Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070104f.jpg" width="353">
For December, announced job cuts reported by Challenger, Grey &amp; Christmas fell a sharp 28.8% to 54,643. The three month moving average of layoff announcements also fell to 66,864, its lowest level since August.
During the last ten years there has been an 83% (inverse) correlation between the three month moving average level of announced job cuts and the three month change payroll employment.
Layoffs fell sharply m/m in the automotive (+77.0% y/y) and apparel (+1.4% y/y) and services (-57.0% y/y) industries.
Job cut announcements differ from layoffs. Many are achieved through attrition, early retirement or just never occur.
Challenger also reported that announced hiring plans fell sharply m/m (-84.4% y/y).

<table border="0" cellspacing="0" width="100%">
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S3/@S301/@S301.HTM">Challenger, Gray &amp; Christmas</a></th>
<th scope="col">December</th>
<th scope="col">November</th>
<th scope="col">Y/Y</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Announced Job Cuts</td>
<td>54,643</td>
<td>76,773</td>
<td>-49.3%</td>
<td>839,822</td>
<td>1,072,054</td>
<td>1,039,935</td>
</tr>
</tbody>
</table>
</body>
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For December, announced job cuts reported by Challenger, Grey & Christmas fell a sharp 28.8% to 54,643. The three month moving average of layoff announcements also fell to 66,864, its lowest level since August. During the last ten [...]

Challenger Layoffs Off Sharply

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070104e.jpg" width="353">
Initial unemployment insurance claims popped 10,000 last week to 329,000 for the third consecutive weekly gain. The increase outpaced Consensus expectations for stability at 318,000.
During the last ten years there has been a (negative) 77% correlation between the level of initial claims and the m/m change in nonfarm payroll employment.
The four-week moving average of initial claims also rose to 317,500 (2.3% y/y) though that was down from the early December high of 328,750.
Continuing claims for unemployment insurance dropped a sharp 76,000.
The insured rate of unemployment remained at 1.9% for the seventh consecutive week and equaled the average rate since February.

<table border="0" cellspacing="0" width="100%">
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<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">12/30/06</th>
<th scope="col">12/23/06</th>
<th scope="col">Y/Y</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
</tr>
</thead>
<tbody>
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<td class="firstcol">Initial Claims</td>
<td>329</td>
<td>319</td>
<td>11.5%</td>
<td>313</td>
<td>332</td>
<td>343</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Continuing Claims</td>
<td>--</td>
<td>2,446</td>
<td>-8.3%</td>
<td>-</td>
<td>2,662</td>
<td>2,924</td>
</tr>
</tbody>
</table>
</body>
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Initial unemployment insurance claims popped 10,000 last week to 329,000 for the third consecutive weekly gain. The increase outpaced Consensus expectations for stability at 318,000. During the last ten years there has been a [...]

Initial Unemployment Insurance Claims Rose

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070104a.jpg" width="353">
The non-manufacturing sector Business Activity Index fell as expected to 57.1 last month and reversed all of November&#39;s 1.8 point increase. The figure from the Institute for Supply Management (ISM) averaged 57.9 last year versus an average of 60.1 during 2005 but did improve slightly during the fourth quarter from 3Q.
Since the series&#39; inception in 1997 there has been a 50% correlation between the level of the Business Activity Index and the q/q change in real GDP for services plus construction.
The new orders sub-index fell hard during December to 54.4, the lowest level since August. The employment index, however, improved to 53.3, its highest since September. Since the series&#39; inception in 1997 there has been a 60% correlation between the level of the ISM non-manufacturing employment index and the m/m change in payroll employment in the service producing plus the construction industries.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070104b.jpg" width="353">
Pricing power improved for the second month and rose to 59.1. Since inception eight years ago, there has been a 70% correlation between the price index and the y/y change in the GDP services chain price index.
ISM surveys more than 370 purchasing managers in more than 62 industries including construction, law firms, hospitals, government and retailers. The non-manufacturing survey dates back to July 1997.
Business Activity Index for the non-manufacturing sector reflects a question separate from the subgroups mentioned above. In contrast, the NAPM manufacturing sector composite index is a weighted average five components.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EF/@EF03/@EF03.HTM">ISM Nonmanufacturing Survey</a></th>
<th scope="col">December</th>
<th scope="col">November</th>
<th scope="col">Dec. &#39;05</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Business Activity Index</td>
<td>57.1</td>
<td>58.9</td>
<td>61.0</td>
<td>57.9</td>
<td>60.1</td>
<td>62.5</td>
</tr>
<tr>
<td class="firstcol">Prices Index</td>
<td>59.1</td>
<td>55.6</td>
<td>67.2</td>
<td>65.4</td>
<td>67.9</td>
<td>68.8</td>
</tr>
</tbody>
</table>


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The non-manufacturing sector Business Activity Index fell as expected to 57.1 last month and reversed all of November's 1.8 point increase. The figure from the Institute for Supply Management (ISM) averaged 57.9 last year versus an [...]

ISM Nonmanufacturing Index Slipped

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070104d.jpg" width="353">
In December, U.S. sales of light vehicles rose 4.4% from the prior month to 16.75M units, according to the Autodata Corporation. The rise was to the highest level since July.
For the full year of 2006, however, vehicle sales fell 2.4% to 16.55M, the lowest level since 1998.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070104c.jpg" width="353">
Improved domestic car sales lifted December vehicle sales with an 11.4% (3.8% y/y) gain but for the year domestic auto sales fell 1.4% versus 2005. Sales of imported autos also were strong last month and posted a 6.1% (8.5% y/y) gain and for the year rose 8.7%.
Imported light truck sales also rose 1.9% (19.0% y/y) last month to 1.51M units and for 2006 rose 14.4%.
Domestic light truck sales slipped for the third consecutive month. The 0.5% decline to 7.14M units (-12.4% y/y) still, however, garnered 84% of the U.S. market for light trucks during 2006.

