Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050930d.jpg" width="353">
The Chicago Purchasing Managers Business Barometer improved unexpectedly in September to 60.5, recovering most of the 14.3 point decline in August. Consensus expectations had been for a slight increase to 52.
During the last ten years there has been a 65% correlation between the level of Chicago PMI and the three month change in factory sector industrial production.
The new orders index rose 16.9 points after a 23.1 point drop in August but the production index gained back less than half of the 14.3 point August shortfall. Employment fell for the fifth month in the last six. During the last ten years there has been a 75% correlation between the level of the employment index and the three month change in factory sector employment.
The index of prices surged 13.4 points to the highest level since Januarys. During the last ten years there has been an 86% correlation between the Chicago price index and the three month change in the &quot;core&quot; intermediate goods PPI.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EF/@EF05/@EF05.HTM">Chicago Purchasing Managers Index, SA</a></th>
<th scope="col">Sept</th>
<th scope="col">Aug</th>
<th scope="col">&nbsp;Sept &#39;04</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
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<td class="firstcol">Business Barometer</td>
<td>60.5</td>
<td>49.2</td>
<td>64.3</td>
<td>62.9</td>
<td>54.6</td>
<td>52.8</td>
</tr>
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<td class="firstcol">&nbsp; New Orders</td>
<td>63.4</td>
<td>46.5</td>
<td>71.8</td>
<td>67.0</td>
<td>58.0</td>
<td>56.2</td>
</tr>
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<td class="firstcol">Prices Paid</td>
<td>76.3</td>
<td>62.9</td>
<td>86.9</td>
<td>80.1</td>
<td>55.8</td>
<td>56.9</td>
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The Chicago Purchasing Managers Business Barometer improved unexpectedly in September to 60.5, recovering most of the 14.3 point decline in August. Consensus expectations had been for a slight increase to 52. During the last ten years [...]

Chicago Purchasing Agents' Index Improved Unexpectedly

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The ADP National Employment Report indicated that nonfarm private sector payrolls rose 192,000 during April following a 208,000 March increase, revised from 184,000, and a 176,000 February gain, revised from 155,000. The 1.8% y/y gain compares with 1.9% increase last year but remained below 3.1% growth in 2022. A 193,000 rise in April ADP employment had been expected in the Action Economics Forecast Survey.

Small business hiring (less than 50 employees) increased 38,000 (1.4% y/y) last month after rising 7,000 in March. Employment at medium-sized firms (50-499,000 employees) rose 62,000 (2.4% y/y) after a 118,000 March increase. Large business hiring (500+ employees) rose 98,000 (1.6% y/y) during April following a 78,000 March rise.

Goods-producing employment rose 47,000 last month (1.6% y/y) after a 45,000 March rise. The number of construction sector jobs rose 35,000 (4.2% y/y) following a 34,000 March increase. Hiring in the manufacturing sector edged 9,000 higher (-0.4% y/y) last month after a 3,000 March gain. Natural resource & mining hiring rose 3,000 (5.0% y/y) after an 8,000 increase.

Service-producing jobs rose 145,000 (1.9% y/y) in April following a 163,000 March gain. Leisure & hospitality employment rose 56,000 (4.3% y/y) and education jobs gained 26,000 (2.7% y/y). The number of trade, transportation & utilities jobs increased 26,000 (0.9% y/y). Professional & business services employment rose 22,000 (0.6% y/y) but information employment fell 4,000 (-1.2% y/y).

Growth in median annual pay for "job stayers" eased to 5.0% y/y in April from 5.1% in March, remaining well below a September 2022 high of 7.8% y/y. Pay increases in manufacturing averaged 4.6% y/y while leisure & hospitality rose 5.8% y/y. Pay increases for “job changers” strengthened 9.3% y/y last month, up from a 7.3% y/y low in January, but remained below the 16.4% y/y peak in June 2022.

The ADP National Employment Report and Pay Insights data can be found in Haver's **USECON** database. Historical figures date back to January 2010 for private employment. Pay data date back to October 2020. The expectation figure is available in Haver's **AS1REPNA** database.

