Carol Stone, CBE

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070308b.jpg" width="353">
Initial unemployment insurance claims fell 10,000 to 328,000 in the week ended March 3, basically reversing the prior week&#39;s 7,000 increase. The figure was marginally lower than Consensus expectations for a decline to 330,000 claims.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070308a.jpg" width="353">
Despite the drop in the latest week, the four-week moving average of initial claims rose to 339,000, the highest since the Katrina-inflated numbers in the autumn of 2005.
In the week of Feb 24, continuing claims fell 98,000 to 2.526 million after a rise of 118,000 the week before, which likely had been storm-related. This pulled the associated rate of insured unemployment back down to its recent 1.9% average from a one-week move to 2.0%.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/WEEKLY/@W5/@W507/@W507.HTM">Unemployment Insurance (000s)</a></th>
<th scope="col">03/03/07</th>
<th scope="col">02/24/07</th>
<th scope="col">02/17/07</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Initial Claims</td>
<td>328</td>
<td>338</td>
<td>331</td>
<td>313</td>
<td>332</td>
<td>343</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Continuing Claims</td>
<td>--</td>
<td>2,526</td>
<td>2,624</td>
<td>2,459</td>
<td>2,662</td>
<td>2,924</td>
</tr>
</tbody>
</table>
</body>
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Initial unemployment insurance claims fell 10,000 to 328,000 in the week ended March 3, basically reversing the prior week's 7,000 increase. The figure was marginally lower than Consensus expectations for a decline to 330,000 claims. [...]

Initial Claims for Jobless Insurance Hover Around 330K

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070308b.jpg" width="353">
Initial unemployment insurance claims fell 10,000 to 328,000 in the week ended March 3, basically reversing the prior week&#39;s 7,000 increase. The figure was marginally lower than Consensus expectations for a decline to 330,000 claims.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070308a.jpg" width="353">
Despite the drop in the latest week, the four-week moving average of initial claims rose to 339,000, the highest since the Katrina-inflated numbers in the autumn of 2005.
In the week of Feb 24, continuing claims fell 98,000 to 2.526 million after a rise of 118,000 the week before, which likely had been storm-related. This pulled the associated rate of insured unemployment back down to its recent 1.9% average from a one-week move to 2.0%.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/WEEKLY/@W5/@W507/@W507.HTM">Unemployment Insurance (000s)</a></th>
<th scope="col">03/03/07</th>
<th scope="col">02/24/07</th>
<th scope="col">02/17/07</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Initial Claims</td>
<td>328</td>
<td>338</td>
<td>331</td>
<td>313</td>
<td>332</td>
<td>343</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Continuing Claims</td>
<td>--</td>
<td>2,526</td>
<td>2,624</td>
<td>2,459</td>
<td>2,662</td>
<td>2,924</td>
</tr>
</tbody>
</table>
January Industrial Production Up in Germany, Off in Smaller European Economies, But All Enjoy Longer-Run Growth 
by <a href="/comment/Stone.html">Carol Stone</a> March 8, 2007


<img align="left" border="0" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070308c.jpg">
Industrial production among a group of European countries reporting today appears to have slowed in January, but is keeping up vigorous trend growth. The largest, Germany, is an exception for the month, with a 1.7% gain in January, but not for the year, as it has seen 8.2% expansion over January 2006. Others have declines for January; these include Sweden, -2.3%, and Hungary, Croatia and Turkey, in the ranges of 0.4% to 0.9%. But all of these also have sizable year-on-year advances.
For Germany, the January advance was widespread in areas where production had already been firm: machinery and some transport equipment. There were also increases in textiles, paper and printing, and rubber and plastics. From a longer time perspective, several sectors seem to be benefiting from a resurgence in construction activity since last summer. This was up 36% in January from the year earlier and has pulled with it building materials: concrete, stone, other nonmetallic mineral products, metals and wood products. Electrical equipment has also grown more than the 5.2% average of total industrial production. Thus, we see a broad-based industrial expansion in Germany.<img align="right" border="0" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070308e.jpg">
In Sweden, January&#39;s 2.3% downturn looks very much like a pause in an uptrend. The year-on-year performance was 4.1% growth, with 5.1% on average for 2006. Machinery, motor vehicles and electrical equipment -- Sweden&#39;s known specialties -- have shown good gains over longer time spans despite flat or down moves in January. Longer-run gains are also evident in chemical products, especially pharmaceuticals.
The minor declines in industrial activity in Hungary, Turkey and Croatia also seem to be interruptions of firmer trends. Hungarian output backtracked 0.4% in January, but was up a whopping 21.2% from January 2006. This is a preliminary figure; detailed data through December show double-digit growth in machinery, electrical equipment, transport equipment and &quot;other&quot; manufacturing. In Croatia, industrial production edged down 0.6% in January after a flat reading in December. But the year-on-year gain was 9.1% in January, with numerous and varied sectors participating. In this smaller economy, we should note, other sectors had sharp declines, the more uneven pattern likely owing to fewer firms in each sector that limit the depth of established business patterns.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070308d.jpg" width="353">
Turkey&#39;s industrial output fell 0.9% in January after a 6.8% decline in December; but November&#39;s had risen 9.5% on the month and January&#39;s year-over-year change is 14.8%. The growth areas are, as with other countries in the region, concentrated in machinery and the associated metals industries; in Turkey electrical machinery and apparatus contributed to the January growth, while computing equipment decreased somewhat, having expanded by a factor of more than 2 in 2006 -- 121% actually.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">Industrial Production,&nbsp; % changes*</th>
<th scope="col">Jan 2007</th>
<th scope="col">Dec 2006</th>
<th scope="col">Nov 2006</th>
<th scope="col">Year/Year</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Germany</td>
<td>1.7</td>
<td>0.2</td>
<td>1.8</td>
<td>8.2</td>
<td>5.2</td>
<td>2.9</td>
<td>4.2</td>
</tr>
<tr>
<td class="firstcol">Sweden</td>
<td>-2.3</td>
<td>3.1</td>
<td>1.1</td>
<td>4.1</td>
<td>5.1</td>
<td>2.3</td>
<td>3.2</td>
</tr>
<tr class="odd">
<td class="firstcol">Hungary</td>
<td>-0.4</td>
<td>0.9</td>
<td>-0.1</td>
<td>21.2</td>
<td>10.4</td>
<td>7.1</td>
<td>7.5</td>
</tr>
<tr>
<td class="firstcol">Croatia</td>
<td>-0.6</td>
<td>0.0</td>
<td>1.3</td>
<td>9.1</td>
<td>4.5</td>
<td>5.1</td>
<td>3.6</td>
</tr>
<tr class="odd">
<td class="firstcol">Turkey</td>
<td>-0.9</td>
<td>-6.8</td>
<td>9.5</td>
<td>14.8</td>
<td>5.8</td>
<td>5.4</td>
<td>9.8</td>
</tr>
</tbody>
</table>
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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070307d.jpg" width="353">
Yesterday, we wrote here about the sharp increases in hourly compensation and unit labor costs now seen in the productivity data for Q4. Compensation rose at an 8.2% annual rate, pushing unit labor costs up at a 6.6% pace. We mentioned that these big moves were the result of unusually large bonuses in Q4.
However, the personal income data show these bonuses -- said by the BLS to be $50 billion -- in January, not during Q4. How do these factors jibe?
The secret is a little noticed item in the National Income Accounts called &quot;Wage Accruals less Disbursements&quot;, which is usually 0. Businesses record wages as they are accrued, but workers receive wages when they are actually disbursed. Normally, these are simultaneous actions. So the clue that compensation would be raised sharply in the productivity revisions was visible to analysts who looked carefully at Table 1.10 in the National Income Accounts at that series &quot;Wage Accruals less Disbursements&quot;. In the GDP revisions released on February 28, this series was changed to $50 billion from the 0 originally reported. We&#39;d expect that to reverse in Q1 as wage disbursements will have been larger than accruals. <img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070307e.jpg" width="353">
Bonuses, of course, had been paid in early 2006 as well, but these were evidently also accounted for by businesses in Q1 2006, not late 2005. So compensation and unit labor cost in the productivity data moved simultaneously in Q1 with the income reported in the personal income data.
Another instructive example of the same kind of phenomenon occurred in 1992 and 1993. Tax rates were expected to be raised early in the new presidential administration, so disbursement of some compensation was accelerated into 1992 to capture it under the old tax rates. This meant that disbursements were larger than accruals, and the series &quot;wage accruals less disbursements&quot; was therefore negative, -$63.0 billion, followed by a commensurate positive offset in early 1993. In this instance, businesses&#39; accrued labor costs were not affected, so compensation in the productivity data continued along a relatively smooth path, despite the whipsaw in compensation -- up in Q4 1992 and down in Q1 1993 -- in the personal income data.
[We thank some colleagues in the New York Association for Business Economics for pointing out the application of accruals less disbursements. In the Haver data offerings, the Wage Accruals less Disbursements series is in the USNA database, and the productivity data are in USECON.]

