019, while about a third of adolescents used therapists in 2023.

If you had to bet on which industry will grow the fastest over the next few years, this would be a fine choice. And if you actually find yourself betting on this, find a therapist to treat your compulsive gambling disorder.

What’s Next

This week is packed with economic data releases, including two big inflation reports. We’ll give you everything you need to know about that in Week in Review, our every-Friday post that covers all the economic news and data in a breezy, five minute read.

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Private construction spending has fallen by nearly 1% since the start of 2024. To the extent the segment has any momentum, it’s entirely confined to two categories: residential improvements and data centers. Without those two categories, private nonresidential spending would be down by a 9% over the past two years.

The data center boom has been much discussed, including in this newsletter, but the surge residential improvements has flown miles below the radar.

What’s driving the increase? A few guesses:

1. High mortgage rates cause some would-be-movers to instead change their current home to suit their needs.

2. An expectation of falling mortgage rates makes some will-be-movers start preparing their homes for the market.

3. Aging-in-place Baby Boomers.

4. The housing stock isn’t getting any younger.

This is pretty normal. Residential renovation work holds up better than other categories when activity contracts. About $1 in every $4 spent on private construction went to residential renovations in January 2026, just below the April 2011 all-time high.

What’s Next

Next up is a critically important inflation release on Friday. We’ll cover that and a lot more in Week in Review, our every-Friday post that covers all the economic news and data in a breezy, five minute read.

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Monday

Texas Manufacturing Survey

Manufacturing activity expanded in March, according to this Dallas Fed Survey, albeit at a slower pace than in February. That’s not particularly interesting—it’s the comments from respondents are the juicy part of these surveys, and the comments did not disappoint.

Three examples that really cover the full range of business conditions:

1. From a computer and electronic product manufacturing respondent: “I am thinking about recommending to our board to close the company.”

2. From a machinery manufacturing respondent: “Spring has sprung. It’s truly like the balm of Gilead. After an extended period of ailment and woe, the healing has occurred and we are on our way to greater things. Our business growth thus far in 2026 is like a sweet fragrance that is healing our loss and hardship from prior years.”

3. From a food manufacturing respondent: “High density Hispanic channels are down. Costs are up, and freight is increasing fast. Tariff chaos has wreaked havoc with all of our export customers and seasoning suppliers.”

Yes, the comments are interesting, but in the aggregate, don’t provide too much insight regarding how the overall economy is performing, or even insight into that state’s manufacturing segment. The point is that this is an economy with big winners and losers. It’s all or nothing for many.

Oil Stuff

Gas prices continued their rapid climb, rising to a nationwide average of $4.13/gallon during the week ending March 30^th. Diesel prices also kept soaring, up to $5.40/gallon. That’s a staggering $1.92/gallon higher than at the start of 2026.

Those prices are going to keep rising, as of this morning (Friday), U.S. oil prices are trading above $112/barrel.

Put simply, the Strait of Hormuz needs to open, and it needs to open soon. Can’t we all just get along?

Tuesday

Job Opening & Labor Turnover Survey (JOLTS)

The U.S. hiring rate (employees hired/all jobs) fell to 3.1% in February. That’s the lowest level since April 2020, when the economy lost 20 million jobs and the unemployment rate surged to 15%.

Of course, just 1.1% of workers were fired or laid off in February. That’s exceptionally low, especially compared to the historically high 8.6% layoff rate in April 2020.

Employees were also reluctant to leave their jobs in February, with the 1.9% quit rate matching the lowest level since—you guessed it—April 2020.

The takeaway here is that it remains a great time to have a job and an extraordinarily bad time to need one. We’ll get to the blockbuster jobs report in a minute or two but let me foreshadow this by telling you that I am skeptical about the headline number in the context of other readings.

Conference Board Consumer Confidence Index

Consumer sentiment improved slightly in March, but I don’t think that captures some of the pump-price-related pessimism that probably didn’t surface until the end of the month. Despite the modest increase, confidence still appears to be trending downward since its 2021 peak.

Perhaps most importantly, consumer inflation expectations surged in March. That can serve as a self-fulfilling prophecy. If firms know that consumers expect higher prices, they’ll meet those expectations.

TSA Checkpoint Travel Numbers

Air travel survived the TSA line craziness and remains above year-ago levels, jumping out of the frying pan only to land in the surging-jet-fuel-price fire. Airfares have already increased sharply, and this is nothing compared to what will happen if the Strait of Hormuz remains closed for another month or two. Let’s be friends.

Wednesday

President Trump’s Address

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The labor market bounced back big time in March. U.S. employment grew by 178,000 jobs, the most in any month since December 2024, while the unemployment rate ticked down to 4.3%.

We averaged 68,000 jobs per month through the first quarter of 2026, the most of any three-month period since February to April of 2025.

Yes, job growth remains heavily concentrated in just two segments, healthcare and leisure and hospitality, but that’s been the case. Don’t expect the composition of job growth to change anytime soon.