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- Job increase is nearly the strongest since July 2023.
- Service-sector and construction sector employment are strong.
- Pace of wage growth steadies y/y.

ADP Employment & Pay Growth Remain Firm in April

Kathleen Stephansen, CBE

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Mortgage applications fell 2.3% (-10.4% y/y) in the week ended April 26 after a 2.7% (-9.3% y/y) decline in the week ended April 19. Home purchase loans declined 1.7% (-14.5% y/y) following a decline of 1.0% (-14.7% y/y) in the prior week. Applications to refinance a loan declined 3.3% (-0.9% y/y) after a decline of 5.6% (+3.3% y/y) the prior week. These data are from the Mortgage Bankers Association's (MBA) Weekly Mortgage Applications Survey.

The effective interest rate on a 30-year fixed-rate loan rose 5bps to 7.48% in the week ended April 26, from 7.43% in the prior week. It compared to a high of 8.12% in mid-October of last year and a low of 6.87% in the fourth week of December. The rate on 15-year fixed-rate mortgages edged down 1bps to 6.90% in the latest week from 6.91% in the week prior. The rate on 30-year Jumbo loans declined 9bps to 7.53% last week from 7.62% in the week prior, while the rate on the 5-year ARM eased 8bps to 6.88% in the latest week from 6.96%. These latter rates remain below the 7.31% high in the last week of October but above the recent low of 5.93% in the last week of December.

The share of applications for refinancing an existing loan declined to 30.2% in the week ended April 26 from 30.8% in the prior week. That compared to a high of 39.7% in mid-December. The percentage of applications that were ARMs rose to 7.8% from 7.6%. The recent low of 5.4% was reached in early-January.

The average loan size fell 1.0% (-3.9% y/y) to $378,200 in the week ended April 26 from $381,900 in the prior week. The average size of a purchase loan declined 0.4% (-1.2% y/y) to $436,000 in the latest week from $437,900 in the prior week. The average loan size to refinance a mortgage fell 4.4% (-8.1% y/y) to $244,600 from $255,800 in the prior week.

The Mortgage Bankers Association Survey covers 75% of all U.S. retail residential mortgage applications and has been conducted weekly since 1990. Respondents include mortgage bankers, commercial banks and thrifts. The base period and value for all indexes is March 16, 1990=100. The figures for weekly mortgage applications and interest rates are available in Haver’s **SURVEYS** database.

- Mortgage applications fell for the second consecutive week.
- Purchase applications & refinancing applications both fell.
- The effective interest rate on a 30-year fixed-rate loan rose, while other rates edged down.

U.S. Mortgage Applications Decreased for a Second Week

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The Conference Board's Index of Consumer Confidence declined 5.9% (-6.5% y/y) to 97.0 during April following a 1.6% March drop, revised from a 0.1% slip. A reading of 104.0 had been expected in the Action Economics Forecast Survey. These declines came after a 5.5% February fall and a 2.7% January rise. The latest level remains well below the high of 137.9 in October 2018.

The Present Situations Index fell 2.7% (-5.9% y/y) this month to 142.9 following a 0.5% March slip and February’s 4.7% decline. The Expectations Index fell 10.3% (-7.4% y/y) to 66.4, the lowest point since July 2022, after falling 3.0% in March and 6.4% in February.

An improved 20.6% of respondents characterized current business conditions as good in April, remaining below its high of 23.4% in June. Labor market readings deteriorated this month. The jobs gap, representing the difference between respondents indicating that jobs are plentiful and those saying jobs are hard to get, fell to 25.3% from 29.5% in March. The reading remained below the March 2022 high of 47.1%. Calculated by Haver Analytics, this series has a 64% correlation with the unemployment rate over the last ten years. The jobs plentiful measure fell to 40.2% from 41.7% and remained below the March 2022 high of 56.7%. The jobs hard-to-get measure of 14.9% compared to 12.2% in March and a recent high of 15.6% in October. The jobs not-so-plentiful reading fell to 44.9% from 46.1% in March and remained well above its 30.5% low in September 2021.

