Markets are flashing contradictions as housing shows only faint signs of recovery while wholesale prices surge.

Rate cuts may be coming, but inflation data could upend the narrative. Here’s what you need to watch now.

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The Big Picture

Labor Market

Americans Struggle to Find Work as Unemployment Claims Climb Higher

New data shows U.S. jobless claims climbing to their highest level in two months, reinforcing concerns that the labor market is losing momentum.

The uptick in both new applications and continuing claims highlights a shift from the rapid hiring pace that characterized much of the post-pandemic recovery.

The latest figures suggest that while layoffs remain relatively contained, finding new work is becoming more difficult.

Continuing claims reached their highest point in nearly four years, indicating that displaced workers are remaining unemployed for longer periods.

Economists view this as a key indicator that labor demand is softening across multiple sectors. A slowing labor market carries broader macroeconomic implications.

Household spending, the backbone of U.S. growth, could come under pressure if wage gains cool and job security weakens.

That, in turn, raises questions about the resilience of consumer-driven sectors such as retail, travel, and housing.

While regional variations persist, the overall trend suggests that the U.S. economy may be entering a period where growth moderates more noticeably.

Policymakers and investors alike are watching closely, as labor market shifts often set the tone for broader economic momentum in the months ahead.

Tourism & Travel

Decline in International Visitors Raises Concerns for U.S. Service Economy

International travel to the United States has slowed noticeably this summer, with Las Vegas emerging as a key indicator of the trend.

Resorts and convention centers in the city report weaker attendance compared to last year, particularly from overseas visitors, underscoring how global economic pressures are reshaping one of America’s most important service industries.

Tourism is a vital contributor to U.S. growth, generating billions in spending across hospitality, dining, retail, and entertainment.

A decline in foreign arrivals ripples far beyond casinos and convention halls, affecting airlines, small businesses, and local tax revenues that rely heavily on travel-related activity.

With consumers worldwide facing higher costs and shifting travel preferences, the U.S. may see reduced inflows of foreign spending at a time when domestic demand is already showing signs of cooling.

Las Vegas is often viewed as a bellwether for discretionary spending, and its slowdown highlights broader concerns about the resilience of the U.S. service sector.

If international tourism continues to soften, policymakers and businesses alike may need to adapt to a future where growth relies more on domestic travelers and new sources of consumer demand.

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Consumer Trends

U.S. Alcohol Industry Faces Shifting Demand and Rising Pressures

The American alcohol market is undergoing a significant transition, shaped by changing consumer habits, economic headwinds, and evolving health trends.

While imported wines and spirits remain popular, U.S. producers are contending with softer demand as households cut discretionary spending and younger drinkers turn toward alternatives like low-alcohol beverages, seltzers, and cannabis products.

A recent Gallup survey found reported alcohol consumption at its lowest levels on record, underscoring how lifestyle choices and tighter budgets are reshaping demand.

Premium brands continue to attract high-income consumers, but mid-range and budget labels face increased pressure as cost-sensitive buyers reassess their spending.

This uneven consumption pattern is adding strain to distributors, bars, and restaurants that rely heavily on consistent alcohol sales, particularly in the holiday season.

At the same time, U.S. producers face an unusual mix of risks and opportunities.

Domestic wine and spirits may benefit from global supply chain challenges, but they also risk losing competitiveness if international markets respond by erecting their barriers.

For policymakers, the alcohol sector provides a window into broader macroeconomic dynamics, including slowing consumer demand, shifting trade flows, and the growing impact of health-conscious consumption on traditional industries.

Metrics to Watch

• Housing Data Shows Mixed Signals
  July housing starts came in at 1.30 million, just under June’s pace, while building permits held steady at 1.39 million.
  
  The flat readings suggest construction is stabilizing but not accelerating, with multifamily demand offsetting single-family softness.
  
  

• Homebuilder Sentiment Still Weak
  The August homebuilder confidence index ticked up to 34 from 33, a marginal improvement but still historically low.
  
  Builders remain cautious as affordability challenges and tariff-driven material costs weigh on activity.
  
  

• Producer Price Index Fallout
  Wholesale inflation jumped 0.9% in July, the steepest monthly rise in three years. That spike raises the odds the Fed’s preferred inflation gauge, core PCE, will drift higher in August, complicating the case for aggressive rate cuts.
  
  

• Fed Divisions in Focus
  Minutes from the Fed’s July meeting revealed a split: most favored holding steady, but dissenters pressed for immediate easing.
  
  With September odds of a cut still near 85%, traders are parsing every signal from officials to gauge whether inflation risks outweigh slowing growth.

