Canary in the Labor Market

The latest economic signals are impossible to ignore. Data on the labor market, retail sales, and consumer spending point to a troubling reality: the foundations of the U.S. economy are weakening. While headline narratives cling to fragile optimism, the underlying numbers tell a different story, one of slowing growth and mounting vulnerabilities. 

Unemployment data, when stripped of seasonal adjustments, reveals alarming trends. Initial jobless claims surged to 351,000, a sharp jump from 306,000 the week prior. Continued claims reached 2.28 million, climbing by over 93,000. These are not seasonal fluctuations; they are the symptoms of a labor market that can no longer absorb displaced workers. 

Seasonal workers, laid off after the holidays, face a sobering reality... the jobs they once relied on are not simply coming back. This is particularly troubling as continued unemployment claims historically indicate a prolonged slowdown in hiring and consumer spending. 

Retailers reported an underwhelming holiday season, with inflation-adjusted retail sales barely scraping positive territory at just 1.27% year-over-year. This modest bump was not a sign of consumer strength but rather a reflection of shoppers front-running anticipated price hikes from looming tariffs. 

Target, a bellwether for retail performance, reported a 2% increase in comparable sales for November and December. However, with inflation running at 2.9%, this represents a real decline in purchasing power. The data exposes a larger issue: consumers are retreating from discretionary spending. Key categories like home goods, long a Target stronghold, have weakened significantly. 

The narrative that wage growth outpaces inflation is increasingly detached from reality. Average hourly earnings for nonsupervisory employees rose by just 1% year-over-year, falling far short of inflation and signaling a real decline in disposable income.

Historical parallels provide a stark warning. In both the dot-com bubble and the Global Financial Crisis, wages temporarily outpaced inflation before recessions took hold. Today, the dynamics are eerily similar, with household budgets stretched to the breaking point by rising debt-servicing costs and dwindling savings. 

Hints from Federal Reserve officials suggest rate cuts may be on the table in 2025, but this is no sign of confidence; it’s an acknowledgment of deteriorating conditions. The Fed faces a near-impossible task: managing persistent inflation while responding to cracks in the labor market and slowing consumer demand.

Yet the root problem remains unaddressed. Debt-to-GDP sits at 120%, deficits hover near 7% of GDP, and the Treasury market is increasingly fragile. The Fed’s failure to reduce debt levels during the recent recovery leaves it ill-prepared for the next downturn.

Tariffs, touted as a tool to address trade imbalances, are poised to deliver another economic shock. Retailers are already raising prices to front-run expected cost increases, further straining consumer budgets. Tariffs might address long-term strategic goals, but in the short term, they risk exacerbating inflation and reducing demand. 

The consequences extend far beyond retail. Higher input costs will ripple through supply chains, hitting manufacturers and small businesses. The combination of rising costs, slowing demand, and reduced consumer confidence paints a grim picture for the months ahead. 

The warning signs are unmistakable. Rising unemployment claims, faltering retail sales, and stagnant wage growth reveal an economy on the brink of a broader slowdown. Policymakers’ failure to address structural imbalances during the last decade leaves the U.S. vulnerable to shocks like tariffs, rising interest rates, and declining consumer confidence. 

The cracks are no longer theoretical; they are real, visible, and widening. 

(C) 2025 Chris Barcelo

The Warm Heart of the "Dismal Science": Economics and the Individual

Criticism of one’s passions is as old as the marketplace itself. For those of us drawn to the complexities of economics and the elegant mechanics of free markets, accusations of being “cold” or “uncaring” miss the mark entirely. They often arise from a profound misunderstanding of what markets represent and, more importantly, what drives those who study them.

The charge frequently leveled is one of financial obsession—the idea that economics is fixated on profits, transactions, and entrepreneurial ambition. Images of industrial robber barons and unfeeling capitalists dominate the imagination. Yet this caricature ignores the broader essence of economics: a discipline rooted in human choices, trade offs, and the allocation of scarce resources to meet real, tangible needs. It is not merely the science of wealth but of human action; how individuals and societies prioritize, innovate, and cooperate to create value, be it monetary, social, or cultural.

The irony is that economics, often labeled detached or dismal, is among the most profoundly human sciences. Markets, when left unencumbered, become stages for innovation, cooperation, and the solving of problems. But government interventions, whether through regulations, mandates, or monetary manipulation, distort these natural mechanisms and often harm those they claim to protect.

