Communications

Nominal Broad U.S. Dollar Index (DTWEXBGS)

The Nominal Broad U.S. Dollar Index is a trade weighted index that reflects the value of the U.S. dollar relative to a broad set of currencies. It is calculated by the Federal Reserve and is set to a base value of 100 as of January 2006. There has been a significant appreciation since 2006, and during the month of October 2025, the value rose by .7%

The dollar spiked during the COVID period reflecting both the fall in international trade, as well as insecurity about the future. Investors rushed into dollar-based assets, forcing up the price of the currency. It has now gone back to recent trend levels suggesting that the new Tariffs have not had a huge impact on relative levels of trade across the world. More trade is an important indicator of economic growth, so this indicator suggests a stagnant economy.

Source: Board of Governors of the Federal Reserve System (US), Nominal Broad U.S. Dollar Index [DTWEXBGS], retrieved from FRED, Federal Reserve Bank of St. Louis; https://fred.stlouisfed.org/series/DTWEXBGS.

Employment Level (CE16OV)

The Bureau of Labor Statistics calculates the number of employed individuals using a survey of households. The measure does not include persons under 16 years of age, inmates of institutions (e.g., penal and mental facilities, homes for the aged), and those on active duty in the Armed Forces. While the BLS has come under a lot of criticism for its methods, this is still one of the most complete measures of the number of people working in the country.

The employment level is one of the best measures of the current health of the economy. Generally, when employment falls for 4 or 5 months straight, one can expect to see recessionary times and a loosening of monetary policy. The employment levels have been relatively stable throughout the year, once again suggesting a stagnant economy.

Board of Governors of the Federal Reserve System (US), Nominal Broad U.S. Dollar Index [DTWEXBGS], retrieved from FRED, Federal Reserve Bank of St. Louis; https://fred.stlouisfed.org/series/DTWEXBGS, December 30, 2025.

New Privately-Owned Housing Units Started: Total Units (HOUST)

Housing Starts as measured by the Census Bureau represent excavation beginning for the footings or foundation of a building. All housing units in a multifamily building are defined as being started when this excavation begins. Beginning with data for September 1992, estimates of housing starts include units in structures being totally rebuilt on an existing foundation. Homes represent both the largest expense, and the largest asset for a large percentage of Americans, and increases in housing starts relative to population growth, are an indicator of future consumption and debt levels.

While they are volatile, housing starts have been in the 1.4 – 1.5 million range on an annual basis going back to the Eisenhower Administration. They did fall precipitously during the 2008 financial crisis and have never recovered to prior levels. This is due to a number of factors including lower levels of household formation, as well as asset price inflation due to negative interest rate policies, that have priced many younger people to forego home ownership. With housing being such a large portion of the economy, subdued start rates (below 1.4 million annually) will be a drag on production, job growth, and overall economic activity. Again, not too low to suggest a deep recession, but low enough to forecast stagnation.

U.S. Bureau of Labor Statistics, Producer Price Index by Commodity: All Commodities [PPIACO], retrieved from FRED, Federal Reserve Bank of St. Louis; https://fred.stlouisfed.org/series/PPIACO, December 30, 2025.

Producer Price Index by Commodity: All Commodities (PPIACO)

The Producer Price Index (PPI) is produced by the Bureau of Labor Statistics (BLS) and measures the average change over time in prices received (price changes) by producers for domestically produced goods, services, and construction. PPIs measure price change from the perspective of the seller.

While there are many indicators for inflation, we (as microeconomists), look toward production rather than consumption as being the key source of inflation. If producers’ costs increase, so too must prices, otherwise production stops and then shortages lead to higher prices from the demand side.

The PPI surged during the COVID period, as production around the world was halted, and the ability to find supplies (and labor) was constrained. Since then, while the index has not gone down precipitously, it has remained quite stable. This mirrors popular opinion that suggests the prices have skyrocketed, even though actual price data does indicate slowing price increases. The real issues leading to an affordability crisis are inflated asset prices (for example home values) and stagnant wages.

U.S. Bureau of Labor Statistics, Producer Price Index by Commodity: All Commodities [PPIACO], retrieved from FRED, Federal Reserve Bank of St. Louis; https://fred.stlouisfed.org/series/PPIACO, January 7, 2026.

10-Year Treasury Constant Maturity Minus Federal Funds Rate (T10YFF)

The 10-Year Treasury Constant Maturity Minus Federal Funds Rate (T10YFF) represents the difference between the yield on a 10-year Treasury bond and the Federal Funds Rate. It helps gauge the demand for US Treasuries and influences interest rates in the economy.

In an economy dependent on debt, interest rates matter. High inflation adjusted interest rates, along with constant borrowing across all sectors of the economy (including commercial debt, personal debt and government debt) can lead to higher consumption today, but lower production in the future. In effect, debt is equal to consumption pushed forward, while savings equals delayed consumption. High debt levels reduce the potential for more investment in the future. The Federal Reserve controls the Federal Funds Rate (FFR), which is equal to the rate banks pay and receive for overnight reserve deposits (something that today is barely used), while the 10-year treasury is considered to be the market rate for debt.

Currently, even though the Federal Reserve is pushing down short-term rates, the longer term 10-year rate has begun to increase, suggesting that markets are expecting inflation to be higher than the FFR and that demand for more debt will grow. Neither of these things are good for the economy over the longer term, so the US should likely expect to continue to underperform.

Source: Federal Reserve Bank of St. Louis, 10-Year Treasury Constant Maturity Minus Federal Funds Rate [T10YFF], retrieved from FRED, Federal Reserve Bank of St. Louis; https://fred.stlouisfed.org/series/T10YFF.

Crude Oil Prices: West Texas Intermediate (WTI) - Cushing, Oklahoma (DCOILWTICO)

The West Texas Intermediate (WTI) is one of the main global benchmarks of oil pricing. This measures the price of oil in Cushing, Oklahoma, one of the countries’ main pipeline terminals (and by the way the most inland port in the country).

Energy is the key resource for economic growth and prosperity. Every time a new, more productive form of energy has been discovered, technology, population and the economy has boomed. WTI is the most applicable indicator of oil prices in the United States.

Crude oil prices have been falling since the end of the COVID period, first due to sizable releases from the US strategic petroleum reserves, then due to increased production. There are some signs that US production is peaking, but this is likely due to falling prices. WTI of less than $50 per barrel tends to preclude new exploration and investment. Prices below $50 per barrel does; however, boost overall economic growth. Barring any exogenous factors, we expect to see oil prices fall to a band around $55 per barrel, a growth neutral level.

Source: U.S. Energy Information Administration, Crude Oil Prices: West Texas Intermediate (WTI) - Cushing, Oklahoma [DCOILWTICO], retrieved from FRED, Federal Reserve Bank of St. Louis; https://fred.stlouisfed.org/series/DCOILWTICO.