Demystifying Data

Existing home sales fell 8.4% in January, the largest monthly decline in nearly four years, and 4.4% over the year. Housing inventory moved down to 1.22 million units, reflecting a 0.8% drop from December but a 3.4% increase from last year. The median existing home price was $396,800, up 0.9% from last year. The Northeast, South, Midwest and West all posted monthly decreases in existing home sales in January.

Single-family home sales fell 9.0% from December and 4.3% from January 2025, with the median price increasing 0.6% from last year to $400,300. Condo and co-op sales decreased 2.6% over the month and 5.0% over the year to 380,000 units in January. Meanwhile, the median price for condos and co-ops rose 3.8% from the prior year to $364,600.

Homes were typically on the market for 46 days in January, up from 39 days in December and 41 days in January 2025. First-time buyers made up 31% of sales in January, up from 29% in December and 28% in January 2025.

The NFIB Small Business Optimism Index edged down 0.2 points to 99.3 in January, remaining slightly above the 52-year average of 98. January’s increase was due primarily to the rise in those expecting better real sales volume. Of the 10 components included in the index, three increased and seven decreased. Meanwhile, the Uncertainty Index jumped 7 points to 91, remaining well above the 51-year average (68) and above the average since 2016 (80).

Small business owners again cited taxes as their top concern, with 18% reporting it as the most important problem, down 2 points from December. The share of business owners reporting labor quality as their top problem fell 3 points from December to 16%, with 31% struggling to fill open jobs and 50% reporting hiring or trying to hire in January. Meanwhile, the cost or availability of insurance was third on the list of concerns, with 13% reporting it as a top problem, up 4 points from the prior month and the highest level since December 2018.

A net 32% of small business owners reported raising compensation, up 1 point in January after rising 5 points in December. Meanwhile, 22% of business owners plan to raise compensation in the next three months, down 2 points from December. Pressure on profitability strengthened in January, with positive profit trends decreasing 1 point from December to a net negative 21%. Among owners reporting lower profits, 34% blamed weaker sales, 14% mentioned usual seasonal changes and 10% noted labor costs. Meanwhile, 3% reported their last loan was harder to get than previous attempts, down 2 points from December, and a net negative 6% of owners cited paying a higher interest rate on their most recent loan, down 3 points from the prior month.

The outlook for general business conditions fell 3 points to 21%. Furthermore, expectations for better business conditions are 26 points below the same month a year ago. On the other hand, 15% reported that it is a good time to expand their business, up 2 points from December but a rather weak reading compared to times of economic expansion. Despite overall growth running hot, small business owners feel like economic conditions are more moderated, with investment-led growth not hitting all sectors equally.

Nonfarm payroll employment rose by 130,000 in January, coming in above expectations. At the same time, the unemployment rate edged down 0.1 percentage point from December to 4.3% in January, while the labor force participation rate ticked up 0.1 percentage point to 62.5%. In addition, the establishment employment survey was revised as a result of the Bureau of Labor Statistics’ annual benchmarking process and the updating of seasonal adjustment factors. As a result of the annual benchmark revision, the employment levels from April 2024 to March 2025 were revised downward by 898,000 nonfarm jobs and 98,000 manufacturing jobs.

Manufacturing employment increased by 5,000 in January after 13 consecutive months of declines. On the other hand, the collective job losses in November and December of 10,000 were revised downward by 8,000 jobs to a decrease of 18,000 jobs. Manufacturing employment is down 82,000 over the year. Durable goods manufacturing employment rose by 9,000 in January, while nondurable goods employment fell by 4,000. The most significant gain in manufacturing in January occurred in transportation equipment manufacturing, which added 4,800 jobs over the month. Meanwhile, the most significant losses occurred in apparel manufacturing and chemical manufacturing, which shed 1,800 jobs each over the month.

