In addition to new waterway knowledge, this week brought us $100/barrel oil prices, surging treasury yields, a flurry of new tariff activity, and more.

Monday

White House Announces Canada Tariffs

The White House vowed to impose tariffs as high as 50% on goods “ranging from wine to hockey sticks to cement.” Energy, potash, certain products tariffed under Section 232 (think metals), and critical minerals will be exempt from these new tariffs.

Just as interesting as the tariffs themselves is the mechanism used to impose them: Section 338 of the 1930 Tariff Act, a provision that’s never been used and could be defunct because it was superseded by a more recent law.

These tariffs don’t go into effect for 30 days. It will surprise no one if they don’t materialize. If they do, expect legal challenges.

The bigger takeaway here is that tariff activity is picking back up (see below and then again under Thursday).

White House Slashes Aluminum Tariffs

The White House reduced aluminum tariffs from 50% to 25% for companies committed to investing in U.S. production capacity. The defense industry pushed for this move, and the White House itself acknowledges that “US demand for primary aluminum currently outpaces the primary aluminum production capacity of US smelting facilities.”

Notably, prices received by U.S. aluminum producers are up 58% since the start of 2025 (the first aluminum tariffs went into effect in Feb-25). For context, that’s more than they increased over the whole 20 years before that (46%).

This follows an early-June reduction in tariffs on certain metal products.

TSA Checkpoint Travel Numbers

The summer travel season continues to disappoint, according to TSA gate check numbers. About 3.0% fewer people flew over the past week compared to one year ago.

A Cyclospora Update

Last week, we told you that the explosive-diarrhea-causing cyclospora outbreak had been linked to Taco Bell’s lettuce supplier, Taylor Farms. The FDA has since announced that it was a false positive that linked the outbreak to them but maintains that there’s “overwhelming epidemiological data” suggesting Taylor Farm’s lettuce is at fault.

North Carolina has since identified parsley and cilantro as potential sources.

Cyclospora is, apparently, very difficult to trace. If you’re interested in some of the nitty gritty details on that, Scott Gottlieb has a good and brief rundown here.

Stay safe out there, people!

Tuesday

State Employment & Unemployment Rates

South Dakota had the lowest unemployment rate of any state in June at a truly absurd and frankly unhealthy 2.0%. You’d think frictional unemployment, the period of joblessness when a worker is between jobs, alone would boost it above that level but hey, maybe South Dakotans are happy with the jobs they have.

No surprise: the highest unemployment rate belonged to D.C. at 6.0% as DOGE funding and federal employment cuts take their toll. Despite the nation’s highest rate of joblessness, unemployment in the District has actually fallen 0.2 percentage points over the past year.

Wednesday

The Congressional Trade Powers Reform Act of 2026 (Good tariff news?)

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If it seems like it took longer than usual to pinpoint the source of this outbreak, that could be because last year’s workforce reductions caused the CDC to reduce the number of foodborne pathogens they track from eight to two.

Unlike cyclospora-caused diarrhea, this week’s economic data releases weren’t particularly explosive, though we still got a cool inflation report, a slew of downbeat housing data, and more.

Monday

Oil Stuff

Well, oil prices are rising again, back above $80/barrel as the on-again, off-again, blocked-again, opened-again Strait situation in Iran resumes. No surprise that gas and diesel prices are once again rising too.

The takeaway here is that a lot of data from June (when oil prices were back below $70/barrel) that came out this week is now largely irrelevant, so, that’s fun.

TSA Checkpoint Travel Numbers

Air travel slipped even farther behind year-ago levels this past week, according to TSA gate check numbers data. It continues to be a disappointing summer travel season.

Tuesday

Consumer Price Index (Inflation)

Consumer prices fell for the first time in two years in June. A decline was expected—oil and gas prices dropped sharply during the second half of the month—but the fall was even larger than expected.

That has a lot to do with core (not food or energy) goods prices, which have now fallen in two consecutive months. Prices for apparel, vehicles, medicine, and computers (more on that below) all fell for the month. What do those categories have in common? They were broadly exposed to tariffs, which have since diminished since the Supreme Court IEEPA ruling back in February.

Which is to say, it looks like tariff pass-through on core goods may be waning.

This is all great, with the enormous caveat that oil prices have rebounded in July. If that increase hangs around, expect a similar rebound in the next CPI data release.

NOTE ON THE CPI FOR COMPUTERS: Actual computer prices have blasted off, but the BLS makes quality adjustments to changes in computer prices differently than it does for most items. The short of it is that while the CPI for computers shows prices down 0.8% year over year, that’s an abnormally small decrease and actual computer prices are rising quickly.

Sunshine Protection Act

The House overwhelmingly passed a White House-backed bill to make daylight saving time permanent.

On the one hand, this is what the people want. Only 12% of people favor the current system of changing the clocks, according to this 2025 survey.

On the other hand, we tried this in the 1970s, and people hated it so much that we reverted back to changing the clocks. Under permanent DST, some parts of the country will get post-9AM sunrises.

It remains to be seen if the Senate will pass this.

NFIB Small Business Optimism Index

Small business optimism improved in June, but that was—you guessed it—largely due to lower oil prices. We’ll see how optimism holds up if oil prices hold on to the recent rebound throughout July.

