U.S. Weekly Initial Claims For Jobless Insurance Fall Further

In November the Services PMI rose to 53.04 from 52.58. The services PMI stands in the 63rd percentile of its range. As such it is stronger than the EMU commission index for the sector that is only in the 47th percentile of its range.

Among EMU nations France’s index is the relative strongest standing in the 81st percentile of its range. Ireland is the relative weakest with the services index standing in the 40th percentile of its range.

Interestingly the service sector has continued to improve with little or no improvement in consumer confidence (see bottom panel of table above).

The service sector is important since it is where most of the jobs are. Despite ongoing sector improvement consumers have simply not had their spirits lifted. In Germany the banks continue to be obstreperous about lending. In the UK the service sector is backing off. France is doing well but at the cost of its fiscal progress. To be sure the various counties of the e-Zone and of EU remain challenged. E-Zone lending has been slow to revive. But getting the service sector back on track is a key objective of mending the Euro-economy. That revival should fix a lot of what is wrong.
The improved economy pushed initial claims for unemployment insurance down to a 15-month low. The Labor Department indicated that during the latest week, which included the Thanksgiving holiday, claims fell to 457,000 from a downwardly revised 462,000 during the prior period. The figures are down from the recession peak of 674,000 claims reached in March. The four-week moving average of claims fell to 481,250 and the latest weekly figure was lower than Consensus expectations for and increase to 488,000 claims.

Last quarter's strength in productivity growth was revised lower with the reduced reading on GDP. Nevertheless, the revised 8.1% jump remained the strongest since 3Q '03 and fell just short of Consensus expectations for an 8.5% increase.

The revision reflected a downwardly revised 2.9% (-3.7% y/y) increase in output. Hours-worked (employment times hours) was little-revised at down 4.8% (-7.4% y/y) which followed a 7.5% 2Q drop.Compensation costs, however, were revised up significantly to a 5.4% quarterly rate of growth and by 2.5% y/y.

The downward revision of productivity and the upward revision to compensation lessened the previously reported decline in unit labor costs. Nevertheless, the 2.5% decline remained the third consecutive quarterly fall but it eased the y/y change to -1.4%.

The surge in 3Q worker productivity growth in the factory sector was revised little at a 13.4% (AR) increase. That was a record and it lifted y/y growth to 3.0%, the highest since early-last year. The increase came as output rose at an 8.4% rate (-10.7% y/y) and hours worked fell at a 4.4% rate (-13.3% y/y). Compensation rose at an upwardly revised 6.5% rate (6.1% y/y), therefore unit labor costs in the factory sector fell at a lessened 6.1% annual rate (+3.0% y/y).

The productivity & cost figures are available in Haver's USECON database.

Fed Chairman Ben S. Bernanke's Senate testimony today can be found here.

Unexpectedly, the November Composite Index for the nonmanufacturing sector deteriorated for the second consecutive month. The figure from the Institute for Supply Management (ISM) fell below the break-even level of 50 to 48.7 and fell short of Consensus expectations for a reading of 51.2. Since the series' inception in 1997 there has been a 64% correlation between the level of the composite index in the nonmanufacturing sector and the Q/Q change in real GDP for the services and the construction sectors.

ISM surveys more than 370 purchasing managers in more than 62 industries including law firms, hospitals, government and retailers. The nonmanufacturing survey dates back to July 1997. The figures are available in Haver's USECON database.

Amongst the components, the business activity index for the service sector fell the hardest to 49.6 and just below the break-even level. The new orders series also fell slightly to 55.1 but remained up from November's low of 35.6. The speed of vendor deliveries increased (lower index level) to its quickest since June. Only the employment index showed slight improvement m/m but it remained well below the September level. Since the series' inception in 1997 there has been an 80% correlation between the level of the ISM nonmanufacturing employment index and the m/m change in payroll employment in the service-producing plus the construction industries.

Pricing power increased slightly despite the weakening in business activity. The pricing index rose m/m 57.9 and was up sharply from the December low of 36.1. Since its inception ten years ago, there has been a 73% correlation between the price index and the q/q change in the GDP services chain price index.

Beginning with the January 2008 Nonmanufacturing Report On Business®, the composite index is calculated as an indicator of the overall economic condition for the non-manufacturing sector. It is a composite index based on the diffusion indices of four of the indicators (business activity, new orders, employment and supplier deliveries) with equal weights. The latest report from the ISM can be found here.