The views and opinions expressed in this post are solely those of the author and do not necessarily reflect the views of the Georgia Institute of Technology or the Georgia Board of Regents. 

Substack has introduced a new feature online…a button you can push to see how much of an article was written by AI. Apparently, some SubStack writers have been using AI to write their articles.

Now, I openly admit, I use AI each week to go out, grab all the data, report the highlights so I can see what moved, and update all my charts on economicsguru.com. I have even been known to cut-and-paste from that data pull and do my own editing if I am in a time crunch. Otherwise, I hammer this out myself from a blank page every week.

After PPI came out Thursday, I was getting ready to send my draft to my proofreaders (yes, I have people who proofread this every Thursday night and give me feedback/corrections). I decided to test out the “AI detection” button for myself.

It came back as 41% written by AI, 0% AI-assisted, and 59% human.

Needless to say, that was a little annoying since I sat here and hammered this out, a little bit every evening, myself. I guess the AI detector searches for certain “tells.” For example, recently, it has been pointed out that AI writing includes a lot of “—” for emphasis or parenthetical expressions. Now, I have always been a huge fan of “—” in my writing — I use it all the time. (See what I did there…)

But apparently, that is a “tell.” I guess there are other “tells” because I can assure you that this week, this post is 100% human.

So, I hammered out the PPI write-up, and the “One More Thing” I always tack on at the end, and re-ran the test for “AI-generated text.” Now I was up to 64% written by AI, 0% AI-assisted, and 36% human. It was getting worse.

So, as usual, the final bit was this introduction. I sat down and wrote this just before sending it to the proofreaders. When it was complete…20% AI, 80% human. Better. But not correct.

While I love AI, and I find it a very useful tool, it does make mistakes. Either that, or I am turning into a robot and my consciousness is becoming merged with the machines. (Given how much I am online, not an unrealistic scenario.)

But none of this has anything to do with economics, so let me get to it…

Small Business Optimism

The week started Tuesday morning with NFIB’s July Small Business Optimism Index (full release here). The index rose 2.4 points to 99.8 — the highest since August 2025, and the first month above the survey’s 52-year average of 98.0 since last February, although it is still slightly below where it was a year ago.

For new readers, the NFIB index is a diffusion index that uses ten questions where owners answer “better,” “same,” or “worse.” It measures what small business owners think is happening, and small business owners have been in a lousy mood since the spring.

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The views and opinions expressed in this post are solely those of the author and do not necessarily reflect the views of the Georgia Institute of Technology or the Georgia Board of Regents. 

I mentioned this briefly in my introduction last week, but I wanted to discuss it a little more, and since there wasn’t a lot of other news (beyond our on-again, off-again relationship with Iran), I thought I would pick it up again.

It has become apparent that the Fed isn’t serious about inflation. And it appears that the bond market is with me on this. On July 31st, the 30-year Treasury yield touched 5.27%. You have to go all the way back to July 6, 2007 (the housing/financial crisis) to find it higher. That was two days after Fed Chair Warsh stood at the podium and told us the Fed “will deliver price stability” and “will not hesitate to act.”

The bond market listened to his comments, and then sold the long bond.

But here is what is interesting. This doesn’t appear to be an inflation-expectations story. I mean, I think it is an inflation issue, but apparently, no one else does. The 10-year “breakeven” — the gap between a regular Treasury and an inflation-protected one, or what the market thinks CPI averages over the next decade — sits at 2.22%. A year ago it was 2.36%.

Nobody out there is forecasting a rerun of the 1970s. Again, I think this looks a lot like the 1970s, but apparently I am alone in that.

So if it isn’t inflation expectations, what has moved is the term premium: the extra yield investors demand simply for agreeing to be locked up for ten years. According to the New York Fed, that is 0.87%, up from 0.53% a year ago. That is the highest since April 2011.

So the market isn’t saying “we expect more inflation.” It’s saying “we have no idea what you people are going to do, and we’d like to be paid for finding out.”

Warsh is the author of this uncertainty. When asked whether rate increases were the remedy, he said rates “could well be part of that solution, but I wouldn’t say it’s in isolation.” Asked about the 2% target, he confirmed it — and then offered that after January, “who knows.”

Understand what that means. The number anchoring every long-dated fixed-income contract in this country is, by the chairman’s own words, up for discussion.

The Fed cut 75 basis points between September and December of last year, and the funds rate hasn’t moved since. Over that same stretch, the 30-year has gone UP about 40 basis points. Core PCE is running 3.3% — not 2/0%, and certainly not falling.

None of this means Warsh isn’t serious about inflation. But it does mean that the market has decided his seriousness is a claim rather than an actual plan, and it is going to charge him for the difference until he shows his stuff. He gets his next chance on September 16th.

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The views and opinions expressed in this post are solely those of the author and do not necessarily reflect the views of the Georgia Institute of Technology or the Georgia Board of Regents. 

Wednesday, the Federal Reserve chose to hold rates steady in the 3.50%–3.75% range — the seventh straight meeting with no move (full statement here). But the vote was 9-3, and all three dissenters wanted rates higher. Beth Hammack, Neel Kashkari, and Lorie Logan each preferred a quarter-point hike on the spot. That is the first time since the fall of 2016 that three policymakers have broken ranks in the same direction — and interestingly, all three are regional bank presidents, not Washington appointees.