Wednesday

Producer Price Index

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First, it’s nice that our legislators put so much effort into solving a problem that is pressing but not the least bit politically charged.

Second, they tried to solve it the right way: with several small but meaningful changes that should add up to a significant increase in housing construction rather than a one-simple-trick, silver-bullet approach.

Third, there’s a ton of good stuff in here, and even the bad stuff (like limits on institutional investor home purchasing) was mostly defanged by the time it passed.

Here’s ten things to know, plus a bonus rant about front yards:

An Excellent Housing Supply Framework

Within the next 3 years, HUD has to issue guidelines and best practices for housing policy that include:

• Reducing or eliminating parking minimums

• Increasing max floor area and building height ratios

• Reducing minimum lot sizes and set-back requirements (a rant on this below)

• Eliminating restrictions against accessory dwelling units

• Increasing by-right uses like duplex, triplex, and quadplex buildings

• Streamlining review processes

• Reducing barriers to modular housing

• Standardizing, reducing, or eliminating impact fees

• Mechanisms for states to encourage local adoption of State zoning frameworks

• Streamlining environmental review

• Imposing maximum review timelines

This guidance will make it easier for states to adopt these recommendations—hey, we’re just doing what HUD said was right—but at the end of the day, they’re just recommendations. In fact, the ROAD Act specifically bans HUD from taking adverse action against any state or locality that declines to adopt a guideline.

Single Stair!

Point-access block buildings—commonly called “single stair”—are apartments organized around a single vertical core (one stairway or elevator). These are not allowed in most parts of the U.S. because building codes tend to require two exit stairways, ostensibly for safety reasons.

The ROAD Act requires HUD to issue guidelines for “model code language, best practices, and technical guidance that could be used to facilitate the permitting of point-access block residential buildings” within the next 18 months.

I love single-stair buildings. They have more interesting designs, more varied floor plans, more natural light, and better cross ventilation than double-loaded buildings, and they allow for more units on smaller lots.

Point-access buildings are widespread in places like Japan and Scandinavia, and it’s no coincidence that those places are known for good looking apartments.

Getting single-stair into the building code sometimes requires a battle against local fire departments, despite the fact that single-stair buildings have strong safety records, and having federal guidance should help with those efforts.

Optimistically, this will add momentum to the already-rolling single-stair movement. Cities like Baltimore and Austin have recently adopted single-stair, joining long-standing single-stair cities like Seattle and Honolulu.

Streamlines Environmental Review

Read more

Monday

ISM Services PMI

The services side of the economy grew in June, same as it has every month for the past two years, according to this survey of the segment’s purchasing managers. The prices component of this measure increased at the slowest pace since February, which is nice, but it still suggests rapid price increases. That’s a bad sign for inflation.

Oil Stuff

Both gas and diesel prices fell again during the week ending July 6^th, but given that the ceasefire in Iran is over, we’ll see if that continues. Oil prices haven’t been particularly bothered by the resumption of hostilities, hovering in the low $70/barrel range.

TSA Checkpoint Travel Numbers

It’s been a disappointing summer travel season so far, with TSA gate check numbers modestly below year-ago levels around the July 4^th holiday.

The optimistic take is that 2025 was a record year for summer travel and, given high prices, a modest decline isn’t so bad.

The pessimistic take is that travel volumes are below expectations, especially given the World Cup, and this is a pretty clear sign that consumers are pulling back in the face of high prices.

Tuesday

The Trade Deficit

The trade deficit surged in May 2026 due to record high imports. What drove the increase? Data centers, of course. Data center equipment is really expensive and we’re buying a ton of it. Computer accessory and semiconductor imports accounted for 18% of the monthly increase.

It wasn’t all data centers, though. Imports of pharmaceuticals and consumer goods also made a sizable impact. A sharp drop in gold exports—precious metal trading has been volatile over the past several months—also contributed to the widening trade deficit.

The big takeaway here is that however much the White House wants to close the trade deficit, that priority is taking a back seat to the AI build out.

Wednesday

More Tariff Pass‑Through Is in the Pipeline

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Way back in October 2025, we wrote about how data center construction wasn’t that large compared to other boom segments. Specifically, it had yet to reach the lofty heights of warehouse construction and the even loftier heights of computer/electronic manufacturing construction.

It was a fun little narrative, and one that came with an elegant explanation: despite the gaudy overall data center cap ex numbers, only a small portion—maybe 20-30%—of that total goes toward actual construction. The rest is used for the equipment that goes inside the facility.

A fun little narrative, and one we can safely retire.1 Data center spending has surged another 24% since we wrote that and is now larger than those two aforementioned boom categories.

Data centers now account for 8% of all private nonresidential construction spending. If current trends hold, it will reach 10% by January 2027.

Data centers are sucking up all the oxygen in the room, and by oxygen, we mean capital. This is especially difficult for other segments because, with rates high and lending standards tight, there’s not a lot of oxygen to go around.

Private nonresidential construction spending excluding data centers reached an all-time high in December 2023. Since that time, it’s fallen 11% while spending on data centers is up a staggering 145%.

We fully expect these trends to continue. Back in the 2010s we were hired to estimate economic and fiscal impacts for a wide assortment of development types.2 In the early 2020s, it shifted toward residential, mixed-use, and warehouse/distribution.