<table border="0" cellspacing="0" width="100%">
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@ED/@ED09/@ED0901/@ED0901.HTM">Light Vehicle Sales (SAAR, Mil. Units)</a></th>
<th scope="col">December</th>
<th scope="col">November</th>
<th scope="col">Y/Y</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">Total</td>
<td>16.75</td>
<td>16.04</td>
<td>-2.1%</td>
<td>16.55</td>
<td>16.96</td>
<td>16.87</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Autos</td>
<td>8.09</td>
<td>7.38</td>
<td>5.3%</td>
<td>7.77</td>
<td>7.65</td>
<td>7.49</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Trucks</td>
<td>8.65</td>
<td>8.66</td>
<td>-8.2%</td>
<td>8.78</td>
<td>9.32</td>
<td>9.37</td>
</tr>
</tbody>
</table>
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In December, U.S. sales of light vehicles rose 4.4% from the prior month to 16.75M units, according to the Autodata Corporation. The rise was to the highest level since July. For the full year of 2006, however, vehicle sales fell 2.4% [...]

U.S. Vehicle Sales Rose in December

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070104d.jpg" width="353">
In December, U.S. sales of light vehicles rose 4.4% from the prior month to 16.75M units, according to the Autodata Corporation. The rise was to the highest level since July.
For the full year of 2006, however, vehicle sales fell 2.4% to 16.55M, the lowest level since 1998.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070104c.jpg" width="353">
Improved domestic car sales lifted December vehicle sales with an 11.4% (3.8% y/y) gain but for the year domestic auto sales fell 1.4% versus 2005. Sales of imported autos also were strong last month and posted a 6.1% (8.5% y/y) gain and for the year rose 8.7%.
Imported light truck sales also rose 1.9% (19.0% y/y) last month to 1.51M units and for 2006 rose 14.4%.
Domestic light truck sales slipped for the third consecutive month. The 0.5% decline to 7.14M units (-12.4% y/y) still, however, garnered 84% of the U.S. market for light trucks during 2006.

<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/USECON/@ED/@ED09/@ED0901/@ED0901.HTM">Light Vehicle Sales (SAAR, Mil. Units)</a></th>
<th scope="col">December</th>
<th scope="col">November</th>
<th scope="col">Y/Y</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">Total</td>
<td>16.75</td>
<td>16.04</td>
<td>-2.1%</td>
<td>16.55</td>
<td>16.96</td>
<td>16.87</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Autos</td>
<td>8.09</td>
<td>7.38</td>
<td>5.3%</td>
<td>7.77</td>
<td>7.65</td>
<td>7.49</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Trucks</td>
<td>8.65</td>
<td>8.66</td>
<td>-8.2%</td>
<td>8.78</td>
<td>9.32</td>
<td>9.37</td>
</tr>
</tbody>
</table>
ISM Nonmanufacturing Index Slipped 
by <a href="/comment/Moeller.html">Tom Moeller</a> January 4, 2007


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070104a.jpg" width="353">
The non-manufacturing sector Business Activity Index fell as expected to 57.1 last month and reversed all of November&#39;s 1.8 point increase. The figure from the Institute for Supply Management (ISM) averaged 57.9 last year versus an average of 60.1 during 2005 but did improve slightly during the fourth quarter from 3Q.
Since the series&#39; inception in 1997 there has been a 50% correlation between the level of the Business Activity Index and the q/q change in real GDP for services plus construction.
The new orders sub-index fell hard during December to 54.4, the lowest level since August. The employment index, however, improved to 53.3, its highest since September. Since the series&#39; inception in 1997 there has been a 60% correlation between the level of the ISM non-manufacturing employment index and the m/m change in payroll employment in the service producing plus the construction industries.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070104b.jpg" width="353">
Pricing power improved for the second month and rose to 59.1. Since inception eight years ago, there has been a 70% correlation between the price index and the y/y change in the GDP services chain price index.
ISM surveys more than 370 purchasing managers in more than 62 industries including construction, law firms, hospitals, government and retailers. The non-manufacturing survey dates back to July 1997.
Business Activity Index for the non-manufacturing sector reflects a question separate from the subgroups mentioned above. In contrast, the NAPM manufacturing sector composite index is a weighted average five components.

<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/USECON/@EF/@EF03/@EF03.HTM">ISM Nonmanufacturing Survey</a></th>
<th scope="col">December</th>
<th scope="col">November</th>
<th scope="col">Dec. &#39;05</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Business Activity Index</td>
<td>57.1</td>
<td>58.9</td>
<td>61.0</td>
<td>57.9</td>
<td>60.1</td>
<td>62.5</td>
</tr>
<tr>
<td class="firstcol">Prices Index</td>
<td>59.1</td>
<td>55.6</td>
<td>67.2</td>
<td>65.4</td>
<td>67.9</td>
<td>68.8</td>
</tr>
</tbody>
</table>
Initial Unemployment Insurance Claims Rose 
by <a href="/comment/Moeller.html">Tom Moeller</a> January 4, 2007


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070104e.jpg" width="353">
Initial unemployment insurance claims popped 10,000 last week to 329,000 for the third consecutive weekly gain. The increase outpaced Consensus expectations for stability at 318,000.
During the last ten years there has been a (negative) 77% correlation between the level of initial claims and the m/m change in nonfarm payroll employment.
The four-week moving average of initial claims also rose to 317,500 (2.3% y/y) though that was down from the early December high of 328,750.
Continuing claims for unemployment insurance dropped a sharp 76,000.
The insured rate of unemployment remained at 1.9% for the seventh consecutive week and equaled the average rate since February.