But the Kashkari vote is the one that made me laugh.

You remember Kashkari…I have written about him before. Back in June 2021, with inflation already climbing, the Minneapolis president was on record opposing any rate hike until after 2023. As late as the middle of 2022, he was still willing to say the word “transitory” out loud. His only two dissents in nine years — February and March of 2017 — were both votes against raising rates, on the grounds that core inflation was 1.7% and the Fed was crying wolf. Now, he’s the loudest voice calling for a rate hike. Don’t tell me politics hasn’t worked its way into the central bank. When their own guy is in office, rates need to stay low…when the other guy is in office, suddenly everyone is an inflation hawk.

At least we know there are three votes to raise rates in September. But the bond market isn’t buying it. The 30-year jumped about 11 points to 5.21% — the highest it has been in 19 years. In other words, traders don’t think this Fed is about to get aggressive. Oh, they will talk tough, wait, and then let inflation run a while longer. Warsh all but confirmed that, suggesting that rising long-term yields are doing the tightening for him! Jack McIntyre at Brandywine Global put it plainly: “The long end doesn’t buy into his inflation-fighting story.” Neither do I.

For five years now, inflation has been above “target.” Headline CPI is 3.5% and core CPI 2.6%, which sounds like progress until you notice that core producer prices are running at 5.1% — that is the cost pressure that hasn’t reached your pocket yet. Plus, on a three-month annualized basis, money is growing at an annual rate of 8.7%. In May alone, it grew at a 13.8% annual rate.

If you don’t hit your “target” for five years, maybe you should either change your target or adjust your aim. But standing around hoping that things are going to get better isn’t a plan...it’s incompetence.

Durable Goods

The week started with the Census Bureau releasing the June advance report on durable goods (full release here), and the headline was a disappointment: new orders were up 0.3% to $334.8 billion, against a consensus looking for 2.5%.

However, as usual, the details are important. Strip out transportation — planes and cars, by far the lumpiest part of American manufacturing, where Boeing sells a hundred jets one month, and none the next — and orders rose 0.6% to $220.9 billion. That is the FIFTEENTH consecutive monthly increase and an all-time high. Core capex did the same thing: up 0.9% to $85.1 billion, also a record, and 12.5% above where it stood a year ago.

Why is this important? Core capex, or nondefense capital goods excluding aircraft, is the closest thing we get to a monthly report on what businesses are actually committing to spend on equipment. Stuff like machines, computers, and other equipment they won’t take delivery of for months. And, it feeds straight into the business investment line of GDP. The last time it grew this fast on an annual basis was late in 2021, and we were measuring against the COVID decline. So, while the headline disappointed, core capex spending bodes well for GDP later in the year.

Remember that these are nominal dollars, and capital equipment prices are up about 3.6% over the past year, so the real number is closer to 8.5%, but that is still plenty strong. It is interesting to note that computers and electronic products led the entire increase, up 3.1% to $31.1 billion, and it has been higher in nine of the last ten months. So what does that mean? It means that a lot of what is clearly a “manufacturing recovery” is actually data-center build-out. But I’ll take it.

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The views and opinions expressed in this post are solely those of the author and do not necessarily reflect the views of the Georgia Institute of Technology or the Georgia Board of Regents. 

Only two pieces of economic data have been released since my last post, and one of them (the Leading Economic Indicators) is practically worthless, so this week’s post will be short.

But that gives me the opportunity to touch on a topic that was recently brought to my attention. When the Consumer Price Index (CPI) came out over a week ago, the number was down. Surprisingly so, and the cause was laid squarely at the feet of oil. But there was more in the report, and as I dug deeper, I came across the CPI reading for medical care. Over the past year, the government says medical care got 2.0% more expensive.

That’s it. Two percent — slower than the 3.5% rise in the all-items CPI, and a long way from what you felt the last time you opened the Explanation of Benefits (EOB) from your insurance company. So either your co-pays are lying to you, or the Bureau of Labor Statistics (BLS) is measuring something different than what you consider “healthcare.”

Turns out, it’s the second one. The government’s CPI says medical care rose 2.0%. The Kaiser Family Foundation says the average employer family premium jumped 6% — to $26,993.

Both are “real,” but only one of them is measuring your real life.

So how does the most-watched inflation gauge in the country look at the fastest-growing line in the American family budget and come back with just two percent? Not by lying, exactly. But by measuring something else — and then letting you assume it measured the thing you actually care about.

First, let’s start with what the CPI does NOT do: it never prices your insurance premium. Not the number on your pay stub, not your “Obamacare” bill — never. The health-insurance piece of the index runs on what the BLS calls the “retained earnings method.” In English — take the premiums insurers collect, subtract the benefits they pay out, and call the leftover — administrative costs and profit — the price of insurance. Understand what that means. If premiums go up, but payouts go up faster, the measured “price” of your coverage actually goes DOWN. Magical deflation!

That is not a hypothetical situation. Through 2022 and 2023, the CPI’s health-insurance number posted steep double-digit annual declines, but not a single American’s premium actually fell. The formula simply decided retained earnings had shrunk, and that phantom drop dampened core inflation for the better part of a year — right when the ruling elite in Washington badly wanted (or better yet needed) a cooler inflation number.