For an economy with an aging labor force, subdued levels of immigration, and extraordinary policy uncertainty, March’s jobs report was about as good as it gets.

But that was March.

Is Time a Flat Circle?

364 days ago, I opened my post on the March 2025 jobs report with: “Writing about March’s labor market data after Wednesday’s [Liberation Day] tariff announcements is like reviewing a patient’s routine blood work from a month ago while they’re in shock trauma with a stab wound to the neck.”

Yes, that was a bit dramatic, but it was also right. We’ve averaged just 22,000 jobs per month since Liberation Day, fewer than a third of the 76,000 jobs averaged during the 12 months before it.

It’s tempting to make a similar comparison with today’s jobs report, which gives us our last glimpse employment dynamics prior to the economic fallout from the conflict in Iran.

I’ll resist that temptation. Today’s jobs report, unlike the March 2025 one, provides a valuable signal about the state of the labor market even with the conflict in Iran weighing on growth in the coming months.

The Upshot

First, you should feel better about the economic outlook than you did yesterday.

Second, the conflict in Iran is still deeply concerning. If the Strait of Hormuz remains closed too much longer, it’s going to cause real and lasting economic damage (more than it already has, anyway).

Third, this looks a lot like full employment. The Fed won’t be in a rush to cut rates.

What’s Next

Anirban is working on Week in Review, our every-Friday post that gives you everything you need to know about the economy in a breezy, five-minute read. That will be out in the next few hours and is just for paying subscribers. If that’s not you and you want it to be, just click the button below:

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Where We’ve Seen Fallout

Iran effectively closed the Strait of Hormuz on March 2^nd. The number of tankers passing through went from about 95 per day in February to less than 5 per day since the closure.

About a quarter of all seaborne oil passes through the Strait. Or it did, anyway.

This massive supply shock caused oil prices to blast off, returning to levels not seen since 2022.1

U.S. gas prices surged and are up more than $1 per gallon since the start of the conflict.

Americans buy 375 million gallons of gas per day, so that’s an additional daily cost of $375 million. Per person, that amounts to about $50 per month or an additional $600 per year.

The type of oil moved through the Strait of Hormuz is heavily weighted toward the kind used for diesel and jet fuel, causing even sharper prices increases for these products.

Greater uncertainty and higher inflation expectations pushed 10-year treasury yields about 0.4 percentage points higher.

That caused mortgage rates, which had finally slipped below 6.0% for the first time since 2022, to spike. More increases are likely over the next few weeks.

Stocks mounted a shockingly orderly retreat, falling steadily throughout March without dropping more than 2% on any single day. They rebounded yesterday (March 31^st), rising nearly 3%, and are up again this morning.

Where We Have Not Seen Fallout

Most U.S. economic data. Not because there won’t be fallout. Data for March just hasn’t been released yet. Notably, there are early indications that inflation will come in scorching hot for the month.

So that’s something to look forward to.

What We Know From 2022

Inflation was already boiling to a 40-year high in when Russia invaded Ukraine in early 2022, so it’s hard to tease out the specific impacts of the supply shock. That said, spending at gas stations is going to rise sharply.

That massive increase in gas station spending during the Summer of 2022, when gas spiked to more than $5.00/gallon, came at a time when the economy was still partially shut down. We drove 127 billion fewer miles in 2022 than we did in 2025.

The increase in air passenger miles has been even sharper since 2022.

Critically, oil prices quickly moderated during the second half of 2022.

What’s Happens Next?

Asia is already experiencing acute fuel shortages. Europe is next. The U.S. is probably still a few weeks from feeling the full force of the supply shock.

The severity of the economic fallout hinges on how long the Strait remains closed. When will it reopen?

I don’t know. Nobody knows. Read some tea leaves. Slaughter a goat and search the entrails. Scroll through President Trump’s Truth Social feed.

Better yet, watch his address tonight at 9PM ET for “an important update on Iran.”

This announcement could be the boots on the ground scenario President Trump hinted at on Sunday. Or it could be a unilateral deescalation that leaves Iran with control of the Strait, as he suggested to his aids on Monday.

Or it could be something else entirely.

Who’s Right?

Markets have remained, all things considered, exceedingly calm. Energy industry executives and analysts have not. Hopefully markets are right.

Looking Ahead

Next up is Friday’s critically important BLS jobs report, followed shortly after by Week in Review, our every-Friday post that covers all the economic news and data from the week in a breezy, five minute read.

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Construction wage growth, which slowed in 2023 and most of 2024, reaccelerated starting November 2024. As of February, earnings for production employees were up 5.1% year over year, the fastest growth in more than two years.

That’s had a lot to do with specialty trade contractors, whose production employees (i.e., not managers) have experienced a 6.5% jump in earnings since that reacceleration began.

[Note that these data are grouped by the kind of work the employer primarily does, not what the employees themselves do.]

There are two popular theories regarding why construction wages are rising while construction spending is falling.

1. Immigration policy has reduced labor supply, causing contractors to more aggressively compete for laborers even when work is scarce.

