It wasn’t a very good two weeks for economic data with the majority of reports disappointing. Most notable I think is that the so called “soft data” is starting to reflect reality rather than some fantasy land where President Trump enacts his entire agenda in the first 100 days of being in office. Politics is about the art of the possible and that is proving a short list for now. Republicans can’t agree among themselves and Democrats are following the golden rule of politics – never interfere when your opponent is busy self-destructing. I said after the election that tax reform would be a 2018 event at the earliest. I may have been too optimistic. 

The energy sector-led economic slowdown that started a couple of years ago has only been partially reversed by the retracement of crude prices to the $50s. Supposedly the shale industry has reduced breakeven prices for a lot of the existing fields so if prices pull back here it won’t have the same impact it had in 2014-15 but that may not matter all that much. It seems that as the energy sector has healed somewhat, other sectors are starting to take its place. In particular, the retail industry appears to be in a mite of trouble recently with bankruptcies, layoffs and store closures ramping up. Some of that is probably due to the Amazon effect but the latest retail sales report wasn’t all that encouraging either. Overall, sales were down 0.2% and ex-autos were flat. That highlights one of the emerging problem areas – autos. Business inventories were reported up and a big part of that was vehicle inventory.

And while Industrial Production was up more than expected, that was due to a huge ramp up in utility output. The manufacturing part of the report was a big disappointment, down 0.4% led by a slowdown in business equipment, building supplies and yes, autos. In addition, some of that soft data on the manufacturing side is fading too. Both the Empire State and Philly Fed reports were less than expected, although still fairly positive. Two employment reports also pointed to weakness or maybe just the absence of strength. The Labor Market Conditions index fell to 0.40 while the JOLTS report showed a 2.1% jump in job openings. That second one sounds pretty good but as I said in the last update, you have to put it in context. Job openings were indeed up from last month but are also about the same as they were in the spring of 2015. And hires – which seem a bit more important than openings – were down 2.4% year over year.