That leads me to the second concern…the weighting of healthcare in the index, which frankly, is arguably worse. The CPI counts only what comes out of YOUR pocket. Of that $26,993 family premium, the employer pays roughly $20,000 — about three-quarters — and as far as the index is concerned, that part is invisible. Medicare Part A and Medicaid? Also out of the formula. So the single biggest cost of insuring a family in this country cannot move the number, no matter how fast it climbs, by definition. That’s why healthcare is barely 8% of the CPI while it is closer to 18% of the economy.

Put these together, and you get a healthcare CPI number that is far below what households actually pay — year after year, and always in the same direction. (When a measurement “error” only ever breaks one way — dampening the official inflation rate, and never overstating it — you’re allowed to stop calling it an accident.)

So is it fraud? Not really. The BLS publishes the methodology, the logic hangs together on its own terms, and honestly, pricing insurance quality is a hard problem. But “hard problem,” and “documented choice” are not the same as “measures your reality.” The CPI answers a narrow question — the price change of out-of-pocket care on a fixed basket of services — and then the whole country reads it as the answer to a completely different question — what is the cost of healthcare doing to me?

People have every right to be frustrated by that gap. But at least, now you know.

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The views and opinions expressed in this post are solely those of the author and do not necessarily reflect the views of the Georgia Institute of Technology or the Georgia Board of Regents. 

Coming back from vacation almost makes going on the vacation not worth it.

Almost.

After a great week of relaxation, you come back to more than 1,000 emails, most of which are junk, but you still have to go through them all so you don’t miss the important ones. Then, respond to all the email and voicemail messages that require your attention. Get up to speed on all the projects that continued moving forward while you didn’t. It is exhausting.

To make matters worse, my AI desktop interface crashed on Tuesday, and I was without access to my AI agent for three days. I learned several important things over those three days. First, it is almost scary how much I have come to rely on AI to help with my day-to-day job. Gathering and organizing raw data; evaluating and analyzing data; manipulating and applying formulas in Excel; designing slides in PowerPoint; reviewing and editing documents in Word; drafting emails; scheduling meetings; building websites; specifying and building statistical models…I could go on and on. My AI agent has become my research assistant, my administrative assistant, and my research collaborator all rolled into one. I rely as much on AI now as I do the Internet itself, or even my laptop. It is a part of my daily routine and skill set. And for three days I was without. Imagine not having any way to access the Internet for three days. Or not having your cell phone or your laptop. That is what it felt like.

Which leads me to the second thing I learned this week. Not only have I come to rely on the technology, but it has also taken my personal productivity to an entirely different level. Frankly, a completely different planet! Those days I was without I felt like I didn’t accomplish nearly what I had been previously. Again, how much would you accomplish with your laptop, cell phone, or access to the Internet?

Not to sound cliché, but if you aren’t utilizing AI in your daily workflow, you are falling behind. Reminds me of a family member who told me the “Internet was a fad” in the late 1990s. AI isn’t a fad. In fact, if you stop and really think about it, the impact it will have on the economy will be profound. And they could be profoundly good or profoundly bad. Part of me is glad I am in the twilight of my career and won’t be significantly impacted either way. But another part of me wishes I were just starting out, because the opportunities really are endless.

Small Business Optimism

On Tuesday, we got the June report on small business sentiment from the NFIB (full release here). The headline Optimism Index jumped 2.1 points to 97.4, beating the 95.7 consensus and closing back in on the 52-year average of 98.0.

After a year of the index grinding sideways below average, that is a real move — and almost all of it came from expectations, with the net share of owners expecting better business conditions up 10 points to +13% (the first improvement all year) and real sales expectations up 8 points to +9%. The reason is no mystery: fuel prices came down, and cheaper diesel shows up fast on Main Street.

However, dig into the report, and you can see what happened underneath. A net 38% of owners raised their selling prices in June — the fourth straight monthly increase, and the highest rate in three years. Inflation jumped back to the number-one spot on the “most important problem” list at 21%, the highest since October 2024, also rising for a fourth consecutive month. So the same survey that says owners feel better also says they are raising prices faster than at any point since early 2023. Sentiment is a mood; pricing is a behavior. The pricing is the one that ends up in the CPI.

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The views and opinions expressed in this post are solely those of the author and do not necessarily reflect the views of the Georgia Institute of Technology or the Georgia Board of Regents. 

I have had an amazing week of vacation down at Cape San Blas, Florida. If you have never been, let me tell you…there is NOTHING to do. Which is EXACTLY what I needed. Either you sit on the beach enjoying the sun and a good book, or you sit by the pool enjoying the same. Beach - pool - back to the beach - back to the pool. Then watching the sunset, playing games with family, and then doing it again the next day. Apply a lot of sunscreen (or aloe if you failed on the sunscreen) and relax. Just what the doctor ordered.

How does this tie in to the economy? Not sure it does, but I will say this…if you are looking for some beach property, there is a LOT of it available in Cape San Blas. As I sit on the front porch of our rental house writing this, I can see no fewer than three “For Sale” signs. Up and down the main road, these signs cluster on nearly every corner. Looks like a buyer’s market to me! I bet the prices aren’t rising here! Of course, that may be because beach property insurance has gone stupid crazy in Florida, or maybe because your house is likely to get wiped out once every 10 or so years, or maybe people are just out of money and need cash, but whatever the reason, if you are in the market, there is ample supply!