2. The boom in data center work has led to sharp competition for certain skilled trades workers, boosting wages.

There’s evidence to support both theories.

The sharpest rise in earnings since the rebound began is for roofers, with average hourly earnings up nearly 10%, and over half of roofers are foreign born, according to data from NAR. This is exactly what you’d expect to see if the loss of undocumented workers was weighing on labor supply.

The second largest increase is in electrical and wiring installation contractors, whose earnings are up 7.7% since November 2024. This supports the data center theory, as does the 5.7% increase in plumbing and HVAC wages.

While these theories check out, there are obviously other factors at work. New building construction has slowed over the past several quarters, for instance, so it’s not surprising that framing contractor wages have actually fallen. The same goes for the modest increase in site prep wages.

What’s Next

Next up is a critically important BLS jobs report and Week in Review, our every-Friday post that covers all the economic news and data in a breezy, five minute read.

Subscribe now

Week in Review is only for paying subscribers. If that’s not you and you want it to be, just click the subscribe button.

The other nightmare. The one that caused the longest TSA wait times in history. Early this morning, the Senate approved funds to pay most Homeland Security agencies. Assuming the House does its part, this could all be wrapped up later today.

This week was light on economic data releases but still brought us updates on construction spending, workplace injuries and illnesses, and more.

Monday

Construction Spending

Construction spending fell 0.3% in January, but that decline was at least partially due to bad weather.

Taking the optimist’s view, spending is up about 2% from the May 2025 cyclical low and has increased in 5 of the past 8 months.

Is that encouraging? Sure, but the recent rebound is almost entirely due to increasing residential renovation work, which has risen by $53 billion (seasonally adjusted annual rate) since May. All other construction spending is down by about $12 billion over that span.

To put this into context, we’re spending about 770% more on residential renovations than we are on data centers. Residential renovations now account for $1 in every $4 of private construction activity.

Just focusing on the nonresidential side of the industry, spending fell in January, and private nonresidential is particularly weak, down 3.0% year over year.

And that’s before we see what kind of pain soaring oil prices cause for the industry. Not great!

Oil Stuff

Gas prices shot up to $4.10/gallon for the week ending March 23^rd. That’s up more than $1.00/gallon from late February.

Diesel prices—what you should really lose sleep over—continue to surge and are now up to $5.38/gallon. That’s going to put upward pressure on a lot of other prices.

Despite the massive increase in prices, domestic oil production hasn’t risen and is actually slightly lower than in February.

Oil prices continued to rise through this morning, so no imminent relief in sight.

Tuesday

TSA Checkpoint Travel Numbers

Air travel has held up better than I would have guessed in the face of the TSA wait time craziness, with passenger volumes still up on a year-ago basis. Even with the end of this TSA funding standoff in sight, the prospect of rapidly rising fuel costs suggests ongoing turbulence for air travel.

Wednesday

Workplace Injuries and Illnesses

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Beyond some macabre housing stats, this week brought us grim updates on oil, producer prices, and a lot more. Oh, by the way, start Gunnar Henderson in the final against Venezuela and the US would have won the World Baseball Classic.

Monday

Industrial Production

This measure of how much our manufacturing, mining, and utilities industries produce increased 0.2% in February and is up 1.4% year over year. Not great, but not too bad, either. This is one of the six indicators that the NBER uses to diagnose a recession, so even tepid growth is encouraging.

NAHB Housing Market Index

Homebuilder confidence improved slightly in March. While this measure is higher than during mid- 2025, it’s still extremely low by historical standards. Homebuilders are particularly glum about the traffic of prospective buyers, so it’s not a surprise that 37% of builders cut prices in March.

Oil Stuff

The oil situation is not improving and—with no end in sight for the conflict in Iran—will keep getting worse for quite some time.

Gas prices continue to race higher, up to $3.85/gallon for the week ending March 16^th. That’s about a dollar higher than in mid-February, meaning that U.S. consumers will spend $375 million more on gas every day than they did one month ago. Can’t we just declare victory and head to Taiwan?

Diesel prices surged above $5.00/gallon for the first time since 2022. That’s going to hurt a lot of parts of the economy in a lot of different ways. Food prices are headed higher as is any good that needs to be transported in the near-term.

White House Tries to Make Oil Stuff Better

The White House is expected to temporarily wave rules about summer gas formulations, which we switch to during hotter months to reduce air pollution, in an attempt to lower gas prices. The White House also waived the Jones Act—one of the very worst economic policies in existence—for the next 60 days.

[Please, please, permanently waive the Jones Act.]

These moves, which don’t exactly inspire confidence that the Iran conflict is going to end anytime soon, will shave a few cents off a gallon of gas. That’s not nothing, but it also won’t make consumers feel much better about soaring pump prices. Expect ongoing efforts to mitigate price increases, but the best way to do this is to end the war and start Gunnar Henderson.

Tuesday

Pending Home Sales

Pending home sales, which are supposed to hint at what actual home sales will look like in a month or two, increased in February but are still down on a year-over-year basis. That’s pretty disappointing given how much mortgage rates fell between February 2025 and February 2026. More recently of course, mortgage rates have been edging higher.