<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">12/30/06</th>
<th scope="col">12/23/06</th>
<th scope="col">Y/Y</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>329</td>
<td>319</td>
<td>11.5%</td>
<td>313</td>
<td>332</td>
<td>343</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Continuing Claims</td>
<td>--</td>
<td>2,446</td>
<td>-8.3%</td>
<td>-</td>
<td>2,662</td>
<td>2,924</td>
</tr>
</tbody>
</table>
Challenger Layoffs Off Sharply 
by <a href="/comment/Moeller.html">Tom Moeller</a> January 4, 2007


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070104f.jpg" width="353">
For December, announced job cuts reported by Challenger, Grey &amp; Christmas fell a sharp 28.8% to 54,643. The three month moving average of layoff announcements also fell to 66,864, its lowest level since August.
During the last ten years there has been an 83% (inverse) correlation between the three month moving average level of announced job cuts and the three month change payroll employment.
Layoffs fell sharply m/m in the automotive (+77.0% y/y) and apparel (+1.4% y/y) and services (-57.0% y/y) industries.
Job cut announcements differ from layoffs. Many are achieved through attrition, early retirement or just never occur.
Challenger also reported that announced hiring plans fell sharply m/m (-84.4% y/y).

<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/SURVEYS/@S3/@S301/@S301.HTM">Challenger, Gray &amp; Christmas</a></th>
<th scope="col">December</th>
<th scope="col">November</th>
<th scope="col">Y/Y</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Announced Job Cuts</td>
<td>54,643</td>
<td>76,773</td>
<td>-49.3%</td>
<td>839,822</td>
<td>1,072,054</td>
<td>1,039,935</td>
</tr>
</tbody>
</table>
Corporate Profitability Strengthens in UK; Return on Capital Reaches Record 15.2% in Q3 
by <a href="/comment/Stone.html">Carol Stone</a> January 4, 2007


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070104g.jpg" width="353">
UK corporations had a record operating surplus in Q3 2006 and earned record rates of return on capital. All private nonfinancial corporations returned 13.4% in gross operating surplus against gross capital stock and 15.2% on a net basis. The gross return compared with 13.2% in Q2 and 13.0% in Q3 2005. Before this latest period, only four other quarters since 1989 had been as high as 13%. The net return comparison is even stronger: Q2 was 14.9% and besides these two latest periods, the high since 1989 was 14.4%. Annual data go back to 1965 and the earlier years were no higher, giving greater weight to the current, precedent-setting performance.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070104h.jpg" width="353">
Clearly some of this has to do with high profitability in the oil industry. The second graph shows the recent strength in that sector, referred to as the UK Continental Shelf, with net returns in the mid-40% range. Q2 2006 does, though, appear to have been a peak and current performance is well off the highs of the mid-1980s.
&quot;Non-continental shelf companies&quot; are also doing well. Nonfinancial services are the source of considerable gain, and &quot;other&quot; industries contribute too (these include utilities, construction, agriculture and mining, not published separately). Service companies have returned more than 19% on capital so far in 2006, about 0.75% above the previous record of 18.5% in 1998. Manufacturing, by contrast, is lagging. The operating surplus in those industries reached a peak of just under &pound;35 billion in 1997, when the yield on capital was 15.3%. By 2005, the surplus had decreased to &pound;20.6 billion and has apparently fallen further in the first three quarters of 2006. This is still, however, better than in the late 1970s and early 1980s, which saw surpluses nearly vanish, generating meager returns as low as 1.3% (1981) and less than 5% for 10 years running.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070104i.jpg" width="353">
These rate-of-return data all come from Haver&#39;s UK database, sourced from the UK Office for National Statistics. While they are issued with considerable lag -- more than three months after the end of the quarter they describe -- they appear to be quite helpful in assessing aggregate and sector corporate performance. Note also that the operating surplus figures that form the basis of these returns were reported two weeks ago on December 21. The published capital data are only annual, but within some limits, they could be inferred from the returns and the surplus data that are available. The ONS cautions though that these data are subject to more revision than other of their series, a common situation with residual information like profits.

<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/UK/@U2/@U224/@U224.HTM">PNFC* Rates of Return</a> &nbsp; (%, ex as noted)</th>
<th scope="col">Q3 2006</th>
<th scope="col">Q2 2006</th>
<th scope="col">Q3 2005</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Gross Operating Surplus (Bil.&pound;)</td>
<td>61,773</td>
<td>58,980</td>
<td>56,995</td>
<td>228,030</td>
<td>219,738</td>
<td>202,479</td>
</tr>
<tr>
<td class="firstcol">&nbsp; % Change</td>
<td>4.7</td>
<td>3.5</td>
<td>8.7 (Y/Y)</td>
<td>3.8</td>
<td>8.5</td>
<td>6.6</td>
</tr>
<tr class="odd">
<td class="firstcol">Rate of Return:&nbsp;&nbsp; Gross</td>
<td>13.4</td>
<td>13.2</td>
<td>13.0</td>
<td>12.9</td>
<td>12.9</td>
<td>12.4</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Net</td>
<td>15.2</td>
<td>14.9</td>
<td>14.4</td>
<td>14.3</td>
<td>14.2</td>
<td>13.4</td>
</tr>
<tr class="odd">
<td class="firstcol">Continental Shelf Companies (Net)</td>
<td>42.9</td>
<td>47.6</td>
<td>37.0</td>
<td>34.1</td>
<td>25.1</td>
<td>24.9</td>
</tr>
<tr>
<td class="firstcol">Non-Continental Shelf Companies (Net)**</td>
<td>13.9</td>
<td>13.4</td>
<td>13.4</td>
<td>13.4</td>
<td>13.5</td>
<td>12.8</td>
</tr>
</tbody>
</table>