I know regular readers have read this before, but I really did intend to take a break this week. But I was sitting here early one morning, mid-week, and decided to write. So, it will be short this week, but here are a few notes on what little economic data was released…

Existing Home Sales

Speaking of the housing market, the National Association of Realtors (NAR) released data on existing home sales for the month of June (full release here). Sales ran at a 4.09 million seasonally adjusted annual rate (SAAR) — down 2.4% from May, though still up 2.8% from a year ago (which, frankly, isn’t saying much). Expectations were for roughly 4.20 million, so this is a clear miss, and it gives back most of last month’s jump. Existing-home sales have now been stuck near a 4-million annual pace since 2023, well below the historic norm closer to 5.2 million. One warm month, it turns out, does not make a spring.

Prices, of course, won’t drop. June’s median of $440,600 (NSA) is up 1.8% y/y — a fresh all-time high and the 36th consecutive month of year-over-year price gains. That is a very different picture from new home sales, where the median was flat from a year ago.

Interestingly, homes are still moving quickly, at a median 28 days on market, barely changed from May — so this isn’t soft demand meeting soft prices. It is fewer sales at ever-higher prices. With the 30-year mortgage back up near 6.5%, the affordability math isn’t fixing itself any time soon.

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The views and opinions expressed in this post are solely those of the author and do not necessarily reflect the views of the Georgia Institute of Technology or the Georgia Board of Regents. 

Tomorrow, the Republic turns 250 — and while I am often highly critical of what our government has become, it is fitting and appropriate to recognize those men who put their names to the Declaration in the summer of 1776.

Think about what they actually did. A few dozen lawyers, farmers, printers, and merchants — most of them flat broke, all of them committing treason against the most powerful empire on earth — sat in a hot Philadelphia room and bet everything on an idea: that rights come from God and not from a king, and that government exists by the consent of the governed. Jefferson wrote it down. Franklin edited it. Adams argued it across the floor until his colleagues couldn’t say no. They pledged “our Lives, our Fortunes, and our sacred Honor,” and — this is the part we too often gloss over — they meant it literally. Many of them lost all three. Be totally honest with yourself…how many would be willing to do the same today?

What still astonishes me, all these years later, is how durable the thing they built turned out to be. They didn’t trust power, so they split it up and set the pieces against each other. They didn’t trust men to be angels, so they wrote a system that assumes they aren’t. Madison’s checks and balances, the separation of powers, a Bill of Rights that tells the government what it may not do — that is engineering of the highest order. They were building for people they would never meet. For us.

And in so many ways, I feel we have let them down. The economist in me can’t sit on my hands here. The same founders who warned against standing debt and “unfunded” obligations would faint dead away at our $38 trillion debt and a Congress that hasn’t passed a budget on time since 1997. We have drifted a long way from the frugal, suspicious-of-power crowd that started all this.

But more on that some other week — not this one. This week isn’t for that. This week is for gratitude. Two hundred and fifty years on, the experiment is still running — flawed, loud, and still quite young by historical standards.

Happy birthday, America!

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The views and opinions expressed in this post are solely those of the author and do not necessarily reflect the views of the Georgia Institute of Technology or the Georgia Board of Regents. 

It was a light week on the economic data front, but before we get to the numbers, a word on Alan Greenspan, who passed away Monday at the age of 100.

For those of us who came of age watching the Fed, Greenspan *was* the Fed. He took the chair in August 1987 — two months after I graduated from high school and just weeks before the market dropped 22.6% in a single day on Black Monday — and he didn’t hand it off until 2006. Eighteen-plus years, four presidents from Reagan to the second Bush, five terms. Nobody is going to match that run.

Longtime readers know I am not in the habit of canonizing central bankers, and Greenspan’s record is genuinely a mixed one. On the credit side, he presided over the long boom of the 1990s, one of the great expansions in American history, and he kept the plumbing working through the 1987 crash, the 1998 collapse of Long-Term Capital Management (LTCM), and the dot-com unwind. He earned the “maestro” label, even if he never much liked it.

But here is the part of the story that gets glossed over in the obituaries: a fair number of the fires Greenspan rushed in to put out were ones his own policies helped start. The line everyone remembers is “irrational exuberance” — December 1996, a dinner speech, wondering aloud how anyone could know when asset prices had run ahead of reality. It was a remarkable thing to say, mostly because he spent the next several years doing the opposite of acting on it. He cut rates and flooded the system with liquidity after the 1998 LTCM scare, and that easy money helped pour gasoline on the very dot-com mania he’d warned about — a bubble that then burst on his watch and forced him to cut again. And when he took rates down to 1% in 2003 and held them there, he set the table for the housing boom that became the 2008 financial crisis. Greenspan himself, testifying in 2008, conceded he’d found a “flaw” in his understanding of how markets police themselves. The maestro, it turned out, had been conducting with the punch bowl in one hand.

So, a complicated legacy — brilliant, careful with his words, but far too willing to keep money cheap and credit flowing. Even so…rest in peace to a giant of the profession.

Which, fittingly, brings us to housing — the corner of the economy where Greenspan’s cheap-money era left its deepest scar, and the place where the Fed is still trying to thread the needle today…

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The views and opinions expressed in this post are solely those of the author and do not necessarily reflect the views of the Georgia Institute of Technology or the Georgia Board of Regents. 