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Yesterday, we wrote here about the sharp increases in hourly compensation and unit labor costs now seen in the productivity data for Q4. Compensation rose at an 8.2% annual rate, pushing unit labor costs up at a 6.6% pace. We [...]

U.S. Productivity & Unit Labor Costs: A Follow-Up

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070307a.jpg" width="353">
The ADP National Employment Report for February points to a 57,000 increase in private nonfarm payrolls. This measure is intended as a leading indicator for the &quot;official&quot; BLS data to be reported Friday, March 9. For January, the ADP figure was 121,000, with the actual coming at 97,000. <img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070307b.jpg" width="353">
With the annual revision of the BLS data, ADP has also revised its figures and made methodological changes in the calculations. ADP, you perhaps know, processes payrolls for millions of American workers; indeed, their annual report says they cover 1 in 6 private sector workers. Initially their calculation was based on a sample of their own clients covering about 7 million workers. They have expanded this to a substantial portion of their entire base, with data collection weekly not just once a month. New efforts are being made to align both the totals and a broad industry breakdown every month. The seasonal adjustment process was shifted from X-11 to X-12 ARIMA, and closer examination is being made for outliers. These changes are aimed at minimizing the production of false signals in the report: for example, in December, the original series pointed to a decline in private sector jobs of 40,000, but the BLS figure showed an increase of 150,000.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070307c.jpg" width="353">
The Report also contains new information. It shows a breakdown for goods-producing and service-producing sectors, with employment in goods industries presently seen declining 43,000 in February and services going up 100,000. Brand-new series are available on the size of payroll units. Since most business growth has occurred in small- and medium-sized firms, this would be useful in assessing the breadth of payroll changes. So for February, the ADP data show a 53,000 gain at small businesses (49 or fewer employees), 33,000 at medium-sized companies (50-499) and a decline of 29,000 at large firms (500 and over). It&#39;s easy to focus on large businesses because they get more public attention, but in fact, it&#39;s the smaller ones where there is more dynamism.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">Private Nonfarm Payrolls (000s)</th>
<th scope="col">Feb 2007</th>
<th scope="col">Jan 2007</th>
<th scope="col">Dec 2006</th>
<th scope="col">Nov 2006</th>
Monthly Averages
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">2006</td>
<td>2005</td>
<td>2004</td>
</tr>
<tr>
<td class="firstcol">ADP Total</td>
<td>115,111</td>
<td>115,054</td>
<td>114,933</td>
<td>114,815</td>
<td>114,165</td>
<td>112,288</td>
<td>110,290</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Change</td>
<td>57</td>
<td>121</td>
<td>118</td>
<td>258</td>
<td>142</td>
<td>171</td>
<td>153</td>
</tr>
<tr>
<td class="firstcol">BLS Total</td>
<td>--</td>
<td>115137</td>
<td>115040</td>
<td>114835</td>
<td>114186</td>
<td>111890</td>
<td>109804</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Change</td>
<td>--</td>
<td>97</td>
<td>205</td>
<td>190</td>
<td>167</td>
<td>198</td>
<td>159</td>
</tr>
</tbody>
</table>
</body>
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The ADP National Employment Report for February points to a 57,000 increase in private nonfarm payrolls. This measure is intended as a leading indicator for the "official" BLS data to be reported Friday, March 9. For January, the ADP [...]

