Tom Moeller

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<p>The <b>ADP/Moody's National Employment Report</b> reported that nonfarm
private sector payrolls increased 189,000 during March following a 214,000
improvement in February, revised from 212,000. The latest gain was the weakest
since January of last year. It disappointed consensus expectations for a 225,000
rise in the Action Economics Forecast Survey.</p>

<p>The ADP survey is based on ADP's business payroll transaction system covering
411,000 companies and nearly 24 million employees. The data are processed by
Moody's Analytics Inc., then calibrated and aligned with the BLS establishment
survey data.</p>

<p>Medium sized payrolls rose a modest 62,000 increase (2.4% y/y), nearly the
weakest gain in six months. Large firms posted a 19,000 rise (2.1% y/y), the
easiest increase since a decline in October. Small sized payrolls improved
108,000 (2.7% y/y), a slight pickup from gains during the prior two months.</p>

<p>Employment in the goods producing sector nudged up 5,000 (2.4% y/y), the
weakest gain since August of 2012. Jobs in the service sector increased a modest
184,000 (2.5% y/y), on a par with the prior two months. Professional &amp;
business employment gained 40,000 (3.3% y/y). Jobs in trade, transportation
&amp; utilities increased 25,000 (1.8% y/y) while employment in the financial
sector improved 16,000 (1.8% y/y).</p>

<p>Construction sector employment grew 17,000 (5.1% y/y), the weakest rise since
May. The number of manufacturing sector jobs declined 1,000 (+1.3% y/y), the
first decline since January of last year.</p>

<p>The ADP National Employment Report data are maintained in Haver's <b>USECON</b>
database; historical figures date back to April 2001. The figures in this report
cover jobs only in the private sector. The expectation figure is available in
Haver's <b>AS1REPNA</b> database.</p>

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    <tr>
      <th class="firstcol" scope="col" >ADP/Moody's National
        Employment Report</th>
      <th scope="col" >Mar</th>
      <th scope="col" >Feb</th>
      <th scope="col" >Jan</th>
      <th scope="col" >Y/Y</th>
      <th scope="col" >2014</th>
      <th scope="col" >2013</th>
      <th scope="col" >2012</th>
    </tr>
  </thead>
  <tbody>
    <tr>
      <td class="firstcol" >Nonfarm Private Payroll Employment (m/m
        chg, 000s)</td>
      <td  >189</td>
      <td  >214</td>
      <td  >220</td>
      <td  >2.5%</td>
      <td  >2.3%</td>
      <td  >1.9%</td>
      <td  >2.3%</td>
    </tr>
    <tr class="odd">
      <td class="firstcol" >&nbsp;Small Payroll (1-49)</td>
      <td  >108</td>
      <td  >103</td>
      <td  >92</td>
      <td  >2.7</td>
      <td  >2.1</td>
      <td  >1.9</td>
      <td  >2.5</td>
    </tr>
    <tr>
      <td class="firstcol" >&nbsp;Medium Payroll (50-499)</td>
      <td  >62</td>
      <td  >57</td>
      <td  >91</td>
      <td  >2.4</td>
      <td  >2.8</td>
      <td  >2.2</td>
      <td  >2.1</td>
    </tr>
    <tr class="odd">
      <td class="firstcol" >&nbsp;Large Payroll (&gt;500)</td>
      <td  >19</td>
      <td  >53</td>
      <td  >37</td>
      <td  >2.1</td>
      <td  >1.8</td>
      <td  >1.6</td>
      <td  >2.1</td>
    </tr>
    <tr>
      <td class="firstcol" >Goods-Producing</td>
      <td  >5</td>
      <td  >22</td>
      <td  >35</td>
      <td  >2.4</td>
      <td  >2.3</td>
      <td  >1.7</td>
      <td  >2.2</td>
    </tr>
    <tr>
      <td class="firstcol" >&nbsp; Construction</td>
      <td  >17</td>
      <td  >28</td>
      <td  >31</td>
      <td  >4.9</td>
      <td  >4.6</td>
      <td  >3.5</td>
      <td  >2.5</td>
    </tr>
    <tr>
      <td class="firstcol" >&nbsp; Manufacturing</td>
      <td  >-1</td>
      <td  >2</td>
      <td  >8</td>
      <td  >1.3</td>
      <td  >1.2</td>
      <td  >0.9</td>
      <td  >1.6</td>
    </tr>
    <tr class="odd">
      <td class="firstcol" >Service-Producing</td>
      <td  >184</td>
      <td  >192</td>
      <td  >185</td>
      <td  >2.5</td>
      <td  >2.3</td>
      <td  >2.0</td>
      <td  >2.3</td>
   </tr>
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The ADP/Moody's National Employment Report reported that nonfarm private sector payrolls increased 189,000 during March following a 214,000 improvement in February, revised from 212,000. The latest gain was the weakest since January [...]