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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/070103j.jpg" width="353">
The German labor markets look quite firm, according to labor force and unemployment data reported today for November and December.
Total employment in November was 39.28 million, up 46,000 from October and 411,000 or 1.1% from November 2005. It has risen every month since January (seasonally adjusted). Annual revisions were included in this release, altering some prior employment levels and unemployment rates. The general pattern is not affected, however.
The number of job vacancies remains supportive to further employment growth. At 728,000 in December (seasonally adjusted), these rose 27,000 in the month and are up substantially from 486,000 a year ago.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070103k.jpg" width="353">
The unemployment situation has gained greater clarity in the last couple of months. When we last examined the German labor data two months ago, the ILO-based definition had shown some hesitation and remained above a recent low, even as the so-called &quot;registered unemployment&quot; measure was coming down. Now, the ILO rate has hit a new low, 7.7% of the labor force and the lowest since July 2002. This is off 1.2% from November 2005. The Germans&#39; preferred measure, the &quot;registered&quot; unemployment rate, dipped below 10% to 9.8%, its first move into single digits since September 2002. This latter move is all the more significant for definitional changes in early 2005 that raised the level of reported unemployment. So the rate on this &quot;new&quot; basis is now well below many months calculated on the &quot;old&quot; basis and in fact is just 0.6% above its 2001 cycle low.
These labor market data correspond to results of recent business surveys in Germany, which we have described elsewhere as showing &quot;growing optimism&quot;. They also mirror the improving employment readings in the purchasing manager surveys covering November; the manufacturing sector eased fractionally in its December results (reported yesterday), but remained in the high range of last spring. Taken together, it all seems to be showing improving conditions in Germany.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">Germany: Seas Adj, ex as noted</th>
<th scope="col">Dec 2006</th>
<th scope="col">Nov 2006</th>
<th scope="col">Oct 2006</th>
<th scope="col">Year Ago</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">LFS Employment (mil)</td>
<td>--</td>
<td>39.28</td>
<td>39.24</td>
<td>38.87</td>
<td>38.82</td>
<td>38.88</td>
<td>38.72</td>
</tr>
<tr>
<td class="firstcol">Change (thous)</td>
<td>--</td>
<td>+46</td>
<td>+35</td>
<td>+411</td>
<td>-53</td>
<td>+151</td>
<td>-368</td>
</tr>
<tr class="odd">
<td class="firstcol">Yr/Yr % Chg NSA</td>
<td>--</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>+1.1</td>
<td>-0.1</td>
<td>+0.4</td>
<td>-0.9</td>
</tr>
<tr>
<td class="firstcol">Unemployment Rate (%, ILO Def.)</td>
<td>--</td>
<td>7.7</td>
<td>7.8</td>
<td>8.9</td>
<td>9.1</td>
<td>9.2</td>
<td>8.8</td>
</tr>
<tr class="odd">
<td class="firstcol">Registered Unemployment Rate (%)</td>
<td>9.8</td>
<td>10.1</td>
<td>10.3</td>
<td>11.3</td>
<td>10.8</td>
<td>11.7</td>
<td>10.6</td>
</tr>
<tr>
<td class="firstcol">Job Vacancies (thous)</td>
<td>728</td>
<td>701</td>
<td>671</td>
<td>486</td>
<td>413</td>
<td>284</td>
<td>352</td>
</tr>
</tbody>
</table>
</body>
</html>

The German labor markets look quite firm, according to labor force and unemployment data reported today for November and December. Total employment in November was 39.28 million, up 46,000 from October and 411,000 or 1.1% from [...]

German Labor Markets Maintain Gains; Unemployment at 4-Year Lows

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070103g.jpg" width="353">
The International Council of Shopping Centers (ICSC)-UBS indicated that chain store sales last week rose 0.3% after three consecutive weeks of double digit increase. The gains lifted December sales 0.5% higher than the November average which advanced 0.3% from October.
During the last ten years there has been a 45% correlation between the y/y change in chain store sales and the change in nonauto retail sales less gasoline.
The ICSC-UBS retail chain-store sales index is constructed using the same-store sales (stores open for one year) reported by 78 stores of seven retailers: Dayton Hudson, Federated, Kmart, May, J.C. Penney, Sears and Wal-Mart.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070103h.jpg" width="353">
The leading indicator of chain store sales from ICSC-UBS, however, repeated its 0.9% decline of the prior week and was down 0.5% from a year ago. The decline may be attributable to the further increase in retail gasoline prices which rose to $2.34 cents per gallon in the latest week, up fourteen cents from the recent low.

<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/surveyw/@S2/@S2.HTM">ICSC-UBS (SA, 1977=100)</a></th>
<th scope="col">12/30/06</th>
<th scope="col">12/23/06</th>
<th scope="col">Y/Y</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Total Weekly Chain Store Sales</td>
<td>476.8</td>
<td>475.4</td>
<td>2.8%</td>
<td>3.6%</td>
<td>4.7%</td>
<td>2.9%</td>
</tr>
</tbody>
</table>


</html>

The International Council of Shopping Centers (ICSC)-UBS indicated that chain store sales last week rose 0.3% after three consecutive weeks of double digit increase. The gains lifted December sales 0.5% higher than the November [...]

Weekly Chain Store Sales Finished 2006 Firm

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070103i.jpg" width="353">
The total number of mortgage applications ticked up 3.6% last week after two weeks of sharp decline which left the average level of applications in December up 1.1% versus the prior month, according to the Mortgage Bankers Association.
Purchase applications rose 4.3% following two weeks of sharp decline but increased 4.7% during the month from the November average which rose 6.4% from the October level.
During the last ten years there has been a 58% correlation between the y/y change in purchase applications and the change in new plus existing single family home sales.
Applications to refinance also ticked up 2.2% after two weeks of double digit decline which gave back more than all some earlier increases. In December applications to refinance were unchanged on average from November.
The effective interest rate on a conventional 30-year mortgage increased again w/w to 6.40%, the highest level since early November. Nevertheless rates averaged 6.28% in December, down versus 6.36% during November. The peak for 30 year financing was 7.08% late in June. Rates for 15-year financing also increased to 6.18% and averaged 6.05% last month versus 6.13% during November. Interest rates on 15 and 30 year mortgages are closely correlated (&gt;90%) with the rate on 10 year Treasury securities.
During the last ten years there has been a (negative) 79% correlation between the level of applications for purchase and the effective interest rate on a 30-year mortgage.
The Mortgage Bankers Association surveys between 20 to 35 of the top lenders in the U.S. housing industry to derive its refinance, purchase and market indexes. The weekly survey covers roughly 50% of all U.S. residential mortgage applications processed each week by mortgage banks, commercial banks and thrifts. Visit the Mortgage Bankers Association site <a href="http://www.mbaa.org">here</a>.