Since 2023, we’ve done almost nothing but data center work.

What’s Next

Next up is 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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Aside from falling oil prices, this week gave us new data on jobs, construction spending, consumer confidence, and more.

[If you missed either of our earlier posts this week, be sure to check out Fireworkonomics and A Weird June Jobs report.]

Monday

Oil Stuff

Oil prices remain below $70/barrel, traffic is improving in the Strait of Hormuz, and both gas and diesel prices have started to fall.

TSA Checkpoint Travel Numbers

Air travel remains just slightly below year-ago levels, at least as of the week ending July 1^st. This is disappointing given the World Cup. We’ll see how the holiday weekend plays out.

Tuesday

Job Opening & Labor Turnover Survey (JOLTS)

Hiring remained historically slow in May, but so did layoffs and quits. Which is to say, it remains an extraordinarily stagnant labor market. That’s great if you have a job and terrible if you need one.

Conference Board Consumer Confidence Index

Consumer confidence improved ever-so-slightly in June, according to this measure. Despite the increase, consumers are pointing in the same direction as the JOLTS data: “the percentage of consumers saying jobs were ‘hard to get’ rose to 22.5%, the highest level since January 2021 (22.8%).”

ISM Manufacturing PMI

Manufacturing activity increased for the sixth straight month in June, according to this survey of the industry’s purchasing managers. Comments from the survey respondents suggest that the conflict in Iran had a huge effect on input costs. That does not bode well for inflation over the next few months even as oil prices fall.

Wednesday

Construction Spending

Here’s what you need to know about the May construction spending data:

1. Data center construction spending rose again and is up 23% over the past year. This has now surpassed the warehouse and computer/electronic manufacturing categories and is the second largest private nonresidential subsegment, trailing only electric power generation projects.

   

2. Despite momentum from data centers, overall private nonresidential spending continues to shrink.

3. Public nonresidential activity continues to expand, albeit modestly.

4. Residential spending continues to expand, but the growth is concentrated in renovation/repair work. Both new single family and multifamily activity shrank in May.

ADP Employment Change

Private employers added a strong 98,000 jobs in June, according to payroll processing firm ADP. This is less important than the BLS jobs report (see Thursday), but it’s nice to see multiple estimates pointing in the same direction.

Mortgage Applications

Mortgage applications inched higher again this week, but these are still really weak.

Thursday

BLS Jobs Report

Employers added 57,000 jobs in June, which is fewer than expected, and the unemployment rate fell to 4.2%, though it fell for the wrong reasons (a smaller labor force).

Zack chalks most of this up to statistical noise (read his full write up on that here), but Anirban views it as a disappointing release.

Mortgage Rates

Mortgage rates dipped this week, with the 30-year fixed down to an average of 6.43%. That’s the lowest since early May but still way too high.

Jobless Claims

Initial jobless claims stayed at a remarkably low 215,000 this past week. Layoffs are nowhere to be seen.

Friday

Independence Day

Happy 250^th, USA!

Links of the Week

Will tariffs spur innovation? (Economic Forces)

Company Plans to Drop 600,000 Bacteria-Infected Mosquitoes into DC This Summer (Gizmodo)

This guy FOIA’d every San Francisco dog license from the past decade, and it’s fascinating (Twitter Thread)

Measuring the Economic Effects of AI (Agglomerations)

Final Thoughts

After this week, Anirban’s outlook for the economy is: Slightly worse

Inflation everywhere and a soft jobs report. If it weren’t for AI…

After this week, Zack’s outlook for the economy is: Better

I don’t put much weight on the weird June jobs report. The one thing we know for sure is that layoff activity remains historically uncommon. That combined with falling oil prices has me feeling good heading into the Holiday weekend.

Looking Ahead

Next week is a light one for data releases that mostly gives us new housing stats.

Today’s jobs report was, in a word, weird. Also good, but mostly just weird.

U.S. employment rose by a cooler-than-expected but still fine 57,000 jobs in June, and the two previous months’ estimates were revised down by a combined 74,000 jobs.

Even with June’s soft growth and the downward revisions, we’ve still averaged a perfectly acceptable 111,000 jobs per month since April.

Here’s where the weirdness creeps in: leisure and hospitality, the second fastest growing segment over the past year, lost 61,000 jobs in June. This doesn’t check out. The World Cup was supposed to cause a ton of hiring at hotels and restaurants. Instead, those two subsegments lost 21,700 and 32,900 jobs for the month, respectively.

The unemployment rate crept down to 4.2%, the lowest level since June 2025, but there’s something wonky going on with the underlying data. The household survey1 shows a sharp decline in the labor force, employment, and unemployment. Even the survey’s more credible and important ratios2 seem off kilter.

The prime age (25-54) employment-population ratio, for instance, plunged to the lowest level since 2022, ending a 3-year period of remarkable stability. That decline was almost entirely due to a breathtaking employment decline in the 25-34 age range.

I don’t buy it. Other data points like weekly unemployment insurance claims show that layoffs remain really low, and I don’t think a ton of 25-34 year olds quit their jobs en masse in June. Maybe they were too busy watching the World Cup to respond to the survey?

I don’t know, but I expect a rebound next month.

