Sharing a bedroom at your family’s Alaska house with your Canadian boss whom you’re supposedly engaged to be married to so that she can keep her job in America? You’ve correctly identified this 2009 rom-com if you said The Proposal starring Sandra Bullock (Margaret Tate) and Ryan Reynolds (Andrew Paxton). Awkwardly lock them in a bedroom together and mix in some Rob Base & DJ EZ Rock and you get absolute magic. As Margaret (in bed) and Andrew (sleeping on the floor) begin to share personal stories, the conversation turns to music and Andrew’s off-key rendition of “It Takes Two.” Released in 1988, the multi-platinum, genre-crossing anthem that peaked at No. 3 on the Billboard Dance chart remains one of the most recognizable and sampled tracks in hip-hop history. Released a year later, the duo’s remake of “Joy and Pain” also scored on Billboard’s Dance, topping at No. 9. Fans are saddened by his May 22nd passing at age 59 from a private battle with cancer. The hip-hop pioneer’s energy, though, will forever stay captured in our playlists.
Tuesday’s U.S. economic calendar afforded us the opportunity to draw an alternative crossover of Joy and Pain. To make our graphic “sing,” a sample of the Chicago Fed National Activity Index (CFNAI) was blended with Conference Board’s Consumer Expectations. The ‘joy’ part of the equation comes from CFNAI’s April 0.14 reading (green line) that bested the -0.03 consensus estimate and generated the third above-trend reading in the last four months. There hasn’t been a start to the year this good for the CFNAI since 2021, and you must return to 2018 for a streak this long that was not impacted by post-pandemic reopening momentum. What’s not to like about this 85-indicator strong growth metric?
When viewed through a longer-term lens, the ‘pain’ side is plain in forward-looking Consumer Expectations. While the 74.4 figure bested the consensus’ 71.9 and the prior month was revised to 73.4 from 72.2, Conference Board noted that the “Expectations Index increased by 1.0 point in May, with two of its three components – net expectations for business and labor market conditions six months from now – inching up. Expected household income was slightly less positive.”
Per the Conference Board, any Expectations’ readings under the 80-level have been associated with recession. While the latest uptick was “nice,” the varsity leading indicator has been under 80 for 16 straight months since February 2025. Placed on a z-score scale, May’s -1.0 indicates a significant underperformance relative to the broader economy (orange line). Solely observing top-line growth proxies hides the cyclical vulnerability households are expressing through their collective outlook.
More pain story is evident in Conference Board’s Fewer Jobs expectations. Granted, the index showed sequential relative improvement, to May’s 26.0 from April’s 26.8. Normalizing these numbers demonstrates the persistent labor fear plaguing consumers. Like Expectations, Fewer Jobs’ z-score has posted a +1 or higher for 16 consecutive months, a stretch only matched during the Great Recession (yellow line). Why worry, though, when Jobs Hard to Get, the reliable Unemployment Rate tracker, dipped to a seven-month low of 18.6 in May. Z-scoring this channel check revealed May at -0.8, comparable to the Unemployment Rate’s -0.9 (red line).
The point of drawing all three of these labor figures on the same basis is to demonstrate that the fear of higher unemployment follow-through from the soft data and the official statistics is far from being exhausted. Multiple cycles have shown daylight opening between Fewer Jobs and the other two metrics that were only closed by a climb higher in Jobs Hard to Get and the Unemployment Rate.
While we’re on the topic of follow-through, we don’t have high conviction that the Production & Income (P&I) boost in April’s CFNAI will be sustained. P&I’s read of .18 accounted for more than the entire uplift in the CFNAI. Recall, the restock narrative has created production impulses that have a short shelf life. This transitory theme implies that early-2026 industrial output gains should give way to a loss of momentum as we move through the second quarter and into the second half.
The May Dallas Fed Manufacturing report concurred. The sequence for the Dallas Fed’s Future Finished Goods Inventories index is instructive: December 4.2, January 11.7, February 2.7, March 4.1, April 4.9 and May -2.9. The latest figure was the weakest since September 2025 and points to less supply build over the next six months. Normalized, the -0.3 z-score (aqua line) sketches the near-term direction, which calls for below-trend outcomes for the CFNAI P&I component after hitting April’s 14-month high of .18 (lilac line).
Not to be excluded, the Philadelphia Fed Non-Manufacturing release proffered a rich theme summarized in three words: demand-side disinflation. It starts with the rare contraction for top-line activity in the largest part of the Third District’s economy. Non-Manufacturing Sales dropped to May’s -7.6, the worst showing since February 2025. Contrasted with Inventories at -1.2 yielded a -6.4 demand-supply spread (fuchsia line). Purely from a fundamental standpoint, the signal is disinflationary. The current environment is being influenced by supply-side factors that can – and will – overwhelm cost and price pressures in the short run.
Impulses like these are likely also behind the advance in the Prices Received index to a three-month high of 13.1 (teal line). Normally this gauge tracks Sales-Inventories well over time. The divergence can be explained by the elevated cost and compensation trends. To that end, Prices Paid, at 36.5 (purple line), and Wages/Benefits, at 33.7 (light blue line), exhibit respective positive z-scores of .53 and .03 when almost every other component (save for Structures Capex) had z-scores in the red.
Another fundamentally disinflationary sign is what’s hiding in the background of today’s fourth quad chart. From March to May, Philly Non-Manufacturing Full-Time Employment is on a three-month losing streak, the longest since COVID-19 first hit (yellow bars). This sounds more like, “It takes three to make a thing go wrong,” than Rob Base’s anthem.