ADP Report Points to 57K Private Payroll Growth for February; Survey Revised, Series Added on Sector and Firm-Size

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070307a.jpg" width="353">
The ADP National Employment Report for February points to a 57,000 increase in private nonfarm payrolls. This measure is intended as a leading indicator for the &quot;official&quot; BLS data to be reported Friday, March 9. For January, the ADP figure was 121,000, with the actual coming at 97,000. <img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070307b.jpg" width="353">
With the annual revision of the BLS data, ADP has also revised its figures and made methodological changes in the calculations. ADP, you perhaps know, processes payrolls for millions of American workers; indeed, their annual report says they cover 1 in 6 private sector workers. Initially their calculation was based on a sample of their own clients covering about 7 million workers. They have expanded this to a substantial portion of their entire base, with data collection weekly not just once a month. New efforts are being made to align both the totals and a broad industry breakdown every month. The seasonal adjustment process was shifted from X-11 to X-12 ARIMA, and closer examination is being made for outliers. These changes are aimed at minimizing the production of false signals in the report: for example, in December, the original series pointed to a decline in private sector jobs of 40,000, but the BLS figure showed an increase of 150,000.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070307c.jpg" width="353">
The Report also contains new information. It shows a breakdown for goods-producing and service-producing sectors, with employment in goods industries presently seen declining 43,000 in February and services going up 100,000. Brand-new series are available on the size of payroll units. Since most business growth has occurred in small- and medium-sized firms, this would be useful in assessing the breadth of payroll changes. So for February, the ADP data show a 53,000 gain at small businesses (49 or fewer employees), 33,000 at medium-sized companies (50-499) and a decline of 29,000 at large firms (500 and over). It&#39;s easy to focus on large businesses because they get more public attention, but in fact, it&#39;s the smaller ones where there is more dynamism.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">Private Nonfarm Payrolls (000s)</th>
<th scope="col">Feb 2007</th>
<th scope="col">Jan 2007</th>
<th scope="col">Dec 2006</th>
<th scope="col">Nov 2006</th>
Monthly Averages
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">2006</td>
<td>2005</td>
<td>2004</td>
</tr>
<tr>
<td class="firstcol">ADP Total</td>
<td>115,111</td>
<td>115,054</td>
<td>114,933</td>
<td>114,815</td>
<td>114,165</td>
<td>112,288</td>
<td>110,290</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Change</td>
<td>57</td>
<td>121</td>
<td>118</td>
<td>258</td>
<td>142</td>
<td>171</td>
<td>153</td>
</tr>
<tr>
<td class="firstcol">BLS Total</td>
<td>--</td>
<td>115137</td>
<td>115040</td>
<td>114835</td>
<td>114186</td>
<td>111890</td>
<td>109804</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Change</td>
<td>--</td>
<td>97</td>
<td>205</td>
<td>190</td>
<td>167</td>
<td>198</td>
<td>159</td>
</tr>
</tbody>
</table>
U.S. Productivity & Unit Labor Costs: A Follow-Up 
by <a href="/comment/Stone.html">Carol Stone</a> March 7, 2007


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070307d.jpg" width="353">
Yesterday, we wrote here about the sharp increases in hourly compensation and unit labor costs now seen in the productivity data for Q4. Compensation rose at an 8.2% annual rate, pushing unit labor costs up at a 6.6% pace. We mentioned that these big moves were the result of unusually large bonuses in Q4.
However, the personal income data show these bonuses -- said by the BLS to be $50 billion -- in January, not during Q4. How do these factors jibe?
The secret is a little noticed item in the National Income Accounts called &quot;Wage Accruals less Disbursements&quot;, which is usually 0. Businesses record wages as they are accrued, but workers receive wages when they are actually disbursed. Normally, these are simultaneous actions. So the clue that compensation would be raised sharply in the productivity revisions was visible to analysts who looked carefully at Table 1.10 in the National Income Accounts at that series &quot;Wage Accruals less Disbursements&quot;. In the GDP revisions released on February 28, this series was changed to $50 billion from the 0 originally reported. We&#39;d expect that to reverse in Q1 as wage disbursements will have been larger than accruals. <img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070307e.jpg" width="353">
Bonuses, of course, had been paid in early 2006 as well, but these were evidently also accounted for by businesses in Q1 2006, not late 2005. So compensation and unit labor cost in the productivity data moved simultaneously in Q1 with the income reported in the personal income data.
Another instructive example of the same kind of phenomenon occurred in 1992 and 1993. Tax rates were expected to be raised early in the new presidential administration, so disbursement of some compensation was accelerated into 1992 to capture it under the old tax rates. This meant that disbursements were larger than accruals, and the series &quot;wage accruals less disbursements&quot; was therefore negative, -$63.0 billion, followed by a commensurate positive offset in early 1993. In this instance, businesses&#39; accrued labor costs were not affected, so compensation in the productivity data continued along a relatively smooth path, despite the whipsaw in compensation -- up in Q4 1992 and down in Q1 1993 -- in the personal income data.
[We thank some colleagues in the New York Association for Business Economics for pointing out the application of accruals less disbursements. In the Haver data offerings, the Wage Accruals less Disbursements series is in the USNA database, and the productivity data are in USECON.]

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Louise Curley

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070306c.jpg" width="353">
Gross Domestic Product in the Euro Area rose 0.89% in the fourth quarter or at an annual rate of 3.59%. These numbers compare with 0.55% and 2.22% for the United States. Although the growth for the whole year was greater in the U.S. than in the Euro Area (3.3% vs 2.6%), growth in the latter was greater than the former in the last three quarters of the year as can be seen in the first chart.
The European Commission is forecasting a range of GDP growth for the Euro Area for the first three quarters of 2007. The high estimates of growth in GDP are 0.8%, 0.9% and 0.9% in the first, second and third quarters. The low estimates are 0.4%, 0.5% and 0.3% respectively. The ranges are shown in the second chart. In 2006, as shown in the table below, the actual period to period changes in the Euro Area&#39;s seasonally adjusted GDP exceeded the upper value of the range in the first, third and fourth quarters of 2006.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070306d.jpg" width="353">
The Commission&#39;s forecast is based on a factor model--a largely mechanical technique that condenses a large data set of some 2000 time series for the Euro-area countries into a small number of &quot;factors&quot;. The model uses these &quot;factors&quot; to make projections of euro-area GDP. The model is not equipped to take into account such one time events as the VAT increase in Germany in January 2007. As a result, the normal confidence level attached to the reported forecast ranges of 68%, which corresponds to +/- one standard deviation of past forecast errors, may fail to reflect the added uncertainty in the outlook relating to the first quarter&#39;s imposition of the German VAT increase. 