Three Not-So-Weird Things

1. Long term (27 week+) unemployment fell to the lowest level since the early months of 2025.

2. The information industry, which includes news, publishing, and tech, lost jobs again in June, and employment in the category is down to a 10-year low (excluding the pandemic).

3. Federal government employment has inched up in two straight months and appears to have leveled off after the massive cuts of 2025.

The Big Picture

Oddities aside, this was a solid jobs report. There’s nothing to worry about with the unemployment rate, and the fact that job growth slowed a touch may even calm Fed-fears of an overheated economy.

What’s Next

This week was packed with data releases, 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 will be out tomorrow 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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Not the most reassuring way to start a primer on youth firework accidents, but to the APA’s credit, firework safety has improved dramatically over the past 50 years.

By weight, firework use is up more than 1,000% since the mid 1970s, while firework injuries have risen just 17%.

This growth has propelled industry revenues from about $610 million in 2000 to $2.95 billion in 2025. Revenues will almost certainly exceed $3 billion in 2026 given the country’s 250th anniversary and tariff/inflation cost pressures.

To put a $3 billion industry into context, that’s about what Americans spend on porta potty rentals each year. The bowling alley industry is about 50% larger.

The domestic pyrotechnic industry is mostly about selling them and setting them off. We imported $589 million of fireworks in 2024, about 95% of that from China, while exporting just $92 million.

To the extent we do manufacture fireworks, it’s primarily professional-grade display products. The bottle rockets and roman candles you buy on the side of the road almost certainly come from China.

If those seem more expensive than they did a few years ago, it’s not your imagination. We currently levy a 30% tariff on firework imports from China, much to the National Fireworks Association's displeasure.

What’s Next?

We’ll have a post covering tomorrow’s jobs report. After that it’s Week in Review, our every-Friday post that gives you everything you need to know about the economy in a breezy, five-minute read, either on Thursday afternoon or Friday morning.

Week in Review 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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New York City just enacted a two-year rent freeze for roughly one-million rent-controlled apartments, so if you hear a low rumbling sound, it’s 98% of economists and housing experts groaning in unison.

Jason Furman, chair of Obama’s Council of Economic Advisers, sums it up nicely: “Rent control has been about as disgraced as any economic policy in the tool kit.”

His colleagues agree. The University of Chicago asked 41 distinguished economists if they agree with the statement:

Local ordinances that limit rent increases for some rental housing units, such as in New York and San Francisco, have had a positive impact over the past three decades on the amount and quality of broadly affordable rental housing in cities that have used them.

And here are their responses:

Here are a few of the comments they offer with those responses:

• Rent controlled units do not end up in the hands of low income people. Rent control discourages landlords from creating modest priced units.

• Unless all the textbooks are wrong, this is wrong.

• The planets are lined up here: theory and evidence point in the same direction.

• Next question: does the sun revolve around the earth.

What’s so bad about a rent freeze? It leads to less residential mobility, fewer available units, fewer new units, higher rents on non-controlled units, and less upkeep of rent controlled units.

We won’t belabor the point. We’re far from the only ones complaining about this, and the best griping on the subject actually comes from Arpit Gupta, an NYU professor and the one member of the NYC Rent Guidelines Board to vote against the freeze.

What’s Next?

We’ll cover Thursday’s jobs report and maybe even get a construction post out during this holiday-shortened week.

Then it’s Week in Review, our every-Friday post that gives you everything you need to know about the economy in a breezy, five-minute read. Week in Review 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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This was a quieter, if not exactly quiet, week for economic news and data releases that still delivered updates on inflation, some housing stats, and more. Given the roller coaster oil prices have taken over the past few months, “quieter” is just fine by us.

Monday

Oil Stuff

Oil prices have plunged back below $70/barrel as traffic picks up through the Strait of Hormuz. Both gas and diesel prices are falling as a result, though not as quickly as some people, like the president, would like.

TSA Checkpoint Travel Numbers

Air travel has slipped below year-ago levels over the past week. This could be a little quirk, or it could be would-be travelers tapping out because of higher prices. Whether or not we get a big bounce over the July 4^th weekend will be telling.

Tuesday

Congress Passes Huge Housing Bill, Trump Cancels Signing

Congress passed the 21^st Century Road to Housing Act by a large and bipartisan 358-32 vote on Tuesday morning. Then, on Wednesday morning, President Trump abruptly canceled the signing ceremony and now says he won’t sign it unless Congress passes the Save Act. That seems unlikely, but we’re willing to bet that won’t matter: President Trump probably won’t veto this, so it will become law one way or another.

There’s a lot of really good stuff in this bill, and even the limit on large investors aren’t quite as bad as it could be. We’ll try to cover this in its own post, but here’s a rundown for anyone interested.

DOE Announces American Nuclear Supply Chain Loans

The Department of Energy issued $17.5 billion in conditional loans to finance 10 AP1000 nuclear reactors across the U.S. Specifically, these loans will fund long-lead time components, like containment vessels and turbines, that take years to get and can really slow down projects.

There’s a long way to go between these loans and functional reactors—they haven’t even identified the specific projects that will be receiving them—but it’s an exciting program.

Wednesday

New Home Sales

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Amusement and recreation construction, a relatively small but scorching hot segment, has rocketed to a new all-time during the first half of 2026.

The biggest driver is the ambiguously named “Social Center” subsegment, which includes banquet halls, lodges, fraternal halls, community centers, and golf courses/country clubs.