U.S. ADP: Job Growth Continues to Moderate

Apart from Japan, Blue Chip forecasters look for further significant monetary policy easing

Apart from the US, productivity is moribund

Financial market concerns ebb even though policy uncertainty continues to soar

US tariff revenues nearly doubled in April

Even with expected tariff-induced increases in inflation, BCFF forecasters look for a more aggressive round of monetary easing

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

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Nonfarm payrolls increased 139,000 (1.1% y/y) during May after rising 147,000 in April, revised from 177,000, and 120,000 in March, revised from 185,000. Expectations had been for a 125,000 rise in the Action Economics Forecast Survey. The three-month average change at 135,000 in May compared to 232,000 in January.

Average hourly earnings rose 0.4% during May after unrevised rises of 0.2% in April and 0.3% in March. Earnings growth of 3.9% y/y has been steady for five months. It has been trending lower from the 5.9% high in March 2022. A 0.3% increase was expected.

The unemployment rate, measured in the household survey, was steady m/m at an expected 4.2%.  It compared to 4.2% in March, 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, held at 7.8% last month, down from 8.0% in February. It was 6.6% in April 2023.

In the **establishment survey**, private-sector employment in May rose 140,0100 (1.1% y/y) after a 146,000 April increase. Factory sector jobs declined 8,000 (-0.7% y/y) following a 5,000 gain. Construction sector employment increased 4,000 (1.4% y/y), after rising 7,000 in April.

Private service-producing sector employment increased 145,000 (1.3% y/y) in May after improving 132,000 in April. Increases varied greatly amongst service sector categories. Private education & health sector employment rose 87,000 (3.5% y/y) last month following a 100,000 April increase. Leisure & hospitality employment rose 48,000 (1.5% y/y) after a 29,000 gain. Financial activities employment improved 13,000 (1.1% y/y) after a 3,000 gain. The number of information sector jobs rose 2,000 (-0.4% y/y) last month after holding steady in April. Trade, transportation & utilities rose 4,000 (0.6% y/y) in May after falling 8,000 in April. Professional & business services employment declined 18,000 (-0.3% y/y) following a 10,000 rise while temporary help employment declined 20,200 (-4.3% y/y) after rising 3,100 in April.

Government sector payrolls rose 1,000 (1.0% y/y) last month after increasing 1,000 in April. The number of local government jobs increased 21,000 (1.4% y/y) following an 11,000 gain. State government employment held steady (+1.6% y/y) following a 3,000 April increase but federal government payrolls fell 22,000 (-1.6% y/y), the largest of four consecutive monthly declines.

Private-sector average hourly earnings rose 0.4% (3.9% y/y) in May after increasing 0.2% in April. Earnings in the goods-producing sector gained 0.4% (4.1% y/y) following no change in April. Earnings in construction rose 0.3% (3.7% y/y), the same as in April but factory sector earnings strengthened 0.5% (4.4% y/y) after falling 0.2% in April. In the private services-sector, earnings rose 0.4% (3.8% y/y) in May following a 0.2% rise. Information sector pay increased 1.3% (6.2% y/y) last month after rising 0.9%, and private education health services earnings rose 0.5% (3.5% y/y) after rising 0.3%. Financial activities earnings rose 0.7% (4.4% y/y) following a 0.3% rise. Trade, transportation & utilities sector pay increased 0.3% (3.1% y/y) after 0.2%. Professional & business sector earnings increased 0.6% (4.9% y/y) after 0.2% in April. Leisure & hospitality earnings rose 0.2% (3.7% y/y) following a 0.1% April rise.

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The length of the average workweek held steady at 34.3 hours in May. The workweek in the goods-producing sector was unchanged at 39.8 hours. The construction sector average workweek also held at 39.0 hours while the factory sector workweek edged up to 40.1 hours from 40.0. The average workweek in the private service sector eased to 33.2 hours from 33.3. Professional & business service hours held at 36.5 while trade, transportation & utilities hours eased to 34.0 from 34.1 hours. Private education hours fell slightly to 32.8, but leisure & hospitality improved to 25.7 hours.

In the **household survey**, the unemployment rate held at 4.2% in May as employment fell 696,000 after a 462,000 rise and the size of the labor force declined 625,000 following a 544,000 increase. The labor force participation rate eased to 62.4% last month from 62.6% in April. It remained below the high of 63.3% early in 2020. The rate for teenagers declined to 36.2%. For workers aged 20-24, the rate fell to 71.3%. For workers aged 25-54 the rate eased to 83.4%. For individuals 55 and over, the rate eased to 38.2% in May.

The employment/population ratio for all workers slipped to 59.7% from 60.0% in April. 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 is concentrated in private services.
- Earnings gain picks up.
- Jobless rate has been roughly steady since mid-2024.