<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/SURVEYW/@S5/@S5.HTM">MBA Mortgage Applications (3/16/90=100)</a></th>
<th scope="col">12/29/06</th>
<th scope="col">12/22/06</th>
<th scope="col">Y/Y</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">Total Market Index</td>
<td>575.6</td>
<td>555.8</td>
<td>5.4%</td>
<td>584.2</td>
<td>708.6</td>
<td>735.1</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Purchase</td>
<td>406.9</td>
<td>390.2</td>
<td>-2.7%</td>
<td>406.9</td>
<td>470.9</td>
<td>454.5</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Refinancing</td>
<td>1,640.4</td>
<td>1,604.6</td>
<td>20.3%</td>
<td>1,634.0</td>
<td>2,092.3</td>
<td>2,366.8</td>
</tr>
</tbody>
</table>
</body>
</html>

The total number of mortgage applications ticked up 3.6% last week after two weeks of sharp decline which left the average level of applications in December up 1.1% versus the prior month, according to the Mortgage Bankers [...]

Mortgage Applications Ticked Up

USD/EUR exchange rate uncoupling from interest rate differential

Widespread downgrading of 2025 GDP outlook

Trade and fiscal policy uncertainty has exploded with the new administration

Much lower US electricity costs gives it a competitive advantage

Wage growth slowing in the US and Euro area; elevated and sticky in the UK

Stagflation-lite: Blue Chip forecasts below-trend growth and elevated inflation

US policy gyrations boosting policy uncertainty worldwide

Expected tariff hikes have boosted inflation expectations

US and Japan ended 2024 on solid ground in contrast to Europe

US economy expected to outperform other major economies in 2025

Only modest evidence of AI-related surge in US productivity growth

Previous Trump tariffs fading. A boost from new tariffs ahead?

Heavy US manufacturing states underperforming while Sun Belt states outperforming

Rising long-term yields a global phenomenon

US financial market concerns shifting from growth to inflation

Economic activity is picking up in the US but remains lackluster abroad

Policy uncertainty has surged since the US national elections.

Recent turnaround in US economic surprises leading to increases in rate-cut expectations

The outlook has brightened in the US, while it has dimmed for other major economies

Headline US PCE inflation elevated by sticky services prices

US and global equity prices have recently diverged

US leading global upturn in economic surprises

Blue Chip forecasters look for further significant monetary easing apart from Japan

Recent rise in global supply chain pressures could augur a pickup in global inflation pressures

Underperforming German economy generating increased policy uncertainty relative to Europe and the US

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The U.S. trade deficit in goods and services (BOP basis) in March grew to $140.5 billion after narrowing slightly to $123.2 billion in February, revised from $122.7 billion, after widening to $130.7 billion in January according to the U.S. Census Bureau. A $136.7 billion deficit was expected by the Action Economics Forecast Survey. Exports rose 0.2% (6.7% y/y) in March after increasing 2.8% in February. This was accompanied by a 4.4% rise (27.1% y/y) rise in imports which came after m/m stability in February. In Q1’25, the deficit grew to an average $131.4 billion, after rising to an average $83.3 billion in Q4’24.

The trade deficit in goods (BOP basis) widened to a record $163.2 billion in March from $147.9	 billion in February, revised from $147.0 billion. Goods exports (customs value) rose 1.4% (7.0% y/y) in March, after increasing 3.6% in February. The latest increase reflected an 8.2% (8.4% y/y) surge in auto exports which came after a 12.7% strengthening. A 3.5% (4.0% y/y) gain occurred in industrial supplies & materials exports which followed a 5.1% rise. Foods, feeds & beverage exports rose 6.6% (1.4% y/y) after declining in four of the prior five month. Working lower, capital goods exports fell 2.5% (+13.9% y/y) in March after a 4.	8% increase and nonauto consumer goods exports were off 1.1% (+3.4% y/y) in March after a 2.4% gain.

Imports of goods increased 5.5% (31.4% y/y) in March after a 0.2% February easing. Imports of nonauto consumer goods imports surged 27.9% (56.0% y/y) following a 3.1% February gain. Auto imports rose 6.6% (8.7% y/y) after a 1.2% rise. Capital goods imports rose 4.2% (22.5% y/y) following a 1.1% rise. Foods, feeds & beverage imports eased 0.4% (+11.1% y/y) following a 2.0% weakening. Industrial supplies & materials imports declined 12.4% (+39.5% y/y) after weakening 4.6% in February. Petroleum imports by end-use fell 4.1% (-10.2% y/y) after a 2.9% decline. Nonpetroleum imports increased 6.0% (34.8% y/y) after holding steady in February.

The inflation-adjusted goods trade deficit (customs value) deepened to $150.9 billion in March from $136.9 billion in February. Real exports rose 1.6% (5.3% y/y) after a 3.0% February increase, while real imports rose 5.8% (29.8% y/y) in March following a 0.5% February slip.

The services trade surplus narrowed to $23.0 billion in March after decreasing to $23.8 billion in February. It reached a peak of $25.7 billion in November of last year. Service exports fell 0.9% (+5.7% y/y) after a 0.8% decline in February. Construction services exports rose 1.0% (37.7% y/y) after increasing 2.6% in February. Travel services exports fell 7.1% (-3.7% y/y) and financial exports increased 0.9% (7.3% y/y). Transport exports rose 3.1% (2.4% y/y). Service imports eased 0.1% (+10.8% y/y) in March following a 0.8% gain. Maintenance & repair services declined 1.5% (+32.1% y/y) while imported transport services increased 1.2% (1.7% y/y). Imported travel services fell 2.2% (5.3% y/y) while charges for use of intellectual property rose 1.0% (13.6 y/y).

