Massive surge in spring breakers coming next week

Trend watch

As we write this, it appears that Congress has made a deal to restore funding for most of the Department of Homeland Security. That would get the beleaguered TSA airport security officers paid. That’s also welcomed news for the impending travel for the surge of spring breakers.

The heaviest in terms of passenger volume will be this coming week – March 29^th through April 4^th – when an estimated 41.8% of schools will be on break (see slide 7, available to clients in the full report).

The current week is a lull between mid-March spring break and the big peak week. Nonetheless, despite the TSA backup and the calendar lull, weekly air passenger counts in the United States remained above 18 million, up 0.5% compared to the same week a year ago.

Lastly, we’ll continue to include the personal tax refunds chart (slide 8, available to clients in the full report) through the end of tax filing season. 

Our take

This was a light week on the economic data front. Much like the impending travel surge, there will be a flood of key releases, such as purchasing managers indices and several labor market indicators for March. The most important will be the March employment report, including monthly job growth and the unemployment rate. There’s also still some catchup from the earlier government shutdowns, including February retail sales, which will be released in the coming week. Beyond that, there’s still some delayed housing data.

Rightly, all eyes remain on the events in the Middle East, and the ongoing effective shutdown of the Strait of Hormuz. That’s caused a spike in crude oil prices of about 50%, or more than $35 per barrel during March.

While the U.S. is largely insulated from an energy supply shock since more than 90% of our supply is sourced within North America, prices are set globally. Still, the determining factor for the U.S. economic drag will be the duration of the conflict and level of crude oil prices. By duration, it would need to stay near $100 per barrel for several months. Conversely, growth would need to really nosedive; that’s not happening.

Even so, consumers will increasingly feel the indirect effects. Diesel costs are embedded in everyday goods through higher freight expenses and more expensive inputs such as fertilizers and chemicals. As a result, higher crude oil prices don’t stop at the pump—they filter through to grocery bills, household goods, and delivery costs, steadily eroding consumers’ purchasing power.

Importantly, $4 per gallon is a key psychological threshold for many households and has the potential to meaningfully alter consumer behavior. According to an American Automobile Association (AAA) survey, 59% of respondents say they would change their driving habits once gas prices exceed $4 per gallon. Higher diesel prices—approaching $5 per gallon—also feed back to consumers, as businesses reassess shipping costs and pass them along in the form of higher prices, particularly for bulkier goods and those traveling longer distances.

In the near term, consumers should have a modest buffer against higher fuel costs from larger tax refunds (see slide 8, available to clients in the full report). Thus far, the average refund is roughly $350 higher than a year ago, or up nearly 11%, and that’s likely to climb as tax filing season progresses. Still, most consumers won’t connect the dots between higher prices at the pump and larger tax refunds. 

Bottom line

We’ve described the U.S. economy as having one foot on the gas—driven by fiscal stimulus—and one foot on the brake, reflecting trade and tariff uncertainty, underwhelming job growth, and now the Iran situation. Against this muddled backdrop, the Federal Reserve is likely to remain in a holding pattern in the near term.