Market Movers

🪑 Fed Politics Intensify
The Fed is under fire. President Trump’s attacks on Powell escalated this week as he weighed firing Governor Lisa Cook over disputed allegations.

With two governors already dissenting for cuts, the clash between political pressure and institutional independence is now front and center.

💳 U.S. Credit Rating Holds Firm
Despite deficits swelling, S&P reaffirmed the U.S. rating at AA+/A-1+, citing strong tariff revenues to plug fiscal gaps.

But the agency warned that eroding Fed independence or deeper fiscal slippage could jeopardize stability over time.

🏗️ Housing Diverges
July housing data showed strength in apartments but weakness in single-family builds.

Multifamily construction surged as demand for rentals grew, while permits dropped 5.7% year over year, highlighting ongoing uncertainty in the sector.

🌍 Global Trade Unease Persists
Europe is looking to diversify. Lagarde urged deeper ties beyond the U.S. as tariff disruptions weigh on growth.

At the same time, allies like Japan and South Korea are still waiting for promised tariff relief, and Japan’s July exports dropped 2.6%, the third straight monthly decline.

🚗 Japan’s Exports Slide
Automobile shipments to the U.S. fell more than 10% year over year, forcing Japanese automakers to cut prices at the expense of profitability.

The weakness underscores how tariff policy is reshaping trade flows and pressuring margins abroad.

Market Impacts

Equities: U.S. stock futures were flat overnight after the S&P 500 logged a four-day losing streak to Wednesday evening.

Tech and chip stocks led the decline, with Apple, Amazon, and Alphabet all sliding more than 1%, while Intel tumbled 7%. Nvidia briefly fell 3% before closing little changed. 

The market’s heaviest weights, the “Mag Seven” plus Broadcom, all finished lower, while the next tier of large caps including Walmart and Mastercard advanced.

Traders are watching closely for Fed Chair Jerome Powell’s remarks at Jackson Hole on Friday, which could determine whether September rate cuts remain on track.

Bonds: Treasury yields edged slightly lower after Fed minutes confirmed divisions within the committee. The 10-year closed at 4.29%, and the 2-year at 3.75%.

While most policymakers saw it as too early to ease, dissent from two governors underscored the growing push for cuts.

Traders continue to price in an 84% chance of a September reduction, with Jackson Hole viewed as the next big catalyst for direction.

Currencies: The dollar slipped after President Trump called on Fed Governor Lisa Cook to resign, a move seen as further politicizing the central bank.

The dollar index dropped to 98.16, while the euro strengthened to $1.1664 and the yen firmed to 147.37.

Sterling eased slightly after hotter U.K. inflation data, and the New Zealand dollar fell to a four-month low following a rate cut. Investors are waiting for Powell’s speech Friday to gauge whether Fed independence is at risk.

Commodities: Oil prices rebounded, with Brent up 1% to $66.45 and WTI gaining 1.25% to $63.13, after U.S. crude inventories fell by 2.4 million barrels and flooding disrupted operations at BP’s Whiting refinery.

Traders remain cautious as Ukraine peace talks stall and Russian supply stays restricted. Gold rose 0.9% to $3,345 per ounce as the weaker dollar supported buying ahead of Jackson Hole.

Analysts say breaking $3,350 could set up a retest of $3,400 if Powell signals dovishness.

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Key Indicators to Watch

📅 Initial Jobless Claims (Thursday, Aug. 21)
Weekly filings are expected at 225,000, roughly in line with last week. Any unexpected rise could reinforce concerns about a weakening labor market.

📅 Philadelphia Fed Manufacturing Survey (Thursday, Aug. 21)
August’s reading is forecast at 7.0, down sharply from 15.9 in July. A lower print would signal slowing momentum in regional manufacturing.

📅 Existing Home Sales (Thursday, Aug. 21)
July sales are projected at 3.91 million, just below June’s 3.93 million. Persistent weakness would underscore ongoing affordability and supply pressures.

📅 Fed Chair Powell Speech (Friday, Aug. 22)
Powell’s Jackson Hole remarks will be the week’s focal point. Markets want clarity on whether rate cuts are a certainty in September or if inflation risks could delay easing.

Everything Else

• China faces a pivotal welfare reform test as a court ruling threatens jobs at small businesses.

• Global markets are flashing stagflation signals, with growth slowing while inflation stays sticky.

• India unveils a major tax relief plan to counter tariff pressures and support its economy.

• U.S. retailers are split on holiday sales as consumer caution weighs on forecasts.
  UK house prices climbed again in August, fueling new concerns over affordability and demand.