The Missing Inflation Number And The Convenient Absence of Accountability The October CPI report on November 10 will omit annual headline and core inflation figures. BLS says the 2025 government shutdown prevented collection of the October prices needed for comparison. That explanation is legitimate. But the timing and absence of even a clearly labeled estimate raise questions about transparency. The Inflation Picture September CPI inflation reached 3.7% annually. Independent estimates suggest October could approach 4%, while hourly wages are growing around 3.1%. If those estimates hold, purchasing power is deteriorating amid an energy shock. Economists expect monthly headline CPI of 0.3% and core CPI of 0.2%. Following September’s larger increase, those numbers could be presented as inflation cooling. But a slower monthly increase does not erase annual price pressures. Omitting the annual figures removes a comparison Americans readily understand. The Methodological Contradiction BLS says missing October 2025 observations prevent an official annual reading. Yet BLS used interpolated figures for seasonal adjustments, while BEA estimated the missing month for other calculations. Estimates cannot recreate prices never collected. An observed figure and a modeled estimate are different. But if estimates are used elsewhere, why not publish an experimental annual range with transparent assumptions and uncertainty? Instead, the annual comparison disappears. Why December Matters The Fed meets December 8 and 9. The next CPI report is scheduled for December 10, making October the last scheduled CPI release before its decision. An estimated annual rate near 4% would sharpen an uncomfortable dilemma. If the Fed raises rates, it risks further weakening investment, refinancing conditions and employment. If it holds, it must explain why persistent inflation does not justify additional tightening. Much of the headline pressure comes from energy. Higher rates cannot repair refineries, increase diesel supplies or resolve shipping disruptions. They can increase financing costs for businesses already facing weaker demand and heavy debt. The Fed must still prevent energy inflation from spreading into broader prices. It targets PCE rather than CPI and has other inflation information available, so a CPI estimate would not dictate its decision. But it would make the tradeoff harder to gloss over publicly. A monthly increase of 0.3% is easier to frame as progress than an annual rate near 4% alongside wage growth of 3.1%. The Bigger Concern BLS announced the limitation in September. There is no evidence officials deliberately suppressed an unfavorable figure. Nevertheless, a genuine data problem creates an opportunity to emphasize a softer monthly number while avoiding a less reassuring annual comparison. The concern is not a hidden exact figure. It is that Americans may hear inflation is cooling while purchasing power continues to erode. If modeled values are already used elsewhere, publishing a clearly labeled estimate with caveats is reasonable. A missing inflation number does not mean inflation has improved. Nor should its absence justify portraying the economy more favorably than the evidence supports.

Oman Crude Is Exposing China’s Energy Route Vulnerability Oman crude has surged toward $155, but the more important signal is the premium buyers are willing to pay for barrels that can reach Asia without relying on the most vulnerable shipping routes. This looks less like booming demand and more like delivery security becoming scarce. Why Oman Is Suddenly So Valuable Asian refiners are competing harder for crude that can reliably arrive. Oman has direct access to the Indian Ocean, allowing cargoes bound for Asia to avoid the Strait of Hormuz. Refiners are increasingly prioritizing delivery security over traditional feedstock economics. Oman’s export volumes do not need to collapse for prices to surge. If disruption makes other barrels harder to obtain, more buyers compete for the same relatively stable pool of accessible supply. The barrel did not suddenly become better. The certainty of receiving it became more valuable. There are alternatives, including Murban exported through Fujairah, so Oman is not the only option. But the pool of easily accessible replacement crude has clearly narrowed. China’s Route Problem Goes Beyond Hormuz Omani crude heading toward East Asia can avoid Hormuz and Bab el Mandeb, but it generally still travels across the Indian Ocean and through Southeast Asian sea lanes such as the Strait of Malacca before reaching China. That helps explain why Beijing has spent years building alternative routes. The China Myanmar oil pipeline begins around Kyaukphyu on the Bay of Bengal and runs into Yunnan, bypassing Malacca entirely. Its designed capacity is approximately 22 million tonnes annually, roughly 440,000 barrels per day. A parallel natural gas pipeline adds another energy channel. The corridor is nowhere near large enough to replace China’s seaborne oil imports. Its importance is redundancy. When normal shipping routes work, 440,000 barrels per day is relatively small in China’s enormous energy system. When major maritime chokepoints are already under stress, an alternative Indian Ocean route becomes disproportionately valuable. That is why Kyaukphyu and the broader China Myanmar Economic Corridor matter strategically. They are part of Beijing’s long running effort to reduce dependence on Malacca. Why Brent Does Not Have To Immediately Catch Up Oil is globally connected but not perfectly interchangeable in real time. Different crude grades have different refinery requirements, delivery locations, freight costs and arrival dates. A cheaper barrel thousands of miles away is not necessarily useful to a refinery that needs compatible crude now. So large price gaps can persist. Pressure can spread as displaced buyers compete for replacement barrels elsewhere, but convergence does not require Brent to rise to $155. Oman can fall, other grades can rise, shipping can improve or demand can weaken. My Take The real problem is that headline benchmarks can increasingly understate what some refiners actually pay after physical premiums, freight and delivery risk are included. Those costs eventually move through trucking, agriculture, manufacturing and consumer prices. Businesses either pass them on, absorb them through lower margins or reduce activity. That is how oil can remain expensive even while demand deteriorates. The strongest interpretation is not that every benchmark must eventually reach Oman’s price. It is that buyers are paying increasingly large premiums for certainty of supply, while China’s entire energy strategy is revealing how valuable alternative routes become when traditional chokepoints are unreliable. The real macro risk is higher delivered energy costs colliding with an economy that is already losing momentum.

