Thirty-three years apart, 1981’s Neighbors and 2014’s Neighbors could not be more different. The only connection between these Hollywood movies is the shared, generic title and the fact that both plots revolve around conflict with the people who move in next door. The 1981 cult classic is known for its dark, absurdist comedy and surreal satire. A mild-mannered suburbanite, played perfectly by John Belushi, is driven to the brink of insanity by a bizarre, chaotic and possibly dangerous new couple, known in Hollywood as Dan Aykroyd and Cathy Moriarty, next door. In contrast, the 2014 variety is a modern, high-energy, mainstream comedy. A young couple with a new baby — Seth Rogen and Rose Byrne — wages a prank war against the disruptive college fraternity, led memorably by Zac Efron, that moves in next door. Sadly, 1981’s Neighbors was John Belushi’s final film before his death in 1982. On the flip side, circa 2014 Neighbors was a commercial hit that spawned the sequel, Neighbors 2: Sorority Rising in 2016.

Canada and Mexico are neighbors who live two doors away from each other. And while they share the North American continent with the U.S., they display clear differences. Canada’s highly developed economy is known for its vast, cold geography and high income, and its European-derived social structure. Mexico’s developing economy is defined by its dense, warm geography and its rich blend of Indigenous and Spanish cultures. They do share vital importance, though, for the North American auto supply chain, producing and exporting into the larger U.S. market.

It follows that consumer confidence from these neighbors could capture the spirit of the auto sector’s cycle. What better way to do that than by using U.S. consumer auto buying conditions as a common guide? After the pandemic, auto buying conditions fell to June 2022’s low of 35 and proceeded to rebound to March 2024’s cycle peak of 85. Since then, buying conditions have trended down in a channel punctuated by lower highs and lower lows; October saw a 50-reading (blue line).

Bottoms in Canada confidence (November 2022) and Mexico confidence (August 2022) lagged that of buying conditions, while their tops were timed perfectly (both October 2024). The cooling in sentiment since has us asking: “Could it really be that simple?” Not depicted is March 2024’s U.S. unit auto sales of a seasonally adjusted annual rate (SAAR) of 17.8 million – the designated local high. On Monday, October’s disappointing 15.3-million-selling rate revealed a loss of consumer spending momentum at the fourth quarter’s outset. Moreover, we would get more concerned should the SAAR break below the 15-million-mark which represents fundamental support.

Through a different prism, yesterday’s RCM/TIPP Economic Optimism Index updated us on U.S. confidence – and it wasn’t pretty. For context, it rose to an interim high of 54.0 in December 2024. November’s RCM/TIPP number fell 9.1% month-over-month to 43.9 from the prior month’s 48.3 (fuchsia line). As background, the 25-year-old RCM/TIPP figure prides itself as a harbinger for forward-looking consumer expectations and reliably guided the University of Michigan (light blue line). The two series were mirror images from 2020 to 2022 before disconnecting in 2023 and 2024.

Squint at the top right chart’s inset and you’ll notice that RCM/TIPP and UMich are back into realignment. The former points to the distinct possibility of a large downside disappointment come Friday’s UMich November preliminary report, which the consensus (50.5, up slightly from October’s 50.3) is not discounting. Diving deeper, RCM/TIPP continued to ease off August’s near-record high of 65.1, posting a third straight decline through November’s 58.6. Non-investor confidence collapsed to 38.0 in November, a level consistent with the post-pandemic inflationary period of 2022-24, the summer 2011 euro crisis and the 2007-09 recession.

Recall that we teased this turn in the recession at the end of Tuesday’s Feather. The National Association of Credit Management’s (NACM) Credit Managers’ Index (CMI) added color with this excerpt (bolding ours):

“One respondent highlighted that there is more emotion in negotiating requests for payment. The respondent added that as conditions worsen, customers are using disputes differently. Customers now have more attitude, tying personal emotionsinto dispute communications, taking a debating and complaining grievance style approach to their disputed invoices. That was not the previous tone taken for disputes for professional contracted services in past years, when they were based in fact or seeking to correct something.”

