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Sectoral shift in US job openings

Robert Brusca

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Norwegian industrial production surged in June, rising 7.6% month-to-month after falling by 0.9% month-to-month in May. The gain was lifted by utilities output and by a screamingly strong increase in mining & quarrying output. Output in manufacturing fell by 1%, in sharp contrast.

**A bifurcated economy**: Sequentially overall output is rising by 8.2% year-over-year and at a 32% annual rate over the last three months. Both utilities & mining are showing output up at a fantastically strong pace over the most recent three months, driving overall industrial production up at an extremely strong pace. However, for the same three-month period, manufacturing output has been weak, falling at a 3.7% annual rate while rising only 0.7% over 12 months.

**Moderate to weak manufacturing**: In June, manufacturing output fell by 1%, with consumer goods output falling by 1.5%, intermediate goods output rising by 3.6%, and capital goods output falling by 1.5%. Sequentially, the main manufacturing sectors are all showing tempered rates of increases. The lone exception is intermediate goods where there is an acceleration underway, with output rising 1.3% over 12 months, at a 4% annual rate over six months, and at a 6.5% annual rate over three months. Capital goods output is weak, falling at an 8.6% annual rate over three months. Consumer goods output is falling at a 0.4% annual rate over three months, led by a sharp decline in consumer durables, which are falling at a 29% annual rate over three months. The Norwegian economy is undergoing substantial crosscurrents in manufacturing. Manufacturing is feeling some amount of duress while a boom is going on in utilities and mining & quarrying.

Over this period, inflation in Norway has been extremely well tempered, with the HICP for June falling by 0.4% and the core HICP falling by 0.2%. Headline inflation is decelerating from a 2.6% pace over 12 months to 2.2% over six months, and it is falling at a 0.8% annual rate over three months. Core inflation is even well-behaved, rising 2.8% at an annual rate over 12 months and six months, and then rising at only a 1.6% annual rate over three months. Despite the strong growth in Norwegian output, there's no sign of overheating since the manufacturing sector is weak and the strength is lodged in mining & quarrying and utilities. The inflation environment remains tempered. Norwegian manufacturing output shows that all sectors have recovered beyond their 2020 pre-COVID levels except consumer durables. Durables output is still 12% below the output levels that had prevailed in January 2020; the rest of the sectors are showing, for the most part, reasonable increases in output over that period of time, ranging from moderate to quite strong—strong in the case of utilities and mining. Capital goods output is also up 21% from its January 2020 level. The Norwegian economy is experiencing some mixed patterns.

In the quarter to date, which is now the complete second quarter, overall output grew by 6.4% at an annual rate, with manufacturing growing at a modest 2.6% annual rate. Consumer goods output grew at a 2.6% annual rate, intermediate goods output grew at a 5.4% annual rate, and capital goods output grew at a skinny 0.1% annual rate. In the quarter, inflation rose at a 0.9% pace, with the core HICP up at a 2.8% annual rate. Obviously, as this quarter was ending, conditions have progressed differently as we're now looking at extreme strength in overall industrial production, declines in manufacturing, and moderation of inflation. These trends will have to be watched closely as things are changing in Norway.

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Norway

Norway’s Industrial Production Grows Strongly, but Not in Manufacturing

Michael J. Moran

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The manufacturing index published by the Institute for Supply Management (ISM) fell 1.0 index point in August, but the reading of 54.6 still suggested a solid performance in the manufacturing sector. (The index can range from 0 to 100, with 50 representing the critical point separating expansion from contraction.) August marked the eighth consecutive month with a reading above 50, and the past two observations were the best of the year thus far (chart, above left). 

The performance of the index this year represents a marked improvement from that in the prior three years. Indeed, the headline index was at 50 or above in only two months during the 2023-25 time span (and barely so at that: 50.5 and 50.0 in January and February 2025).