ADP Shows A Rebound But The Seasonal Adjustment May Be Doing More Work Than The Labor Market The September 15 ADP NER Pulse improved to 16,250 jobs per week over the 4 weeks ending August 29. That is almost double the July 25 low of 8,250, but still about 33% below the June 13 reading of 24,250 and only back to the same level as July 4. More importantly, this is a preliminary, seasonally adjusted 4 week moving average not the number of jobs created in the latest week. ADP also uses a 2 week lag so the release contains nothing from September 5 or September 12. The Rebound May Be Partly Statistical My base case is that some of this improvement is real, but some may reflect seasonal adjustment interacting with a labor market that already weakened earlier in the cycle. Imagine an industry normally hires 40,000 seasonal workers and later lays off 40,000. If demand weakens and it only hires 10,000 this year, it may later only lay off 10,000. The raw workforce still falls. But if the seasonal model expects the normal 40,000 decline, losing only 10,000 can mathematically appear as 30,000 seasonally adjusted job growth. That is the danger near turning points. If the normal hiring upswing never happened, the normal seasonal layoffs cannot happen either. A model calibrated to the historical hire then fire pattern can mistake fewer layoffs than usual for genuine underlying improvement. ADP then smooths those adjusted weekly estimates again through a 4 week average. So the headline is built from the raw employment change then the seasonal adjustment, then the 4 week smoothing. That does not make the 16,250 false. It means the raw weekly data and seasonal factors would be needed to know how much of the rebound represents actual new hiring. August Already Showed Weak Breadth The August monthly report produced just 38,000 private jobs and the composition was narrow. • Education and health services added 45,000 • Leisure and hospitality added 16,000 • Manufacturing lost 17,000 • Professional and business services lost 16,000 • Trade, transportation and utilities lost 5,000 • Information lost 4,000 • Natural resources and mining lost 5,000 5 of 10 major industries contracted. Education and health alone created more jobs than the entire private economy. Excluding that category employment fell roughly 7,000. Excluding education and health plus leisure and hospitality, the rest of the private economy lost roughly 23,000 jobs. Large establishments added 34,000 jobs, nearly 90% of the headline gain. Small establishments added only 3,000 net while medium sized establishments added nothing. What Is Probably Driving The Improvement The Pulse gives no industry or employer size detail, so we cannot know. But based on August’s composition I would expect education and health services to remain the strongest contributor followed by leisure and hospitality, construction and large employers. I would be much more skeptical that manufacturing, business services, information or trade and transportation suddenly became major engines of hiring. There is also a possible World Cup effect. Weak post event employment weeks may now be rolling out of the 4 week average, allowing less negative late August weeks to lift the headline without a genuine surge in gross hiring. My Take The rebound is real within ADP’s adjusted estimate. But August already proved that positive payroll growth can coexist with deteriorating breadth. The September Pulse only tells us the national aggregate improved afterward. It does not tell us whether the weak sectors recovered, whether the improvement came from fewer separations rather than more hiring, or whether seasonal adjustment amplified the rebound. Until manufacturing, business services and smaller employers improve I’d treat this as a narrow late cycle rebound, with seasonal adjustment possibly exaggerating some of the strength.

