Retail Sales Decline

November 1, 2002

· Nonfarm payrolls fell about as expected last month, down 5,000. Figures for September and August were revised up slightly as a result of raised private service sector & construction figures.

· Amongst industries, factory sector jobs fell 49,000 (-2.7% YTD), continuing a decline that began in early 1998. The one-month diffusion index for the factory sector fell to 40.4, suggesting future declines in manufacturing sector jobs. Construction jobs fell 27,000 (-1.4% YTD). Jobs in service producing industries rose 70,000 (0.5% YTD). Government employment rose 24,000 (0.9% YTD).

· The length of the workweek dipped back to the 3Q average. As a result, the index of aggregate hours worked (employment times hours worked) fell 0.4% and began 4Q slightly below the average for 3Q. That followed a 0.2% 3Q decline.

· The one-month diffusion index for nonfarm payrolls fell slightly to 47.3 from an upwardly revised September level of 50.7. The three month diffusion index rose to 48.7.These levels suggest little or no employment growth near term.

· The gain in average hourly earnings (2.3% YTD) was slightly less than expected and September's gain was revised down.

· The unemployment rate rose less than expected. Employment fell 271,000 (0.6% YTD) and the labor force fell 154,000 (0.6% YTD).

· The nonfarm payroll employment figures are based on reports provided to the US Labor Department by businesses, while the figures from which the unemployment rate is derived are based on a survey of US households.

Employment	Oct	Sept	Y/Y	2001	2000	1999
Payroll Employment	-5,000	-13,000	-0.4%	0.2%	2.2%	2.4%
Manufacturing	-49,000	-39,000	-4.0%	-4.2%	-0.4%	-1.3%
Average Weekly Hours	34.1	34.2	34.0	34.2	34.4	34.5
Average Hourly Earnings	0.2%	0.2%	3.0%	4.1%	3.9%	3.6%
Unemployment Rate	5.7%	5.6%	5.4%	4.8%	4.0%	4.2%

Personal Income Up, Spending Down

November 1, 2002

By Tom Moeller

· Personal income (4.5% AR, YTD) rose slightly less than expected last month. August's figure was revised down slightly. Consensus expectations were for a 0.5% gain.

· Wage and salary disbursements rose 0.6% (3.3% AR, YTD) following the strong 0.5% August gain. Strength centered in the service industries where wages rose 0.9% (4.4% YTD, AR). Manufacturing wages were unchanged m/m and down 1.2% YTD (AR). Personal transfer payments rose 0.6% (10.2% YTD, AR). Personal interest income fell for the third straight month (1.0% YTD, AR).

· Personal consumption expenditures fell more than expected. Durable goods purchases fell 5.1%, reflecting a 12.6% decline in light vehicle unit sales. Spending on nondurable goods also fell, down 0.1% (4.4% YTD, AR). Spending on services rose 0.4% (5.6% YTD, AR).

· Disposable personal income rose 0.5% (8.9% AR, YTD). Personal tax payments were unchanged m/m but were down 19.2% YTD (AR).

· The PCE price deflator rose 0.2% following a 0.2% rise in August. Prices were up 2.3% YTD (AR). Less food and energy, the price deflator rose 0.2% (1.9% YTD, AR).

Disposition of Personal Income	Sept	Aug	Y/Y	2001	2000	1999
Personal Income	0.4%	0.3%	3.7%	3.3%	8.0%	4.9%
Personal Consumption	-0.4%	0.4%	6.0%	4.5%	7.0%	6.7%
Savings Rate	4.2%	3.4%	4.6%	2.3%	2.8%	2.7%
PCE Price Deflator	0.2%	0.2%	2.2%	2.0%	2.5%	1.6%

ISM Index Again Below 50

November 1, 2002

By Tom Moeller

· The ISM Composite Index of manufacturing sector activity remained below 50 for the second month. The decline to 48.5 was about as expected and consistent with yesterday's report from the Chicago purchasing managers. Before that report, Consensus expectations were for a decline in the ISM to 49.0.

· Production, inventories and the supplier delivery indexes fell while new orders and employment rose just slightly.

· Inflation pressure fell to the lowest level since March. The percentage (NSA) of companies reporting higher prices fell for the third straight month.

· Over the last ten years there has been a 45% correlation between the ISM Composite Index and quarterly growth in real GDP.

ISM Manufacturing Survey	Oct	Sept	Y/Y	2001	2000	1999
Composite Index	48.5	49.5	39.5	43.9	51.6	54.6
Prices Paid Index	58.3	62.5	33.3	43.0	64.8	54.2

Construction Spending Strong Due to Gov't Building

November 1, 2002

By Tom Moeller

· The value of construction put in place rose more than expected in September due to a surge in public sector spending. Figures for August were revised down but were revised up for July.

· Residential building rose but the level of activity has been flat since February. Single family has been relatively strong but building on multi-unit structures has been down.

· Nonresidential building activity fell hard for the seventh month this year and was down 15.3% YTD. The decline was again paced by lower industrial and office building.

· Spending by governments rose sharply due to broad based increases amongst categories, notably a 10.3% gain in military facilities.

Construction Put-in-place	Sept	Aug	Y/Y	2001	2000	1999
Total	0.6%	-0.8%	0.1%	2.5%	7.3%	8.7%
Residential	0.7%	-0.8%	5.1%	3.3%	7.4%	11.2%
Nonresidential	-1.7%	-2.9%	-18.8%	-3.1%	7.1%	1.9%
Public	2.2%	0.7%	11.0%	7.4%	5.4%	10.6%

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