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">&nbsp;DOMESTIC PRODUCT GROWTH RATES &nbsp;</th>
<th scope="col">Q4&nbsp; 06</th>
<th scope="col">3Q 06</th>
<th scope="col">Q2 06</th>
<th scope="col">Q1 06</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">(SA Period to period % Chg)</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td class="firstcol">Euro Area Actual&nbsp;</td>
<td>0.89</td>
<td>0.57</td>
<td>0.97</td>
<td>0.82</td>
<td>2.64</td>
<td>1.38</td>
<td>2.01</td>
</tr>
<tr class="odd">
<td class="firstcol">Euro Area Forecast Low</td>
<td>0.3</td>
<td>0.4</td>
<td>0.4</td>
<td>0.4</td>
<td>--</td>
<td>--</td>
<td>--</td>
</tr>
<tr>
<td class="firstcol">Euro Area Forecast High</td>
<td>0.8</td>
<td>0.8</td>
<td>0.8</td>
<td>0.7</td>
<td>--</td>
<td>--</td>
<td>--</td>
</tr>
<tr class="odd">
<td class="firstcol">United States</td>
<td>0.55</td>
<td>0.49</td>
<td>0.63</td>
<td>1.37</td>
<td>3.30</td>
<td>3.22</td>
<td>3.91</td>
</tr>
</tbody>
</table>
</body>
</html>

Gross Domestic Product in the Euro Area rose 0.89% in the fourth quarter or at an annual rate of 3.59%. These numbers compare with 0.55% and 2.22% for the United States. Although the growth for the whole year was greater in the U.S. [...]

GDP Growth in the Euro Area Exceeds That of the U. S. for the Third Time

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070306b.jpg" width="353">
Nonfarm labor productivity was revised to 1.6% in Q4 from 3.0% reported a month ago. The revision was in line with market forecasts, which were based on the most recent revision to GDP. For 2006 as a whole, productivity was also up 1.6%, a downward revision from 2.1% initially estimated.
This productivity report also incorporated revisions to hours worked derived from the annual rebenchmarking of nonfarm payroll data. This year&#39;s change added significantly to hours; the total in 2006 now shows 2.2% growth compared with 1.7% shown before. In Q4, though, the revision was slightly downward to 0.9% from 1.2% before. Seasonal adjustment revisions also impacted the data back to 2002.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070306a.jpg" width="353">
Compensation per hour last quarter was lifted substantially, reflecting unusually large bonuses paid by companies in Q4. Originally seen at 4.8%, that figure is now at 8.2%. However, Q3 was revised downward to just 0.6% from 3.1%, so the year as a whole was lowered to 4.8% from 5.3% reported last month.
Unit labor cost growth rose commensurately in Q4 with the upward revision to compensation and the downward shift in productivity. It is now reported at 6.6% from 1.7% before. Forecast expectations had it at about 3.0% but at least some forecasters projected as much as 6.5%, factoring in all of the changes in output and compensation. Interestingly, though, these various changes all offset each other over the course of 2005 and 2006, so that unit labor costs for those years as a whole were unchanged from the initial 2.0% and 3.2% estimates.<span style="font-size:10.0pt;font-family:Verdana;mso-fareast-font-family:&quot;MS Mincho&quot;;
mso-bidi-font-family:&quot;Times New Roman&quot;;mso-ansi-language:EN-US;mso-fareast-language:
JA;mso-bidi-language:AR-SA">
Factory sector productivity growth was unchanged in Q4 from the 2.2% gain shown earlier. The yearly figure was pushed up slightly, however, from 3.9% to 4.0%. Compensation in manufacturing had already shown a sizable Q4 increase of 7.3% and it was actually reduced a bit to 7.1%. For the year, it rose 3.8%, compared with 4.1% reported before. Unit labor costs were still firm in Q4, 4.7%, revised from 5.0%. The sharp reduction in Q3 compensation lowered annual unit labor costs in manufacturing to an outright decline of 0.2% from a 0.2% increase reported last month.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EC/@EC02/@EC02.HTM">Non-farm Business Sector</a> (SAAR)</th>
<th scope="col">4Q &#39;06 (Rev)</th>
<th scope="col">4Q &#39;06 (Old)</th>
<th scope="col">3Q &#39;06 (Rev)</th>
<th scope="col">Y/Y (Rev)</th>
<th scope="col">2006 (Rev)</th>
<th scope="col">2005 (Rev)</th>
<th scope="col">2004 (Rev)</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Output per Hour</td>
<td>1.6%</td>
<td>3.0%</td>
<td>-0.5%</td>
<td>1.4%</td>
<td>1.6%</td>
<td>2.1%</td>
<td>2.9%</td>
</tr>
<tr>
<td class="firstcol">Compensation per Hour</td>
<td>8.2%</td>
<td>4.8%</td>
<td>0.6%</td>
<td>4.9%</td>
<td>4.8%</td>
<td>4.1%</td>
<td>3.6%</td>
</tr>
<tr class="odd">
<td class="firstcol">Unit Labor Costs</td>
<td>6.6%</td>
<td>1.7%</td>
<td>1.1%</td>
<td>3.4%</td>
<td>3.2%</td>
<td>2.0%</td>
<td>0.7%</td>
</tr>
</tbody>
</table>


</html>

Nonfarm labor productivity was revised to 1.6% in Q4 from 3.0% reported a month ago. The revision was in line with market forecasts, which were based on the most recent revision to GDP. For 2006 as a whole, productivity was also up [...]