The U.S. goods trade deficit with China narrowed to a seasonally adjusted $24.8 billion in March from $26.6 billion in February. Exports to China declined 8.2% (-10.5% y/y) while imports weakened 7.2% (-2.7% y/y). The deficit with the European Union deepened to a record $48.3 billion in March from $30.9 billion in February. Exports rose 10.9% (14.5% y/y) while imports soared 34.0% (65.4% y/y). The deficit with Japan deepened to $5.8 billion from $5.2 billion in February. Exports rose 1.8% (8.8% y/y) and imports rose 6.4% (9.9% y/y).

The international trade data, including relevant data on oil prices, can be found in Haver’s **USECON** database. Detailed figures on international trade are available in the **USINT** and **USTRADE** databases. The expectations figures are from the Action Economics Forecast Survey in **AS1REPNA**.

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- Goods deficit grows as imports surge ahead of tariff imposition.
- Exports edge higher, led by autos.
- Petroleum product imports fall as crude oil prices decline.

U.S. Trade Deficit Deepens to Record in March

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Retail gasoline prices for all grades improved to an average $3.27 per gallon (-13.1% y/y) in the week ended May 5 and reversed the prior week’s easing to $3.26. Prices were $3.37 per gallon to begin the month but remained above their low of $3.13 in the week of December 9. An earlier high was $3.79 in the week ending April 22, 2024. The all-time high of $5.11 occurred in the week ending June 13, 2022. The retail price for on-highway diesel fuel eaed to $3.50 per gallon (-10.2% y/y) in the week of May 5 from $3.51 in the prior week. The latest diesel price stood well below a high of $4.63 in the week ending September 18, 2023 and a peak of $5.81 in the week ending June 20, 2022.

The price of West Texas Intermediate crude oil declined to $59.64 per barrel (-26.4% y/y) in the week ended May 2, after rising to $63.09 per barrel in the prior week. Prices remained below a high of $91.45 in the week of September 29, 2023. The cost of crude oil peaked at $120.46 in the week of June 10, 2022. Yesterday, the price was $57.13 per barrel. The price of European Brent crude oil declined to $63.50 per barrel (-25.9% y/y) in the week of May 2 from $67.92 in the previous week. Prices remained well below a recent high of $95.61 in the week of September 29, 2023 and compared to a peak of $127.40 in the week of June 10, 2022.

Natural gas prices improved to an average $3.09 per mmbtu (+88.4% y/y) in the week ended May 2, after falling to $3.00/mmbtu in the prior week. Prices remained well above a low of $1.40/mmbtu in the week of March 15, 2024 but below their peak of $9.56 in the week of August 26, 2022. Yesterday’s price was $3.26/mmbtu.

Gasoline demand rose 3.2% y/y in the four weeks ending April 25 following a 0.4% y/y decline in the prior four weeks. Demand for all petroleum products improved 0.3% y/y in the four weeks ending April 25 after a 0.4% y/y rise in the previous four-week period. Crude oil input to refineries eased 0.1% y/y in the four weeks ending April 25 after a 1.3% y/y decline in the prior four weeks.

Gasoline inventories slipped 0.7% y/y in the week ending April 25 after a 1.2% y/y rise in the week ending April 18. Residual fuel oil inventories fell 18.7% y/y in the week of April 25, after a 19.0% y/y fall in the prior week. Crude oil inventories rose 1.4% y/y in the week of April 25 after a 2.6% y/y rise in the previous week.

Measured in days’ supply, gasoline inventories fell w/w to 25.5 days in the week of April 25 from 26.4 days in the prior. The recent low was 22.9 days in the week of November 8. The supply of crude oil eased w/w to 27.9 days in the week of April 25 after three weeks at 28.3 days, and remained below a high of 31.9 days in the week of March 3, 2023.

These data are reported by the Energy Information Administration of the U.S. Department of Energy. The price and supply/demand data can be found in Haver’s **WEEKLY** & **USENERGY** database.

- Gasoline prices edge higher.
- Crude oil prices decline.
- Natural gas costs rise.

U.S. Energy Prices Remain Mixed in Latest Week

Tian Yong Woon

This week, we focus on trade developments between the US and major Asian economies. Early indications coming out of US-India trade talks seem encouraging, with terms such as “forward most-favoured-nation” for the US and “zero-for-zero” tariffs appearing in news reports — terms which, if enacted, would represent a significant win for the US. India stands to benefit greatly as well if key exports to the US, such as pharmaceuticals (chart 1), receive substantial tariff relief. The benefits could be strongly mutual if a deal also grants the US greater access to India’s large auto consumer market, particularly for major US electric vehicle (EV) producers, given that EV adoption in India remains at a very early stage (chart 2).

Turning to South Korea, discussions also appear to be progressing at a healthy pace, although details remain limited and ongoing domestic political challenges continue to hinder substantive breakthroughs. Nonetheless, the South Korean won has shown signs of stabilisation, while local equity markets have remained buoyant (chart 3). Recent trade data for April has also provided some investor relief, as weak exports to the US were more than offset by a strong performance in semiconductor shipments (chart 4).

In Japan, the race to secure a trade deal with the US is well underway, with automotive exports expected to be a key focal point given their significance to Japan’s economy and the US being a major export destination (chart 5). China, however, remains a notable outlier, with formal trade talks with the US not yet underway. Still, the US-China trade relationship continues to be the most closely watched, given its scale and potential impact on global growth and trade dynamics. While markets await China’s official April trade data, early indicators such as port activity already suggest a decline in bilateral trade flows (chart 6).