U.S. Job Growth Eases in May, While Earnings Improve; Jobless Rate Is Unchanged

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Consumer credit outstanding jumped $17.9 billion during April (2.1% y/y) after increasing $8.6 billion in March, revised from $10.2 billion, and falling $0.9 billion in February, revised from a decline of $0.6 billion. An $11.0 billion rise had been expected in the Action Economics Forecast Survey. As a percentage of disposable personal income, consumer credit eased to 22.1% in April, compared to 22.8% one year earlier.

Nonrevolving credit outstanding rose $10.2 billion (1.7% y/y) in April after rising $6.8 billion in March. Nonrevolving credit held by depository institutions declined 7.5% y/y in April after declining 8.2% y/y in March. Finance company debt holdings rose 0.6% y/y after increasing 0.8% y/y in March, while credit union holdings eased 1.6% y/y in April after a 1.9% y/y March decline. Nonrevolving debt of the federal government rose 3.6% y/y following a 3.4% y/y rise in March.

In April, revolving credit outstanding, which includes credit cards, rose $7.6 billion (3.4% y/y) following a rise of $1.8 billion in March. Revolving credit outstanding held by depository institutions fell 2.0% y/y after down 2.4% y/y in March. Revolving credit held by finance companies dropped 11.6% y/y after a 12.2% y/y drop in March, while credit held by credit unions rose 3.9% y/y following a 3.7% y/y gain in March.

The consumer credit figures from the Federal Reserve Board are break-adjusted and calculated by Haver Analytics. The breaks in the series in 2005, 2010 and 2015 are the result of the incorporation of data from the Census and the Survey of Finance Companies, as well as changes in the seasonal adjustment methodology. The consumer credit data are available in Haver’s **USECON** database. The Action Economics forecast figures are contained in the **AS1REPNA** database.

**The Disruptive Economics of AI** from the Federal Reserve Bank of San Francisco is available [here](https://www.frbsf.org/news-and-media/events/2025/06/avi-goldfarb-the-disruptive-economics-of-ai/?utm_source=frbsf-homepage&utm_medium=latest-carousel&utm_campaign=eern-seminar_2025-05_seq3).

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- Consumer credit strength exceeds expectations.
- Both nonrevolving and revolving credit move notably higher.

U.S. Consumer Credit Surges in April

Robert Brusca

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German industrial production (headline series including construction) fell by 1.4% month-to-month in April as a recent see-saw pattern of monthly increases vs. declines is in train back to October. Output declines in the month were distributed across consumer goods, capital goods and intermediate goods.

In addition, construction output fell in April, dropping by 1.5% month-to-month after rising in March and declining in February.

Manufacturing output fell by 1.8% month-to-month in April as real sales also fell by 1.5%, and as real orders for manufactured goods rose in the month by 0.6%.

**Sequential trends**
The sequential trends for IP and its various sectors as well as for orders show unclear trends. Capital goods and intermediate goods show improving trends (from 12-months to 6-months, to 3-months) as output transitions from declines over longer periods to increases over the recent shorter periods. Manufacturing joins that sequence as it also shows a transition from a period of declining output to increases in recent periods. But construction trends remain erratic and the trend for real orders is also chaotic, although it is topped up by a very strong gain over three months. Real sales are on board for the transitional move from declines to sales increases over recent periods. While there is some degree of mixed trends in the data, there are also some traces of an ongoing recovery with improvement in progress. It is still nascent, but the improvement is identifiable and easily recognizable.

**Surveys**
Manufacturing surveys from ZEW, the IFO, and the EU Commission are mixed in their message. The ZEW survey shows a sharp improvement month-to-month. The IFO shows weakening for manufacturing and for manufacturing expectations. The EU commission index shows an improvement month-to-month. Compared to February levels, these same four readings show contrary results. Their sequential signals remain mixed, both in terms of their lack of monotonic signaling as well as in terms of the simpler comparison of the 12-month readings to the 3-month readings. There is simply no clear signal on direction here.

**Other Europe**
Portugal and Norway offer two separate Northern- and South-European signals; both show strongly improving sequential trends. Their month’s performance remains chaotic, but their sequential performance is upward and a clear positive signal.

**QTD**
Quarter-to-date signals (QTD) show mixed results for output-based measures and for real orders in Germany. But the survey data show improvement QTD and the two European readings for Portugal and Norway show gains in progress as well.

**Queue standing**
The queue standing data that ranked performance over a longer profile show most readings with rankings below the 50% mark which in all cases leaves the current reading below its median for this period (data back to 2000), the exceptions with above 50-percentile readings are consumer goods in Germany (54.6%), real manufacturing orders in Germany (66.7%), and Norway (99.6%).