Q4 Productivity Revised Down; Bonus Payments Boost Unit Labor Cost

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070306b.jpg" width="353">
Nonfarm labor productivity was revised to 1.6% in Q4 from 3.0% reported a month ago. The revision was in line with market forecasts, which were based on the most recent revision to GDP. For 2006 as a whole, productivity was also up 1.6%, a downward revision from 2.1% initially estimated.
This productivity report also incorporated revisions to hours worked derived from the annual rebenchmarking of nonfarm payroll data. This year&#39;s change added significantly to hours; the total in 2006 now shows 2.2% growth compared with 1.7% shown before. In Q4, though, the revision was slightly downward to 0.9% from 1.2% before. Seasonal adjustment revisions also impacted the data back to 2002.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070306a.jpg" width="353">
Compensation per hour last quarter was lifted substantially, reflecting unusually large bonuses paid by companies in Q4. Originally seen at 4.8%, that figure is now at 8.2%. However, Q3 was revised downward to just 0.6% from 3.1%, so the year as a whole was lowered to 4.8% from 5.3% reported last month.
Unit labor cost growth rose commensurately in Q4 with the upward revision to compensation and the downward shift in productivity. It is now reported at 6.6% from 1.7% before. Forecast expectations had it at about 3.0% but at least some forecasters projected as much as 6.5%, factoring in all of the changes in output and compensation. Interestingly, though, these various changes all offset each other over the course of 2005 and 2006, so that unit labor costs for those years as a whole were unchanged from the initial 2.0% and 3.2% estimates.<span style="font-size:10.0pt;font-family:Verdana;mso-fareast-font-family:&quot;MS Mincho&quot;;
mso-bidi-font-family:&quot;Times New Roman&quot;;mso-ansi-language:EN-US;mso-fareast-language:
JA;mso-bidi-language:AR-SA">
Factory sector productivity growth was unchanged in Q4 from the 2.2% gain shown earlier. The yearly figure was pushed up slightly, however, from 3.9% to 4.0%. Compensation in manufacturing had already shown a sizable Q4 increase of 7.3% and it was actually reduced a bit to 7.1%. For the year, it rose 3.8%, compared with 4.1% reported before. Unit labor costs were still firm in Q4, 4.7%, revised from 5.0%. The sharp reduction in Q3 compensation lowered annual unit labor costs in manufacturing to an outright decline of 0.2% from a 0.2% increase reported last month.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EC/@EC02/@EC02.HTM">Non-farm Business Sector</a> (SAAR)</th>
<th scope="col">4Q &#39;06 (Rev)</th>
<th scope="col">4Q &#39;06 (Old)</th>
<th scope="col">3Q &#39;06 (Rev)</th>
<th scope="col">Y/Y (Rev)</th>
<th scope="col">2006 (Rev)</th>
<th scope="col">2005 (Rev)</th>
<th scope="col">2004 (Rev)</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Output per Hour</td>
<td>1.6%</td>
<td>3.0%</td>
<td>-0.5%</td>
<td>1.4%</td>
<td>1.6%</td>
<td>2.1%</td>
<td>2.9%</td>
</tr>
<tr>
<td class="firstcol">Compensation per Hour</td>
<td>8.2%</td>
<td>4.8%</td>
<td>0.6%</td>
<td>4.9%</td>
<td>4.8%</td>
<td>4.1%</td>
<td>3.6%</td>
</tr>
<tr class="odd">
<td class="firstcol">Unit Labor Costs</td>
<td>6.6%</td>
<td>1.7%</td>
<td>1.1%</td>
<td>3.4%</td>
<td>3.2%</td>
<td>2.0%</td>
<td>0.7%</td>
</tr>
</tbody>
</table>
GDP Growth in the Euro Area Exceeds That of the U. S. for the Third Time  
by <a href="/comment/Curley.html">Louise Curley</a> March 6, 2007


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070306c.jpg" width="353">
Gross Domestic Product in the Euro Area rose 0.89% in the fourth quarter or at an annual rate of 3.59%. These numbers compare with 0.55% and 2.22% for the United States. Although the growth for the whole year was greater in the U.S. than in the Euro Area (3.3% vs 2.6%), growth in the latter was greater than the former in the last three quarters of the year as can be seen in the first chart.
The European Commission is forecasting a range of GDP growth for the Euro Area for the first three quarters of 2007. The high estimates of growth in GDP are 0.8%, 0.9% and 0.9% in the first, second and third quarters. The low estimates are 0.4%, 0.5% and 0.3% respectively. The ranges are shown in the second chart. In 2006, as shown in the table below, the actual period to period changes in the Euro Area&#39;s seasonally adjusted GDP exceeded the upper value of the range in the first, third and fourth quarters of 2006.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070306d.jpg" width="353">
The Commission&#39;s forecast is based on a factor model--a largely mechanical technique that condenses a large data set of some 2000 time series for the Euro-area countries into a small number of &quot;factors&quot;. The model uses these &quot;factors&quot; to make projections of euro-area GDP. The model is not equipped to take into account such one time events as the VAT increase in Germany in January 2007. As a result, the normal confidence level attached to the reported forecast ranges of 68%, which corresponds to +/- one standard deviation of past forecast errors, may fail to reflect the added uncertainty in the outlook relating to the first quarter&#39;s imposition of the German VAT increase. 

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">&nbsp;DOMESTIC PRODUCT GROWTH RATES &nbsp;</th>
<th scope="col">Q4&nbsp; 06</th>
<th scope="col">3Q 06</th>
<th scope="col">Q2 06</th>
<th scope="col">Q1 06</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">(SA Period to period % Chg)</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td class="firstcol">Euro Area Actual&nbsp;</td>
<td>0.89</td>
<td>0.57</td>
<td>0.97</td>
<td>0.82</td>
<td>2.64</td>
<td>1.38</td>
<td>2.01</td>
</tr>
<tr class="odd">
<td class="firstcol">Euro Area Forecast Low</td>
<td>0.3</td>
<td>0.4</td>
<td>0.4</td>
<td>0.4</td>
<td>--</td>
<td>--</td>
<td>--</td>
</tr>
<tr>
<td class="firstcol">Euro Area Forecast High</td>
<td>0.8</td>
<td>0.8</td>
<td>0.8</td>
<td>0.7</td>
<td>--</td>
<td>--</td>
<td>--</td>
</tr>
<tr class="odd">
<td class="firstcol">United States</td>
<td>0.55</td>
<td>0.49</td>
<td>0.63</td>
<td>1.37</td>
<td>3.30</td>
<td>3.22</td>
<td>3.91</td>
</tr>
</tbody>
</table>


</html>

US and China big leaders in adoption of AI models

Robust US demand for advanced technology products

China's export growth rotating away from the US

More pronounced upward revisions in countries more exposed to AI investment

Stable job openings and hiring rates point to cautious hiring

Global freight costs are on the rise while supply chain pressures are contained

Accelerating positive economic surprises in the G10 are boosting the global economy

Considerably more monetary ease expected from US and UK as Japan tightens

Tighter US immigration enforcement adversely impacting labor force

Economic policy uncertainty, while still elevated, is declining

Gradual disinflation and easier monetary policies across advanced economies

Largest October layoffs since 2003, led by technology

Subdued global shipping costs not yet pointing to supply chain problems

PMIs show still-elevated but slowing US inflation

AI boosting US investment in data centers

US productivity growth has been significantly faster than in other major economies

Consumers' short-term US inflation expectations still elevated while longer-term expectations of financial markets are steady

US financial markets have gotten used to elevated policy uncertainty

FOMC now expects more rate cuts going forward than in June

China gaining ASEAN exports while US exports slump

Job openings less than the number unemployed in July for first time since 2021

Reaccelerating goods price inflation along with sticky services inflation clouds the outlook

Falling oil prices aren't pulling down inflation expectations, pointing to a boost from increased tariffs

Equity market exuberance outpacing macroeconomic data

Apart from Japan, Blue Chip forecasters expect further sizable monetary easing

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Robert Brusca

260206E.jpg

With the December report, Germany’s production and some of the early European industrial production data reveal a good deal of chaos in terms of the embedded trends. On the month, German industrial production fell by 1.9%, with consumer goods output up by 0.5%, capital goods output falling by 5.3%, and intermediate goods output falling by 1.2%. Among the early reporters in the monetary union—France, Spain, and Portugal—only Spain showed an increase in manufacturing IP in December; however, Spanish industrial production is notoriously volatile.

