Articles authored by Sonu Varghese

This was a big week if you wanted to get a picture of the economy, inflation, and even policy (both monetary and tariffs). Here’s the big picture: The labor market is clearly slowing, despite a low headline unemployment rate of 4.2%. Soft payroll growth and easing wage growth means aggregate income growth is slowing. Inflation …

One of the most popular economic indicators is the Conference Board’s Leading Economic Index (LEI), and it currently points to recession. The LEI has historically had a high correlation with GDP growth – the chart below shows year-over-year change in both. You can see how the index started to fall ahead of the 1990, 2001 …

In my opinion, the trade war is over. There may be more tariffs to come, especially a few large tariffs on August 1st on a bunch of countries (50% for Brazil!), plus sectoral tariffs on things like copper, pharmaceuticals, semiconductor chips, and electronics. But even those may be postponed (in fact, pharma tariffs may actually …

One big question on everyone’s mind has been how tariffs would impact inflation. This is especially pertinent for the Federal Reserve (Fed), as it’s going to determine their next course of action—whether they continue to wait or cut rates sooner rather than later. April and May were too early for any tariff impact to show …

One of the opportunities we highlighted in our 2025 Outlook was a big tax bill that boosted corporate profits, similar to 2017. We never believed it would be as large as the 2017 tax bill’s boost on profits—after all you can only cut the corporate tax rate from 35% to 21% once—but there was still …

The Case-Shiller National home price index fell 0.4% month over month in April, the second consecutive month of declines following the 0.3% decline in March. Note that the Case-Shiller index is actually a three-month average, and so the April index prices are a three-month average of February, March, and April. That means the actual monthly …

The Federal Reserve (Fed) kept rates unchanged in the 4.25-4.50% range at their June meeting, as was expected. The most notable change in their official statement was that the Fed believes uncertainty concerning the economic outlook has reduced – but that’s only relative to a couple of months ago (post-Liberation Day). They still believe uncertainty …

Thursday, June 12, has been a tragic and exhausting day. It started with the terrible crash of an Air India flight in India, killing over 250 people—the worst aviation disaster in India since 1996. Then the day ended with Israel striking Iran, targeting their nuclear program and killing several top Iranian military officials (including the …

The May payroll report showed that labor markets remain OK, at least on the surface. As I wrote in my payroll blog, there’s weakness under the hood, but surface resiliency means the Federal Reserve (Fed) is likely to stay on pause for a lot longer—unless the unemployment rate really picks up, and then we have …

On the face of it, the May payroll report was ok. The economy created 139,000 jobs in May (above expectations for a 126,000 increase) and the unemployment rate was unchanged at 4.2%. But pop the hood and there’s cause for concern. For one thing, we got a net 95,000 downward revision of jobs created in …