Tom Moeller

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<p></p><div align="left"><img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080131i.jpg" width="353">
<p>The Conference Board indicated that its index of help-wanted advertising did rise slightly last month but only to 22 from 21 in November. The figures are at the record lows for the series which dates back to the 1950s.</p>
<p>The Conference Board surveys help-wanted advertising volume in 51 major newspapers across the country every month.</p>
<p>During the last ten years there has been a 57% correlation between the level of help-wanted advertising and the three month change in non-farm payrolls.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080131j.jpg" width="353"></p>
<p>The proportion of labor markets with rising want-ads improved to 59% from a low of 12% in August.</p></div>
<p>The regions of the country where the index of help-wanted advertising improved m/m were the West South Central, the West North Central, the East North Central, and the Middle Atlantic. States in each of the other regions of the country showed flat or declining ad volume.</p>
<p>The latest help wanted report from the Conference Board is available <a href="http://www.conference-board.org/economics/helpwanted.cfm">here</a>.</p><div align="left">  </div>
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/CBDB/@C3/@C3.HTM"><b>Conference Board</b></a></th>
<th scope="col"><b><u>December</u></b></th>
<th scope="col"><b><u>November</u></b></th>
<th scope="col"><b><u>December 2006</u></b></th>
<th scope="col"><b>2007</b></th>
<th scope="col"><b>2006</b></th>
<th scope="col"><b>2005</b></th>
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<td class="firstcol">National Help Wanted Index</td>
<td>22</td>
<td>21</td>
<td>33</td>
<td>26</td>
<td>33</td>
<td>39</td>
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The Conference Board indicated that its index of help-wanted advertising did rise slightly last month but only to 22 from 21 in November. The figures are at the record lows for the series which dates back to the 1950s. The Conference [...]

U.S. Help-Wanted Advertising Remained Low

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Andrew Cates

**Global growth momentum**
Global economic activity has shown some signs of improvement over the past three months according to the latest raft of flash PMI surveys. Comparing the latest composite PMI for April with its level from January reveals that most major economies are registering both positive growth (i.e. a PMI above 50) and a quickening pace of growth compared with three months ago (i.e. an April PMI that is higher than where it stood in January). The notable exception to this is the United States, where the pace of expansion that is being signaled by these surveys has slowed. Compared with the major advanced economies, India also stands out as registering a relatively rapid pace of economic growth as well (see chart 1).

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**Copper prices**
Copper is closely monitored as a key commodity due to its extensive use in the industrial sector and its growing importance, in particular, in renewable energy and electric vehicle production. That copper prices have risen strongly over the past few months will therefore likely be viewed as a positive signal about the underlying health of the world economy (see chart 2). To be sure, supply disruptions have also contributed to the rise in prices in recent weeks, but it is surely no coincidence that other key barometers of growth (e.g. PMI surveys) have been signaling an improving global economic environment at the same time.

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**Semiconductor trade**
Copper is a component used in producing semiconductors, particularly in the manufacture of integrated circuits. And that’s surely a key reason why the recent relative buoyancy of South Korea’s semiconductor exports, evidenced in chart 3 below, also aligns with the messages from charts 1 and 2 above. Haver’s calculations specifically suggest that South Korea’s semiconductor exports climbed by around 43% y/y in the first 20 working days of April on a seasonally adjusted and working day adjusted basis. That’s down a little from around 47%y/y in March but nonetheless still a punchy growth rate compared with longer-term trends.

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**Monetary policy transmission**
Calibrating monetary policy in recent years has been particularly challenging thanks to significant supply-side shocks to the global economy and considerable uncertainty regarding the demand-side implications. Whether or not monetary policy settings are now sufficiently restrictive in the world’s major economies is now being actively debated not least given recent indications that inflationary pressures have been building again. One point of contention is the seemingly blunt impact of monetary policy in both exacerbating, and then mitigating, inflation. This effect can be indirectly observed across advanced economies through the apparent breakdown of the Phillips curve relationship, which traditionally links unemployment and inflation. Over the past 20 years, as shown in Chart 4 below, this relationship typically yielded a negative correlation, in line with textbook theory. However, the post-COVID period has witnessed a significant divergence from this, a substantial disinflationary process has unfolded even as labor markets have remained very tight over the past two years.

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**US fiscal policy support**
An analysis of financial balances can be insightful in understanding these dynamics. Chart 5 below illustrates those balances for the three sectors that constitute the US economy: the private sector, the government sector, and the foreign sector. Each sector's financial balance is determined by subtracting its total expenditure from its income. A financial surplus means the sector is accumulating financial assets, whereas a deficit indicates it is depleting assets (or increasing its borrowing) to fund its activity. Because these three sectors encompass all US economic activity, both domestic and international, their combined financial balances must equal zero.