TSA Checkpoint Travel Numbers

Air travel remains elevated compared to the same time last year, according to TSA data, but we’ll see how long that lasts with jet fuel prices soaring and TSA lines lengthening.

Wednesday

Producer Price Index (Inflation)

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This week brought us updates on inflation, small business optimism, GDP, consumer sentiment, and a whole lot more. Oh, and it also brought Maxx Crosby to the Ravens. . .oh, wait, no it didn’t.

Monday

Oil Stuff

The International Energy Agency, which has deemed this “the largest supply disruption in the history of the global oil market,” announced that it will release a record 400 million barrels of oil, while the White House is going to release 172 million barrels from our Strategic Petroleum Reserve.

But that wasn’t enough to bring down crude oil prices, which are nearing $100/barrel. Late last year, the price of oil was routinely below $60/barrel.

As you might expect, gas prices continue to surge, with the average up to $3.63/gallon as of the week ending March 9^th.

Diesel prices have also spiked, with the average price up to $4.86/gallon from $3.80 just two weeks ago. While higher gas prices are going to hurt consumers at the pump, $5.00/gallon diesel (which will likely be a reality in the next week or two) is arguably the bigger economic problem since that impacts shipping costs and therefore the price of food, fertilizer, etc.

TSA Checkpoint Travel Numbers

Air travel remains in great shape, according to TSA data, with TSA checkpoint numbers up about 3.5% compared to the same week last year. Of course, these are all flights booked well before the recent jump in jet fuel prices. Expect airfares to begin rising significantly during the weeks to come.

Tuesday

NFIB Small Business Optimism

Small business optimism fell slightly in February but remains in pretty decent shape. The most interesting part of this is are quotes from NFIB members (page 4 of the link) that show agricultural firms having a particularly hard time with rising input prices. The crisis of the moment relates to fertilizer, which is having a tough time getting here from Russia, Saudi Arabia, Egypt and Qatar. For many farmers, this is planting season.

Existing Home Sales

Sales of existing homes (that is, not new houses) increased slightly in February but are still lower than during the same month last year. Disruptive weather played a part, but mortgage rates were close to 7% during February 2025 and now they are closer to 6%. The lack of year-over-year improvement in home sales is disappointing.

Wednesday

Consumer Price Index

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Zack’s Answers

How many rate cuts, if any, do you suspect will happen in 2026?

Two? I don’t know. Nobody knows. The conflict in Iran, which has upended my already tenuous forecast, could last four weeks, four months, or for God only knows how long. At this point, I’d feel more confident guessing how many M&Ms are in a giant jar at an office party.

Has the elimination of de minimis harmed small businesses? For larger companies, has it had a significant impact, or is it just more of a nuisance?

This is a tricky question. The biggest victim of the de minimis exemption was foreign small businesses who had large customer bases in the U.S. (like this Australian jewelry seller).

For U.S. small businesses, it’s more of a headache. Sourcing is more complicated, with longer delays and more logistical work, and small businesses are unlikely to have a dedicated customs broker. They certainly don’t have a sourcing department that can give tariffs the attention it requires. As a result, some owners are probably now buying inputs in bulk (and then figuring out how to fund/store those larger orders).

[I run a small business and, as much as I enjoy the doing our actual work, I hate—HATE—any task that brings me in contact with big-business or government bureaucracy. Seriously. I’d rather shove a glass tube up my nose and then get punched in the face by Mike Tyson than have to figure out how to pay tariffs on $500 of foreign inputs. I’m angry just thinking about it. It’s fortunate that we’re a services firm.]

Of course, a domestic jewelry seller that no longer has to compete with that Australian shop is better off. Which is to say, some U.S. small businesses are benefiting from the end of the exemption.

Some large companies are likely benefiting because of how this harms small businesses, although I’m sure it was a headache for shipping firms like FedEx and UPS.

What can we expect in terms of political uncertainty during the coming months? Will the 2026 midterm elections affect this at all?

Political uncertainty is so high that we could climb it to the moon. This indicator reflects media attention to economic policy matters. As you can see, it’s been outrageously elevated since Liberation Day in April 2025.

You can see the measure spiking as oil prices surge in response to the Iran conflict, and while uncertainty will lessen whenever that ends, we’re still way above the historical baseline.

Midterm elections are their own form of uncertainty, and we have a long way to go to get there. Even if the House and Senate flip, I have a hard time imaging them reigning in trade policy. Which is to say, I think uncertainty will stick around for a while.

What price inflation is directly resultant from tariffs?

Core goods inflation (physical things other than food and energy) is the first place to look. These prices have been rising at a less than 2% annual pace for the past year or so, but it’s unusual that they’re rising at all. Note that they consistently declined from 2012 to 2019.

Consider TVs. A top of the line 65” plasma TV, which would look like garbage by today’s standards, cost $3,500 in 2012. A high end 65” inch TV now goes for less than $1,500. So if we add a 10% tax on the import of those TVs, and the business passes along even a third of that tax, those prices are suddenly rising.

