While the US economy has evidenced persistent, impressive resilience in the face of numerous challenges—second–quarter growth was recently revised upward, and third-quarter growth is estimated to be well above 2.5% —the housing sector has been an equally persistent source of weakness and concern. Mortgage rates are the latest difficulty, pushed to the highest level since 2023 by rising bond yields.
The September employment report will not bring any happiness to the housing market. The headline news is an increase of only 29,000 jobs and a tick up in the unemployment rate to 4.2%, but the downward revisions to August and July are arguably the bigger story. Looking at the three-month moving average is a helpful perspective, yet it remains that there were 60,000 jobs fewer than originally reported.
Growth in construction employment was one of the employment bright spots in September, along with health care. With the residential housing market so weak, however, it is clear that the boost to construction employment is coming from the data center build-out. Some of those data center plans are now threatened by moratoriums and work stoppages, a development that is likely to factor into the labor market picture as the holidays approach.
Oil and general cargo shipments are making their way through the Strait of Hormuz VERY carefully, with the assistance of the US Navy. The transport is utilizing smaller-sized carriers that transfer cargo to larger vessels upon exiting the danger zone. Not surprisingly, the impact on rates for very large cargo container (VLCC) vessels, including tankers, has skyrocketed, keeping the effective cost of oil high, even when spot crude oil prices fall.
There is global concern over the possibility of a US ban on diesel exports. Europe is especially worried about the impact on fuel prices in euro area economies that are on something of a knife-edge. However, there is also considerable angst in the US marketplace, in part due to the realities of petroleum refining. A barrel of crude oil yields a number of different products as a result of the refining process. A diesel (“distillate” is mostly diesel) export ban would potentially fill up storage tanks and force a reduction in overall refining activity, raising prices for other crude oil products, including gasoline.
