All Things in Moderation

Vital Statistics:

The manufacturing sector returned to contraction in March, according to the ISM Manufacturing Survey. “In March, U.S. manufacturing activity slipped into contraction after expanding only marginally in February. The expansion in both February and January followed 26 consecutive months of contraction. Demand and output weakened while input strengthened further, a negative for economic growth. Indications that demand weakened include: the (1) New Orders Index falling further into contraction territory, (2) New Export Orders Index dropping into contraction, (3) Backlog of Orders Index contracting at a faster rate, and (4) Customers’ Inventories Index remaining in ‘too low’ territory.

“Demand and production retreated and destaffing continued, as panelists’ companies responded to demand confusion. Prices growth accelerated due to tariffs, causing new order placement backlogs, supplier delivery slowdowns and manufacturing inventory growth. Forty-six percent of manufacturing gross domestic product (GDP) contracted in March, up from 24 percent in February. “

Needless to say, tariff uncertainty is causing manufacturers to be more cautious.

Job openings fell to 7.6 million in February, according to the JOLTs job openings report. Openings fell across the board on a YOY basis, although we did see construction openings increase. The quits rate was flat at 2.0%.

Construction job openings are at a 3 year low as homebuilders battle affordability issues. While tariffs aren’t necessarily helping, the driver of affordability has been the rapid rise of real estate prices driven by expansionary fiscal and monetary policy during the COVID era and higher mortgage rates. The layoff rate in construction remained extremely low at 1.8%.

New York and San Francisco are seeing increased demand for real estate, according to research from Redfin. 57% of homes in San Francisco sold over asking, and Nassau County saw a similar percentage. “The Bay Area has an unending population of people with enormous swaths of money,” said Josh Felder, a Redfin Premier real estate agent in the Bay Area. “A decade or so ago, we all thought the growth in home prices was unsustainable, but they just keep going up and up. That’s partly because there aren’t enough homes for sale, and partly because tech continues to boom despite ups and downs in the stock market and geopolitical uncertainty.”

Southern California (particularly San Diego) is seeing more homes sell below listing.

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