The employment-population ratio inched up 0.1 percentage point from December to 59.8% in January but is down 0.3 percentage points from a year ago. Employed persons who are part-time workers for economic reasons declined by 453,000 from December to 4.89 million in January but are up from 4.48 million in January 2025. Native-born employment is down 1,195,000 from December but up 840,000 over the year. Meanwhile, foreign-born employment is up 565,000 over the month but down 97,000 over the year. At the same time, the native-born unemployment rate is up 0.4 percentage points over the year to 4.7% in January, while the foreign-born unemployment rate is down 0.1 percentage point to 4.5%.

Average hourly earnings for all private nonfarm payroll employees rose 0.4%, or 15 cents, reaching $37.17. Over the past year, earnings have grown 3.7%. The average workweek for all employees edged up 0.1 hour to 34.3 hours and by the same to 40.1 hours for manufacturing employees.

In January, consumer prices increased 0.2% from December and 2.4% over the year, down from the 2.7% annual rise in December and less than the anticipated 2.5% hike. Core CPI, which excludes more volatile energy and food prices, rose 0.3% from December and 2.5% over the year, down from the 2.6% 12-month increase in December and the slowest pace since March 2021.

Energy costs edged down 0.1% over the year in January, after rising 2.3% year-over-year in December. Within the energy index, gasoline prices declined 7.5% over the year, while fuel oil prices fell 4.2%. Meanwhile, electricity prices increased 6.3% year-over-year, and natural gas prices surged 9.8%.

In January, food prices grew 2.9% over the year, after increasing 3.1% year-over-year in December, while prices for food at home advanced 2.1%. Meanwhile, prices for food away from home climbed 4.0% from January 2025, down from the 4.1% year-over-year increase in December. Of the different food groups, beef and veal and coffee continue to rise at the fastest pace, soaring 15.0% and 18.3% over the year, respectively.

The shelter index grew 0.2% from December and 3.0% over the year, the greatest factor in the all-items monthly increase but down from the 3.2% annual gain in December. Meanwhile, prices for used cars and trucks decreased 1.8% over the month and 2.0% over the year, while new vehicle prices inched up 0.1% over the month and 0.4% from January 2025. Relatedly, prices for motor vehicle maintenance and repair jumped 4.9% year-over-year.

Although the headline inflation rate is still above the Federal Reserve’s target of 2.0%, it has moderated back closer to 2025 lows. Federal Reserve officials held their interest rate target steady at their January meeting, and markets anticipate that the Federal Open Market Committee will keep its interest rate target unchanged again at next month’s meeting. Risks to the Federal Reserve’s employment and inflation mandates remain elevated but appear to be easing.

The S&P Global Manufacturing PMI was 52.4 in January, up from the December reading of 51.8. New orders rose in January, though growth was modest and below the survey average. However, exports declined for the seventh consecutive month, as tariffs were noted to have driven up costs and hurt demand. Meanwhile, prices on inputs increased, with vendors raising charges in response, and selling price inflation rose to its highest level since August. In sum, the rate of inflation remained elevated from a historical context in January.

Production rose at the strongest rate since last August, and combined with weak sales, allowed stocks of finished goods to increase for the sixth consecutive month. In anticipation of future production, employment grew modestly in January. Backlogs of orders increased in January due to the rise in new orders, following four months of decline. Meanwhile, delivery times continued to lengthen, a result of difficulty sourcing inputs and resource constraints for suppliers.

Potential for growth from lowered interest rates and reduced import competition held business confidence steady in January. At the same time, output continuing to outpace sales presents the risk of a production slowdown and negative effects on employment unless demand improves.

In January, growth in global manufacturing activity strengthened from December, rising from 50.4 to 50.9, a three-month high. Output and new orders both expanded as manufacturers saw the strongest rise in new work in almost a year. New export orders contracted in January for the 10th consecutive month but at their slowest pace during this downturn. Meanwhile, lead times continued to slow, lengthening for the 20th consecutive month. Employment grew for the first time in three months as job gains in the U.S., China and Japan contrasted job losses across the Eurozone.