The new orders component accounted for most of the softening in the headline measure in August, falling 3.0 points to 53.7 (chart, above right). Still, the new orders index remained within the range of  observations so far this year, and the average reading of 55.46 in the past eight months easily exceeds the average of 47.69 in the prior three years. The slowdown in new orders led to a similar-sized drop in the backlog of bookings, as this index fell 3.2 points to 51.8 (this item is not seasonally adjusted). Like new orders, the backlog index remained within the range of observations this year and represented a far better performance than that in the prior three years.

The slowdown in orders had little effect on the pace of production, as this component fell only marginally (down 0.2 point to 58.3) and remained comfortably above results in the first six months of the year (which averaged of 54.07). The employment component registered a slightly larger response, dropping 1.6 points to 51.2. Despite the easing in the employment index, the reading above 50 was encouraging, as this measure was below the expansion/contraction threshold in the first six months of the year. In fact, July and August marked the first above-50 readings since September 2023.

The prices index, which is not a component of the headline measure and is not seasonally adjusted, was unchanged at 71.7. A reading far above the critical point of 50 might seem striking, but this measure often runs high; readings above 80 are not uncommon. In fact, the recent high was 84.6 in April and the index touched 92.1 during the inflationary burst in 2021-22. Much of the pressure, no doubt, reflects the jump in energy prices this year and supply chain disruptions stemming from the conflict in the Middle East. Problems with supply chains were evident in the supplier delivery index, which rose 0.4 point to 59.3 (higher values in this measure signal slower delivery times). The latest observation remained below the recent highs of 60.6 in April and May, but those observations were above readings in other recent years, signaling difficulty in securing supplies (charts, below).

The ISM figures are based on responses from over 400 purchasing and supply executives from 18 industries, which are weighted according to each industry’s contribution to GDP. These data are diffusion indexes where a reading above 50 indicates expansion; below 50 indicates contraction. The ISM Manufacturing PMI is a composite index based on the diffusion indexes of five of the indexes (seasonally adjusted) with equal weights: New Orders, Production, Employment, Supplier Deliveries, and Inventories. The figures from the Institute for Supply Management can be found in Haver’s **USECON** database; further detail is found in the **SURVEYS** database. The expectations number is available in Haver’s **AS1REPNA** database.

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- New orders accounted for most of the easing in the headline index.
- The production index showed a small decline; the employment index posted a moderate drop.
- The prices index was unchanged at an elevated level, but still below recent peaks.

ISM Manufacturing: A Dip in August, but still Signaling Expansion

Winnie Tapasanun

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The value of construction put in place unexpectedly fell 0.5% m/m in July to a seasonally adjusted annual rate of $2,157.6 billion following no change in June (-0.1% initially) and May (unrevised), according to data from the U.S. Census Bureau. The July reading was the first m/m fall since April (-1.4%). A flat reading for July had been expected in the Action Economics Forecast Survey. The year-on-year rate was -3.8% in July, the 12th straight y/y decline and the deepest in three months, after -3.1% in June (+0.1% in July 2025), remaining well below a high of 13.1% in November 2023 and a peak of 18.5% in April 2022.

Private construction slid 0.5% (-5.5% y/y) to $1,614.2 billion in July, the fourth consecutive m/m slide and the sixth in seven months, after a 0.1% downtick in June (unrevised). Residential private construction fell 1.3% (-7.3% y/y) to $859.0 billion in July, down for the fourth month running, after a downwardly revised 0.5% decline in June (-0.3% initially). Single-family building dropped 3.2% (-6.5% y/y), the third successive m/m fall, after a 0.1% June downtick; it was 46.0% of the residential private construction. Home improvement building, however, rebounded 0.3% (-10.2% y/y), the first m/m gain since March, following a 0.8% June decline; it was 40.6% of the residential private construction. Multi-family building rose 0.2% (-0.9% y/y), the first m/m rise in four months, after a 0.7% June decrease; it was 13.4% of the residential private construction.