That’s the case for how tariffs directly caused (in the past tense) inflation. I think the companies making core goods have, for the most part, already raised their prices to reflect tariffs.

This will be difficult to tell in the coming months because of other inflationary factors—like soaring computer component costs—that will specifically affect consumer products like TVs and laptops.

Is AI really causing layoffs?

I don’t think so, at least not en masse. If a company needs to lay off workers, “we’re using AI to enhance productivity” sounds a lot better than “our staffing levels got a bit bloated in 2021-22” or “we’re struggling and need to reorganize.”

And there aren’t many layoffs in general right now. About 1.75 million people were fired in December, which might sound like a lot, but it’s fewer than the 2015-19 monthly average (1.8 million/month).

More plausibly, AI is forestalling hires. Maybe a medical office uses an AI scheduler instead of hiring a second front desk person, or a research shop holds off on adding a research assistant.

Of course, a lot of people think this will change, and change rapidly, over the next few years.

What historical world economy do you think most closely represents the United States circa 2026?

Two comparisons come to mind, neither of which I think are particularly useful.

First up, England in the early 1800s. Automation, especially in the textile industry, caused largescale social upheaval, and there are similar concerns about the effects of AI. So far, those concerns are unjustified. England experienced a sharp increase in unemployment and a sudden decrease in wages. As of January 2026, unemployment is at 4.3% and real wages are at an all-time high. There’s also not a giant, ominous comet coursing through the sky.

Second, there are some similarities with the late 1920s/early 1930s. The U.S. had just emerged from a pandemic (the Spanish Flu in 1918-20), we had a massive increase in tariffs (Smoot-Hawley in 1930), and markets surged to all-time highs due to widespread speculation.

But this isn’t the 1930s. We have a services based economy, so tariffs won’t bite as hard. More importantly, investors aren’t leveraged up to their eyeballs right now. Seriously, people were buying stocks at 10:1 margins in the 1920s, which means that a 10% decline could wipe out their entire investment. I’m extraordinarily confident saying that even a large market drawdown won’t cause a 1929-style crash.

Who do you think the economy will be good and bad for during 2026 (specifically by income tiers)?

Income tiers is a difficult way to look at this because the economy tends to work better for those in the higher tiers (even if their incomes grow more slowly). It’s hard to fathom a situation where the top 5% struggle but the masses thrive.

I prefer to frame this as a job-havers economy. Given the incredibly slow pace of hiring and firing, it’s a great time to have a job and a terrible time to need one. This may sound obvious, but it wasn’t the case in 2022 when job switchers saw significantly larger pay increases than job stayers.

How will growing discontent with data centers affect smaller edge data center developments?

Discontent that manifests as community backlash will hamper hyperscale developments far more than edge ones. Discontent that manifests as legislation likely won’t distinguish between small and large data centers, and that’s going to be a problem for edge and smaller solo developments.

Even so, I think smaller projects will continue to have an easier time going forward.

On the graph Specialty Trade Contractor Employment by Subsegment from a few weeks ago: what’s the different between “New Single Family” and “For-Sale Builders?”

These data are categorized by what the employer primarily does. Employers in the new single family category primarily work on new single family homes, but they don’t sell them (i.e., they’re contracted by others to work on new houses). For-sale builders construct homes with the intent to sell them.

How does Maryland’s budget per capita compare to other states?

Maryland ranks 19^th in state spending per capita, but that’s a little misleading. It’s best to look at state and local spending per capita, because the state/local division of responsibilities varies significantly between states. As of 2021, Maryland ranked 15^th in terms of state and local spending per capita at about 5% above the national average.

It wouldn’t surprise me if we’re now ranked higher than that. Being above average is probably unavoidable; because Maryland has the highest median income of any state, our governments have to pay more in order to compete for talent.

That said, we spend on a lot of things we shouldn’t, and I’d reduce our spending were I the State’s benevolent ruler (note: I think it’s easier for benevolent rulers to balance budgets because they don’t have to worry about getting reelected).

AI and government budget cuts are going to kill the Eds and Meds economy nationwide. The superstar cities are dead meat.

I disagree! The Meds economy has an exceptionally wide AI moat; it’s highly regulated, physical in nature, and part of what you’re paying for is the ability to sue if something goes wrong. It’s also worth noting that healthcare has accounted for the vast majority of job growth over the past few years.

Regarding education: trouble is coming, but it’s not going to touch the superstar cities. I’m worried about small towns economically dependent on nonbrand name colleges. Austin will be fine, but places like Macomb, home to Western Illinois University, are going to have a hard time.

I have pharmacological firms pledging to spend $500 billion over the next five years (maybe half of which is construction). How does this compare to the data center boom? Will the industries have issues handling these megaprojects with the data center boom already in effect?

We’ve spent more on chemical manufacturing construction ($43.1 billion) than we have on data centers ($39.3 billion) over the past twelve months. So even without a pharma boom, this is already a huge segment.