Consider minimum wage laws, frequently hailed as a safeguard for fair pay or a "living wage". While noble in intent, they almost always backfire in the long run. By raising labor costs, these policies discourage businesses from hiring, particularly at the entry-level, leaving the most vulnerable locked out of opportunities. Profits surge and business get bigger by eating up their smaller competitors. How is this possible? In such an environment, automation and outsourcing thrive compounding the very inequities the laws aim to address.

Tariffs and heavy-handed regulations are no better. Cloaked in rhetoric about protecting domestic industries or defending national pride, they raise consumer costs, stifle competition, and throttle innovation. Such policies may line the pockets of a few connected industries, but they do so at the expense of broader societal progress, lowering the living standards of the many to serve the privileged few.

Then there’s inflation—the most insidious of interventions. It is no mere rise in prices, as the public is so often led to believe, but a devaluation of the currency itself, brought about by the reckless expansion of the money supply. Central banks and governments, seeking to stimulate growth, print money with abandon, diluting its value and eroding the savings of ordinary people. This silent theft disproportionately harms those least equipped to bear it, while the architects of these policies frame their actions as economic "stimulus" or acts of benevolence. It is a bait-and-switch worthy of the robber barons of old—only now, the theft occurs under the guise of public service.

The public, misled by this distorted narrative, applauds and requests policies that perpetuate cycles of booms and busts. Each crisis, from the dot-com bubble to the housing collapse of 2008, is met with bailouts and monetary expansion—short-term fixes that exacerbate long-term problems. The 2008 financial crisis, ostensibly "resolved" by unprecedented intervention, sowed the seeds for even greater instability, culminating in the distortions of the COVID-19 era. Massive stimulus and monetary easing have pushed global markets to the brink of a reckoning—a precarious predicament where the weight of past excess threatens to overwhelm the system entirely.

Understanding inflation’s true nature and the destructive consequences of interventionist policies is not academic nitpicking; it is essential for breaking free from this harmful cycle and the very real devastation (be it financial, emotional, familial, societal, etc). Without fiscal and monetary discipline, and without an educated populace to demand it, we are destined to repeat these patterns, each iteration more severe than the last.

It’s not about tearing down good intentions. Not by a long shot. It is an appeal to acknowledging how they can, when the wrong means of achieving them applied, lead to outcomes that harm the very people they aim to help. 

Economics isn’t simply an academic pursuit; it’s a practical framework that, when paired with ethical considerations, empowers individuals to advocate for ideas and approaches that foster growth and innovation and the general rising welfare of humanity. Economics is all about social cooperation. Consequently, the most meaningful solutions often involve removing the very policies and responses, such as those questioned here, that obstruct progress and stifle human potential.

Far from being “dismal,” economics is a profoundly empathetic endeavor. It seeks to address systemic problems at their roots, offering the tools to build a society where individuals—not governments—shape their destinies through creativity, cooperation, and freedom.

This is not about serving nations, states, or even communities in the abstract. It is about serving individuals—the true architects of society. The so-called "cold" science of economics, when rightly understood, is nothing less than the warm heart of human progress.

(C) 2025 Chris Barcelo

Wall St Prospers While Main Street Suffers

Wall Street Prospers While Main Street Suffers

by. Doug French (Mises Institute)

“The U.S. economy is in very good shape — it has a strong underlying growth trend,” said Douglas Holtz-Eakin, an economist and president of the American Action Forum, a center-right think tank, reports the Associated Press. After all, 3rd quarter GDP rose 2.8 percent.

However, Murray Rothbard used to tell us in class that GDP was a ridiculous way to gauge the strength of the economy. He said if the U.S. government destroyed everything west of the Mississippi and then rebuilt it, the nation’s GDP would explode but no one west of the Mississippi would be better off.

In fact, the growth in prices has left lower income Americans broke. According to Moody’s Analytics chief economist Mark Zandi, “High-income households are fine, but the bottom third of U.S. consumers are tapped out. Their savings rate right now is zero.”

Almost Daily Grant’s reports that overall credit card balances reached $1.17 trillion in the third quarter, up 26 percent over the prior two years. Many borrowers can’t make the payments leading to “U.S. credit card firms [writing] off $46 billion of bad debt over the first three quarters of 2024, reports the Financial Times, citing research from BankRegData. That represents a 50 percent uptick from the same period last year and marks the highest comparable nine-month figure since the Great Recession’s aftermath in 2010.”

Consumers aren’t the only ones stiffing their lenders. Roughly one in ten office building borrowers in the U.S. is delinquent on payments. Bisnow.com reports, “Roughly 11 percent of office buildings tied to CMBS loans were delinquent, beating the previous high watermark of 10.7 percent set during the Great Recession in December 2012, according to Trepp, which began tracking the CMBS sector in 2000.”