**US-India trade talks**
US-India trade discussions have reportedly been progressing rapidly, with both sides having already finalized in April the terms of reference for talks, setting the stage for formal negotiations. One early sign of favourable momentum is India’s possible offering of a “forward most-favoured-nation” clause to the US. This would ensure the US always receives the most favourable tariff terms, ahead of any other trade partner. If enacted, this would be a significant win for the US and a major leap forward in the US-India trade relationship. Another reported breakthrough involves India’s reported proposal of “zero-for-zero” tariffs on steel, auto components, and pharmaceuticals—offered on a reciprocal basis up to a certain quantity. If agreed, this would be mutually beneficial, especially as pharmaceuticals remain one of the US economy’s key imports from India, as shown in chart 1. On a separate note, and more recently, India’s phone exports to the US have reportedly gained prominence. With steep US tariffs on China, firms like Apple are increasingly incentivised to accelerate production shifts to India.

250506T1.jpg

Additionally, India’s proposed “zero-for-zero” tariff plan for auto parts may galvanise US access to India’s large domestic auto market, which has remained comparatively insulated due to high import tariffs. Another area to watch in the trade talks is electric vehicle (EV) imports, especially given US EV giant Tesla’s continued interest in expanding into the Indian market. That said, EV adoption in India remains in its early stages by many measures. While India has an immense middle class with future sales potential, EVs accounted for only about 2% of new cars sold in 2023, as shown in chart 2. This is well below levels seen in other Asian economies like China, or leaders in this space like Norway, where nearly all new cars sold are EVs. Challenges remain in unlocking the domestic Indian market—particularly around affordability and the underdeveloped state of EV infrastructure.

250506T2.jpg

**US-South Korea trade talks**
Discussions on the US-South Korea trade front also appear to be progressing at a steady pace, with technical talks reportedly having concluded in Washington last week. However, details remain limited, and full-scale negotiations have not yet begun. Complicating matters is South Korea’s domestic political landscape. With the country heading into a snap presidential election on June 3, Vice Industry Minister Park has said there is no chance of a comprehensive deal being reached before then. Still, both sides have committed to working toward an agreement before the expiration of Trump’s 90-day reciprocal tariff pause on July 8. In financial markets, the won continues to swing but remains above its year-to-date lows (chart 3). Meanwhile, South Korean equities have been lifted by a softening in trade rhetoric from both the US and China, as well as optimism around the US-South Korea talks.

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Turning to the hard trade data, South Korea’s more complete April numbers offered some initial relief to investors. The economy still managed to post moderate export growth, surprising many, despite a nearly 7% y/y decline in exports to the US, as shown in chart 4. One of the key drivers was semiconductors, which recorded double-digit y/y growth for the second consecutive month. However, these figures likely do not yet reflect the full initial impact of the steep mutual tariffs between the US and China. Firmer indications may emerge in the coming months. By then, though, attention will likely have shifted toward the outcome of US trade talks with key partners, as the end of its 90-day reciprocal tariff pause draws near.

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**US-Japan trade talks**
Turning to Japan, there is a sense of cautious optimism, with Japan’s chief trade negotiator Akazawa expressing hope for a US-Japan trade deal by June, following the second and most recent round of talks held in Washington last week. A key point of interest is whether Japan can negotiate an exemption from the current 25% automotive tariffs imposed by the US. This is especially significant given the importance of the US as a destination for Japanese auto exports, as shown in chart 5, and the central role the sector plays in Japan’s broader manufacturing economy. Also worth noting is a recent clarification by Japan’s Finance Minister Kato, who walked back earlier remarks and stated that Japan will not use the sale of US Treasuries as a bargaining tool. The clarification may help defuse a potential point of friction between the two sides as trade discussions continue.

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**US-China trade developments**
Turning to US-China trade developments — while progress here has lagged, this relationship remains the most closely watched, given its potentially large impact if meaningful movement occurs. Recent messaging from both sides has softened, stepping back from the fiery exchanges and tariff escalations seen earlier in April, offering some interim relief for investors. China has reportedly exempted certain US imports from tariffs, including specific pharmaceutical and industrial chemical products. However, on US-China trade talks, they remain at a very early stage, with China merely “evaluating” the prospect of negotiations with the US. This suggests we are still far from anything resembling a formal deal. Investors are now closely watching for first-round effects of US tariffs, which are expected to appear in China’s April trade numbers due later this week. Early signs point to a slowdown. For example, vessel traffic at the Los Angeles–Long Beach port remains at range lows, hinting at reduced shipments from China.

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Asia

Economic Letter from Asia: Art of the Deal

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The U.S. ISM Services PMI rose to 51.6 during April, after falling sharply to 50.8 in March from 53.5 in February, according to today’s report by the Institute for Supply Management. The reading indicated service sector expansion for the tenth consecutive month, although the rate of expansion has slowed significantly. The index hit a recent high of 55.8 in October of last year and remains below the all-time high of 67.5 in November 2021. The Action Economics Forecast Survey expected 50.2 for April.

Haver Analytics constructs a composite index combining the services index and the manufacturing index released on Thursday. This index rose to 51.2 in Apri from 50.6 in March. The latest figure remains above its June low of 49.1.

Amongst the services component series, the employment index led last month’s improvement in the overall index. It rose to 49.0 after falling sharply to 46.2 in March. Higher employment was reported by a slightly improved 14.6% (NSA) of respondents while a lessened 16.4% reported a decline. The new orders index rose to 52.3 after falling to 50.4 in March. A higher 22.4% (NSA) of respondents reported a rise in orders while a lessened 15.3% reported a decline. Reporting slower delivery speeds, the supplier delivery series edged up to 51.3 in April after falling to 50.6 in March. Working lower, the business activity series declined to 53.7 after rising to 55.9 in March. A higher 26.2% (NSA) of respondents reported improved activity while a lessened 14.0% reported deterioration.

On the inflation front, the prices index surged to 68.9 in April after easing to 62.8 in March. A greatly increased 39.6% (NSA) of respondents reported higher prices while a lessened 1.9% reported lower prices. The index was increased from its December 2022 low 53.1 and stood at its highest level since October 2022.