Nonresidential private construction grew 0.4% (-3.3% y/y) to $755.2 billion in July, the third consecutive m/m increase, after an upwardly revised 0.4% rise in June (+0.1% initially). The July gain reflected m/m increases in nonresidential private construction categories for office (+3.3%; +21.3% y/y), communication (+0.6%; +3.3% y/y), utilities (+0.5%; +6.5% y/y), lodging (+0.3%; -9.9% y/y), and transportation (+0.3%; -1.6% y/y). Significantly, within the office category, private construction for data center jumped 6.2% (57.2% y/y) in July, the eighth straight m/m gain, on top of a 7.7% advance in June. To the downside, the following nonresidential private construction categories fell m/m in July, including educational (-1.0%; -5.0% y/y), religious (-1.0%; +19.2% y/y), manufacturing (-0.8%; -21.7% y/y), amusement & recreation (-0.6%; +3.4% y/y), health care (-0.4%; -5.3% y/y), and commercial (-0.2%; -4.7% y/y).

The value of public construction was down 0.2% (+1.7% y/y) to $543.4 billion in July, the first m/m decrease since December, after an upwardly revised 0.1% increase in June (0.0% initially), reflecting declines of 0.4% (-5.2% y/y) in residential public construction and 0.2% (+1.9% y/y) in nonresidential public construction. Several nonresidential public construction categories fell m/m in July, led by conservation & development (-1.4%; +26.9% y/y), followed by transportation (-0.8%; +3.3% y/y), health care (-0.7%; +7.9% y/y), educational (-0.2%; +0.4% y/y), office (-0.2%; -7.9% y/y), and amusement & recreation (-0.1%; +2.5% y/y). Notably, spending on highways & streets, which accounted for 27.7% of public construction spending, declined 0.2% (+4.5% y/y) following a 0.1% June easing and two successive m/m gains. In contrast, the following public constructions rose m/m in July, led by commercial (+2.5%; -8.7% y/y), followed by water supply (+0.5%; +1.1% y/y), public safety (+0.4%; -8.4% y/y), sewage & waste disposal (+0.4%; -1.1% y/y), and utilities (+0.1%; -3.7% y/y).

The construction figures can be found in Haver's **USECON** database. The expectations figure is from the Action Economics Forecast Survey in **AS1REPNA**.

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- Headline -0.5% m/m in July, first decrease since Apr.; -3.8% y/y, 12th straight y/y drop.
- Residential private construction -1.3% m/m, driven by a 3.2% fall in single-family building.
- Nonresidential private construction +0.4% m/m, third consecutive monthly gain, boosted by data center office construction.
- Public construction -0.2% m/m, led by a 0.4% decline in residential public building.

U.S. Construction Spending Declines in July, Led by Residential Weakness

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There's a good deal of concern about the development of inflation globally and across individual areas where central banks are making decisions on what to do with policy. In the euro area in August, the headline rate rose by 0.4%, with the core rising by just 0.2%. The three-month inflation rate for headline HICP inflation is 3.3% annualized while the pace for the core is only 2.4% annualized. That's excessive relative to the 2% target but not a particularly strong acceleration for inflation. It's not the kind of number that says to the ECB that it has to raise rates right now.

Sequentially, the headline rate goes from 3.3% to 4.3% to 3.3% over 12 months, six months, and three months on an annualized basis. These are all too high and too uncomfortable, topping 3% and in one case topping 4%. These are the kinds of numbers that require some kind of remedy. However, core inflation posts a very different set of numbers that go from 2.4% to 2.5% to 2.4% over 12 months, six months, and three months, again all annualized. These numbers show inflation skimming too high over the target but not even half a percentage point too high. It’s the kind of thing that a central bank might be willing to continue to tolerate for a while. There's nothing about a 2% target that says 2.4% is an outrageous miss and requires a monetary policy remedy. On the other hand, the fact that that's happening and the headline rate is cruising at a much higher pace over the top of the target may be something that will cause the central bank to say, well, core inflation is too high and I'm also concerned that headline inflation is going to pull it even higher, so maybe it is time to act. These sorts of considerations will keep the market a little bit off balance and wondering what the ECB is going to do.