This may seem like old news. But, “more than $2B in office loans became freshly delinquent in December, causing a 63-basis-point increase in the overall delinquency rate, according to Trepp.”

“Looking closer at the CRE sector, loans secured by offices, especially those in major cities, remain the top concern,” the Fed said in its November supervision and regulation report.

Apartment and retail loan delinquencies are also rising, “with the delinquency rate on apartment properties rising from 2.7 percent to 4.6 percent. More retail owners also are also having trouble staying current, with delinquencies rising from 6.5 percent at the end of 2023 to 7.4 percent.”

The housing market seems to have hit a wall with unsold inventory for sale of completed new houses spiked by 57 percent year-over-year to 124,000 houses in November, according to Census Bureau data. This is the highest since June 2009 during the housing bust.

Wolf Richter wrote on WolfStreet.com, “Homebuilders are trying to find buyers for these completed ‘spec’ houses by piling on incentives, including costly mortgage-rate buydowns, and by cutting prices. But obviously, they haven’t done nearly enough to trim their bloated inventories, which continue to balloon, and they’ll have to do a lot more to bring those prices and payments down.”

Median new home prices have fallen to the lowest level since 2021. Unsold inventories for sale at all stages (not yet started to completed) of construction increased by 8.1 percent to 493,000 houses, the highest since December 2007 and 9.1 months worth of supply.

Mega Builder Lennar stated during its latest earnings call, “Consistent with our strategy of matching sales pace with production, we adjusted sales price, incentives, and margin in order to re-ignite sales and actively manage inventory levels.” (emphasis added)

As for existing home sales 2024 saw 4.04 million sales, the lowest number since 1995, “below even the worst years during the Housing Bust,” Richter points out. 

While prices on Wall Street remain robust, trouble lurks on Main Street.

Wall Street Prospers While Main Street Suffers by Doug French is licensed under CC BY-NC-ND 4.0

The Global Echo of Labor and Leadership: Economic Fragility Unveils Political Collapse

The global economy narrative continues to unfold, one of unraveling promises. Major governments around the world, from Canada to France and Germany, are succumbing to abrupt political turmoil, and the threads connecting these collapses are far more significant than budget deficits or parliamentary squabbles. At the heart of the upheaval is a shared failure: the inability to address the systemic economic fragility that has long been masked by superficial assurances and unsustainable policies. Beneath the veneer of optimism, voters are grappling with a stark truth: the economic recovery promised after the supply shocks of recent years never materialized.

In Canada, rising unemployment and stagnant GDP growth have pushed the Trudeau government to the brink. The resignation of Finance Minister Chrystia Freeland, citing policy disagreements over runaway spending and looming U.S. tariffs, has thrown Ottawa into chaos. Unemployment now nears 7%, a stark reminder that economic performance is failing to meet the rhetoric of its leaders. While politicians tout disinflation and declining interest rates as signs of progress, citizens feel the crushing weight of lost purchasing power. For them, the economic story isn’t about inflationary trends retreating; it’s about the absence of a pathway to regain what was lost. The labor market, with its lack of hiring and increasing layoffs, serves as a daily reminder that their prospects are dimming, not improving.

Across the Atlantic, France’s political landscape mirrors this economic discontent. Emmanuel Macron’s government, already battered by multiple reshuffles and snap elections, faces escalating pressure as jobless claims surge. Payroll growth stalled last year, and recent months have seen the largest increases in unemployment benefits claims since the pandemic. The Bank of France’s downward revision of growth forecasts only solidifies the public’s frustration. Voters see the widening public deficit, now projected at 6.1% of GDP, as the natural outcome of a government trying to buy time with spending while ignoring the structural rot beneath.

Germany, too, finds itself in a familiar quagmire. Dependent on global demand and deeply intertwined with China’s struggling economy, Germany has endured a protracted, shallow recession for years. Despite promises of avoiding economic contraction, Chancellor Olaf Scholz faced a no-confidence vote this week, signaling the end of his government. The parallels between Germany’s plight and its European neighbors are striking: labor markets turning sour, unemployment climbing, and political leadership refusing to acknowledge the severity of the economic crisis.

What unites these cases—and others across the globe—is the labor market’s pivotal role in exposing deeper vulnerabilities. It isn’t just layoffs, though those are beginning to rise. It’s the absence of hiring, the slowing income growth, and the realization among workers that the opportunities to rebuild their financial stability are vanishing. The labor market weakness is not isolated; it is global, and its ripple effects are reverberating across economies once deemed resilient.

