Elliot Eisenberg Economic & Policy Blog

Housing Halt + Seasonally adjusted annualized July housing sales came in at 3.95 million , the 35th straight month of Y- o-Y declines , and the fifth month of sub-4 million sales , a level historically rarely seen . Troublingly , 30-year rates are 81 basis points lower Y-o-Y and months of inventory is up 21 % Y-o-Y , yet sales remain anemic . First-time buyers struggle with high payments , move-up buyers remain locked-in with low rates .

Weakening Work For the year ending 3 / 24 , estimated job growth has been preliminarily revised down by 818,000 , bringing average job growth down from 242,000 / month to 174,000 / month . The revision is based on data from state unemployment insurance tax records , not low response rate monthly surveys . But this data doesn ’ t include illegal immigrants ,

and this data also gets revised . Bottom line , the economy ’ s somewhat weaker , and that ’ ll increase the likelihood of Fed rate cuts .

Glittering Gold Gold recently surpassed $ 2,500 / oz and has been rising rapidly since 10 / 22 , when it traded at $ 1,650 / oz . A major reason , central bank buying . From 1970-1988 , cumulative net central bank gold purchases were roughly zero . From 1989-2009 , banks were net sellers every year . Since 2010 , they have been net buyers every year . Moreover , through 2020 net purchases averaged about 600 tons / year . Since then , they ’ ve averaged 2000 tons / year , a huge increase in demand .

Bad Betting Two recent papers show the detrimental effects of gambling . One reports that where gambling is legal , average credit scores drop 0.3 % after four years , and where online betting is legal , they drop by 1 % and bankruptcy filings rise 25 % -30 % within 3-4 years . Another paper shows that legalization boosts sports gambling , and such gambling does not lead to reductions in other

gambling activities or general consumption , thus lowering savings / investment .

Insignificant Inflation July CPI fell to 2.9 %, its lowest level since 3 / 21 , while the more important core measure hit 3.2 %, its lowest since 4 / 21 . Moreover , over the last three months core CPI is up 1.6 % annualized , down from 2.1 % in June . The major problem , housing . It was responsible for 90 % of the CPI ’ s 2.9 % Y-o-Y rise . Nonetheless , a 25bps September cut is guaranteed and maybe 50bps , or more likely 25bps in November .

Margin Movement Pre-Covid , next twelve-month operating margins for fortune 500 firms on an equal weighted basis ( thus largely excluding tech megacaps ), were 13 %. When Covid hit they quickly collapsed to 9 % by 6 / 20 . However , over the ensuing 12 months they more than recovered and peaked at 14.5 % in mid-2022 . From then through mid-2023 they fell to 13.25 % where they have remained since . Pricing power of most firms has largely disappeared .

Crisis Concerns When fund managers were asked

what they consider the biggest tail risk , a recession is now top for 39 % of managers , up from 18 % a few months ago . Geopolitical conflict is unchanged at 25 %, while inflation follows at 12 %, down from over 30 %. A systematic credit event is cited by 11 %, up slightly , then an AI bubble at 7 %, and lastly a US election sweep at 4 %, down from 13 %.

Unemployment Upswing The labor market is meaningfully weakening . A year ago , the Y-o-Y increase in the labor force was 3 million and net employment gains were 2.9 million . 97 % of job entrants found a job . Now the labor force is 1.3 million larger than it was Y-o-Y , but employment gains have been a paltry 57,000 , meaning 4 % of entrants have found employment . Unsurprisingly , the unemployment rate has jumped from 3.5 % to 4.3 %.

Elliot Eisenberg , Ph . D . is an internationally acclaimed economist and public speaker specializing in making economics fun , relevant and educational . Dr . Eisenberg earned a B . A . in economics with first class honors from McGill University in Montreal , as well as a Master and Ph . D . in public administration from Syracuse University . Eisenberg is the Chief Economist for GraphsandLaughs , LLC , a Miamibased economic consultancy that serves a variety of clients across the United States . He writes a syndicated column and authors a daily 70-word commentary on the economy that is available at www . econ70 . com .

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