The Big Four economies in the monetary union all have year-over-year inflation rates for the headline that are excessive compared to the target set for the entire community. France has the lowest 12-month headline pace at 2.7%. Spain has the highest at 4.5%. Over three months, both France and Italy run headline inflation near a pace of 1.5%, while German inflation runs hot at 3.7% and Spanish inflation sizzles at a 7.0% pace.

Once again, however, core is a better-behaved series, at a 12-month pace of 2.9% for Spain, 1.4% for Italy, and with German ex-energy inflation up at a 12-month pace of 2.2%. Over three months, the ex-energy or core paces run at 0.4% for Italy, 2.0% for Germany, and 2.6% for Spain.

**Bottom line**
European inflation is too high. The inflation rate in the community appears to be irregular, just judging by the Big Four countries and all their variation. Core inflation is mostly contained, but the headline is not. Still, core inflation is running mildly hot. It is decision time for the ECB. The safe course would seem to hike rates again to be sure. But nothing here is clear. Stay tuned.

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Europe

EMU Inflation Is Too High but Not Jet-setting

Tian Yong Woon

In this week’s Letter, we examine why the continuing oil shock is placing renewed pressure on several Asian currencies—and why the mechanisms differ significantly across economies. The US–Iran conflict shows no meaningful sign of abating, with further strikes exchanged earlier this week. Meanwhile, shipping through the Strait of Hormuz remains severely disrupted (chart 1), effectively putting a floor beneath crude prices. The resulting increase in energy costs is sustaining inflation risks and worsening the terms of trade for oil-importing economies. This has contributed to the weakness of both the yen and the rupee this year, although energy dependence is only part of the explanation (chart 2). Unfavourable interest-rate differentials remain the principal constraint on the yen, while portfolio flows have amplified the rupee’s decline. Pressure on the Indonesian rupiah, by contrast, owes more to concerns about domestic politics and fiscal credibility. Although broad dollar strength is often blamed for the region’s currency weakness, our trade-weighted nominal dollar index has moved largely sideways.

India’s vulnerability to the oil shock is particularly pronounced. Domestic crude production covers only a small share of consumption, leaving the economy highly exposed to movements in global prices (chart 3). South Korea, Japan and Taiwan face similarly heavy import dependence, while the headline figures for China probably understate its underlying exposure. For India, however, a deteriorating energy bill has coincided with financial-account pressure. Portfolio investors withdrew capital for an extended period after conflict erupted in late February (chart 4). These outflows subsequently reversed after the RBI introduced incentives in June to attract dollar deposits—measures that proved effective enough to be withdrawn ahead of schedule. Nevertheless, the rupee has recovered little of its earlier decline. Indonesia presents a different risk profile. Investor unease centres less on oil-import dependence than on the direction of fiscal policy and the broader political environment. Foreign ownership of rupiah-denominated government bonds has fallen below 13%, even as the outstanding stock of debt has continued to expand (chart 5). President Prabowo’s USD 230bn budget for 2027 targets a smaller deficit (chart 6), but it remains unclear whether this will be sufficient to restore investor confidence.

**The oil situation**
There is little sign of a substantive let-up in the US-Iran situation. Both sides exchanged strikes earlier this week, the first such exchange in about a month. Absent the strikes, the underlying economic reality remains broadly unchanged. Shipping traffic through the Strait of Hormuz has remained weak (chart 1), leaving an implicit floor under crude oil prices. Upside inflation risks stemming from energy therefore remain alive, and with them the implications for monetary policy. Beyond inflation, this protracted bout of elevated oil prices continues to add to the hefty bills faced by net energy importers, in the region and well beyond it.

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**Currencies**
Among other drivers, the exposure of Japan and India to oil imports has weighed on their currencies this year. The surge in oil prices has raised their energy bills sharply. Other factors are also at play, with rate differentials weighing on the yen and capital flows compounding rupee weakness. The latter is a topic we revisit later in this Letter. Other Asian currencies have also shown significant weakness this year, though energy is not the main driver of their depreciation. The Indonesian rupiah has fallen sharply (chart 2), largely on fiscal concerns as the government pursues a highly expansionary fiscal policy. That has raised worries about fiscal sustainability, among other woes, which we also return to later. Dollar strength has been frequently cited as an additional driver of this Asian currency weakness. Yet the broadly sideways pattern of our trade-weighted nominal dollar index suggests otherwise.