Energy markets echo this malaise. Gasoline prices, which should rise seasonally at year’s end, have instead stagnated. Inventories are swelling, a sign not of oversupply but of weak demand. The absence of a seasonal price rebound highlights the same underlying truth: economies are not expanding. Commuters drive less, businesses cut back, and households tighten budgets in a silent acknowledgment of economic stagnation. This lack of demand, mirrored in labor data, signals that the global economy is not simply slowing—it is recalibrating to a lower baseline of activity.

Central banks, once seen as saviors in times of economic stress, are now playing catch-up. Rate cuts from the Bank of Canada and the European Central Bank signal not recovery but retreat, a tacit admission that growth has not rebounded as promised. To be abundantly clear, these actions are not harbingers of economic strength but desperate attempts to mitigate further declines. The faster central banks cut rates, the clearer it becomes that their economies are in trouble.

Voters, however, are no longer content to endure these cycles of promises and disappointments. They have shown remarkable patience through years of supply shocks and price illusions, tolerating inflation and diminished purchasing power on the condition that better times would follow. But as labor markets weaken and the narrative of recovery unravels, that patience has run out. The political turmoil we see today—from Canada’s budget battles to France’s government collapse and Germany’s leadership crisis—is the natural result of unmet expectations. Dare I say the same of recent U.S. elections?

The common cause here is that governments misread the situation, believing that spending and rhetoric could buy time and confidence. But the bond markets and labor statistics have been flashing warnings all along, signals that went unheeded in favor of maintaining appearances. Political leaders doubled down on policies that ignored the structural issues, and now they face the consequences of those choices.

The story is the same across borders: a weak economy breeds political discontent. In each case, the public deficit is not merely a financial issue but a reflection of deeper systemic failure. When leaders insist on painting an optimistic picture while reality worsens, they lose credibility. The public may not always grasp the technical nuances of economic data, but they feel the effects in their daily lives. As job prospects dry up, purchasing power declines, and the promise of recovery fades, people are no longer willing to accept the status quo. 

Mises was right regarding Economics and the Citizen.

The broader lesson is clear. Political upheaval is downstream of economic failure, and economic failure is now a global phenomenon. The instinct to call for bold action from governments and central banks is misguided; it is precisely such interventions—endless monetary manipulation, fiscal overreach, and centrally planned illusions of control—that created the fragility we see today. True recovery requires stepping back, not doubling down. It requires allowing markets to correct, unsustainable imbalances to unwind, and the natural process of economic recalibration to take place. Any attempt to intervene further only deepens the distortions and delays the necessary reckoning. The solution is not bold action but disciplined restraint, a path that demands far more courage than the reckless interventions that have brought us to this precipice.

Engels Airbase Burns

Ukrainian drones targeted fuel depots in Engels, Saratov region, igniting a massive fire and disrupting operations at the Engels-2 military airport—one of Russia’s vital strategic aviation hubs. This airport, central to Moscow’s long-range bomber operations against Ukraine, now faces significant logistical hurdles, diminishing its immediate capacity for aggression. However, the strike, while disruptive, falls far short of delivering a decisive blow to Russia’s broader military efforts.

Local authorities, scrambling to contain the fallout, declared a state of emergency. Two firefighters tragically lost their lives, and one was hospitalized. Despite the inferno’s intensity, Russian officials reported no significant air pollution in the area. Meanwhile, Ukrainian military statements framed the attack as a major achievement in degrading Russia’s strategic capabilities, with experts emphasizing Engels-2’s irreplaceable role in Russia’s aerial campaigns.

Viewed through a wider lens, the attack’s timing and media amplification are quite thought provoking. I would go as far as to suggest a strategic overlay is at play beyond battlefield calculus. With the Trump administration’s return looming, this incident could serve several purposes: For one, it could bolster narratives opposing any perceived abandonment of Ukraine. Think of it, how could the west abandon them just as they get the "upper hand". Further, the increasingly potent attacks could be baiting Russia into rash escalations that could jeopardize its diplomatic positioning with a potential Trump-led White House. Trump, attempting to cast himself the America First Pragmatist, likely prioritizes conflict resolution and the restoration of diplomacy, even if it involves contentious concessions.

These developments, however, do more than highlight a momentary battlefield disruption; they further expose the precariousness of the global order. As these tensions escalate, they underline the severe risk of a greater—and potentially global—conflict. Investors should heed this reality with neither dismissal nor complacency, as the economic and geopolitical consequences of miscalculation in this fraught environment could ripple far beyond regional boundaries. The risks are real, and the stakes are high.

(ht rmx news)