Glutted Week in Review
Oil prices, construction spending, & more
Mathematician Nassim Nicholas Taleb once wrote, “I’ve seen gluts not followed by shortages, but I’ve never seen a shortage not followed by a glut.” And sure enough, banks like JPMorgan and Morgan Stanley are slashing their oil price forecasts in anticipation of a possible oversupply.
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 1st. 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:
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.
Despite momentum from data centers, overall private nonresidential spending continues to shrink.
Public nonresidential activity continues to expand, albeit modestly.
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 250th, 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.