Regarding the boom part, I expect this to be a lot different than what we see with data centers. That $500b number comes from a trade group and is probably a little exaggerated, but let’s be generous and say 30% of it goes toward construction put in place and that occurs over the next decade. That comes out to $15 billion a year.

That’s a lot! But it’s not transformative, and I imagine some of it covers spending that’s already occurring in the chemical manufacturing segment. Which is to say, I expect the category to remain strong, but it won’t show the kind of rapid growth we saw with data centers.

As to whether the industry can handle it: I’m a big believer in the elasticity of supply. If Eli Lilly wants to build a $3 billion plant in Pennsylvania, contractors will gladly rise to the challenge regardless of how much data center work they have under contract.

Anirban’s Answers

What is going on with the bond market? Are foreign investors getting rid of US bonds?

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But hey, at least we’re supposed to hike our new global tariffs from 10% to 15% this week.

It wasn’t all gloom this week, but the bright spots are decidedly dim when viewed through the thickening fog of war.

Monday

ISM Manufacturing PMI

Manufacturing activity expanded in February, according to this survey of industry managers. That’s the second straight month of growth, which is good: manufacturing activity shrank in 37 of the previous 38 months.

That’s the good news. The bad—bordering on horrible—news is that the ISM Prices Index surged to the highest level since June 2022. As this respondent explained:

“Today, American produced commodities like steel and aluminum are the highest priced in the world, by far. Hence, the Section 232 tariff policy is having the exact opposite effect of their intention on an American manufacturer like us: It is raising prices while lowering demand and profitability.”

TSA Checkpoint Travel Numbers

Air travel remains in good shape, according to TSA data, but airfares are exceptionally exposed to the Iran conflict because a majority of Europe’s jet fuel travels through the Straight of Hormuz. While U.S. airfares are more insulated, it’s a global market, and the rising price of jet fuel will definitely push air travel prices higher.

Tuesday

Oil Stuff

Crude oil prices are, as of this morning, in the mid $80/barrel range, up more than $20/barrel from just a few weeks ago. This is due to the conflict in Iran as well as related factors like this morning’s news that Kuwait is cutting oil production.

So no surprise that EIA data shows that gas prices surged to $3.15/gallon for the week ending March 2^nd, and more real-time data from GasBuddy shows prices up to $3.31/gallon as of this morning.

Diesel prices also jumped and are up to $3.90/gallon, with the more recent GasBuddy estimate showing prices are at $4.26/gallon as of this morning, the highest since November 2023.

What should you take from this? First: our prolonged period of low gas prices is definitely over.

Second: buckle up! The next few days could be absolutely wild in oil markets.

Wednesday

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Today’s jobs report was, in a word, brutal. U.S. employment fell by 92,000 jobs in February, and December and January’s employment growth was revised down by a combined 69,000 jobs. The unemployment rate rose to 4.4%.

Employers have added just 156,000 jobs over the past year, and it’s difficult to explain just how atrocious that is. For context, we averaged more than 156,000 per month in every year from 2011 to 2019. As all know, these numbers are subject to revision, so that 156,000 figure could be completely revised away, or worse.

Are there a few caveats to today’s data? Absolutely. A Kaiser strike caused employment to fall in the healthcare segment, and those jobs will presumably come back in March.

The weather was also worse than normal for the month, and that can hurt leisure and hospitality hiring. True, the so-called reference week (when underlying surveys transpire) occurred well before the February 23-24 storms. Nonetheless, there was likely at least some weather impact here based on the poor performance of weather-centric segments like construction and leisure/hospitality.

There was also some shift in methodology that I won’t get into here, but that triggers some additional uncertainty regarding how one should interpret the initial estimate for February jobs.

But those caveats don’t change the fact that the labor market is utterly stagnant. What’s (or who’s) to blame? There’s a lot going on, but it’s no coincidence that employment is now lower than it was in April 2025, the month that kicked off our ongoing tariff misadventure. We’ve also observed weaker job growth in industries that typically depend on unauthorized immigrants, although that may be due to cyclical factors rather than immigration policy.

Are there any silver linings in today’s report? Yes, as long as you really squint. The prime age (25-54) employment-to-population ratio ticked down but remains very elevated by recent standards. This economy is fine for anyone who has a job but rather brutal for those in search of one.

The Upshot (Is it Time to Panic?)

Viewed in isolation, no, it’s not time to panic. It’s one bad jobs report, and as mentioned above, there are caveats. But the risk of recession is rising and the economy is becoming increasingly dependent on the AI infrastructure spending boom to drive growth. With oil prices spiking and market values declining, the trajectory is not good. This war needs to end soon, or it could utterly upend the 2026 economy.

What’s Next

This week was loaded with important data releases (beyond just this one), and we’ll cover all of them in Week in Review, our every-Friday post that gives you everything you need to know about the economy in a breezy, five-minute read. That’s just for paying subscribers. If that’s not you and you want it to be, just click the button below:

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This is fun speculative fiction, but it’s just that: fiction. This Citadel Securities note nicely outlines many of my objections to the Citrini piece.