**Broader IP trends in Germany and elsewhere in Europe**
As for other early industrial production reporters, both Sweden and Norway showed strong-to-solid gains in December and each of them showed two-months of gains in a row. Beyond that, sequential growth rates from 12-months to six-months to three-months show accelerating growth in German consumer goods output against decelerating growth for intermediate goods. Real manufacturing output and real sales show mixed results- no clear trends; however, real manufacturing orders in Germany are off the map strong. 

**German manufacturing/industrial Surveys**
German industrial surveys from the IFO for manufacturing shows persistent weakening as well as for IFO manufacturing expectations, and in the EU Commission industrial index in the last three months. More broadly, Germany shows some modest but ongoing step up all of these based on average levels from 12-months to six-months to three-months for IFO expectations and the EU Commission industrial readings with mixed results for other survey readings.

**IP trends in Europe**
For the early reporting EMU members France, Spain, and Portugal, who report industrial production trends, each show mixed monthly trends against ongoing decelerations for manufacturing output over the broader sequential periods (12-month, to 6-month, to 3-month). However, for other Europe, Sweden and Norway, manufacturing trends are steadily accelerating on this broader timeline.

**A feeling of ‘Deja- What?’**
These combinations of opposed trends mixed with a lack of trends leave us with this sense of confusion about what's going on in manufacturing. For Germany, the extreme strength in orders is reassuring since orders should be forward-looking rather than backward-looking or even contemporaneous. But orders can also be a fickle series and so we'll have to watch it to see if the trends for German orders hold up.

**Current quarter-What’s been happening now**
In addition, current quarter growth for Germany actually looks quite good with industrial production up 3.7% at an annual rate in the current quarter, led by output increases in manufacturing against a decline in the intermediate goods output. Real orders in the quarter are surging at a 44% growth rate, while real sales in manufacturing only had a 0.1% uptick at an annual rate. The industrial indicators for Germany in the quarter show weakness or flatness with the only exception being IFO manufacturing expectations that advanced by a small amount. The three EMU members who report industrial production data show positive growth in the just-completed quarter except for Portugal where industrial production is falling at a 2.9% rate in the fourth quarter. Sweden and Norway, European countries but not monetary union members, show a strong 22% annual rate gain in Sweden against the 3% annual rate decline in Norway.

260206.jpg

**Rankings**
**How growth rates stack up…**
Moving away from short-term trends, the rankings of growth rates of these various metrics using 12-month growth rates on data back to 2006, show below-median growth rates for German industrial production and all three of its major sectors. All of them have rankings below the 50% mark where the median resides. Germany’s manufacturing output growth rate is below its median as is the growth of real sales; and once again real manufacturing orders break out and show a stunning 90th percentile standing, extremely strong compared to other growth rates on this period.

**Indicator rankings are poor**
However, the survey based industrial indicators for Germany, ranked based on their index levels, are all extremely weak and much weaker than German sector or other German metrics. The strongest indicator reading is the 29th percentile standing for IFO manufacturing expectations while the current ZEW index, IFO manufacturing index, and the EU Commission industrial readings, all reside below their 15th percentile. The survey rankings suggest that industrial sentiment is in much worse shape than activity and growth.

**IP elsewhere in Europe**
However, the growth ranking of manufacturing industrial production for the reporting EMU members and other European members are all quite solid, with percentile standings ranging from the 66th up to the 93rd percentile.

**Summing up**
From these data, Germany emerges as the weak economy compared with historic norms based on industrial production growth and indicator readings. However, there's a glimpse of positivity from the growth of real orders, and at the same time, some concern about ongoing sentiment for manufacturing in Germany as distinct from actual performance.

Germany

German IP Reveals Chaotic Trends

Andrew Cates

**The Global Monetary Policy Consensus**
The latest Blue Chip Financial Forecasts survey points to a notably more balanced global monetary policy outlook over the coming year. In contrast to the pronounced easing bias that dominated much of the past two years, expectations are now more symmetric, with a similar number of central banks projected to raise rates as to ease policy. Japan is seen delivering further tightening, while Canada is expected to initiate an interest rate hike in coming months. In Australia’s case, this tightening guidance was reinforced this week, with the Reserve Bank lifting its policy rate by 25 basis points. Elsewhere, and in contrast, the euro area, UK and US are expected to move in the opposite direction.

260205Z1.jpg

**US manufacturing activity**
The second chart underscores the recent improvement in US economic momentum, highlighted by an unexpected surge in the January ISM manufacturing PMI. After spending much of the past year hovering below the 50 threshold consistent with stagnation, the index jumped sharply back into expansionary territory, signalling a renewed pickup in industrial activity. This rebound has coincided with a broader run of stronger-than-anticipated US economic data, as reflected in the upswing in the Citigroup Economic Surprise Index. Together, these developments point to a US economy that continues to display notable resilience, complicating expectations of monetary easing in the near term.

260205Z2.jpg

**US Bank Lending Standards and Financial Stress** 
The next chart turns to US financial conditions, highlighting the latest readings from the Senior Loan Officer Opinion Survey. The net proportion of banks tightening lending standards on corporate loans and mortgages is now more modest by historical standards, and well below the extremes seen during past episodes of financial stress. Some easing in credit headwinds has occurred alongside relatively subdued readings on the OFR Financial Stress Index, which continues to hover below its long-run average. Together, these indicators suggest that the US financial system has continued to avoid the kind of acute stress typically associated with sharp slowdowns in credit availability—helping to underpin the recent resilience in economic activity.