Indeed is showing stabilization in job ads and not necessarily a hiring recovery. The latest total postings index is roughly flat year over year and it can turn positive simply because last year’s comparison keeps getting easier, even if the current level barely moves. More importantly job postings are not hires. Indeed itself notes that listings can remain online after jobs are filled, and JOLTS already shows the disconnect clearly. July job openings were about 2.6% higher year over year while actual hires were about 3.3% lower.

Jim Bianco’s argument is simple. The Fed began cutting in September 2024, the 10 year yield later rose roughly 130 basis points and the 2 year rose too, therefore the bond market rejected the easing cycle. The problem is that the charts do not prove that conclusion. Treasury yields are not a scorecard grading the last Fed decision. The 10 year reflects expectations for future short rates, growth, inflation and term premium. Yields can rise because growth expectations improve, inflation rises, an energy shock changes the outlook or markets expect the Fed itself to tighten later. The Timeline Matters Bianco’s chart shows the 10 year rising from 3.70% in September 2024 to 4.79% by January 2025, then falling back near 3.95% by October 2025 and 3.94% by February 2026 before surging toward 5%. Using those endpoints, roughly 106 of the 130 basis points of net increase occurred after February 2026. That does not prove the energy shock caused the move. It does show this was not one uninterrupted rejection of Fed cuts. Markets Were Pricing Flawed Information The Fed slowed and eventually paused easing while payroll growth still appeared resilient. Bond markets were looking at the same data. Later QCEW based benchmark revisions showed employment growth had been materially overstated. The March 2024 benchmark ultimately removed roughly 589,000 jobs while the March 2025 benchmark eventually removed about 898,000. Markets do not price the true economy. They price the economy visible to them. If investors believed employment was stronger than reality, they would naturally price fewer cuts, stronger nominal growth and higher yields. A bond selloff influenced by overstated labor data cannot later be treated as proof that monetary policy had been too easy. Monetary Policy Works On Two Clocks Markets can reprice instantly. The real economy cannot. Rate changes move gradually through refinancing, mortgages, business borrowing, investment, hiring and consumption. Many effects historically take roughly 9 months to 2 years or longer. And cutting rates does not automatically create easy money. A company refinancing an old 3.5% loan at 6.5% is still experiencing substantially tighter financing even if that rate might have been 7.5% without Fed easing. Policy can ease at the margin while earlier tightening continues working through the economy. History Breaks The Simple Argument Spring 2008 is the clearest example. Between March and June 2008, the 10 year Treasury rose roughly 93 basis points while the 2 year surged around 170 basis points despite aggressive Fed easing. If rising yields proved policy was too loose, the Fed should have tightened. Yet the NBER later determined the recession had already begun in December 2007. By December 2008 the 10 year was near 2%. The opposite has happened too. During the 2004 to 2005 tightening cycle, long yields sometimes fell while the Fed raised short rates. Policy rates and long yields do not move mechanically together. The Real Question The proper question is not whether yields rose after cuts. It is why they rose. • Did expected growth increase • Did inflation expectations rise • Did term premium increase • Did overstated payrolls make the economy appear stronger • Did the energy shock alter the inflation path • Did markets begin expecting the Fed to reverse course September’s Empire State survey now shows new orders falling from 17.3 to 2.0, shipments turning negative and expected workweeks falling below zero while input costs remain elevated. That looks far more like a cost shock colliding with weakening demand than an economy desperately needing further demand destruction. Bianco’s charts prove expectations changed. They do not prove the Fed caused that change, that keeping rates higher would have produced a better economy or that hiking now would fix it.