OK, so my wife was right. I couldn’t help myself. I couldn’t break my streak of weekly blog posts. But at least I did it while I was watching the 2026 World Cup. You can have the Olympics (summer or winter) - I have no interest. But every four years when the World Cup rolls around…forget about it. My productivity drops, and I am totally consumed. When I was younger, I used to absolutely HATE soccer. Then, my son got very into it, and I came to appreciate how elegant and difficult the sport actually is when played well. And watching national teams compete for the title of World Champion…I can’t get enough.

Anyway, before the next match comes on, let me update you on all the economic data for the week.

Oh, but before I do that…Kevin Warsh presided over his first Fed meeting today. They left interest rates unchanged. The President must be thrilled. In fact, to add insult to injury, the committee’s updated projections signaled a likely quarter-point hike later this year. Hate to say “I told you so” but…I did. Be honest…inflation is at a three-year high. Cuts have got to be off the table.

The bigger story from the first Warsh meeting was institutional. Chair Warsh announced five task forces to overhaul Fed communications, the balance sheet, and other operations, framing it as the “regime change” he’d promised. The policy statement was slashed to roughly 130 words (from 300+) and stripped of forward guidance, which he called “not well-suited to the current policy conjuncture.”

There is clearly a new sheriff in town.

Industrial Production

Industrial production rose just 0.1% in May, a little slower than the 0.3% expected, though the sting is softened by an April revision up to 0.9% from 0.7% (full release here). However, manufacturing output was flat — up a rounding-error 0.05%, the weakest month of the year — as factory production rose in only about a third of categories. The one source of real growth was mining, up 1.3% on oil and gas, while utilities slipped 0.4%. In other words, the part of this report that describes American factories went nowhere. But that is OK. Given how strong manufacturing has been in recent months, taking a little breather is fine…as long as it is just a little breather.

Even so, there were still sectors worth noting. Durable-goods production rose 0.8% with broad gains, and business equipment kept climbing — up 0.6% on the month and 5.7% from a year ago, the same capex story we keep seeing in the durable-goods reports.

But nondurables fell 0.9%, dragged down by petroleum, plastics, and textiles, and even the business-equipment pace is cooling. Year-over-year, output is up 1.7% and manufacturing 1.4%, both the best since last November. In fact, it is actually negative once you adjust for inflation, and neither has been sustainably above 2% in nominal terms since 2022.

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The views and opinions expressed in this post are solely those of the author and do not necessarily reflect the views of the Georgia Institute of Technology or the Georgia Board of Regents. 

I know this will come as a shock to many of you, but on occasion, politicians say stupid things.

To be fair, they are constantly hounded by a hostile and generally dishonorable media that constantly bombards them with questions, just hoping that they will slip up. This is why, despite regular requests, I completely stopped talking to the media many years ago.

This is especially true at the national level. Combine that with the fact that our current President uses hyperbole the way the rest of us use oxygen, and the “gotcha” quotes appear to be a daily occurrence. For the better part of the last ten years, the extent to which the media has taken the President’s hyperbolic rhetoric seriously has been laughable, and the only damage they have done is to their own reputations as they demonstrate that they are not serious people.

That said, this week’s quote that the President “loves the inflation” ranks as possibly one of the most stupid, tone-deaf statements ever uttered in the Oval Office. And that is saying something.

Yes, I get that he was once again trying to make the point that 1) the price increases are only due to the price of oil, and 2) that when the conflict with Iran is over, prices will come down. Unfortunately, he is completely wrong on both points.

Trump blaming his actions in Iran for inflation is just like Biden blaming the Russian invasion of Ukraine. Both ignore the fact that their governments are printing money at an historic pace, and we would have inflation without these external activities.

The President is further incorrect that prices will come all the way back when the conflict is over. They won’t. Oil infrastructure has been badly damaged, and global output will still be hampered long after the fighting stops.

But neither of those two things is why the comment was stupid. It was stupid because people are hurting. I mean, they are really hurting. Inflation is up, and it doesn’t matter if it is because they are printing money or fighting a war in the Middle East — that distinction is lost on anyone who buys groceries. The level is the problem. Since 2020, a typical basket is up north of 20%, and none of that is coming back down — disinflation just means the pain accumulates more gently from an already-painful base.

Meanwhile, wages aren’t keeping up. Adjusted for inflation, real hourly compensation has been flat-to-negative, which means every nominal raise is getting eaten before it ever hits the bank. So how are people keeping up? The same way they have for two years now — draining savings and leaning on credit cards at 21%. Add gas well north of $4 a gallon, and you have a household sector not just running in place…they are losing ground. A lot of ground.

So I don’t really care what point the President was trying to make. Tens of millions of households are watching their paychecks shrink in real terms and draining savings they can’t replace — and the man at the top loves it. Whether that’s more hyperbole or simple contempt for the people footing the bill, the result is the same. Inflation isn’t something you love. It’s a tax on everyone who isn’t rich enough to ignore it.

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The views and opinions expressed in this post are solely those of the author and do not necessarily reflect the views of the Georgia Institute of Technology or the Georgia Board of Regents. 

