Inflation remains sticky at just under 3 percent and shelter costs are still pushing higher. The labor market is softening more quickly than official headlines suggest, with payroll growth almost stalling and unemployment creeping up to 4.3 percent. Black unemployment surged to 7.5 percent, a reminder that downturns rarely hit evenly. Long-term joblessness is rising too, a classic late-cycle marker.
On the demand side, consumer sentiment dropped to its lowest point in four months, with middle and lower income households leading the decline. Early holiday retail forecasts are already being revised down, suggesting households are tightening before peak spending season. Housing is showing faint signs of stability with supply at 4.6 months, but affordability remains stretched and mortgage rates above 6.5 percent continue to bite. Commercial real estate remains the largest structural red flag, with office delinquencies above 7 percent.
Major headlines also shaped sentiment. Reports that the U.S. and China have reached a “framework” deal on TikTok lifted markets briefly, but details remain thin and Beijing has not confirmed. At the same time, pressure on the Fed to cut rates appears to have succeeded, with a decision expected this week. That raises the risk of easing into sticky inflation, a classic stagflation trap. Meanwhile, agriculture and trade remain stressed: China has not purchased any U.S. soybeans for the new crop year, pushing cash prices below $9 per bushel in some regions, and U.S. timber exports continue to weaken as Chinese demand for hardwood furniture slows. In labor-intensive manufacturing, the DHS raid at the Kia battery plant in Georgia, where hundreds of South Korean workers were arrested, has rattled investment confidence in advanced manufacturing projects. Tourism in D.C. and Chicago is also showing signs of strain amid political rhetoric and security crackdowns. Tourism to the US is down about $12B from last year, and a drag on the GDP of .1-.2 percentage points by itself.
Other important headlines that will factor into our economic reporting: Bolsonaro’s conviction could spark new economic fighting with Brazil. Brazil is already set up to provide China with soybeans and beef to counter the US market. On top of that India and China are straightening their relationships after Trump’s tariffs have fractured US/India relations. They are the 4th and 10th largest economies respectively.
Looking ahead, markets are focused on the Fed’s policy meeting midweek. Jobless claims will offer an early signal of whether layoffs are broadening. Housing starts and permits at week’s end will show whether builders still see demand in the face of high rates. And PCE inflation later this month will test whether the Fed’s preferred measure is cooling enough to justify more than one rate cut.
The balance of risks continues to tilt toward stagflation-lite: growth flat, jobs weaker, inflation sticky. But a sharper downturn cannot be ruled out if labor weakness deepens and consumers retreat further into the holidays.
Quick-Read Dashboard
Inflation (CPI, YoY): 2.7% | Core (YoY): 3.1% | 1-month: +0.2%
Unemployment rate: 4.3%
Nonfarm Payrolls (Aug): +22k — weakest pace outside recessions
Fed funds target range: 4.25–4.50% (cut expected imminently)
GDPNow (Q3 real growth nowcast): ~2.0%
Manufacturing PMI (ISM): 48.9 (contraction)
Composite PMI (S&P Global): 54.6 (expansion)
10y–2y Treasury spread: ~+0.6% (no longer inverted, but flat)
High-Yield credit spread (HY OAS): ~2.9% (tight)
30-yr mortgage (Freddie Mac): 6.58%
Existing-home sales (SAAR): 4.01M, months’ supply 4.6
Housing starts (SAAR): 1.43M (single-family ~0.94M)
CRE stress: CMBS delinquency elevated (esp. office)
New Relevant Statistics to Track / Add Moving Forward
Long‑term unemployment, especially 27‑plus weeks, as % of total unemployed. Already rising.
Consumer inflation expectations, especially among low and middle incomes. Recent rise to ~3.9% mentioned.
Job revisions and how much earlier estimates were overstated (e.g. over 900,000 jobs revised downward). This matters because policy and sentiment react to data reported, not revised.
Tightness in housing/rental supply and changes in “owners’ equivalent rent” or rent of primary residences inflation (lagging indicators).
Weekly initial jobless claims (national & local) as early warning.
Consumer sentiment / expectations indices (Michigan etc.).
Takeaway: Growth is fragile, inflation sticky, labor softening. Housing activity weak but stabilizing; CRE remains the deepest structural stress.
Sources: Bureau of Labor Statistics, Bureau of Economic Analysis, Federal Reserve, Atlanta Fed GDPNow, U.S. Census Bureau, NAR, MBA, Department of Labor, Treasury/FRED, ICE/BofA, S&P Global, ISM, University of Michigan, Conference Board, USDA, FAO, Trepp, Moody’s/Fitch/S&P, TSA, EIA, American Soybean Association, National Hardwood Lumber Association, Reuters, Bloomberg, WSJ, Financial Times, Politico, The Hill, NPR, AgWeb, Farm Policy News. Internal analytics: Stagflation Index, Structural Risk Index, Retirement Defense Checklist, Early House-Sale Triggers, Where Could We Land? Tracker.