Jobs

While thinking about what to highlight this week, the NFP dropped in our lap this morning. Never a dull moment!

As you can see above the number was 73k, and funny enough that happens to be the same number as healthcare additions alone.

The more alarming focus may well be the Revisions though. Largest downward move lower since 2020, Covid.

Unfortunately, some of the things we wanted to highlight from the week were already not setting up well for the market.

The JOLTS numbers were released Tuesday, July 29^th and Job openings continue to decline.

Already back to pre-pandemic levels. Granted it’s just one metric, but when comparing where JOLTS were pre pandemic to the Fed Funds rate, it would imply a substantial move lower in the Fed Funds.

The same day that JOLTS were released the Conference Board released some of their metrics. They track quite a few things, among them easy to find jobs as well as hard to find ones. That differential has a pretty good track record of identifying recessions. As we have pointed about before, we are not sure whether it is causational or coincidental, either way we feel its worth keeping an eye on.

The issue is that this differential has reached its worst level since the pandemic.

We add the Unemployment rate for perspective. It has not responded like it has historically, yet.

Since 2024 the correlation is negative .67

It has often been said that negative occurrences start slowly and then happen all at once; let’s hope not.


Delinquencies

If the job picture is starting to get a bit too cloudy, could that impact the consumer? After all the likes of AXP, V, MA, COF have all stated the following:

– Visa’s Chief Economist described the consumer as cautious but resilient, with spending holding up despite economic headwinds like tariffs and demographic shifts.

– CEO Michael Miebach said consumer spending remains healthy, supported by low unemployment and wage growth outpacing inflation.

American Express – CEO Stephen Squeri noted that metrics are “better than what we saw in 2024”, and the company maintained its full-year outlook.

Capital One – CEO Richard Fairbank said the U.S. consumer “remains a source of strength”, with stable debt servicing and improving delinquency rates.

But the Federal Reserve Bank of St. Louis seems to be picking up on something different.

“The share of people 30 days delinquent on their credit card debt has trended upward since the first half of 2021, and that trend was widespread among all four geographies we examined. The trend is more notable in the lowest-income 10% of ZIP codes than it is in the highest-income 10% of ZIP codes: From the second quarter of 2021 to the first quarter of 2025, their delinquency rates grew by 63% and 44%, respectively, in relative terms. In each geography, the share of credit card debt in delinquency largely increased since its last trough. The highest-income 10% of ZIP codes experienced the greatest proportional increase; the delinquency rate for that geography climbed from 4.8% in the second quarter of 2022 to 8.3% in the first quarter of 2025, or 73% in relative terms. The delinquency rate for the lowest-income 10% of ZIP codes increased from 14.9% in the third quarter of 2022 to 22.8% in the first quarter of 2025, or 53% in relative terms.”

https://www.stlouisfed.org/on-the-economy/2025/may/broad-continuing-rise-delinquent-us-credit-card-debt-revisited

Maybe this phenomenon is being picked up in Real Final Sales figures.

Real final sales to private domestic purchasers, a gauge of underlying demand, advanced 1.2%, a not-so-hot (but not terrible) figure. It is the lowest quarterly reading since 2022.   

Sales moving lower and delinquencies moving higher across all income levels, not a great combo.

Dow Theory

The latest GDP report was also released this week and it exceeded expectations by coming in at 3% vs the expected 2.6%. The release was on Wednesday July 30^th.

But the reaction to that upside surprise in GDP was certainly not what many would have expected, especially from the Transports Index. If GDP is picking up so much shouldn’t that be a good thing for the movement of goods? Here is the GIP chart for the TRAN Index on Wednesday.

In full disclosure Avis and Old Dominion both reported that day and were disappointing, so its understandable that the Index would see some pressure.

Here is the member snapshot.

Weightings

22% of the Index was green that day, the 2 rail names at the top, yet on a day when GDP surprised to the upside the TRAN Index could not muster up a positive showing.

We have alluded to this before, but we would like to once again dust off an old theory, the Dow Theory.

According to Co-Pilot:

So, in short, we would like to see the TRAN Index hit new highs to vindicate the Dow Jones Industrial average doing the same. We know that the DJIA no longer has the following it used to have but to stay old fashion we will use it to begin with, and then expand to other indices.

The TRAN index has rolled over rather quickly.

So, we decided to look at its correlation to other indices.

It actually has a stronger correlation to the equal weighted S&P, the SPW, than it does to the actual INDU or DJIA.

In case anyone is curious, the RUR2ES is the equal weighted Russell 2k.
Bottom line is that there are some statistically significant correlations in there, which makes the below chart worth a look.

CapEx

Also related to GDP, there was a particular chart that caught our eye this week. It came from this link:

https://sherwood.news/markets/the-ai-spending-boom-is-eating-the-us-economy/

That made us wonder, what if? What if the US economy did not have this massive amount of Capital expenditures into Artificial Intelligence arms race.

We asked Co Pilot. What would the impact to GDP be if those expenditures were not there?

That 3% GDP number would now become 1.39%

Without the Capital Expenditures of those companies the US would be at 1.025% semiannual run rate in GDP growth. That is nowhere near headline levels and makes one wonder what happens when the music stops with the AI arms race.


Random Chart

We will leave you with this.

For the first time in over 3 decades, 2 Fed members dissented this week’s Fed decision: Is there is a growing divide within the Fed?

Have a great weekend!

Best,

Meraki trading team