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EndGame Macro
The Empire State Manufacturing Report: A Strong Headline Hiding a Weak Foundation

At first glance, the Empire State report looks like something you’d want to cheer. Business conditions jump to 18.7, the strongest print since last November. New orders and shipments rise sharply. Inventories finally move out of negative territory. If you’re only watching the headline number, it feels like manufacturing is catching a second wind.

But once you actually look inside the report, the story gets a lot more complicated and honestly, a lot less healthy than the headline suggests.

Activity Is Up, But the Underlying Pulse Still Looks Weak

The bounce in activity is real, but look at what’s happening underneath:
•Unfilled orders fall again to -5.8, meaning firms are working down backlogs rather than building new business. That’s not a sign of robust, broad based demand. It’s a sign that things got quiet, and now firms are catching up.
•Supply availability worsens, slipping further to -11.5. Even with demand improving, it’s still harder to get inputs. That’s not what a smooth, confident recovery looks like, it’s what late cycle strain looks like.

In a real expansion, orders rise, backlogs rise, and supply eases. Here, orders rise but backlogs shrink and supply chains tighten. That’s not strength, that’s friction.

Pricing Pressure Isn’t Easing the Way It Should

This is the part nobody wants to talk about.
•Prices paid: 49.0
•Prices received: 24.0

Both cooled slightly, but they’re still elevated after two years of supposed normalization. And when you flip to forward looking expectations firms still expect:
•Prices paid to stay extremely high (62.5)
•Prices received to rise further (41.3)

This isn’t an economy gliding back to 2% inflation. It’s an economy where firms still assume costs will rise and they’ll be able to pass a chunk of that through.

The Labor Market Lift Is Real… but Small

Employment did tick up to 6.6, and the average workweek jumped to 7.7, a multi year high.

But zoom into the distribution on the same page:
•Only 13.8% of firms are hiring
•7.2% are cutting
•The majority are doing nothing

This is not broad based hiring. It’s mild relief after a soft patch, not the beginning of a strong labor resurgence. And again, that lines up with a late cycle pattern: firms stretch hours first before committing to new hires.

The Most Telling Signal: Optimism Falls

Here’s the part that flips the whole narrative: the future expectations index falls hard from 30.3 to 19.1 even as current activity improves.

That is exactly what you see when businesses enjoy a brief uptick but don’t trust it to last.
•Orders today? Up.
•Outlook six months from now? Down.

It’s the economic equivalent of smiling at the moment but glancing over your shoulder.

Why This Isn’t the “Everything Is Fine” Print People Want

If you put all of it together…rising activity, shrinking backlogs, input constraints, elevated pricing pressure, cautious hiring, and a sharp drop in optimism the picture becomes much clearer:

This is a late cycle relief bounce, not a sign that the economy is gaining real momentum.

It’s the kind of report you get when things aren’t falling apart, but they’re not strengthening either. Firms are busier than they were a few months ago, but they’re also more uncertain, more squeezed, and more constrained.

The cheerleaders will focus on the 18.7 headline. Anyone who actually reads the survey will see the real message.

The economy is wobbling forward with just enough energy to disguise the fact that the underlying supports are getting thinner.

The November Empire State Manufacturing Survey indicates that manufacturing activity grew at a solid pace in New York State. The headline general business conditions index climbed eight points to 18.7, its highest reading in a year.
https://t.co/psUPHT8E8l https://t.co/Kk83Y82zOu - New York Fed Research tweet

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