In April, a greatly lessened 12.8% of consumers believed that business conditions in six months would improve and a higher percentage of 19.9% believed they would worsen. A lessened 11.7% of respondents felt there would be more jobs in six months, down from a high of 41.2% in April 2020. This remains below a recent high of 20.0% in December of 2022. A lessened 15.4% expected income to increase in six months, down from 18.3% in December and below a high of 19.6% in October of 2022.

The expected inflation rate in twelve months of 5.3% compared to 5.3% in March. It remained below the 7.9% high in June 2022, but above the 4.4% low in January 2020.

A steady 53.8% of respondents felt that interest rates would be higher in twelve months, up from a low of 42.1% in January. A diminished 20.5% thought they would be lower. A lessened 46.3% of respondents believed that stock prices would be higher in twelve months. Roughly 27% thought stock prices would be lower in twelve months versus a high of 44.7% in July of 2022. The share of respondents planning to buy a home within six months declined to 4.9% from 5.2% and remained below the October 2022 high of 7.4%. The percentage of respondents planning to buy a major appliance fell sharply m/m to 41.2% and remained below a high of 52.4% in October 2022.

The Consumer Confidence data are available in Haver's **CBDB** database. The total indexes, which are indexed to 1985=100, appear in **USECON**, and market expectations are in **AS1REPNA**.

**How Do Households Respond to Income Shocks?** from the Federal Reserve Bank of Minneapolis is available [here](https://www.minneapolisfed.org/article/2024/wealth-moves-dramatically-with-income-shocks-with-implications-for-policy-and-theory).

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- Decline moves to roughly two-year low.
- Present situations and expected conditions decline.
- Inflation expectations remain steady.

U.S. Consumer Confidence Diminishes Greatly in April

Sandy Batten

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The MNI Chicago Business Barometer fell for the fifth consecutive month, to 37.9 in April, its second lowest reading since the pandemic and well below the critical 50 level that separates expansion from contraction. The Action Economics Forecast Survey had looked for the index to increase to 45.0 in April.

Haver Analytics calculates an ISM-adjusted version of this index that gives equal weights to each of the five key component subindexes. The headline index includes the same subindexes but with varying weights. This ISM-adjusted index fell to 41.0 in April, equaling the lowest reading in 15 years, from 44.0 in March. This index has been pointing to weak activity for quite a while, having been above the critical 50 level in only one month since August 2022.

All the subindexes remained below the critical 50 level in April with four of the five declining from March. Only the inventories subindex increased, rising to 45.8 from 39.5 in March. The production subindex declined 6.9 points to 35.5, its lowest reading since November 2022, with 14% of respondents reporting an increase and 35% reporting a decrease. The new orders subindex fell 5.1 points to 37.9, its lowest reading since November 2022, with 40% of respondents reporting a decline in orders. After having risen in March, the employment index fell 8.5 points to 38.6 in April, its lowest reading since February 2023. Twenty-eight percent of respondents reported a decline in employment while only 9% reported an increase. And the supplier deliveries subindex slipped 0.8 point to 47.3 in April, its third consecutive month below 50, indicating that delivery times are shortening.

Input prices continued to rise in April with the increase picking up pace. The index increased 6.7 points to 69.3, its highest reading since August 2023. Forty-seven percent of respondents reported paying higher prices in April vs. 35% in March while only 3% reported paying lower prices in April.

The Chicago Business Barometer is considered to be a leading indicator of the U.S. economy. A reading above 50 indicates expansion while one below 50 suggests contraction. Summary data are contained in Haver’s **USECON** database with detail including the ISM-style index in the **SURVEYS** database. The expectations figure from the Action Economics Forecast Survey is in the **AS1REPNA** database.

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- Index falls to the second lowest level since the pandemic and moved deeper into contraction territory.
- All component indexes remained below 50.
- The prices paid index rose to highest level since August 2023.

Chicago Business Barometer Unexpectedly Falls Again in April

Chicago Purchasing Managers Index, SA	Sept	Aug	Sept '04	2004	2003	2002
Business Barometer	60.5	49.2	64.3	62.9	54.6	52.8
New Orders	63.4	46.5	71.8	67.0	58.0	56.2
Prices Paid	76.3	62.9	86.9	80.1	55.8	56.9