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**India**
Focusing more on India, chart 3 shows how dependent the country is on imported petroleum for its consumption needs. Compared with oil producers in Asia such as Malaysia, India's production is minuscule as a proportion of its consumption. That implies an extremely high dependence on imported sources. It leaves India almost wholly exposed to fluctuations in global oil prices, apart from supply supplements drawn from oil reserves. Several other Asian economies fall into the same bucket, namely South Korea, Japan and Taiwan. Their production is slightly higher relative to consumption for petroleum and other liquids, but still very low. For other Asian economies such as China, the statistic does not tell the whole story, since much of China's refined production also relies on imported crude.

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India's hefty imported energy bill aside, another drag on the rupee came from persistent capital outflows earlier in the year. These immediately followed the initial outbreak of the US-Iran conflict in late February. As shown in chart 4, India faced protracted outflows from foreign institutional and portfolio investors during that early period. Those outflows were subsequently reversed following concerted measures by the Reserve Bank of India (RBI) to spur inflows. Specifically, the central bank introduced a raft of measures in June to boost dollar inflows. These allowed banks to offer attractive rates on FX deposits, with the RBI subsidising hedging costs. They have apparently been so successful in attracting inflows that the central bank has decided to shut them down early. That said, the rupee has not yet regained the ground it lost this year, despite the surge in inflows.

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**Indonesia**
Moving to Indonesia, the driver landscape behind the year's persistent rupiah weakness looks rather different. It is characterised more by investor perceptions of the country's political and fiscal state than by the energy-driven narrative facing India. Chart 5 shows one symptom of this loss of standing among foreign investors. The share of non-resident ownership of tradable rupiah government bonds has extended its mild decline through the year, falling to just under 13%. That decline reflects broadly unchanged non-resident holdings against a total stock of government securities that has continued to grow. Driving that expansion in the debt stock, and possibly further expansion ahead, are the fiscal-intensive measures of the current government, including its Free Nutritious Meals programme. Other measures, notably energy subsidies, have also bitten into the fiscal spend. All in, these have raised concerns about the country's future fiscal position, weighing on the rupiah in turn.

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On that note, Indonesia's President Prabowo has unveiled a USD 230bn "expansive" budget for 2027. This came earlier last month, perhaps in an attempt to allay the above-mentioned investor concerns about fiscal sustainability. The fiscal deficit is set at 2.4% of GDP, the narrowest in three years. It remains to be seen whether investor concerns will be substantially allayed by the news. Nor is it clear whether the rupiah could recover meaningfully on the back of these announced measures. Also still lacking is the full scale of the ongoing Free Nutritious Meals programme, which has already been beset by issues and scaled back. A further point to watch is whether expectations of Indonesia's fiscal trajectory shift substantially. That applies to investors and to organisations such as the IMF, in its upcoming fiscal outlook publication.

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Asia

Economic Letter from Asia: Lingering Unease

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Growth among the eleven reporting EMU countries continues to be mixed. Growth in EMU is stable enough but modest at 0.5% to 1.2% over four quarters when assessed over the last four quarters. Quarterly results are more volatile, of course. Median annual growth is 1.3% to 2.1%.

**Mixed Result on Growth**
In Q2, five of these eleven countries showed lower growth based on annualized quarter changes, while three showed weaker growth quarter-to-quarter based on four-quarter rates of growth. Belgium, Denmark, and France were weaker based on four-quarter growth rates. Growth in Spain was unchanged at 2.7%. Danish growth slowed to 4.6% from 6.1%.