India, Greece, the Philippines and Thailand had the highest PMI readings in January. On the other hand, Brazil, Germany, Russia and Italy were some of the larger nations to register declines in activity. The upturn in manufacturing occurred across consumer, intermediate and investment goods in January, with the fastest growth seen in consumer goods.

Meanwhile, input and output price pressures rose at the quickest rates in three years in January, with the jump largely driven by the U.S. Despite this, forward-looking indicators remained positive, with business optimism hitting a 10-month high but remaining below long-run averages.

Job openings for manufacturing increased by 34,000 to 433,000 in December. On the other hand, the November job openings level of 399,000 was revised downward from 403,000 in the previous report. Nondurable goods job openings in December rose by 11,000 to 139,000, while durable goods job openings climbed by 23,000 to 294,000. The manufacturing job openings rate ticked up to 3.3% from 3.0% in November but stayed the same from 3.3% the previous year. The rate for nondurable goods manufacturing advanced 0.2 percentage points to 2.8% and 0.3 percentage points to 3.6% for durable goods manufacturing.

In the larger economy, the number of job openings dropped to 6.5 million, a decline of 386,000 from November and 966,000 from the previous year. The job openings rate fell to 3.9% from 4.2% in November and from 4.5% in December 2024. This data reflects an overall labor market that has eased back to pre-pandemic levels, but remains relatively tight from a historical perspective.

The number of hires in the overall economy increased 172,000 to 5.3 million in December but decreased 81,000 from the previous year. The hires rate for the overall economy edged up 0.1 percentage point in December to 3.3%. Meanwhile, the hires rate for manufacturing similarly ticked up 0.1 percentage point to 2.3%, down from 2.4% in December 2024. The hires rate for durable goods stayed the same at 2.0%, while the hires rate for nondurable goods inched up 0.1 percentage point to 2.7%.

In the larger economy, total separations, which include quits, layoffs, discharges and other separations, rose 107,000 from November to 5.3 million and 169,000 from the previous year. The total separations rate ticked up 0.1 percentage point to 3.3% for the overall economy but stayed the same for manufacturing at 2.4%, down from 2.5% from the year prior. Within that rate, layoffs and discharges increased by 7,000 in December for manufacturing, while quits ticked up by 2,000. The quit and layoff rates continue to remain lower for manufacturing than the total nonfarm sector.

In January, the U.S. manufacturing sector expanded for the first time after 10 consecutive months of contraction, with the ISM Manufacturing® PMI increasing to 52.6% from 47.9% in December. Demand indicators moved into expansion territory, with the New Orders, New Export Orders and Backlog of Orders Indexes rising to 57.1%, 50.2% and 51.6%, respectively. Meanwhile, the Customers’ Inventories Index contracted at a faster rate into “too low” territory, which is also a positive sign for future production. Meanwhile, the Production Index expanded at a faster pace in January, increasing from 50.7% to 55.9%.

The New Orders Index expanded in January after contracting for four consecutive months, jumping 9.7 percentage points from December. Of the six-largest manufacturing sectors, four—machinery; transportation equipment; chemical products; and food, beverage and tobacco products—reported an increase in new orders. In a turnaround from recent months, respondents noted optimism about near-term demand. However, numerous respondents cited post-holiday replenishment and customers’ desire to get ahead of additional tariff-driven price increases as likely reasons for the increase.

The New Export Orders Index expanded after 10 consecutive months of contraction in January, 3.4 percentage points higher than December. Nonetheless, respondents remain concerned about dampened international demand amid ongoing trade tensions and policy uncertainty. Meanwhile, the Imports Index stayed the same in January after nine consecutive months of contraction, up 5.4 percentage points from December to 50.0%.

The Employment Index contracted for the 12th consecutive month but at a slower pace than the prior month, up 3.3 percentage points from December to 48.1%. Of the six-largest manufacturing sectors, two—transportation equipment and computer and electronic products—reported increased employment. Companies continued to focus on layoffs and attrition to restrict headcounts due to uncertainty around near- to mid-term demand. For every comment on hiring, two respondents noted reduced headcounts.