Beneath the Luxury Tier, This Is How Bad Housing Really Is The headline housing numbers are being disproportionately held up by the luxury market. Redfin has explicitly noted that stronger high end price gains are lifting the overall market while ordinary buyers remain constrained by affordability. National median prices were still up 2.2% year over year in August, but beneath that headline the market is increasingly defined by price cuts, seller concessions and collapsing buyer depth. Earlier this summer, luxury prices were rising roughly 3x faster than non luxury prices, and July luxury prices were still up 5.3% nationally. • Nearly 3 in 5 homes are now selling below their original asking price. Buyers are no longer routinely chasing sellers higher. Sellers are increasingly chasing buyers lower. • 21% of sellers are actively cutting their listed price. That is before counting concessions, closing cost assistance, repairs or rate buydowns that can reduce the effective sale price even further. • Sellers now outnumber buyers by 58% nationally, the largest imbalance in Redfin’s records. August had roughly 1.535 million sellers versus only 972,000 buyers. Supply is rising while demand is essentially stagnant. • 36 of the 49 major metros Redfin tracks are now buyer’s markets. In Nashville there are 139% more sellers than buyers, Miami 138%, Houston 131%, Orlando 122%, Las Vegas 117%, San Antonio 116%, Austin 115% and Dallas 108%. • Housing supply is at a 6 year high. Total homes for sale are at their highest level since 2020 while new listings reached their highest level since 2022. The problem is that buyers are not matching that increase in supply. • Mortgage applications fell another 2.7% in the latest MBA survey. Refinance applications dropped 6% in one week and sit 25% below last year, while the average 30 year fixed mortgage rate reached 6.85%, its highest since June 2025. Purchase applications were essentially flat. • The luxury market is masking some of the weakness underneath. Earlier this year luxury prices were rising 4.7% year over year versus only 1.5% for non luxury homes. In July, Miami luxury prices surged 18% while non luxury prices actually fell 1.3%. Tampa luxury prices rose 15.4% while non luxury prices were essentially flat at +0.3%. That is the real housing story. The headline median can keep rising while the marginal transaction underneath it gets weaker. Wealthy cash rich buyers are much less sensitive to a 7% mortgage than ordinary households. Remove that upper end resilience and what remains is a market with record seller competition, historically weak buyer depth, widespread price reductions and increasingly aggressive negotiation.

Treasury Is Building A Defense Before The Coming Energy Shock Treasury’s decision to double maximum long end buybacks from $2 billion to at least $4 billion per operation matters because it is happening before the energy shock reaches its most dangerous phase. The SPR is not about to run out. The real constraint is the remaining capacity under the current 172 million barrel emergency release. The reserve fell from roughly 415 million barrels in March to 293 million by August 14. At the recent draw rate, that leaves roughly 11 weeks of support, placing the critical window around late October into early November. Treasury’s larger buybacks begin September 9, run through November 4 and will be reassessed at the November 4 Quarterly Refunding Announcement. That overlaps almost perfectly with the period when emergency oil releases could lose much of their ability to mask the physical shortage. If Hormuz remains impaired and Gulf production does not normalize, inventories eventually stop bridging the gap between current supply and consumption. Global supply was already roughly 6.3 million barrels per day below year earlier levels in July while observed inventories had fallen about 410 million barrels since the conflict began. Once stored barrels stop filling that gap, the market clears through restored supply, restored shipping or demand destruction. The first violent repricing may appear in diesel, jet fuel, LNG, freight and tanker rates before crude fully reflects it. Why Treasury Is Acting Now An energy shock initially creates a brutal environment for long term bonds. Energy prices rise, inflation uncertainty increases, fiscal spending can expand and investors demand more compensation for holding 20 and 30 year debt even as economic growth weakens. Treasury already expects roughly $1.367 trillion of privately held net marketable borrowing during the second half of 2026. Meanwhile Japanese yields are increasingly competitive, China has reduced reported Treasury holdings and Europe is issuing heavily. The Treasury market also contains enormous leverage. Hedge funds hold roughly $830 billion in Treasury basis trades and trillions in repo financing. If yields rise sharply, volatility and margin requirements increase, dealers accumulate inventory and leveraged positions can begin unwinding. A normal bond selloff can become a liquidity event. Doing this beforehand strengthens the shock absorbers. Buybacks give dealers a predictable buyer for older, less liquid long bonds and free balance sheet capacity for new auctions and market making. More importantly, the machinery already exists. If the energy shock drives long yields sharply higher, Treasury can quickly enlarge and increase the frequency of operations instead of building an emergency response during the crisis. What This Really Is This is not QE because Treasury cannot create reserves. It is not yield curve control because there is no explicit yield ceiling. But it can evolve into a Treasury version of Operation Twist. If Treasury removes more 20 and 30 year debt while financing increasingly through bills and shorter maturities, private investors exchange long duration risk for short duration government liabilities. Money market funds, banks and regulated stablecoin issuers provide deep demand for those bills. If energy reprices violently over the next 9 to 13 weeks, the Fed may initially be trapped by inflation. Treasury can act first through larger buybacks and shorter duration financing while the Fed supports funding markets. Only after energy driven demand destruction overwhelms inflation does the Fed gain room to cut aggressively. The sequence is energy inflation, demand destruction, financial stress, then Fed easing. Treasury doubled long end buybacks now to free dealer balance sheets, support auctions and install a scalable circuit breaker before an energy shock collides with heavy issuance, weaker foreign demand and leveraged Treasury market plumbing.

