June 4, 2025: Checking the Vitals (of the US Consumer)
For this week’s briefing, we focus on a nuanced - yet massively material – pivot in monetary policy posture: the FOMC appears to be favoring one side of the dual mandate coin (price stability) over the other (maximum employment). Indeed, in public remarks FOMC members have almost universally stressed the “wait-and-see” approach on potential tariff-driven inflation. Meanwhile, Fed Chair Jay Powell raised eyebrows in the press conference immediately following the May FOMC meeting by characterizing the economy as “solid.” Make no mistake: this speaks to the “jobs” side of the mandate and serves as a subtle indication that the FOMC sees maximum employment as less of an immediate economic risk. So, how solid is the economy, and how best to measure this relative strength?
Our approach to analyzing the relative health of the US economy begins by identifying the economic data releases highly correlated to both GDP growth and, more broadly, the health of the US consumer. We then thematically group these data points into four categories: Consumer Spending & Retail Sales, Labor Market Health, Savings & Delinquency Rates, and Consumer Sentiment. Lastly, we pinpoint the relevant economic data points measured, seek to identify the trend bias within each category, and provide a brief summation of our current JWM “house view” before circling back to judge the results taken together.
Consumer Spending & Retail Sales
Relevant Data Points: Advance Retail Sales & Core Personal Consumption Expenditures (PCE)
Trend Bias: Adv. Retail Sales – Declining (yet still positive); Core PCE – Declining (yet choppy)
House View: Retail Sales has historically been choppy print, but the May print hints at a spending pullback (particularly in China-exposed Goods), while Core PCE has more than halved from February 2022 but could spike in 2H 2025 over 3% (from 2.5% YoY currently)
Labor Market Health
Relevant Data Points: Initial Jobless Claims & Continuing Claims; Job Openings and Turnover Survey (JOLTS); Bureau of Labor Statistics Change in Nonfarm Payrolls
Trend Bias: Weekly Jobless Claims – Rising (yet from low levels); JOLTS – Relatively Strong (well off peak in 1Q 2022, yet still above pre-pandemic levels); Δ in NFP – Increasing (yet at a decelerating rate)
House View: Weekly claims have risen from 205K to 240K YTD, while JOLTS topped estimates this week. The last two government NFP reports have come in above the 10-year average. The jobless rate across all three subcategories is near certain to rise in 2H 2025 as employees subject to DOGE staff reduction begin falling off the government payroll
Personal Savings & Delinquency Rates
Relevant Data Points: BEA Personal Saving Rate; NY Fed Household Debit & Credit Report; Federal Reserve US Delinquency Rates (All Banks/All Loans)
Trend Bias: Saving Rate – Rising (yet below pre-pandemic levels); NY Fed Credit – Rising; Fed Delinquency Rates – Steadily Rising (yet potentially plateauing)
House View: The Savings Rate has risen YTD, more than doubling from the 1H 2022 lows. Most delinquency rate categories in the NY Fed data have ticked up over the prior 12 months with delinquencies over 90 days rising (particularly in student loan debt as the Department of Education restarted collections in May 2025)
Consumer Confidence/Sentiment
Relevant Data Points: Conference Board Consumer Confidence & Expectations; University of Michigan Consumer Sentiment & Expectations
Indicator Type: Conf. Board Confidence & Expectations – Leading (~1-3 Months); UMich Sentiment & Expectations – Leading (~1-3 Months)
House View: The hard data/softa data divergence continues. Both current and future data from each report are historically noisy, and subject to considerable political bias. With that said, these reports still matter immensely as a consumer unwilling to spend could potentially beget a “self-fulfilling prophecy” economic pullback
SOURCE: The Daily Shot 5.28.25
In conclusion, the results from the four categories listed above lead us to confirm our existing house view that the economy continues to grow, albeit at a decelerating pace. With a nice split among lagging/coincident/leading indicators in the data above, we infer the lagging/coincident indicators as confirming a slowing economy, while the leading indicators hint at a potential bottoming of sentiment (and thus a potential tailwind moving forward as trade agreements come into clearer focus). Our most concrete takeaway is that any marked deterioration in these metrics could add pressure to the side of the dual mandate the FOMC currently appears to have placed on the backburner. Should these categories buckle, calls for deeper FOMC rate cuts will surely grow louder.