A key point to note with respect to the US is the dramatic deterioration in the government’s financial balance in the post-COVID phase, initially prompted by private sector retrenchment (which subsequently reversed). Subsequently, however, COVID relief packages – which allowed the private sector to accumulate big saving reservoirs - coupled with large infrastructure investment programmes, have still left the government sector with an historically large deficit (amounting to 9.3% of GDP in Q3 2023). Against that backdrop, and partly thanks to that hefty fiscal policy support, the private sector has, on the whole, accumulated financial surpluses. These were depleted in the post-COVID recovery phase – which allowed the economy to maintain strong momentum - but were still sizeable, at around 4% of GDP, in Q3 2023. It is equally notable, however, that this private sector surplus has been climbing over the past 18 months. That could signal that monetary policy is restrictive not least as it has been accompanied by a smaller deficit on the foreign sector’s account as well.

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**Euro area financial balances**
An analysis of euro area financial balances is not as dramatic. The regional oscillations in each sector’s financial position have, in particular, not been as large as in the US (see chart 6). The government sector’s deficit position, for example, at 2.7% of GDP in Q3 2023, is little-changed compared with its pre-COVID level (of 3.1% of GDP) in Q1 2020. The private sector surplus, in the meantime, notwithstanding some initial post-COVID shocks, stood at 5.8% of GDP in Q4 2023, which compares with 2.5% in Q1 2020. This implies that the euro area economy as a whole has been in balance largely thanks to an offsetting increase in the foreign sector’s deficit, or putting that another way, in a higher current account surplus. The bottom line is that, at least on a regional basis, fiscal policy has been much less accommodative, and through a much higher private sector surplus, monetary policy is placing a big brake on the region’s economies as well.

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Following a week in which the risks to the global economic outlook suddenly skewed to the downside, the pendulum has swung back again over the past few days. Confidence in a soft landing for the world economy has instead now re-surfaced partly thanks to firmer-than-expected global economic data, together with some solid corporate earnings reports from the United States. Additionally - and at the root of last week’s concerns - geopolitical tensions between Israel and Iran have eased, further bolstering investors' risk appetite. In our charts this week we delve into key insights from April's flash purchasing managers' (PMI) surveys (see chart 1). We also examine the recent rise in copper prices—often a reliable indicator of global economic activity—and now echoing the messages from those PMI surveys (chart 2). An additional echo (and indeed reason for) both improving global growth momentum and higher copper prices can also be found in the impressive growth in South Korea’s exports of semiconductors (see chart 3). Next, we explore monetary policy issues, particularly how traditional Phillips curve models have struggled to accurately predict the relationship between inflation and unemployment in recent years (chart 4). We conclude with an analysis of financial balances in the US and euro area, which offers some reasons for those struggles (charts 5 and 6).

Charts of the Week: Flash Dance

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New orders for durable goods increased 2.6% (1.3% y/y) during March after rising 0.7% in February, revised from 1.4%. The Action Economics Forecast Survey called for a 3.0% rise.

The March gain in new orders reflected a 23.7% rise in aircraft orders after they increased 13.9% in February. Transportation sector orders overall increased 7.7% (1.9% y/y) after rising 1.8% in February as motor vehicle orders gained 2.1% (2.9% y/y, about as they did in February.

Most other durable goods categories posted minimal orders changes last month. Machinery orders rose 0.1% (1.0% y/y), after increasing 1.5% in February. Orders for primary metals slipped 0.5% (-1.6% y/y) and orders for fabricated metals products rose 0.2% (2.7% y/y). Orders for computers & electronic equipment improved 0.8% (1.8% y/y) while orders for electrical equipment edged 0.1% higher (-0.3% y/y) following a 2.8% February decline.

These industry changes in orders accompanied a 6.0% rise (1.4% y/y) in capital goods orders after a 0.3% February gain. Nondefense capital goods orders rose 5.4% (2.7% y/y) while nondefense capital goods excluding aircraft rose 0.2% (1.1% y/y) in March after a modest increase of 0.4% in February. Defense capital goods orders surged 10.6% (-6.2% y/y) following a 13.9% decline in February.

Shipments of all manufactured goods rose 0.4% (1.6% y/y) in March after increasing 1.5% in February. Shipments of durable goods held steady (+1.0% y/y) in March after rising 1.2% in February. Nondurable goods shipments improved 0.7% in March (2.3% y/y) after increasing 1.8% in February.

Unfilled orders of durable goods rose 0.4% (9.1% y/y) after easing 0.1% in February. Excluding transportation, unfilled orders edged down 0.1% (-1.0% y/y) in March as they did in February. They’ve been edging lower since late-2022.

Manufacturers’ inventories increased 0.1% (0.6% y/y) in March after gaining 0.2% in the prior month. Durable goods inventories held steady (+2.2% y/y) following a 0.2% February increase. Nondurable goods inventories rose 0.2% (-1.7%) in March after a 0.3% February increase.