The Prices Index ticked up 0.5 percentage points from December to 59.0%, indicating raw materials prices grew for the 16th straight month in January and at a slightly faster pace than the prior month. Of the six-largest manufacturing sectors, four—machinery; computer and electronic products; transportation equipment; and chemical products—reported increased prices. The increase continues to be driven by higher steel and aluminum prices impacting the entire supply chain, as well as the tariffs applied to most imported goods. Roughly 29.0% of companies reported paying higher prices, up from 26.4% in December and from 21.0% in January 2025.

Manufacturing activity stayed the same in the Tenth District in January, with the month-over-month composite index remaining unchanged at 0 from December. Meanwhile, expectations for future activity stayed positive but declined 3 points to 7. The month-over-month activity remaining constant was due to an increase in durable manufacturing offsetting a decline in nondurable manufacturing. At the same time, the new orders index inched up, while shipments turned negative in January. New orders for exports decreased at a slightly faster pace than the prior month. The Tenth Federal Reserve District encompasses the western third of Missouri; all of Kansas, Colorado, Nebraska, Oklahoma and Wyoming; and the northern half of New Mexico.

The production index remained negative but inched up from -3 to -2, while the new orders index moved up from -2 to 0, indicating new orders were constant over the month after declining for two consecutive months. The employment index rose in January from -4 to 0, while the average employee workweek index ticked up from 3 to 4. The backlog of orders fell further into negative territory, dropping from -5 to -11. The pace of growth for prices received weakened, while growth for prices paid accelerated over the month, with raw materials prices increasing 3 points to 44, and prices received falling from 24 to 19. Over the year, the indexes for prices received and paid both decreased, moving down from 54 and 67, respectively.

In January, survey respondents were asked special questions about changes in labor demand and factors negatively affecting business. Over half of the firms (57%) reported little to no changes in labor demand over the past year, while 14% saw reduced labor demand and 17% experienced increased demand. When asked about business concerns, more than one-third (39%) noted concerns about domestic demand for goods and services, 24% were concerned about geopolitical uncertainty and 21% cited worries about worker availability.

The NFIB Small Business Optimism Index inched up 0.5 points to 99.5 in December, remaining slightly above the 52-year average of 98. December’s increase was due primarily to the rise in those expecting better business conditions. Of the 10 components included in the index, two increased, three decreased and five stayed the same. Meanwhile, the Uncertainty Index dropped 7 points to 84, the lowest reading since June 2024 but still well above the 51-year average (68) and slightly above the average since 2016 (80).

Taxes were cited as the top concern for small business owners, with 20% reporting them as the most important problem, up 6 points from November. The share of business owners reporting labor quality as the top problem fell 2 points from November to 19%, with 33% struggling to fill open jobs and 53% reporting hiring or trying to hire in December. Meanwhile, inflation fell to third in the list of concerns, with 12% reporting it as a top problem, down 3 points from November, with a net 30% raising prices.

A net 31% of small business owners reported raising compensation, up 5 points in December after remaining unchanged in November. Meanwhile, 24% of business owners plan to raise compensation in the next three months, unchanged from November. Pressure on profitability weakened in December, with positive profit trends rising 3 points from November to a net negative 20%. Among owners reporting lower profits, 41% blamed weaker sales, 13% cited increased material costs, 12% mentioned usual seasonal changes, 9% reported price changes from their products or services and 7% noted labor costs. Meanwhile, 5% reported their last loan was harder to get than previous attempts, up 1 point from November, and a net negative 3% of owners cited paying a higher interest rate on their most recent loan, down 5 points from the prior month.

The outlook for general business conditions rose 9 points to 24%, the first increase since July. Despite the improvement in December, expectations for better business conditions have fallen 23 points since the start of 2025. At the same time, 13% reported that it is a good time to expand their business, unchanged for the second consecutive month and a rather weak reading compared to times of economic expansion. Overall, despite consumer sentiment remaining low, small business owners anticipate economic conditions to remain broadly favorable in 2026, with cost pressures moderating and other challenges easing.