**Assessing Rates of Growth**
The change in growth rate assessment is useful but never quite definitive, as you can see from the still-strong, although slower, Danish pace of growth. 4.6% is less than 6.1%, but it is still quite strong, hardly a problem. Similarly, Ireland shows better growth, but that is an ‘improvement’ to -5.6% from -13.2%, an improvement and a sharp one, but still chillingly weak. Of course, Ireland, with a preponderance of multinational corporations headquartered there, shows some accounting fluctuations that are not that representative of a real macroeconomic impact on the Irish economy but can have a big impact on reported GDP. Ireland logs the only negative growth rate in the monetary union over four quarters, with Belgium the next weakest at 0.5%, and Germany and Italy at 1%.

**The Big Four Economies**
The four largest EMU countries with GDP pooled have run an annual growth that has been quite steady around the 1% mark (0.9% to 1.1%). The rest of the EMU has had a more volatile growth rate. Pooling the remaining countries’ GDP performance yields growth rates over fourth quarters ranging from -0.9% to +2.1% over the last four quarters.

**Within EMU**
The table chronicles growth rates for 11 EMU members plus the United Kingdom, the United States, and Japan. Among these 14 countries, year-over-year growth rates on data back to 1998 show only five countries with GDP growth rates ranking over four quarters above 50%; rankings above 50% put them above their median for that period. Those five countries are Spain, Finland, Italy, Portugal, and Denmark. While Spain and Italy have rankings above their medians for the period, German growth ranks at only 45.7%, and French growth is quite weak at a 17.4 percentile standing, marking a split in performance among the Big Four economies.

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German GDP trends higher, U.K. waffles, and French trends continue to deflate.

**Other Considerations**
Growth in the EMU is uneven across the community, and inflation has begun to rise with Germany recently showing an adverse uptick to 2.9% from 2.8%. Conditions in the Middle East regarding the Strait of Hormuz are impacting growth, inflation, and the outlook; conditions are still touch and go. While it is still August, colder weather is coming and LNG supplies are going to be very important for winter in Europe. Weather has been a factor with drought conditions again sapping many important European rivers of their lifeblood flow, causing ships and barges to either run with lighter loads or not at all. In a number of cases, European nuclear facilities were run at a slower pace; some were shut completely because river flows were so low and river temperatures were too high to permit cooling at full capacity.

Between nature and geopolitics, conditions remain uneven and that extends to the outlook. International relations are strained as well, and Russia has been creating mischief and trying to unnerve NATO members with threats of broadening the war in Ukraine. All in all, it is a difficult picture and one of considerable instability on offer. The shake-out in the Middle East will be important for inflation and the evolution of energy prices and more. The outlook is in flux.

EMU GDP in Member Countries: Some Minor Revisions

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The U.S. international trade deficit in goods unexpectedly expanded to $118.81 billion in July, the biggest since March 2025, from $101.41 billion in June and $105.33 billion in May, according to the advance estimate from the U.S. Census Bureau. The July reading marked the second widening in the goods trade deficit in three months, exceeding a $101.28 billion shortfall in July 2025. A deficit of $99.5 billion for July had been expected by the Action Economics Forecast Survey. The deficit reached a low of $61.44 billion in October 2025 (the smallest since February 2020) and a record high of $158.73 billion in March 2025.

In Q2'26, the goods trade deficit widened to $288.96 billion after narrowing to $245.88 billion in Q1'26; the monthly deficit averaged $96.32 billion in Q2'26, the largest since Q1'25, up from $81.96 billion in Q1'26. In real terms, the goods trade deficit subtracted 1.00%-point from real GDP growth in Q2'26 after having subtracted 0.41%-point in Q1'26.

Total goods exports fell 2.9% m/m (+11.7% y/y) to $199.37 billion in July, the third consecutive monthly fall and the lowest level since January, after a 1.8% decline to $205.41 billion in June. A record high of $220.11 billion was reached in April. However, exports were up 22.6% from a June 2023 low. The m/m decline in exports in July was led by an 11.2% drop (+18.4% y/y) in industrial supplies & materials, followed by decreases of 3.5% (+4.7% y/y) in other goods, 1.4% (+10.1% y/y) in foods, feeds & beverages, and 0.7% (+1.0% y/y) in automotive vehicles & parts. To the upside, exports of nonfood consumer goods excluding autos (+8.1%; +0.2% y/y) and capital goods excluding autos (+2.9%; +13.1% y/y) rose m/m in July.