Before we get into all the economic data of the week, I want to mention that today is a very special day for me personally, as it represents a major milestone along my life’s journey. Our lives are often defined by small, everyday occurrences that we experience and too often take for granted. Then, occasionally, we have major events in our lives that represent a transition from one stage to another.

Today is one such milestone for me. This evening, my son will be getting married, and I will go from only having two sons to having two sons and a daughter. And I couldn’t be happier.

As was the case when I was married back in the early 1990s, the young couple is starting their life together in a very uncertain economic environment. Of course, we don’t have a recession right now as we did back then (at least not yet), but there is no question that the economy is slowing. With GDP posting only 1.6% in the first quarter during a time when everyone was getting larger-than-expected tax refund checks…that's not an indicator of a strong economy.

Back in the 1990s, a friend of mine created his own economic indicator series…the “junk-for-sale-on-the-side-of-the-road” index (or JFSOTSOTR for short). As he drove to work along the same route each day, he noted that more and more people were selling their stuff along the side of the road…cars, trucks, boats, RVs, furniture, etc. As the economy declined, the number of things for sale on the side of the road increased in an almost direct inverse relationship.

When he told me about this years ago, I started noticing it myself. And sure enough, when the economy slows, JFSOTSOTR rises. Once you see it, you can’t unsee it. It happens every time. It really seems to be a great economic indicator for the local economy.

I bring it up because recently, he mentioned to me that he has noticed that the JFSOTSOTR index has been on the rise. I have asked him to start collecting the data in a more formal way, and perhaps I can start reporting on the JFSOTSOTR index on a regular basis. Not sure at this point how to formalize that, but that is what my AI agent is for!

Now on to what we learned this week…

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The views and opinions expressed in this post are solely those of the author and do not necessarily reflect the views of the Georgia Institute of Technology or the Georgia Board of Regents.

We got a little bit of housing data this week, and if you have been paying attention to the bond market, you know that rates are going up, and with them, mortgage rates are moving up too. The average 30-year fixed conforming rate climbed to 6.65%, up from 6.56% the week before, and is now 30 basis points higher than it was five weeks ago — the highest level since August of last year.

The latest data from the Mortgage Bankers Association told us that mortgage applications fell 8.5% for the week ending May 22 — that is the kind of drop that gets your attention. Almost all of it came from refinancing, where the index dropped 18% in a single week. Purchase applications were essentially flat, down just 0.4%, and still running 5% ahead of a year ago. So this was not buyers walking away; it was refinancers who had been circling lower rates suddenly losing their reason to act.

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The views and opinions expressed in this post are solely those of the author and do not necessarily reflect the views of the Georgia Institute of Technology or the Georgia Board of Regents.

Another light week for economic data — just a few data points on the housing market, and they weren’t very good. And the 30-year mortgage rate rising to 6.7% isn’t going to help. But when the 10-year treasury is in the 4.7% range, rising more than 20 basis points in a week, mortgage rates are going to respond.

The driver for all this was the Federal Open Market Committee (FOMC) minutes from the May meeting that were released on Wednesday. The committee voted 8-4 to hold rates constant. However, the four dissents were the most at any FOMC meeting since October 1992. There was one dovish dissent (Stephen Miran wanted a quarter-point cut because, well, he is clearly an idiot) and three hawkish ones — Hammack, Kashkari, and Logan — who voted to hold but did not want the easing-bias language.

But what moved the bond market was the fact that the minutes themselves read more hawkish than the vote. Inflation was described as “elevated” and having “moved higher.” The vast majority of participants flagged that inflation will likely take longer to return to 2% than they thought back in March (consider me shocked). Of course there are still tariffs and the “Middle East conflict,” but the committee pointed to “emergent price pressures” in categories unrelated to either. (Maybe the fact that we are printing money at an annualized rate of 11% might have something to do with it).

The real kicker was that a majority said some policy firming would likely become appropriate if inflation kept running persistently above 2%. That is Fed-speak for RATE HIKES — written into the official record. Thus, the moves in the bond market and the jump in mortgage rates.

I bet Kevin Warsh just can’t wait to run his first meeting on June 16th.

Home Builder Confidence

Monday, we got the May report on home builder confidence from the National Association of Home Builders (full release here). Confidence rose three points to 37, slightly higher than expected and up from 34 in April — which was the lowest since September 2025. Even with the bounce, 37 is still well below the 50 breakeven that separates optimism from pessimism, and this is now the 25th consecutive month the index has failed to crack 50. The last reading at or above the line was April 2024. Two-plus years of builders telling us conditions are bad. A three-point bounce does not change that.

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The views and opinions expressed in this post are solely those of the author and do not necessarily reflect the views of the Georgia Institute of Technology or the Georgia Board of Regents.

The economic news this week centered around inflation, with both CPI and PPI coming in incredibly hot as the conflict in the Middle East stagnates with no conclusion on the horizon. But let’s be honest…today is a day to celebrate, as it represents the end of the Powell era at the Federal Reserve Bank.

Be careful what you wish for.

Earlier this week, in the most partisan confirmation vote ever, the Senate confirmed Kevin Warsh to a 14-year term as the chairman of the Federal Reserve Bank. While I think it would be a great job (not that anyone is asking me) I don’t envy him. The man who appointed him has made no secret about the fact that he expects rates to be cut.

