by Calculated Risk on 7/12/2006 11:54:00 PM

Dr. Thoma has two excellent posts on the economy.

The first is the Dallas Fed's Economic Outlook.

The second is Selling the Economy.

The economy is clearly slowing, especially housing and consumer spending. I'd argue cause and effect: the slowing housing market is leading to less borrowing, and less consumer spending. I'm less confident in the Dallas Fed's views on inflation.

On consumer spending, ac provided a link to this BusinessWeek story in the comments: The Real Problem with Job Growth, U.S. retailers are no longer the job-creation engine they were, suggesting that consumers may finally be crying "uncle"

"We have to work hard to keep our labor and hiring in check given our outlook in same store sales," says Mike Marchetti, Finish Line's executive vice-president of store operations.

Around the country, retailers are echoing similar sentiments, and many are holding off on their hiring plans.
...
It's unusual that retailers are trimming their workforces when the rest of the economy is growing. For years, retailers have been the source of significant job creation in the U.S. During the 1990s, department stores, groceries, and other retailers added 2.3 million jobs, or an average of almost 20,000 a month, according to the Bureau of Labor Statistics.

Now, the concern is that retailers, who are positioned to detect the pulse of consumers more quickly than many other types of companies, are sensing trouble ahead. "Something is screamingly wrong with consumers, and retailers are reacting," says Richard Hastings, economic advisor to the Federation of Credit and Financial Professionals and a senior retail analyst at Bernard Sands, a retail credit rating firm.

The outlook for the U.S. economy, in its fifth year of expansion, is already weakening.

Click on graph for larger image.

From the Cleveland Fed: Fed Funds Rate Predictions

Even though the economy is clearly slowing, expectations are for another 25 bp rate hike in August.