Total goods imports rebounded 3.7% m/m (13.7% y/y) to $318.18 billion in July following a 2.4% decline to $306.81 billion in June, marking the fifth monthly increase in six months and the highest level since March 2025’s record high of $340.11 billion. Imports were up 26.9% from a March 2023 low. The m/m rise in imports in July was led by an 11.3% rebound (46.9% y/y) in capital goods excluding autos, with a marginal 0.1% increase (-1.7% y/y) in nonfood consumer goods excluding autos. In contrast, imports of industrial supplies & materials (-3.9%; -11.7% y/y), automotive vehicles & parts (-1.6%; +3.9% y/y), foods, feeds & beverages (-0.9%; -4.2% y/y), and other goods (-0.4%; +10.0% y/y) fell m/m for the second successive month in July.

The advance international trade data can be found in Haver's **USECON** database. The expectation figure is from the Action Economics Forecast Survey, which is in **AS1REPNA**.

- Deficit: $118.8 bil. in July, up $17.4 bil. (+17.2%) from June’s $101.4 bil.
- Exports -2.9%, third straight m/m decline to a six-month low, driven by an 11.2% drop in industrial supplies & materials exports.
- Imports +3.7%, fifth rise in six mths. to highest level since Mar. ’25, led by an 11.3% rebound in nonauto capital goods imports.

U.S. Goods Trade Deficit Balloons in July, Largest Since March ’25

Kathleen Stephansen, CBE

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Initial claims for unemployment insurance declined 4,000 to 203,000 in the week ending August 22, from 207,000 in the week ending August 15, revised marginally from 206,000. The four-week average was 205,500 in the August 22 week, up from 204,250 in the August 15 week. Claims remain largely range-bound at historically low levels between 200,000 and 230,000. The Action Economics/Haver Analytics Survey looked for 208,000 claims to have been filed.

The total number of unemployment insurance beneficiaries—also known as “continuing claims”— decreased by 18,000 to 1.778 million in the week ending August 15, from 1.796 million in the week ending August 8, revised from 1.799 million. The four-week moving average rose to 1.789 million in the August 15 week up from 1.788 million in the August 8 week. The insured unemployment rate remained unchanged at 1.2% in the week of August 15. 

The insured unemployment rate varies greatly across individual states and territories. In the week ending August 8, the highest unemployment rates were in Oregon (2.01%), Minnesota (2.06%), Massachusetts (2.11%), Rhode Island (2.20%), Puerto Rico (2.57%), and New Jersey (2.60%). The lowest rates were in South Dakota (0.26%), Florida (0.36%), Alabama (0.39%), Louisiana and North Carolina (both 0.40%), Arkansas (0.43%), and North Dakota (0.49%). Rates in other notable states include California (1.89%), New York and Pennsylvania (both 1.71%), Illinois (1.54%), and Texas (1.05%). These state data are not seasonally adjusted.

Data on weekly unemployment claims are from the Department of Labor itself, not the Bureau of Labor Statistics. They begin in 1967 and are contained in Haver’s **WEEKLY** database and summarized monthly in **USECON**. Data for individual states are in **REGIONW** back to December 1986.

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- New claims declined by 4,000 to 203,000 in the week of August 22.
- Continuing claims declined by 18,000 to 1.778 million in the week ending August 15.
- The insured unemployment rate was unchanged at 1.2% in the week of August 15.

U.S. Initial Unemployment Claims Edge Down in the Week of August 22

Andrew Cates

**The survey points towards higher rates**
The latest Blue Chip Financial Forecasts survey suggests that the shift towards tighter policy extends beyond the immediate market reaction. Over the next twelve months, panellists anticipate the largest rate increase in Japan, at slightly more than 40 basis points, followed by Canada at just over 20 basis points and the euro area at around 15. Much smaller increases are expected in the US and Australia, while the UK is the only economy in which rates are forecast to fall.

