“Our lives are the sum of our choices.”
Tagline from Mission: Impossible – The Final Reckoning (2025)
Your mission, should you choose to accept it, is to buy a ticket and a bucket of popcorn and immerse yourself in a movie theater recliner for the eighth installment of the Mission: Impossible film series. You have eight days until the widescreen release on Friday, May 23rd. This Feather will self-destruct in five seconds…. With a budget of at least $400 million, the real mission for Final Reckoning will be quantified by how much it rakes in at the box office. 2023’s Dead Reckoning underperformed, pulling in $565 million worldwide relative to a $300 million budget. Screen Rant explained that, “Usually, a film needs to make about 2.5 times its budget to break even, which means that Mission: Impossible – The Final Reckoning may have to make $1 billion to be considered a box office success.” This might be a high hurdle for Paramount, especially since its film will duke it out with Disney’s live-action Lilo & Stitch remake on Memorial Day weekend.
The barren U.S. economic calendar diverted the usual macro discussion in the QI Pro chat Wednesday morning to the upcoming Tom-Cruise-does-all-his-stunts spectacular. Two words were all the trigger Danielle needed. Her QI Pro chat post illustrated that things were getting worse in housing, and the words “Mission Impossible” brought that to mind. As per Zelman & Associates Western Markets update:
“During the week ended May 11th, net absorptions across California, Arizona and Nevada declined 13% sequentially to 0.59 sales per community – marking the steepest drop recorded in nine weeks. The absolute pace was the lowest recorded since the first week of January and was also nearly 30% weaker than the typical pace observed across our data series dating back to 2000 – continuing the below-seasonal activity that has been ongoing since the start of the year. While typical seasonal declines are expected following March, we note that the shortfall of the absolute absorption pace to its typical rate has widened from 15-20% from a month ago. On a year-over-year basis, absorptions were down 32%, which is the steepest drop since January 2023.”
If the Mortgage Bankers Association (MBA) report was the only weekly housing release in existence, a glimmer of hope would be merited. Thus far in May, the MBA Purchase index is running at a two-year high (green line). It’s the other channels we heed that muck up this happy conclusion. Redfin’s weekly installment illustrated that seasonally adjusted New Listings have also picked up (red line). But “List & Apply’ is not one in the same as “Sign & Buy.’ Redfin’s Pending Home Sales (blue line) and Homes Sold (yellow line) remain mired in a multi-year slump, deflecting the optimism suggested in the MBA Purchase data.
The absence of a strong demand impulse fits with the narrative that housing disinflation is in train. On this count, MBA and Redfin agree. Year-over-year (YoY) trends in the former’s Average Home Purchase Loan Size (lime line) and the latter’s Median Sales Price (light blue line) are well off their respective local highs reached late last year. Thus far in May, the MBA series has ratcheted down from October’s 8.6% YoY rate to 1.5% YoY. Meanwhile, the Redfin metric has cooled from November’s 6.2% YoY figure to 2.6% YoY this month.
These two high-frequency gauges suggest that today’s producer price index (PPI) could indicate a similar downdraft in its Residential Real Estate Agents’ index from March’s 4.2% YoY pace (orange line). The totality of this data point to continued downward pressure in Housing Service Prices in the personal consumption expenditures (PCE) price index (purple line).
One mission that appears possible is guided by the Empire manufacturing headline General Business Conditions. If May’s consensus estimate of -8.0 is an accurate guide (versus April’s -8.1 and March’s -20.0), this morning’s May print should extend current pessimism to a third month (teal line). The ‘possible’ comes from the persistent weakness in Second District factory activity upping the ante for a loosening in the regional industrial labor picture. To that end, continuing claims in New York State’s manufacturing industry could rise off the nearly neutral 1.1% YoY increase registered in the latest available month of March (inverted fuchsia line). Over time, the ups and downs of the Empire headline figure have consistently guided layoff trends on New York factory floors.
Two key factory states – Indiana (highest intensity) and Texas (largest exporter) – are going the opposite way — both indicated slight YoY continuing claims declines in April of -1.8% and -1.7%, respectively (lavender and bright pink lines). Operators in the Hoosier and Lone Star States aren’t yet in panic mode, jettisoning staff to preemptively offset trade policy risks.
At the opposite end of the spectrum lie Kansas and Kentucky. These states’ continuing claims registered respective YoY advances of 212.4% and 95.5% last month (yellow and light blue bars). By way of background, the Sunflower State plays a significant role in U.S. manufacturing, particularly in food processing, aerospace, and related industries, where household names like General Motors, Newell Rubbermaid and Johnson Controls call home. The Bluegrass State is a major manufacturing hub for auto assembly and auto parts fabrication, and it’s a vital producer of primary metals like steel and aluminum. Its central location and robust infrastructure make it a key hub for logistics and distribution.
The sampling of regional comparisons in continuing claims suggests that vulnerabilities in the industrial cycle should not be dismissed as just China was given a 90-day reprieve. Market expectations for weakness to persist in today’s May Philly Fed manufacturing headline number (-11.0 consensus versus April’s -26.4). Though not illustrated, this fits with Pennsylvania’s 1.9% YoY gain in April manufacturing continuing claims, which we expect to deteriorate further. With a rate cut not fully priced in until October, the Federal Reserve’s turning a blind eye to continued loosening in the industrial labor market redefines Mission: Impossible, albeit one that won’t end spectacularly.