To quantify, the combined manufacturing/services CMI for Disputes has fallen in steady fashion to 48.8 in October (yellow line). To be sure, readings south of the 50-breakeven are common; however, the persistent compression has a distinct ring to it. The 2.8-point drop over the last four quarters was matched in the 12 months ending 2008’s first quarter, and the level of the CMI for Disputes during the same three-month interval was 48.6 (and 48.9 in 2007’s fourth quarter). These periods heralded the Great Recession.

Tighter credit conditions characterized the 2007-09 downturn as evidenced by commercial and industrial (C&I) lending standards for businesses of all sizes (orange and lime lines), according to the Federal Reserve’s Senior Loan Officer Opinion Survey. NACM’s services CMI for Rejections of Credit Applications serves as an alternative measure of lending standards. October 2025’s 48.8 is not moving in line with those of bank loan officers, revealing relatively tighter trade credit conditions (inverted purple line). Per NACM:

“[Service credit managers] are also indicating that they are getting stricter in their credit underwriting. One respondent said they’ve had more credit applications come in that have only qualified for credit card terms than in recent months. They haven’t seen a large uptick (yet) of bankruptcies, but have seen more excuses being made by customers for late payments – asking for extended terms, delaying payment for multiple reasons, etc.’’

Deteriorating North American consumer confidence, emotional trade credit disputes and stricter underwriting do not paint a neighborly fundamental backdrop. Add that to the chorus of Wall Street executives warning of financial market overvaluation risks, and equity and credit volatility look cheap.

According to traditional folklore, putting a ripe tomato on the mantel or windowsill of a new home brought good fortune and ensured future prosperity, while warding off evil spirits and repelling bad luck. Perish the thought, especially since tomatoes were seasonal and would eventually rot, defeating the purpose of a permanent good-luck charm. Because the traditional tomato season typically runs from May to October, this practice could only be applied six months of the year. As for November to April? To maintain the symbol of prosperity year-round, women of the Victorian Era (when the tradition began) created stuffed, red fabric tomatoes filled with sand or sawdust. Like many innovations, the mother of invention created newfound utility. These durable fabric versions were quickly found to be an excellent, stable place to store expensive sewing pins and needles, thus was created the classic tomato pin cushion. Today, households likely do not keep the pin cushion as a centrally displayed “rabbit’s foot.” Little do they know they’ve relegated good luck to their junk drawers and nightstands.

No such good luck magic fruit has been harvested for the U.S. economic calendar as Monday marked Day 34 of the government shutdown. At least, of the dismal science persuasion were thankful to be in receipt of private business surveys from the Institute for Supply Management (ISM) and S&P Global. The former being the predominant market-mover, it garnered the most attention. The headline ISM manufacturing index dipped to 48.7 in October, a mild disappointment from the 49.5 consensus estimate, and September’s 49.1 figure. The result extended the factory slump to 36 months; since November 2022, only the two months of January 2025, at 50.9, and February 2025, at 50.3, recorded readings above the breakeven level – and even that was underpinned by front running ahead of potential tariff increases.

Speaking of underpinning, the Street’s favorite ISM New Orders-Inventories spread advanced to 3.6 in October, a nine-month high and the third straight positive reading (light blue line). The spread at face value was bullish for risk assets. We would go so far to say that it also has a don’t-fight-the-tape quality to it for investors and algorithms, regardless of both September’s and October’s New Orders (48.9 and 49.4) and Inventories (47.7 and 45.8), respectively, being in contraction. The reasoning is sound – it’s been a historically good tracker of annual returns in the S&P 500 (yellow line).