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**Shipping stress returns**
The next chart helps explain why the expected policy path has lately become less benign. The Baltic Exchange Dry Index, a market measure of the cost of moving bulk commodities, has climbed sharply in recent months. At the same time, the Federal Reserve Bank of New York's Global Supply Chain Pressure Index has moved decisively above zero after spending much of the previous two years at or below its historical norm. Neither measure maps mechanically into producer prices, but together they signal renewed pressure on freight, capacity and traded inputs. Such pressure tends to reach PPI inflation with a lag, suggesting that part of the disinflation delivered by normalising supply chains is now being unwound.

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**More is still in the pipeline**
The latest manufacturing PMI surveys for August tell a similar story. Global manufacturing output prices rose sharply in late 2025 and, although they have eased from their recent peak, remain comfortably above the neutral level of 50. Suppliers' delivery times, meanwhile, have dropped below 50, indicating that deliveries are slowing again. The combination of longer delivery times and elevated output prices is a familiar warning that supply friction is feeding into factory-gate inflation. With oil back above $90/bbl and a new round of tariffs raising the cost of traded goods, the pressures entering the pipeline are, for the moment, being renewed about as quickly as they drain.

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**A newer squeeze, where workers are needed**
The aggregate US labour-market picture conceals a sharp sectoral rotation. Over the past three months, job-opening rates have risen most clearly in manufacturing and construction, with smaller increases in trade and government, while they have fallen in education, leisure and, most dramatically, professional services. That divergence is awkward for policy. Demand is softening in parts of the white-collar and service economy even as industries that depend heavily on foreign-born labour continue to search for workers. Tighter immigration enforcement can therefore lift wage and operating costs in bottleneck sectors while aggregate hiring and growth weaken at the same time.

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**The demand side has already yielded**
In contrast to these supply-side pressures, demand-driven inflation has been more contained. Core inflation in many G10 economies is now clustered relatively close to target, ranging from just over 0.5% in Switzerland to 2.6% in the United Kingdom. Rates in the United States and euro area remain above target but have lately been easing, while those in Canada, Japan, Sweden and Switzerland are below 2%, despite some recent firming. Wage growth has also moderated as labour markets have cooled.

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**And the cost of capital has turned**
A final theme this week lengthens the horizon. The real yield on advanced-economy government debt - the cost of capital once inflation is stripped out - fell for four decades, from the peaks of the Volcker era to the lows of the 2010s and the negative rates of the 2022 inflation, and has since turned back up to its highest since before the financial crisis. Part of the rise is cyclical; part reflects a more lasting increase in the demand for capital, as artificial intelligence, the energy transition, rearmament and widening deficits draw on a pool of saving that is no longer expanding to meet them. Whether rates settle back towards their former lows, as much of the financial system still assumes, is on this account increasingly open to question.

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Central banks dominated the financial-market narrative last week. In his first Jackson Hole address as Federal Reserve chairman, Kevin Warsh indicated that the next move in US interest rates was more likely to be an increase than a cut. The ECB, having raised rates in June, is also expected to tighten further. Government bond yields consequently remained under upward pressure across the advanced economies, with long-term yields close to their highest levels in two decades. Rising real yields weighed on equities and gold, while oil climbed back above $90 following US strikes on Iranian launchers near the Strait of Hormuz. The latest Blue Chip Financial Forecasts survey places this shift in a broader context. Panellists expect policy rates to rise over the next twelve months in Japan, Canada and the euro area, with more modest increases anticipated in the United States and Australia; the United Kingdom is the only economy in which rates are expected to fall (chart 1). At the same time, shipping costs and global supply-chain pressures are rising again (chart 2), with renewed inflationary pressure emerging at the factory gate (chart 3). US labour demand is also shifting towards sectors where supply constraints appear most pronounced (chart 4). Yet core inflation across the G10 is now relatively close to target (chart 5). The final chart places these developments within a longer-term shift: after declining for four decades, the real cost of capital has moved decisively higher (chart 6).

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Charts of the Week: The Turn Towards Tightening

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U.S. Trade Deficit Widens in July to Highest Level Since March ’25

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