Improbably, that wasn’t this week’s most important economic connection to science fiction; a tussle between the Pentagon and Anthropic evokes Skynet, the apocalyptic AI featured in the Terminator movies (more on this under Thursday).

This week’s biggest nonfiction story is that average mortgage rates dipped below 6.0% for the first time since 2022. Read on for updates on that, consumer confidence, construction spending, inflation, and a lot more.

Monday

Companies Sue for Tariff Refunds

FedEx filed a lawsuit against the Trump administration and is seeking a full refund of the IEEPA tariffs it paid over the past year (the Supreme Court ruled those tariffs illegal last Friday), joining thousands of other companies who had already initiated lawsuits with the U.S. Court of International Trade. Notably, FedEx has vowed to pass any refunds on to its customers.

The White House has signaled that it will fight to keep the $133 billion in illegally collected revenue.

Oil Stuff

Gas prices typically rise from early March to early June as refineries switch to the more expensive summer-blend, so it’s no surprise that gas prices inched higher for the sixth straight week. At $3.07/gallon, it’s still pretty cheap, though.

Diesel prices also rose and are above $3.80/gallon for the first time since November.

TSA Checkpoint Travel Numbers

Another squall of winter weather suppressed air traffic, according to TSA data, but fundamentals here look good, with far more people flying than during early 2025 (weather permitting).

Tuesday

Conference Board Consumer Confidence Index

Consumer confidence improved slightly in February but is still down substantially from the November 2024 cyclical peak. Interestingly, Gen Z has the best sentiment over the past six months while Gen X has the worst.

S&P Cotality Case-Shiller Home Price Indices

Home prices fell slightly in December and, on a national basis, are down nearly 0.5 over the past three months. Given how slow home sales are at the moment, I’m all for anything that improves affordability.

Wednesday

Mortgage Applications

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While that’s the story of the week, we also got a deluge of economic data including updates on inflation, GDP growth, the trade deficit, home sales, and a lot more.

Monday

Presidents Day

43^rd President George W. Bush is now writing on Substack. The poor guy only has 3,600 subscribers, about 10,000 fewer than this humble economics newsletter. What can we say? Blogging isn’t for everyone.

Tuesday

NAHB Housing Market Index

Homebuilder confidence fell in February and remains pretty low by historical standards. Slightly more than one in three builders cut prices in February (36%, to be exact). While that’s the lowest percentage since May, it still signals that home sellers are having a tough time finding buyers.

Oil Stuff

Gas prices increased for the fifth straight week but are still pretty low. Diesel prices also rose and are above $3.70/gallon for the first time since early December.

Domestic oil production inched up last week and is even closer to the November 2025 all-time high. With crude oil prices rising over the past week, production is likely to hold up well, at least in the short term.

TSA Checkpoint Travel Numbers

Air travel roared back this past week, according to TSA data, with nearly 7% more people flying than during the same week last year. This is a bullish sign.

Wednesday

New Residential Construction

Permitting for new housing units sped up in December, rising to the highest (seasonally adjusted) level since March. Despite the increase, permitting was still lower than it was in December 2024. Housing starts also picked up, but those too are down year over year.

Big picture, the housing boom of 2022 and 2023 continues to unwind. There will be another boom at some point in the future as America deals with its housing shortage and affordability issues in earnest, but we’re not there yet.

Industrial Production

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This chart shows that spending growth among the lowest income consumers began to lag in mid-2022 and by 2024 was well below spending among higher income households. That’s our K-shape: the blue line started rising, the green line started going down.

But our K-shape started to look less K-shaped during the second half of 2025. As you can see, the blue line is flat for most of the year, while the green line rose sharply.

The trend is particularly visible on the chart below, which shows cumulative spending growth since the start of 2023. Note that low-income household spending growth caught up to middle-income spending growth by December 2025.

We see the same trend by education level. While college educated consumers have still spent more over the past two years, the gap narrowed over the course of 2025.

The Upshot

This is just one data source, but it shows that lower income household spending grew at a faster rate than high or middle income household spending in 2025.

What’s Next

We’ll keep digging through this Fed data, which likely has more info on the K-shapedness of the economy.

Chronologically, next up is Week in Review, our every-Friday post that covers everything you need to know about the economy in a breezy, five minute read. That’s just for paying subscribers. If that’s not you and you want it to be, just click the button below:

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First, the White House agreed to allow $800 million in Argentinian beef imports in an effort to lower prices.

Then on Tuesday Congress rejected a measure that would have limited Congress’s ability to vote against the White House’s tariffs (yes, you read that right).

As a result, Congress voted to overturn the tariffs on Canada on Wednesday, a move that succeeded due to six Republican defectors. Of course, the president will almost certainly veto that once it gets through the Senate.

And as of this morning, the Financial Times reports that the White House is planning to roll back some of its steel and aluminum tariffs, a tacit acknowledgement that these import taxes are in fact causing economic harm.