Manufacturers’ orders and shipments of durable and nondurable goods, along with unfilled orders and inventories, are compiled by the U.S. Census Bureau. They are available in Haver’s **USECON** database. The Action Economics forecast data are in the **AS1REPNA** database.

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- Aircraft orders continue to fuel order levels.
- Excluding transportation, orders remain little changed.
- Durable goods shipments & inventories hold steady; backlogs rise.

U.S. Durable Goods Orders Rise Moderately in March as Expected

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Mortgage applications fell 2.7% (-9.3% y/y) in the week ended April 19 after a 3.3% rise in the prior week. Home purchase loans declined 1.0% (-14.7% y/y) following a 5.0% rise in the prior week. Applications to refinance a loan declined 5.6% (+3.3% y/y) after improving 0.5% one week earlier. 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 to 7.43% last week after rising to 7.32% 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 rose to 6.91% in the latest week from 6.80% the prior week. The rate on 30-year Jumbo loans increased to 7.62% last week from 7.54% in the week prior, while the rate on the 5-year ARM rose to 6.96% from 6.74%. These 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 30.8% in the week ended April 19 from 32.1% in the prior week. That compared to a high of 39.7% in mid-December. The percentage of applications that were ARMs rose to 7.60% from 7.3%. The recent low of 5.4% was reached in early-January.

The average loan size fell 1.1% (-0.7% y/y) to $381,900 in the week ended April 19 from $386,200 in the prior week. The average size of a purchase loan declined 2.2% (+1.5% y/y) to $437,900 in the latest week from $447,900 in the prior week. The average loan size to refinance a mortgage edged up 0.2% (-0.4% y/y) to $255,800 last week from $255,300 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.

- Last week’s decline in applications reverses prior week’s gain.
- Purchase applications & refinancing applications both fall.
- Interest rates continue to rise.

U.S. Mortgage Applications Decline as Interest Rates Increase

Robert Brusca

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**The April IFO improves but is a mash-up-** The IFO survey in April exhibits broad-based improvement in climate, current conditions, and expectations. However, among the three categories, the least-broad improvement is in current conditions module. Current conditions show a monthly worsening for manufacturing, construction, and wholesaling. But the all-sector reading is boosted to a value of_+2.6 in April from +0.6 in March on the back of improved conditions in retail and a strong month-to-month gain in services conditions. Manufacturing still slips by five points month-to-month as wholesaling slips by 3-points, and construction drops by about a point more in April than in March. But retailing improves month-to-month by five points and services improve by nearly six points, driving the overall all-sector current-index higher. The current situation is still clearly in flux with so much weakening and improving going on at the same time in different sectors and industries.

**Changes are one thing; the level of assessment is another-** We are speaking here (so far) only of changes since the absolute levels of these readings remains weak or no better than middling across the board. The all-sector queue rankings in April find climate at a 23.2 percentile standing, the current index at a 15.9 percentile standing, and a 15.1 percentile standing for expectations. The standing data leave no doubt about the continuing impacted state of the German economy. The monthly gains are still good news. But this news is still not enough to buoy spirits or enough output to make a significant mark in the outlook. Moreover, the bifurcated nature of the current readings, with some improving sharply and some still back-tracking sharply, leaves a quizzical ‘buzz’ in the air.

**The current survey-** In the current survey, construction (54.1 percentile) and retailing (66th percentile) are the only current queue standings above 50, a level that marks each entries’ historic median. Manufacturing, wholesaling, and services all still reside in the lower one fifth or one fourth of their historic queue of data- weaker-than- ‘this’ only one fourth or one fifth of the time.

**The climate and expectations surveys-** All the climate readings are below their 50th percentiles with retailing’s 46.9 percentile standing, the closest to breaking through to an above-median reading. But the all-sector climate standings are otherwise bottom quartile readings or worse. Despite gains (and broad gains!) this month, expectations are marked by an all-sector standing in its 15.9 percentile. Ominously, the services category that shows such a jump in its current reading makes the smallest possible one-tick improvement in expectations for April. That is not a resounding endorsement of the month’s jump as a future trend.

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**Summing up**
Despite the clear improvements in the IFO across sectors and its temporal and functional assessment gains, the improvement this month is little more than a tempest in a teapot. It is not an indication of ‘something brewing’ that seems ready to spring out into a continued improving or accelerating trend. If you go to the beer-garden on this report, it will be to soothe your nerves rather than to drink to economic success. Instead, it is a ‘good month’ with still a lot of flaws present and lingering problems. We can cheer the IFO reading in April, but it is too early to celebrate it.

U.S. Help-Wanted Advertising Remained Low

Summary

Tom Moeller

More Economy in Brief

Charts of the Week: Flash Dance

U.S. Durable Goods Orders Rise Moderately in March as Expected

U.S. Mortgage Applications Decline as Interest Rates Increase

IFO Improves in Most Gears, But the Speed-limit Remains Very Low