Our best guess is that this boom is driven by new neighborhood centers, particularly in age-restricted communities.

Demand has to be fairly weak for banquet and fraternal halls. While golf course openings have picked up slightly from the 2010s, with the new tracks concentrated at high end facilities in Florida, Texas, and South Carolina, according to the NGF, they remain uncommon, especially compared to the 1990s and 2000s.

The weakest amusement subsegment is, unsurprisingly, movie theaters. Blame streaming and the proliferation of giant high def TVs.

Fitness construction has been decent, though maybe a little disappointing given that gym membership is at an all-time high. Two potential explanations: first, this subsegment tracks with residential development, and second, a lot of new gyms are small studios in strip malls that don’t require much if any construction activity (think Orange Theory or a yoga studio).

Sports facility spending, which includes everything from a local field to an NFL stadium (as long as they’re not located at schools or colleges), has also been strong over the past few years. This is likely driven by megaprojects, like the Buffalo Bills new $2.2 billion stadium, and also maybe pickleball.

Finally, theme park construction is also nearing an all-time high. There’s been a nice wave of new/renovated parks in recent years, including Universal facilities in Texas and Florida and expansions at Disney. That said, iron and steel prices are up 70% since 2020, and that’s really the only physical input to a roller coaster, so in real terms this subsegment is likely disappointing.

What’s Next

Next up is 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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States can suffer from a crushing accumulation of well-intentioned but costly housing policies. Take Maryland, for instance, where minor housing regulations add up to major home price increases.

Sprinkling on Additional Costs

Two states require sprinklers in all new single family homes: California, where there are massive, frequent, and hellacious wildfires, and Maryland, where there aren’t.

Sprinklers cost about $2.00-$3.00 per square foot, so a new 2,500 square foot home costs about $5,000-$7,500 more because of this requirement.

Yes, sprinklers significantly reduce the threat of home fire fatalities. Some estimates put the decrease at about 90%. That sounds incredible—90% less likely to die in a home fire!—but fewer than 50 Marylanders die per year in residential fires (about 0.09% of statewide deaths).

And that’s fire deaths in all housing units. New single family homes built since 2015 (the only ones subject to the sprinkler requirement) account for less than 5% of the state’s housing stock.

Back of the envelope model: this requirement leads to about 1.5 fewer deaths per year. But even that’s generous because new homes are almost certainly less likely to catch on fire than older ones.

Maybe you still think $5,000 added to the cost of a new home is worth 1.5 lives saved every year. It sounds worse when you say that Maryland homebuyers are paying about $35 million every year to maybe save one life.

But That’s Just Sprinklers

Maryland is one of just five1 states that requires EV chargers (or at least wiring for it) in new homes, and the State updates to the newest international energy conservation code faster than most others. These two policies tack on another couple thousand to the cost of a new home.

Individually, these policies can be justified, or at least excused. But policies don’t exist in isolation, and an accumulation of cost-boosting regulations is particularly pernicious; overturning one bad policy is a lot easier than dozens of tiny ones.

What’s Next?

We’ll have a post on the amusement and recreation construction segment out tomorrow morning.

After that is Week in Review, our every-Friday post that gives you everything you need to know about the economy in a breezy, five-minute read. Week in Review 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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And while being thanked is nice, there’s plenty to be thankful for this Father’s Day, not least of all that the U.S. infant mortality rate fell to the lowest level ever in 2025.

On the economic front, this week brought us significant deescalation in Iran, lots of housing data, and update on retail spending, and more.

Monday

Industrial Production

This measure of how much our manufacturing, mining, and utility sectors produce inched up 0.1% in May and is up a modest—but pretty okay—1.7% over the past year. This is one of the indicators the NBER uses to diagnose a recession, so it’s nice to see growth.

NAHB Housing Market Index

Homebuilder confidence fell in June, and the decline was due to a drop in the Single Family Sales: Present component of the index. High mortgage rates and gas prices have made this a dud of a summer selling season.

Oil Stuff

Oil prices have fallen to levels not seen since early March as the U.S. and Iran signed a memorandum of understanding that, among other things, reopens the Strait of Hormuz (for at least 60 days). Both gas and diesel prices fell again as a result. Note that the EIA data only goes through the 15^th. Safe to say, gas is well below $4.00/gallon and diesel is well below $5.00/gallon now.

TSA Checkpoint Travel Numbers

Air travel has trended about 0.5% above year-ago levels over the past few weeks. Given the World Cup, it’s a little disappointing that travel numbers are up so modestly.

Tuesday

New Residential Construction

Housing starts fell sharply in May, plunging to the lowest level since May 2020. This data series can be volatile, and there’s a large (+/-9.8%) margin of error. Given broader market fundamentals, however, this isn’t terribly surprising.

Wednesday

Fed Interest Rate Decision

Read more

Construction spending on houses of worship has surged since the start of 2022, rising 115% from that multi-decade low.

We’re still investing about one third less in houses of worship than we were in in the 2000s, and that’s in nominal terms. Inflation-adjusted spending in the category is far below that peak.

Even so, it’s an impressive rebound.

What’s driving the increase? The Washington Post thinks it’s a combination of migration patterns, churches opening smaller satellite sites, and renovations that were delayed during the pandemic, among others factors.