On the data front, this week brought us updates on inflation, retail spending, a jobs report (read our longer post on that here), and a whole lot more.

Monday

Oil Stuff

Gas prices increased for the fourth straight week and are back above $3.00/gallon for the first time since mid-December. Diesel prices were essentially flat for the week.

Domestic oil production bounced back to near-record highs last week, confirming that the prior week’s slowdown was weather-related.

TSA Checkpoint Travel Numbers

Air travel has bounced back big time after plunging during the big winter storms, according to TSA data. During the week ending February 9^th, travel volumes were 4.1% higher than during the same week one year ago.

Tuesday

Retail Sales

Retail spending was unchanged in December and just 2.4% higher than in December 2024. That’s not great, but I actually think this data is…I don’t want to say “better,” but maybe slightly less bad than it looks at a glance

A lot of this recent weakness is due weak spending in interest rate-sensitive dealerships and furniture stores. Most other categories have posted healthy increases over the past year.

And 2025 was actually a decent year for retail spending, with total sales 3.7% higher than in 2024. That jumps to 4.2% if you exclude sales at gas stations (gas prices were lower in 2025).

There’s plenty of reasons to worry about consumers (see right below this!), but at least as of December, nothing in the retail sales data is panic-worthy. Of course, given recent winter storms, retail sales will likely be weak again for January, so we won’t get another credible read on this until February’s data is released.

Household Debt and Credit

This data on delinquency rates is worrying and will get its own post at some point in the not so distant future.

For now, let’s start with the share of credit card debt 90+ days overdue, which rose to 12.7% in Q4 2025, the highest level since 2011.

Auto loans are also a large and growing cause for concern, with 5.21% of the total balance 90+ days past due. That’s the second highest quarterly rate ever, trailing only Q4 2010.

The youngest borrowers (18-29) are transitioning into serious delinquency at the fastest rate. That’s always the case. What’s interesting is that the transitioning rate for those 18-29 has slowed over the past year for most debt types with one glaring exception: student loans.

We’ve also seen rising delinquency in states that had red-hot housing markets and have since cooled (like AZ, FL, and TX). This makes sense, especially with some portion of recent homebuyers likely underwater.

Despite those massive red flags, the total share of household debt that’s 90+ days late stands at just 3.12%, which is lower than in Q4 2019. That’s entirely due to low (albeit rising) delinquency rates on mortgages and home equity line of credits.

Big picture, this data has me a little worried about consumers, especially those at the lower end of the income distribution.

Tariffs Cost Average Household $1,000 in 2025

This Tax Foundation analysis estimates that tariffs implemented in 2025 amounted to an average tax increase of $1,000 per U.S. household in 2025. This represents the “largest US tax increase as a percent of GDP (0.54 percent for 2026) since 1993.” That’s obviously not helping the household debt problems mentioned above.

U.S. Import and Export Price Indexes

U.S. import prices are flat over the past year, while U.S. export prices are up 3.1% over the past year. While it’s possible (likely, even) that import prices would have risen absent tariffs, the fact that import prices haven’t fallen is a sign that foreign companies are not eating the cost of tariffs.

NFIB Small Business Optimism Index

Small business owner optimism fell slightly in January and remains quite a bit below the December 2024 cyclical peak. That said, small business owners are always happier with a Republican in the White House, and overall optimism levels remain relatively elevated.

Wednesday

BLS Jobs Report

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Job growth surprised to the upside in January, with U.S. payroll employment rising by 130,000. That’s the good news.

The better news is that the unemployment rate ticked down for the second straight month and, at 4.3%, is in much better shape than in November (4.5%). The prime age (25-54) employment to population ratio is also in really great shape.

This will be reassuring to the Fed.

Now for the bad news: after pretty serious downward revisions, we averaged just 15,000 jobs per month in 2025. That’s the worst non-recessionary calendar year of growth since 2003, and you have to go back decades earlier than that to find another one so bad.

And even that might understate 2025’s labor market weakness, because virtually all recent job growth has occurred in the healthcare segment.

Seriously, since January 2024 the healthcare and social assistance sector has added 1.6 million jobs. All other sectors combined have lost a combined 27,500 jobs over that two-year period.

Even with January’s upside surprise, job growth will likely remain unusually slow in 2026.

In one sense, that’s okay. Given demographic dynamics and a lack of immigration, it won’t take many new jobs to keep the unemployment rate steady.

In another sense, this low hire, slow employment growth environment is less okay. Just ask anyone who’s currently searching for a job outside of healthcare.

The Upshot

We’re in the midst of a jobless economic expansion. That’s pretty weird.

The Fed’s takeaway from today’s jobs report will be that unemployment is steady and there’s no need to cut.

What’s Next

This week is loaded with important data releases (beyond just this one), including a big consumer price index update on Friday. We’ll cover that and more in Week in Review, our every-Friday post that gives you everything you need to know about the economy in a breezy, five-minute read.

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That’s just for paying subscribers. If that’s not you and you want it to be, just click the subscribe button.