ISM’s key metric for supply conditions, Customers’ Inventories, added another (under)pin to the lucky tomato market narrative. Coming in at 43.9 in October, it was the second lowest observation after September’s 43.7, following last September’s “mini shock” to 50.0 (orange line). To be sure, Customers’ Inventories acts as a short-run guide for leading New Orders – and the lower the better. Since 1997, past forays well north of the 50-mark have endorsed recession, whether it be of the whole-economy or industrial variety. Moreover, the present index level was below the long-run average (44.8) for the third consecutive month. There hasn’t been a streak like this in three years.

While these details can’t help but foster optimism, a few excerpts from October’s ISM report offer a stout counterpoint (bolding ours):

• “A chain reaction of one-month index improvements started with New Orders in August and flowed to Production in September. In October, it manifested in a 1.7-percentage point increase in the Backlog of Orders Index. These short gains have not appeared to translate into sustained growth for the sector, a reflection of continuing economic uncertainty.”
• On growth, “the percent of [manufacturing] GDP in strong contraction (registering a composite PMI of 45 percent or lower), is at 41 percent, up 13 percent from September. The share of sector GDP with a PMI at or below 45 percent is a good metric to gauge overall manufacturing weakness.”
• On employment, “67 percent of panelists indicated that managing head count is still the norm at their companies, as opposed to hiring.”

Ongoing uncertainty and a fatter left tail on growth underpin escape velocity from the industrial slump. Add to that (a percentage of respondents that only a teenager would love saying) labor cost-cutting is taking precedence over labor cost expansion.

Moreover, the global trade theme remains patently bearish. ISM’s New Export Orders registered relative improvement, to October’s 44.5 from September’s 43.0. This is cold comfort in historical business cycle context as the 32 sub-50 readings in the last 39 months have no precedent (lime line). The global trade cycle, more specifically S&P Global’s World New Export Orders excluding the U.S., has been pressured even longer, contracting in 40 out of 44 months since March 2022 (purple line). Absent a global trade recovery, it’s premature to contemplate a bullish industrial backdrop.

Compounding this stance, the compression in factory employment is far from over. Indeed, the ISM Employment index continued its bearish below-the-breakeven run. Relative improvement from the prior 45.3 to the current 46.0 (red line) does little in the convincing department to greenlight near-term job creation. Granted, at 47.9, Backlogs have run north of Employment, at 46.0, for four straight months. However, that hasn’t been sufficient to generate sustained gains in ADP’s manufacturing payrolls; August (-18,000) and September (-2,000) indicated a fall back after temporary gains between February and July catalyzed by tariff terror.

With a ‘Closed’ hanging on the Bureau of Labor Statistics’s door, investors will have to stick a pin in the ADP numbers tomorrow to take the pulse of the upstream and downstream private labor picture. Red is more likely than green due to the persistent contractions in ISM Backlogs and Employment. And to tease tomorrow’s Feather that will deep-dive into credit managers’ latest take, the October NACM report noted this about the factory sector: “For the second month in a row, respondents have likened current business conditions to what we experienced during the Great Recession from 2007-2009.” That suggests that lucky tomato has clearly spoiled.

In 1930, Marlene Dietrich moved from Germany to the United States and signed a seven-year contract with Paramount Pictures, which hoped the actress could compete at the box office with MGM’s Swedish starlet, Greta Garbo. Today she’s remembered as one of Classic Hollywood’s most captivating screen presences. But Dietrich viewed her advocacy work during World War II as her most noble achievement. She rejected lucrative offers from the Nazis to star in propaganda films for the Third Reich, opting instead to apply for U.S. citizenship, which she received in 1939. At the height of the war, Dietrich toured with the USO, singing for Allied troops as a way to boost morale on the front lines. Despite the significant risk, she even crossed into German territory to perform, saying she had to, “out of decency.” In 1947, President Truman awarded her the Medal of Freedom for her support for the war effort. The medal sat beside her coffin at her funeral, at which the officiating priest remarked that she “lived like a soldier and would like to be buried like a soldier”.