I think the Prime Day pull forward is a fair explanation for some of the 2.2% drop in nonstore sales, but it does not explain the rest of the report. Autos and gasoline cannot explain the 0.4% decline in the control group because both are excluded from it. And most of the categories that did rise were only up modestly. Furniture was +0.3% but still −1.2% YoY, building materials +0.3%, health +0.7%, general merchandise +0.3% and restaurants +0.5%. Those are nominal sales too, not inflation adjusted real spending. The World Cup also matters because it ran through July 19 and likely gave some temporary support to restaurants, clothing and general merchandise through tourism, bars, apparel and event spending. Clothing and general merchandise are actually included in the control group. So if those categories were getting some World Cup help and the control group still fell 0.4%, that suggests the underlying weakness elsewhere was strong enough to outweigh it. Prime Day may explain part of one category, but it does not turn this into a broadly strong consumer report.

When Boston Construction Starts Cracking The Cycle Is Already Late I’m in the Boston area and I keep hearing the same thing from people working directly in construction. Work is slowing, layoffs are beginning, and the pipeline ahead looks noticeably weaker. One person with a very good view of upcoming projects told me conditions are already becoming recessionary. That is anecdotal, but it lines up with the broader data. Boston’s office and lab markets remain heavily oversupplied, many completed buildings are struggling to find tenants, and the pipeline for new construction is deteriorating. Why Boston Matters Construction does not turn all at once. Permits, financing, leasing and project approvals usually weaken first. Employment responds later because contractors continue finishing projects approved years earlier and tend to hold onto skilled workers until they are certain the slowdown is lasting. That mattered during the last housing downturn. National construction employment peaked in 2006, well before total U.S. employment rolled over. The earliest cracks appeared in highly speculative housing markets such as Riverside, Phoenix, Las Vegas and parts of Florida. Boston reacted later. Local construction employment remained relatively resilient through 2007 and much of 2008 before falling much harder in 2009 and 2010. Unemployment followed a similar pattern, worsening materially after the broader national contraction was already underway. That makes Boston useful today because it has historically behaved more like a lagging confirmation market than an early warning market. The sequence is appearing again Several of the markets that weakened first during the last housing cycle are showing construction stress again. Riverside has suffered some of the largest construction job losses in the country. Miami has weakened. Tampa has been roughly flat. Phoenix has cooled considerably even where payrolls remain stable. Las Vegas has held up better partly because data center and infrastructure construction are offsetting housing weakness. The pattern is not identical to 2006, but the direction is increasingly difficult to ignore. Now weakness is reaching slower moving markets like Boston. Boston permitted only 432 housing units in Q1 2026, down from 549 one year earlier and 642 two years earlier. That is a 21.3% decline in one year and 32.7% over two years. A large share of those permits came from a single project, meaning the underlying pipeline was even thinner than the headline suggests. Permits are tomorrow’s construction employment. Workers can stay busy for months finishing old projects while new work quietly disappears. Once those backlogs are exhausted, layoffs can accelerate quickly. Where This Puts Us In The Cycle The last national construction employment trough came in 2011. That places 2026 roughly 15 years into the current expansion. The 18 year housing cycle is not a precise clock, but it places us deep into a mature cycle where financing becomes harder, speculative development slows, completed buildings struggle for tenants and labor eventually follows the shrinking pipeline. This does not automatically mean another 2008. But the sequence matters. The leading housing markets weakened first. Boston permits and commercial leasing are now deteriorating. People working directly in construction are reporting fewer projects and early layoffs. Official employment remains relatively resilient because employment is one of the last indicators to turn. Boston is moving from pipeline deterioration into labor market confirmation. If this continues, the next 6 to 18 months likely bring fewer projects, more subcontractor stress, broader layoffs and deeper commercial real estate weakness. When a backlog heavy market like Boston starts confirming what the early cycle markets have already been signaling, it suggests the economy is firmly late cycle and becoming increasingly vulnerable to a broader contraction.