They also point to new laws that make it easier for religions to build affordable housing on their land. We’re skeptical that would show up in the religious category, though it’s possible that these residential developments allow for greater investment in associated houses of worship.

Could the rebound be driven by increased religiosity? It seems unlikely. Yes, there’s been a small increase in self-reported church attendance, but church membership continues to decline.

A final possible explanation: church-to-other-use conversions have become more popular (in Baltimore churches have been converted into apartments and even a brewery in recent years ). That activity shouldn’t count as religious construction spending in the Census Bureau’s data, but it’s possible that some small portion of it is being misclassified.

What’s Next

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

I say this as a proponent of low taxes and limited government: the “no tax on ____” movements need to end.

Over the past few years, we’ve seen least semi-serious efforts to end taxes on:

• Tips

• Overtime

• Social security income

• Bonuses

• Property

• Property, but just for seniors

• Property, but just for anyone with a paid off mortgage (wtf?)

• Sales tax, but only for diners in New Jersey that have been open for at least 25 years

• Pet food

• Car loan interest

• Boat loan interest

• Federal income tax for the entire middle class

• Federal law enforcement income

• Guns and ammo

I’m one “no tax on ____” proposal away from an aneurysm.1

It’s like the world’s worst game of Musical Chairs. When the music stops, the one W-2 worker who hasn’t gotten an exception will be funding the entire government.

The best taxes have low rates and broad bases, a design that leads to fewer behavioral distortions and steadier revenues. Granting exceptions to favored voters or industries necessitates higher rates on a narrower base. That leads to less predictable revenues.

At a political-level, I get it. This stuff resonates with voters. Take this quote from a New York Times’ focus group:

Except no, Governor DeSantis doesn’t have a very good point . What does a mortgage have to do with property taxes? Should sales taxes only apply to people paying with credit?

[You can read the Tax Foundation’s detailed analysis on Florida’s property tax proposal here.]

Yes, voters eat this stuff up, but we Americans notoriously eat all kinds of stuff that we really shouldn’t.

Briefly, here are a few reasons to oppose these efforts.

Thinking Through Incentives

High tax rates can reduce an unwanted behaviors like smoking cigarettes, drinking, gambling, etc.

Tax deductions, credits, and exceptions can encourage desirable behaviors like charitable giving, having children, etc.

Look at the list up above. Do we really want to incentivize tips and bonuses while disincentivizing salaries? Is stimulating boat buying a worthwhile policy goal? Even pets, much as I love them, do not need tax incentives.

Fairness

I don’t like fairness as a policy consideration, but come on. This is bad.

Take a teacher who makes $50,000/year (all salary) and a bartender who makes $50,000 (half tips). Under the OBBBA’s new “no tax on tips” provision, the teacher would owe about $4,000 in federal income tax, while the bartender would owe about $500.

Property Taxes Are the Worst Taxes (Besides All the Others)

Property taxes should be kept low. Property taxes are also critically important because they encourage the transfer of land to higher efficiency uses and produce revenues that are exceptionally stable over time.

Without carrying costs on real estate, you’d get major land hoarding, which would make housing less affordable in the long run and, quite possibly, in the short run too.

There’s also this notion that seniors shouldn’t have to pay property taxes (many states currently limit property taxes for seniors). I sympathize with anyone forced out of their home because of rising property taxes, but “the asset I own appreciated too quickly” isn’t the worst kind of problem.

These exemptions are hard on younger households, especially families (or would-be families) looking to become homeowners. Municipalities are forced to raise other tax rates to compensate for the lower revenues, shifting an even larger portion of the tax burden onto everyone else. This also reduces school funding while making it harder for those young families to afford a home.

California, which limits the annual increase in assessed value to 2% per year, is the poster child for how these policies can distort the real estate market.

The Government Needs to Be Funded

The federal deficit is $39 trillion. Will getting rid of these bad tax exemptions fix it? Not even a little bit, but given that neither party has the political appetite to cut spending, avoiding needless tax carve outs is a small and easy step in the right direction.

What’s Next?

We’ll have a Construction Trend Tuesday post out later this week. After that, it’s Week in Review, which 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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Of course, $1.75 trillion doesn’t go as far as it used to, not with prices rising the way they have the past few months. That—the ongoing reemergence of inflation—was the biggest economic story during a week that also brought updates on home sales, consumer sentiment, small business optimism, and more.

Monday

Oil Stuff

Both gas and diesel prices fell again during the week ending June 8^th. The Strait of Hormuz is still closed, and yet oil prices have fallen below $90/barrel, nearing levels not seen since early March. There are several reasons for the surprisingly low price of oil, perhaps the greatest being a sharp decline in Chinese oil imports that has freed up supply for the rest of the world.

Regarding a deal to reopen the Strait, one could happen “soon, very soon,” which has somehow been true for most of the past three months.

TSA Checkpoint Travel Numbers

Air travel has rebounded and is now trending about 1% above year-ago levels. This slight bounce is at least partially due to the World Cup.

Tuesday

Existing Home Sales

Existing home sales (i.e. not newly built) increased about 3% in May and are up modestly on a year-over-year basis. Median sales prices are up just 1.3% year over year as home prices remain tame even as housing affordability remains a major issue.