 Also intended to be done “out of decency,” the 60-day notice period required under the Worker Adjustment and Retraining Notification (WARN) Act affords impacted workers time to come to terms with their loss of employment and to start searching for an alternative gig. WARN notices are typically reported at the state level, and in three of today’s four Feather charts, we’ve compiled the most recent figures available for October. They’re another valuable prism into the current state of the labor market, and carry some extra heft right now as we approach a second delayed monthly jobs report (that is, unless your name is Jerome Powell).

Aggregating the state-level WARN data to create a national view makes clear that we’ve entered dangerous territory. On a rolling six-month basis, October’s 202,616 total marked a significant leap from the prior month’s 188,969 (red line). Though June’s 195,372 and July’s 199,475 weren’t too far off, October also crossed the 200,000-threshold for the first time since September 2009, the COVID shutdown aside. In fact, it wasn’t until the middle of the Great Recession that WARN notices breached current levels. Unsurprisingly, the results align with MacroEdge’s final Job Cuts total for October, which, at 152,041, edged out February’s 151,082 marking the highest on record in the relatively young 25-month series.

From the nationwide aggregate to the state level, what’s most glaring is the (bad) breadth on display. An abnormally high number of states saw 4 or 5-digit gains in their pink slip totals last month. October saw 10 states register 4-digit increases (Arizona, Florida, Illinois, Kentucky, Minnesota, North Carolina, New Jersey, Pennsylvania, Tennessee, Texas), the third month of 2025 in double-digit territory (orange line). In data to 2006, 4-digit increases in at least 10 states have occurred in less than 20% of months. Meanwhile, two states (California and Washington) registered 5-digit spikes. Though this may not seem like many, only 10% of months since 2006 have had any states post a one-month jump above 10,000; the COVID shutdown is the only other time that the monthly tally was higher. Even during the height of the GFC, just one state, California, saw a 5-digit increase in three separate months: October 2008, December 2008, and April 2009. Together, the combined 12 states with at least 1,000 WARN notices for the month is the most since August 2023’s 15-count.

As for the worst performers, California and Washington, they’ve been on quite the tear in recent months, alongside their Western neighbor, Arizona. Together, these three states account for more than 16% of the country’s population and tallied a combined 25,660 WARN notices in October, nearly double September’s 14,860 and just shy of May’s 25,889 (yellow line). Current levels are more than double the long-run monthly average of 10,343 and well above the October 2008 GFC peak of 18,508. Drilling down, while the e-commerce giant calls Seattle home, Amazon’s latest culling contributed given its WARN-ing north of 14,000 for Golden State workers. Something else that hit our radar in California—while not a layoff announcement per se, YouTube offered voluntary exit packages to thousands of its U.S.-based employees last week, as CEO Neal Mohan informed staff of an AI-driven re-org. Lastly, what drove Arizona’s surge to 3,158 WARN notices in October, a post-pandemic high, was a whopping 2,792 care of Arizona Autism, the state’s largest provider of therapeutic services for children with developmental disabilities.

The last dataset the Bureau of Labor Statistics released before the shutdown was August’s JOLTS report, which had echoed warnings of the trouble being registered out West. The Hires-Separations spread, which guides nonfarm payrolls, traced a double-dip through the summer (fuchsia line). The smoother 6-month rolling average was negative for 12 straight months from December 2023 to November 2024. While it poked its head above water to May’s 37,000, it then returned to the red for three straight months with June’s -13,000, July’s -4,000, and August’s -3,000 prints. Job openings in the region have traced a similar pattern (blue line). The 6-month average sank to 1.54 million in September 2024, and after rising to March’s local high of 1.625 million, is now at a cycle low 1.501 million. This is materially lower than where Job Openings were just prior to the pandemic.

All in all, the sheer magnitude of distress evidenced by WARN data in the region flags further downside once we get our hands on delayed data. The University of Michigan’s (UMich) Bad News Heard on Unemployment gauge, which already hit a recessionary 33% in the West last month, looks poised to deteriorate further with November’s release as well. If only something as simple as a serenade from Marlene Dietrich was enough to quell impacted workers’ woes.