260205Z3.jpg

**Semiconductor Sales**
The fourth chart highlights the renewed surge in global semiconductor sales, with momentum strengthening sharply over recent months across the Americas, China and the broader Asia-Pacific region. After the cyclical downturn in 2022–23, sales have rebounded to fresh highs, reflecting a powerful revival in demand for advanced chips and related technologies. This upswing has taken place amid intense investor preoccupation with artificial intelligence, with expectations that AI adoption will drive a sustained wave of capital spending on data centres, cloud infrastructure and high-performance computing. In contrast, semiconductor sales in Europe remain comparatively subdued, reflecting the region’s smaller footprint in high-end chip manufacturing, weaker industrial demand, and the ongoing impact of slower economic growth. While semiconductors are inherently cyclical, markets have increasingly interpreted the current rebound elsewhere as structural rather than purely cyclical—underpinned by the belief that AI represents a transformative and durable source of demand growth.

260205Z4.jpg

**Large-Scale AI Models**
The next chart illustrates the rapid proliferation of large-scale AI models globally, with newly updated data for 2025 pointing to a further sharp acceleration in development activity. The United States continues to lead by a wide margin, while China has also seen a steep rise in model deployment in recent years, underscoring the intensifying technological competition between the two economies. Growth in the UK and other regions has been more modest by comparison, highlighting the increasingly concentrated nature of AI innovation. Taken together with the surge in semiconductor sales, these trends help explain the market’s strong preoccupation with AI as a potential driver of future productivity and investment cycles—although the geographic concentration of activity also raises questions about the uneven distribution of any resulting economic gains.

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**An AI Bubble?** 
The final chart draws on the latest Blue Chip Financial Forecasts special questions, highlighting market participants’ perceptions of the economic gains likely to be delivered by artificial intelligence. While a sizeable share of respondents still believe that financial markets may be overestimating AI’s potential benefits, an increasing proportion now judge current expectations to be broadly accurate, with only a small minority viewing the gains as underestimated. Notably, this represents a softening in scepticism compared with the survey results from last month, when concerns about excessive market optimism were more pronounced. The shift suggests a growing acceptance that AI-related investment and innovation could translate into meaningful economic impacts—though uncertainty remains high around the scale, timing and distribution of these gains.

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Financial markets have experienced renewed gyrations in recent weeks, as shifting geopolitical risks, questions around Federal Reserve independence, renewed talk of US dollar “debasement,” and ongoing enthusiasm surrounding artificial intelligence have combined to drive volatility across asset classes. These cross-currents have also contributed to a degree of rotation away from high-flying technology stocks, as investors reassess valuations and the timing of anticipated AI-driven gains. Against this backdrop, the charts in this week’s COTW highlight several important themes. Policy rate expectations now appear more balanced globally, marking a clear shift away from the one-sided easing bias of the past two years (chart 1), even as resilient US data—underscored by the unexpected jump in the January ISM index and a run of positive economic surprises—continues to complicate the outlook for monetary easing (chart 2). At the same time, US financial conditions remain relatively benign, with limited evidence of widespread credit stress or aggressive tightening in lending standards (chart 3). Meanwhile, the sharp rebound in semiconductor sales and the accelerating rollout of large-scale AI models underscore why investors remain so focused on the AI narrative, even as Europe lags behind due to weaker industrial momentum and a smaller footprint in advanced chip production (charts 4 and 5). Finally, while some scepticism about AI’s ultimate economic impact persists, the latest survey results suggest a moderation in concerns that markets are materially overestimating its gains (chart 6). Taken together, these developments paint a picture of a US economy that remains more resilient than many had anticipated, set against a financial landscape increasingly shaped by powerful—if sometimes competing—narratives around geopolitics, policy, and technological transformation.

Charts of the Week: Balanced Policy, Resilient Data and AI Narratives

Winnie Tapasanun

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**Total job openings** fell 5.6% m/m (-12.9% y/y) to 6.542 million in December after a downwardly revised 7.0% decline to 6.928 million in November (previously -4.1% m/m; 7.146 million), according to the Job Openings and Labor Turnover Survey. December marked the third consecutive m/m fall and the lowest level since September 2020. The job openings rate declined to 3.9% in December, the lowest since April 2020, from 4.2% in November, remaining below a record-high 7.4% in March 2022. This rate is calculated as the ratio of job openings to total nonfarm employment plus openings. Significantly, the drop in job openings also lowered the **ratio of job openings to unemployed individuals** to 0.872 in December—the lowest since March 2021—from 0.890 in November, down from 1.085 in December 2024 and a pre-pandemic 1.211 in February 2020. A reading of 0.872 implies there were about 0.87 open jobs per unemployed person—indicating fewer openings than unemployed workers. December was the fifth time in six months that this ratio remained below 1.0.

**Private sector job openings** fell 6.8% (-12.5% y/y) to 5.804 million in December after a 6.6% fall to 6.227 million in November, registering the third successive m/m decline and the lowest level since September 2020. The private sector job openings rate fell to 4.1% in December, the lowest since April 2020, from 4.4% in November. The December m/m decline in private sector openings reflected drops of 27.7% (-36.9% y/y) in financial activities, 20.2% (-25.5% y/y) in professional & business services, 14.4% (-5.1% y/y) in trade, transportation & utilities, and 5.2% (-12.4% y/y) in private educational & health services. To the upside, private sector openings in the following categories rose m/m in December: other services (21.1%; 11.0% y/y), mining & lodging (17.6%; 0.0% y/y), information (13.5%; -4.7% y/y), manufacturing (8.5%; 0.5% y/y), leisure & hospitality (7.5%; -17.2% y/y), and construction (2.8%; 42.4% y/y). Meanwhile, government job openings rose 5.3% (-15.6% y/y) in December, the first m/m rise in three months, after a 10.6% drop in November.

**Total hiring** rebounded 3.4% (-1.5% y/y) to 5.293 million in December, the first m/m increase since September, following a 4.6% decrease to 5.121 million in November. The hiring rate edged up to 3.3% in December from 3.2% in November, though it remained below pre-pandemic levels. **Private sector hiring** rose 3.1% (-0.4% y/y) to 4.978 million in December, the third m/m rise in four months, after a 4.0% decline to 4.826 million in November. The private sector hiring rate rose to 3.7% in December from 3.5% in November, the same as in October and September. The December m/m increase in private sector hiring was led by a 32.1% jump (42.3% y/y) in information, followed by gains of 24.0% (-4.6% y/y) in financial activities, 23.5% (0.0% y/y) in mining & lodging, 6.5% (-4.8% y/y) in private educational & health services, 4.2% (-4.9% y/y) in trade, transportation & utilities, 3.6% (6.1% y/y) in construction, 3.4% (7.9% y/y) in leisure & hospitality, and 1.8% (-4.3% y/y) in manufacturing. To the downside, private sector hiring in professional & business services (-5.2%; +0.5% y/y) and other services (-4.3%; -16.5% y/y) declined m/m in December. Meanwhile, government hiring rebounded 6.4% (-16.3% y/y) in December, the first m/m rise since September, following a 13.5% drop in November.