NFIB Small Business Optimism Index

Small business owner optimism declined in May as they struggled with “significant and unpredictable hikes in fuel prices, which are more challenging for small businesses to pass on to their customers compared to their larger corporate competitors.” A net 36% of small business owners reported raising their prices in May, well above the historical average of 13%.

FDA Approves Sunscreen with Bemotrizinol

The FDA has finally approved a superior form of sunscreen. If “finally” seems dramatic, consider that the European Union approved this kind of sunscreen 26 years ago, and the FDA has been working on getting it approved for over a decade.

What does this have to do with the economy? Not much, but Zack is extraordinarily pale, so this is worth some celebration.

Wednesday

Consumer Price Index (inflation)

Read more

(If you really want to be freaked out by this development, Google what a human screwworm case looks like.)

Flesh eating larvae aside, this week brought several strong data releases including on manufacturing, the labor market, and a lot more.

Monday

Construction Spending

Construction spending increased 0.4% in April and is up about 1% year over year.

Residential spending increased a healthy 0.8% for the month due to a sharp increase in single-family spending, though single-family investment remains subdued.

Nonresidential spending also increased slightly for the month, but that was entirely due to public sector activity. Private nonresidential spending actually decreased in April, although that was mostly because of manufacturing megaprojects winding down (a topic we covered at length in our post from yesterday).

ISM Manufacturing PMI

Manufacturing activity grew for the fifth straight month in May, according to this survey of industry purchasing managers (i.e., the people in charge of buying inputs). That’s the good news. The bad news is that the prices component remained sky-high, and high diesel prices are really starting to hurt, according to respondents’ comments.

Tuesday

Job Opening & Labor Turnover Survey (JOLTS)

The number of open, unfilled jobs rose sharply in April and is now at the highest level since May 2024.

More importantly, there’s now more than one job opening for every unemployed person for the first time since the middle of last year. This suggests the labor supply is tightening, and that could lead to faster wage increases over the coming months.

That increase aside, it remains a low-hire, low-fire, low-quit labor market. There just isn’t a lot of churn going on at the moment.

Oil Stuff

Both gas and diesel prices fell considerably during the week ending June 1^st despite the Strait of Hormuz remaining closed. Oil prices are hovering in the low $90s, well below where they were over the past several weeks and way above where they were prior to the conflict in Iran.

Oil markets seem optimistic about a near-term resolution (or about the market’s ability to adjust to a long-term closure) and unconcerned by steadily falling crude oil stockpiles.

Wednesday

ADP Employment Report

Private employers added an impressive 122,000 jobs in May, according to payroll processing firm ADP. This is yet another sign that the demand for labor is heating up, even if this estimate matters less than the Friday one from the BLS.

ISM Services PMI

The services side of the economy grew for the 23^rd straight month, according to this survey of industry purchasing managers. As was the case with the manufacturing PMI, prices are rising quickly and purchasing managers do not have good things to say about the effects of higher oil prices.

The Beige Book

The economy appears to be growing, according to this Fed-published report based on interviews with business leaders and other market experts in each of the Fed’s 12 regions.

A big takeaway here is that lower income households are struggling with rising prices while higher income households are unbothered. As one Fed District noted, “Sales were also robust for some businesses that cater to higher-income consumers such as landscaping and golf simulators.”

Mortgage Applications

Mortgage applications fell again despite slightly lower mortgage rates. Buyers remain uninterested in borrowing at interest rates in the mid 6% range.

Thursday

Mortgage Rates

Mortgage rates inched lower this week but are still way too high. Given recent moves in the bond market, they’re going to rise again next week.

Jobless Claims

Initial jobless claims increased to the highest level since February, but that’s probably just a seasonal quirk. These remain low, and there’s nothing to worry about with layoffs for the time being.

Friday

BLS Jobs Report

U.S. employers added a booming 172,000 jobs in May, and the unemployment rate held steady at 4.3%. Nothing to dislike here besides what it means for interest rates: not only are rate hikes now more likely than rate cuts, they may happen sooner than previously expected.

Links of the Week

A compute tax is a REALLY dumb idea (Economic Forces)

The struggle against excessive corporate power needs better standard-bearers (Noahpinion)

Why Are Men So Bad at Making—and Keeping—Friends? (Derek Thompson)

Final Thoughts

After this week, Anirban’s outlook for the economy is: Worse

I know this is a shocker, but today’s terrific jobs report indicates that the U.S. economy is overheating. While the summer is shaping up to be phenomenal for business investment and consumer spending, there are additional headwinds that face us going forward like sticky inflation and higher interest rates. Bottom line, the short-term outlook is great, and the longer-term one is sketchy.

After this week, Zack’s outlook for the economy is: Better

Am I worried about rates? Sure, but even with inflation picking up I think a strong labor market is preferable to the alternative.

Looking Ahead

Next week is all about inflation data.

U.S. employers added an impressive 172,000 jobs in May, and March and April’s estimates were revised up by a combined 93,000 jobs. This tramples expectations and suggests the wobbles of 2025 and early 2026 are now decidedly behind us.

There’s not much to dislike here. The unemployment rate stayed at a perfectly acceptable 4.3% (it actually fell slightly when you take it to the hundredths). Prime age (25-54) labor force participation inched up and is close to a cyclical high. Young adult unemployment improved slightly, and fewer people are working part-time for economic reasons.