As I have predicted before, given the inflation data we got this week, there is no chance that rates will be cut in June, and frankly, I can’t see it happening for the rest of the year. In fact, it is likely that the Warsh Fed will have to raise rates modestly to stop the current wave of inflation. Fed funds futures now put the odds of a hike at the next meeting at roughly 39%.

Can you imagine the posts on Truth Social that will generate? Mr. Warsh is in for a rude awakening.

Existing Home Sales

The National Association of Realtors (NAR) gave us the April read on existing home sales (full release here), and the spring season is still failing to launch. Sales ran at a 4.02 million seasonally adjusted annual rate (SAAR) — virtually flat from March, and flat from one year ago. Expectations were for roughly 4.12 million, so the housing market continues to underperform. Existing-home sales have now been hovering near a 4-million annual pace since 2023, well below the historic norm closer to 5.2 million.

However, despite the slow sales, the median price keeps creeping higher. April’s median of $417,700 is up 0.9% y/y — a modest increase, but it is an all-time high for any April on record and the 34th consecutive month of y/y price gains. That price movement is very different than what we saw last week with new home sales, which are down 6.2% from one year ago. More homes are sitting longer (median 32 days on market versus 29 a year ago), sales are flat, and prices won’t drop. With the 30-year mortgage stuck near 6.4%, the affordability math isn’t fixing itself any time soon.

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The views and opinions expressed in this post are solely those of the author and do not necessarily reflect the views of the Georgia Institute of Technology or the Georgia Board of Regents.

Last week, I was in Savannah, GA, and this week saw me in Washington D.C., speaking at Innovate 2026. I hope everyone there enjoyed my talk and were able to take something away that will help them and their business going forward. And let me officially welcome the many conference attendees who subscribed to the blog!

Unfortunately, the new subscribers won’t get a feel for how the blog normally flows. Given my hectic travel schedule, I haven’t had time to put together my usual opening commentary on some recent happenings in the economic sphere. Any free time I have had recently has gone to developing a new resource that my paid subscribers will learn about at the bottom of this post.

So, without further ado…on to the data…

Factory Orders

New orders for manufactured goods were up 1.5% in March to $630.4 billion, more than double the 0.6% gain that was expected (full release here). February was +0.3% and January was essentially flat at +0.03%, so the headline has now climbed for three straight months — and the March gain is the largest single-month move outside of the tariff-frontloading spike back in May 2025.

Nondurable goods orders were up 2.1%, the fourth consecutive monthly gain and the largest since August 2023. Durable goods orders, after three straight monthly declines (December through February), rebounded by 0.8% — slightly better than the 0.5% that was expected. Computers and electronic products led the durables side, up 3.7% to $29.6 billion (up eleven of the last twelve months). Simply put, the manufacturing sector finally has some momentum.

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The views and opinions expressed in this post are solely those of the author and do not necessarily reflect the views of the Georgia Institute of Technology or the Georgia Board of Regents.

Last week, there was only one piece of economic data released. That is rare, and when the calendar happens to fall that way, it is nice to have a “lite” week where I don’t have to write a lot. However, the flip side is that I pay for it the following week when the dam breaks, and there are multiple data releases almost every day. To make matters worse, I spent three days this week at the GEDA Spring Workshop in Savannah, and all the networking, activities, sessions, and dinners kept me away from my computer until late every evening. So this week’s update may lack some of my usual commentary.

But before we get to the data, there is one oversight I need to correct. I failed to mention several weeks ago that, on March 17th, the U.S. government officially crossed the $39 trillion debt level. It took just 145 days to move from $38 trillion to $39 trillion. Since 2021, on average, we add $1 trillion to the debt every 165 days. (This last trillion was slightly quicker.)

Here is another interesting fact…in February, the money supply (M2) grew at an annualized rate of 11.1%. That is the fastest rate of expansion since August 2021. And one year later, in August of 2022, inflation was running 8.2%.

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The views and opinions expressed in this post are solely those of the author and do not necessarily reflect the views of the Georgia Institute of Technology or the Georgia Board of Regents.

There was only ONE piece of economic data released this week…March retail sales. So, I apologize in advance that this will be a very short Economic Update. Due to the lack of content, I have made it completely available to all my subscribers, both free and paid.

But first, before we get to the data…as is probably the case in the rest of the country, we here in Georgia are in the heart of the political primary season. Every single day, my mail box is full of nothing but colorful flyers informing me of why a particular candidate deserves my vote, or conversely, why another candidate is a scoundrel and deserves my total derision. And if someone can figure out a way to block all political texts, they will become rich beyond their wildest dreams.

This past Sunday, one of the many candidates for Georgia Governor came to my church, so I thought I would take the opportunity to introduce myself and ask exactly how he planned to make “Georgia the most affordable state in America.” The answer would have economic applicability, so I figured I could discuss it here.

So I did that. He totally blew me off. I mean, it was a stunning display of total disregard. I got a smile, and then he just walked away.

I get that maybe you don’t want to get into a substantive economic discussion in the lobby of a church, especially given the fact that there is very little a Governor can do to make the state “more affordable.” So when asked about your economic plan by an actual economist, perhaps the cold shoulder is the smart play. Or, maybe he was simply more interested in shaking hands and being seen “going to church” than actually discussing policy. But either way, it was a total blow-off. If you are going to behave like that, why even go out in public? Most politicians can be somewhat personable when they dare to go out and meet with the plebeians, even if it is totally fake. But if you can’t even fake it, maybe it is just better to stay home and let your commercials do the talking.