**Total separations** rose 2.1% (3.3% y/y) to 5.251 million in December after a 1.5% rise to 5.144 million in November, marking the third m/m increase in four months and the highest level since September. The total separations rate edged up to 3.3% after holding at 3.2% in November and October. Private sector separations rose 1.6% (4.2% y/y) to 4.932 million in December, the highest level since June, while government sector separations jumped 10.4% (-9.1% y/y) to 319,000 following two consecutive m/m declines. **Total quits** (voluntary separations initiated by the employee) increased 0.3% (3.5% y/y) to 3.204 million in December, the third m/m rise in four months and the highest level since June, after a 7.4% rebound in November. The quits rate (a measure of workers’ willingness or ability to leave jobs) held at 2.0% in December and November, slightly below 2.3% in February 2020. Private sector quits eased 0.2% (+4.5% y/y) following an 8.4% November rebound. **Layoffs and discharges** (involuntary separations initiated by the employer) increased 3.6% (5.6% y/y) to 1.762 million in December, up for the third time in four months, after an 8.1% drop in November. The layoffs & discharges rate remained at 1.1% in December and November, marginally below 1.3% in February 2020. Private sector layoffs grew 4.3% (7.8% y/y) following a 7.3% November decrease.

The Job Openings and Labor Turnover Survey (JOLTS) data are available in Haver’s **USECON** database.

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- Job openings down 5.6% (-12.9% y/y) to 6.542 mil., third straight m/m decline.
- Hiring up 3.4% (-1.5% y/y) to 5.293 mil., first m/m increase since September.
- Separations rise to a three-month high; quits reach a six-month high; layoffs rebound.

U.S. JOLTS: Openings Drop to Lowest Level Since Sept. ’20; Hiring Rebounds in December

Sandy Batten

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Initial claims for unemployment insurance jumped 22,000 to 231,000 in the week ended January 31 following an unrevised 209,000 in the prior week. The four-week average rose to 212,250 from 206,250. The Action Economics Forecast Survey looked for 213,000 claims to have been filed. Winter Storm Fern and the accompanying very cold temperatures could have provided a temporary boost. Historically speaking, claims remain at low levels.

The total number of unemployment insurance beneficiaries—also known as “continuing claims”—increased by 25,000 to 1.844 million in the week ending January 24, from a downwardly revised 1.819 million in the prior week (previously 1.827 million). The insured unemployment rate remained at 1.2% in the week of January 24, unchanged from the previous eight weeks.

The insured unemployment rate varied greatly across individual states and territories. In the week ending January 17, the highest unemployment rates were in Rhode Island (2.83%), New Jersey (2.77%), Massachusetts (2.67%), Washington (2.54%), and Minnesota (2.45%). The lowest rates were in Florida (0.30%), North Carolina (0.42%), Louisiana (0.43%), Alabama (0.46%), and Arkansas (0.47). Rates in other notable states include Illinois (2.15%), California, (2.08%), New York (2.02%), Pennsylvania (1.91%), and Texas (1.09%). 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 jumped 22,000 to 231,000, the highest level since December 6.
- Continuing claims rose to 1.844 million from 1.819 million.

U.S. Initial Unemployment Claims Surged in Latest Week

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German real orders in December adjusted for inflation rose strongly again, gaining 7.8% month-to-month after rising 5.7% month-to-month in November. Foreign orders were up by 5.6% in December compared to 5.2% in November. Domestic orders surged by 10.7% in December after rising 6.4% in November and 10% in October.

**Real sales**
Real sales were mixed in December with overall sales falling 1.4% month-to-month mostly on weakness in capital goods sales.

**Broad categorical acceleration**
Many flows are accelerating this month. Sequential growth rates show acceleration. Total real orders accelerate from a year ago, to the current year, to six-months, and to three-months. Sales growth rates for consumer goods, consumer nondurables, and intermediate goods all show accelerations in gear. The exceptions are foreign orders that are not as strong over six months compared to their 12-month growth. And on the sales side, consumer durables sales and capital goods sales are weak.

**Quarter-to-quarter**
Quarterly annualized growth is complete for Q4 with this report. Foreign orders are the ‘weak flow’ expanding at a 13.6% annual rate – certainly not a weak growth rate. But domestic real orders are up at an astounding 101.9% annual rate. The net impact on the total real orders growth is to lift it to a pace of 44.1%. 

**Order ranking is very strong**
The table provides two rankings: one based on the level of variables and the other based on its year-on-year growth. The rankings this month for real orders overall, foreign, and domestic orders all reside in their top 80th to 90th percentiles- extremely strong based on level or growth. Sales do not follow suit. This gives us some reason to suspect that there is some lumpiness involved in the manufacturing data as distinct from strength. That will be something to watch. Overall mining and manufacturing sales growth is essentially at its historic median at a rank of 49.8. However, capital goods, intermediate goods and manufacturing sales all have rankings at or above their medians - as high as a 61-percentile standing for capital goods.

**Industrial confidence**
Industrial confidence for Germany, France, Italy and Spain (the EU’s big-four economies) show rankings based on these survey levels that are much lower at the 11th percentile for Germany, the 42nd and 36th percentiles, for France and Italy, respectively. Spain scores better with a 61.8 percentile standing on its industrial confidence measure. 

On balance, there is now an accelerating profile that is broad in sales trends and especially strong order trends. Perhaps Europe, under the pressure to stimulate its miliary capabilities, has a core of demand to help drive output ahead more consistently. This is something to watch in the coming months.

Economy in Brief: 2007

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Initial Claims for Jobless Insurance Hover Around 330K

Initial Claims for Jobless Insurance Hover Around 330K

U.S. Productivity & Unit Labor Costs: A Follow-Up

ADP Report Points to 57K Private Payroll Growth for February; Survey Revised, Series Added on Sector and Firm-Size

ADP Report Points to 57K Private Payroll Growth for February; Survey Revised, Series Added on Sector and Firm-Size

GDP Growth in the Euro Area Exceeds That of the U. S. for the Third Time

Q4 Productivity Revised Down; Bonus Payments Boost Unit Labor Cost

Q4 Productivity Revised Down; Bonus Payments Boost Unit Labor Cost