If you really want to nitpick, long-term unemployment (at least 27 weeks) inched up and is at a cyclical peak, but it’s not particularly high by historical levels, about the same as it was in 2017.

And really, there’s no need to nitpick. Job gains were broad-based by recent standards, though healthcare and leisure and hospitality still dominated growth.

Government also added a surprising 52,000 jobs for the month, the majority of which were noneducational local government positions.

The financial activities sector lost another 22,000 jobs for the month, and employment in that category is now down by more than 100,000 over the past year. While these losses are spread across subsectors, insurance carriers have been hit particularly hard, shedding about 73,000 jobs since May 2025.

For the labor market and broader economic resilience, today’s report is purely good news. And for anyone working in an interest rate segment, today’s report is…I don’t want to say “bad,” but decidedly less good.

Rate Hikes Are (Probably) Coming

The Fed has two jobs: maximize employment and keep inflation at a 2% annual rate. Today’s blowout report suggests the employment side of the mandate is in good shape, while recent inflation data shows price increases are speeding up.

As a result the Fed is now more likely to raise rates then cut them, and those hikes could come sooner than previously expected.

What’s Next

This week was packed with data releases, 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 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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The computer/electronic/electrical manufacturing subsegment experienced the boom of all booms starting in mid-2021.

Spending in the category surged from less than $8 billion per year to a peak of about $126 billion in mid-2024, a stunning 1,500%+ increase.

The CHIPS Act deservedly gets a lot of credit for this, though it wasn’t signed until August 2022, about 12 months after the meteoric rise began.

Why did the boom start before the law was signed?

1. The semiconductor shortage spurred investment

2. The CHIPS Act didn’t just poof into existence in August 2022. Companies knew that it (or something like it) was in the works

3. Interest rates were historically low

4. This category also includes batteries, so other investments (like EVs) helped

5. This data series is nominal, and construction input prices took off in early 2021

Spending in this category has been falling—nearly as quickly as it rose—since late 2024. The construction intensive part of CHIPS Act megaprojects is winding down, EV supply chain investment has slowed, and interest rates have risen sharply.

This rapid rise and fall has made it difficult to assess the broader nonresidential construction segment. Including that subsegment, private nonresidential spending has been in decline since late 2023.

Excluding that one subsegment, however, all other private nonresidential spending began to rebound at the start of 2025 and is less than 1% below the December 2023 all-time high.

And because we know you’re wondering: data centers account for 46% of the increase in all other nonresidential spending (the green part of the above graph) since January 2025. That’s a lot, but there’s still been modest growth across the remainder of the segment.

Big picture: the headwinds causing the computer/electronic/electrical manufacturing construction slowdown remain firmly in place, and the subsegment will continue to shrink over the next couple quarters. That will drag on total nonresidential spending, an important consideration when viewing the aggregate data.

What’s Next

Next up is 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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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 Jones Act mandates that any ship taking goods from one U.S. port to another be:

1. U.S. built

2. U.S. owned (at least 75%)

3. U.S. flagged

4. U.S. crewed (at least 75%)

This law, technically called the Merchant Marine Act of 1920, is the absolute worst. Some of the drawbacks include:

• It dramatically raises shipping costs: U.S.-built container ships can cost about 5x the average global price (or more), a direct result of the protectionist policy, while U.S. crews command higher labor costs.

• Those high building costs mean there’s very few Jones Act compliant ships. One source estimates there are just 92 Jones Act-compliant oceangoing cargo ships, less than 0.2% of the global fleet.

• There’s not much trade activity between U.S. ports, which diverts trade to more expensive rail and truck routes.

• The law is particularly painful for isolated states and territories like Alaska, Hawaii, and Puerto Rico because international ships can’t bring them goods from U.S. ports.

So yes, there are a lot of drawbacks, but at least the Jones Act has kept the U.S. shipbuilding industry healthy and hale. Except, no, it hasn’t done that at all. Despite a century of protection, the U.S. commercial shipbuilding industry remains tiny by global standards, can’t meet our domestic needs, and accounts for a negligible share of worldwide ship production.

Consider that “China’s largest state-owned shipbuilder built more commercial vessels by tonnage in 2024 than the entire U.S. shipbuilding industry has built since the end of World War II.”

What if We Repealed the Jones Act?

No need to guess! It’s been suspended since March 18^th to ease energy prices during the conflict with Iran, a move that confirms that the Jones Act does, indeed, raise prices.

As of May 13^th, 45 foreign-flagged vessels had taken advantage of the suspension, according to this Cato review. Roughly 4x more fuel was shipped from the Gulf Coast to the western U.S. in the first 50 days of the waiver than in all of 2025.

This has provided critical relief to prices at a time when inflation is once again on the upswing. The waiver is currently set to expire on August 16^th, but it’s not out of the question that it gets extended again, especially with midterm elections just a few months after that.

Regarding full repeal, don’t get your hopes up. The Jones Act lobby, comprised of maritime unions and domestic shipbuilders, is a tough one to beat.

What’s Next?

Boy, do we have some Policy Gripes in the pipeline. For the time being, we’ll try to get a construction post out later this week before Friday’s Week in Review. Week in Review is only for paying subscribers. If that’s not you and you want it to be, just click the button below:

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