I had to chuckle at his “handler”… a young fella whose only job seemed to be to pull out a tin of Altoids every once in a while and give his boss a mint. Well, at least they were in church. Although they probably spent the time thinking about getting on to the next event.

I once ran for local office. At the time, I really felt I would be good and could contribute. Maybe everyone who runs for office starts out that way. You know the worst part about running for office? People called me a “politician.” I guess technically, I was, but I hated it when people would use that term to describe me. If you have read this blog for any period of time, you know how I feel about “politicians,” especially those at the national level. George Will once said, “we have gotten to the point in this country where if you want to run for President, it means you aren’t qualified.” Unfortunately, I think nowadays that applies to just about every office, at every level.

The end of this election season can’t come quickly enough.

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The views and opinions expressed in this post are solely those of the author and do not necessarily reflect the views of the Georgia Institute of Technology or the Georgia Board of Regents.

I had the opportunity yesterday to attend the Barrett-Jackson Auto Auction in West Palm Beach, Florida. And if you are wondering, no, I did not purchase an automobile, although the temptation was ever present. I have wanted a classic muscle car for some time. However, I do not yet have enough subscribers to this weekly blog to afford such a thing, plus, I promised my wife that I would not come home with another car… this year. However, hope springs eternal, and there is always next year.

But as I spent the entire day yesterday looking at cars ranging from Bentleys, Lamborghinis, and Ferraris to Chevys, Fords, and Volkswagons, I couldn’t help but think about how the auction process is nearly a perfect example of the free market at work. I think Adam Smith would view auctions as an elegant manifestation of his “invisible hand” principle. He’d appreciate how they efficiently aggregate dispersed knowledge — buyers and sellers revealing true valuations through competitive bidding, with prices emerging organically rather than by decree.

Smith might note that auctions solve the “double coincidence of wants” problem that plagues barter, creating liquidity and price discovery where none existed. The competitive process ensures goods flow to those who value them most, maximizing societal welfare without central planning.

Of course, there could be collusion and information asymmetries — problems he recognized in The Wealth of Nations. The sellers have knowledge that the buyers may not, although there was ample opportunity for buyers to peruse the cars prior to any bidding.

My guess is that I was the only person at the South Florida Fairgrounds yesterday thinking this way, but hey…I am an economist after all. It is what I do.

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The views and opinions expressed in this post are solely those of the author and do not necessarily reflect the views of the Georgia Institute of Technology or the Georgia Board of Regents.

I enjoyed a great week of vacation at Hilton Head Island, SC, where I played some tennis, enjoyed some bike riding, and dined out at some fantastic restaurants. But I still found time to track and report on the economic data for the week! (FYI…that won’t be the case when I travel in June, but more on that when the time gets closer.)

But, before we get to any data, I thought I would provide an update on the federal debt. In February, the federal budget deficit jumped 225% to $308 billion.

That means that over the first five months of FY2026 (October through February), the budget deficit is $1 trilion. In five months, we spent $1 trillion more than we took in. That is the third-worst start to a fiscal year in our history.

To make matters worse, government receipts are up 11% year-over-year to a record $2.09 trillion. Think about that. We grew revenue 11% year-over-year, and STILL overspent by $1 trillion! We spent $3.1 trillion in five months. Net interest expense is up 7% year-over-year to a record $425 billion. Through February, net interest expense was higher than what we spent on the defense of the country. (Of course, once we get the March data, that may change given our expensive foray into Middle East politics.)

Deficit spending continues to be out of control. This simply can’t continue.

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The views and opinions expressed in this post are solely those of the author and do not necessarily reflect the views of the Georgia Institute of Technology or the Georgia Board of Regents. 

It has been a while since I offered an edition of “stupid economic statement of the week.” Long-time readers will know that honor usually, but not always, goes to that icon of economic buffoonery, Paul Krugman. (I realize that Mr. Krugman has a Nobel Prize in economics, but that says more about the Nobel Prize committee than it does Mr. Krugman.) In any event, this week’s honor falls to Fed Chair Jerome Powell, whose mediocre term as Fed Chair is thankfully coming to an ignominious end.

Earlier this week, Chair Powell spoke to a principles of economics class at Harvard. I find that somewhat ironic because it is highly unlikely that he himself ever took a principles of economics class. In fact, all available evidence suggests he did not, and if he did, he slept through it. Remember that Powell is the first Fed Chair in 40 years without a Ph.D. in economics. Instead, he has an A.B. degree in Politics and a law degree, both of which were awarded in the 1970s. Rather than any formal economic training, he has relied on his extensive experience as a lawyer and investment banker to steer the U.S. economy. Is it any wonder that we find ourselves where we are today? Not that having a Ph.D. in economics is all that special (I speak from experience), but having some economic background should be a requirement for Fed Chair.

But I digress. In his talk this week, Powell claimed that “Quantitative Easing” (or “QE”, which was an explosion of the money supply) did not cause inflation. Specifically, he said, referring to QE, “at the very beginning, there was a thought that it would be inflationary. We have not seen that.” DO WHAT?

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