Additionally, the new export orders index increased to 48.6 (NSA) in April following a decline to 45.8 in March from 52.1 in February. Just 14.8% of survey respondents reported higher exports while an increased 17.7% reported a decline. The imports index plummeted to 44.3 last month from 52.6 in March. A greatly lessened 4.7% of respondents reported higher imports while a doubled 16.2% reported a decline. The inventory change index jumped to 53.4, a six-month high. The order backlog index edged up to 48.0 in April after falling sharply to 47.4 in March. A lessened 12.2% of respondents reported higher backlogs while a fewer 16.2% reported a decline. These series are not seasonally adjusted and not included in the ISM Services PMI total.

The ISM Services PMI is a composite index consisting of four equally weighted diffusion indexes: Business Activity, New Orders, Employment, and Supplier Deliveries. A reading above 50 indicates expansion in the services sector, while below 50 suggests	 contraction. Supplier Deliveries is the only ISM index that is inversed; a reading above 50 indicates slower deliveries. The ISM figures are available in Haver's **USECON** database, with additional detail in the **SURVEYS** database. The expectations figure from Action Economics is in the **AS1REPNA** database.

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- Total index remains near nine-month low.
- Employment, new orders & supplier deliveries edge up. Business activity weakens. 
- Prices Index strengthens to roughly two-year high.

U.S. ISM Services PMI Edges Higher in April; Prices Strengthen

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Nonfarm payrolls increased 177,000 (1.2% y/y) during April after rising 185,000 in March, revised from 228,000, and 102,000 in February, revised from 117,000. Expectations had been for a 130,000 rise in the Action Economics Forecast Survey. The latest figure left the three-month average change at 155,000 in April, down from 232,000 in January.

Average hourly earnings rose 0.2% during April after unrevised increases of 0.3% in March and 0.2% in February. Earnings growth of 3.8% y/y was below the 5.9% high in March 2022.

The unemployment rate, measured in the household survey, held m/m at an expected 4.2% in April, and compared to 4.1% in February and 4.0% in January. It reached a low of 3.4% in April 2023. The unemployment rate, including employees working part-time for economic reasons plus all marginally-attached workers, eased to 7.8% in April from 7.9% in March.

In the **establishment survey**, private-sector employment rose 167,000 (1.2% y/y) after a 170,000 March increase. Factory sector jobs edged 1,000 lower (-0.7% y/y) following a 3,000 gain. Construction sector employment increased 11,000 (1.7% y/y), after rising 7,000 in March.

Private service-producing sector employment increased 156,000 (1.4% y/y) in April after improving 161,000 in March. Increases varied greatly amongst service sector categories. Private education & health sector employment rose 70,000 (3.4% y/y) last month following a 74,000 March increase. Leisure & hospitality employment rose 24,000 (1.3% y/y) after a 38,000 gain. Trade, transportation & utilities rose 32,000 (0.9% y/y) in April following a 25,000 March increase. Professional & business services employment rose 17,000 (-0.1% y/y) following a 3,000 rise while temporary help employment rose 3,600 (-3.9% y/y) following a 2,700 decline. Financial activities employment improved 14,000 (1.2% y/y) after a 6,000 gain. The number of information sector jobs held steady (-0.4% y/y) last month after falling 2,000 in March.

Government sector payrolls rose 10,000 (1.3% y/y) last month after increasing 15,000 in March. The number of local government jobs increased 13,000 (1.4% y/y) following a 17,000 gain. State government employment rose 6,000 (1.8% y/y) following a 2,000 March increase but federal government payrolls fell 9,000 (-0.3% y/y), the third consecutive monthly decline.

Private-sector average hourly earnings rose 0.2% (3.8% y/y) in April after increasing 0.3% in March. Earnings in the goods-producing sector eased 0.1% (+4.0% y/y) following a 0.6% gain. Earnings in construction rose 0.3% (3.6% y/y), after a 0.2% rise but factory sector earnings declined 0.3% (+4.3% y/y) after surging 0.8% in March. In the private services-sector, earnings rose 0.2% (3.7% y/y) in April for the third straight month. Information sector pay increased 1.0% (5.2% y/y) last month after easing 0.1%, and financial activities earnings rose 0.5% (4.3% y/y) for the second straight month. Trade, transportation & utilities sector pay increased 0.4% (3.4% y/y) after 0.6%. Professional & business sector earnings increased 0.1% (4.4% y/y) after 0.2% in March. Leisure & hospitality earnings held steady (+3.8% y/y) following a 0.6% March increase.

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The length of the average workweek held steady at 34.3 hours in April. The workweek in the goods-producing sector eased to 39.8 hours from 40.0 hours. The construction sector average workweek eased to 39.0 hours from 39.3 hours while the factory sector workweek moved lower to 40.0 hours from 40.2. The average workweek in the private service sector held at 33.2 hours. Professional & business service hours fell to 36.3 hours from 36.4 while trade, transportation & utilities hours improved to 34.3 from 34.0 hours. Private education hours rose slightly to 32.8, but leisure & hospitality held steady at 25.5 hours.

In the **household survey**, the unemployment rate held at 4.2% in April as employment rose 436,000 and the size of the labor force increased 518,000. The labor force participation rate edged up to 62.6% last month from 62.5% in March. It remained below the high of 63.3% early in 2020. The rate for teenagers declined to 36.9%. For workers aged 20-24, the rate held steady at 72.1%, up from 71.8% six months earlier. For workers aged 25-54 the rate rose to 83.6%, a five-month high. For individuals 55 and over, the rate improved to 38.4% in April.

The employment/population ratio for all workers in April rose to 60.0%. It remained below the peak reading of 61.1% in February, 2020 just prior to the pandemic.

The employment and earnings data are collected from surveys taken each month during the week containing the 12th day of the month. The labor market data are contained in Haver's **USECON** database. Detailed figures are in the **EMPL** and **LABOR** databases. The expectations figures are in the **AS1REPNA** database.

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- Job growth spreads across most sectors.
- Earnings growth trend decelerates.
- Jobless rate holds steady.

Economy in Brief: January 2007

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