**Summing up**
Despite the month’s step back, there is still evidence that growth and improvement is stirring or trying to stir. Economic performance often is not monotonic and various factors including weather and other unique and temporary factors can interrupt even a solid trend. There is reason to be hopeful that German data still show progress and with the mandate to do more to defend themselves in NATO is also a spur to output we should expect over the coming months.

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Germany

German IP Slips

Andrew Cates

**The global policy rate consensus**
Despite concerns about inflation, consensus forecasts from the Blue Chip Financial Forecasts survey still reflect expectations for meaningful interest rate cuts across most major economies over the next 12 months. The chart below shows that forecasters anticipate policy rates to fall by between 50 and 90 basis points in countries such as the US, UK, euro area, Canada, and Australia. In contrast, Japan is the lone outlier, with forecasts pointing to a further modest rate increase — highlighting its position in a different part of the global monetary cycle. Overall, this consensus arguably suggests that the inflationary effects of protectionism are, for now, being outweighed by expectations of weaker demand.

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**The Fed and the US labour market**
This chart reinforces the case for the Federal Reserve to further ease policy, with both market signals and underlying economic conditions pointing to a more accommodative stance. Downward shifts in 2 year Treasury yields have closely tracked movements in the ISM manufacturing employment Index, which has – on the whole - remained consistent the 50-point threshold that signals employment expansion. The alignment of softer labour market data with falling short-term yields signals confidence that the Fed will probably prioritize demand-side weakness and labour market softness over tariff-driven inflation pressures.

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**Oil and inflation**
This next chart underscores the increasingly disinflationary role of energy, with the year-on-year change in WTI crude oil prices now firmly in negative territory. After being a major driver of headline inflation during 2021 and early 2022, oil prices are now exerting downward pressure on global inflation rates. This shift has coincided with a sharp decline in the Citigroup G10 Inflation Surprise Index, which has also lately shifted into negative territory after a short period of upside surprises. Alongside the charts above, the message is clear — declining energy prices are acting as a powerful disinflationary force, helping to stabilise expectations and clear space for further loosening of monetary policy.

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**Euro area inflation and wage pressures** 
This fourth chart underscores the growing case for further policy easing by the European Central Bank, with wage growth and services inflation — core drivers of domestic price pressures — now decelerating sharply. This synchronized decline signals that second-round inflation effects in the euro area are rapidly fading. For the ECB more specifically, this trend provides cover to pivot toward another round of rate cuts later this week.

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**Global trade** 
This next chart underscores the fragile state of global trade — and the mounting downside risks posed by escalating US tariff policies. The Global PMI for Manufacturing New Export Orders remained well below the 50 threshold in May, signalling ongoing contraction in global trade flows. At the same time, South Korea’s export growth, a bellwether for global industrial demand and tech-cycle sensitivity, has continued to weaken. Both indicators reflect a world economy grappling with weak external demand, geopolitical uncertainty, and a retreat from globalization. With the US now aiming to implement broad-based tariffs on a range of imports (notwithstanding recent legal challenges), the risk is that already-fragile export orders deteriorate further.

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**China’s imbalances**
This final chart highlights the deep structural imbalances in China’s economy and its ongoing role in global financial disequilibrium. The private sector has consistently run large savings surpluses — recently nearly 10% of GDP — reflecting chronic under-consumption and excess saving. Meanwhile, the general government sector remains in persistent deficit, around 8% of GDP, driven by state-led investment and fiscal support. The foreign sector remains in surplus, underscoring China’s continued reliance on net exports and its limited appetite for foreign capital outflows. These dynamics reveal a domestic model still overly dependent on state intervention and weak household demand. Globally, China’s excess savings and export surpluses exacerbate trade and capital imbalances, pressuring deficit economies like the US and distorting global interest rates. Without rebalancing toward consumption and reduced reliance on external demand, China will remain both a source and amplifier of global financial tension.

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Recent weeks have seen a complex recalibration in global financial markets, as investors weigh the implications of renewed US tariff actions against accumulating signs of economic softness and growing confidence in the prospect of central bank easing. As part of this recalibration, there has been heightened, if not uniformly sustained, concern about the safe-haven appeal of US assets, with long-dated Treasury yields rising at times on fiscal worries and the US dollar showing episodic vulnerability. Yet despite these concerns, consensus forecasts continue to anticipate meaningful policy rate cuts across most major economies (chart 1). Shorter-dated yields in bond markets have moved in sympathy, with 2-year Treasury yields, for example, have trending lower from mid-May, tracking a deterioration, albeit modest, in the US labour market (chart 2). Lower oil prices and a slew of negative inflation surprises have further softened inflation expectations (chart 3). In the euro area, wage growth and services inflation have also cooled, giving the ECB more latitude to reduce its policy rates again this week (chart 4). The growth backdrop, in the meantime, remains fragile, with global export demand and new manufacturing orders softening, and increasingly exposed to a drag from protectionist US trade policy (chart 5). Finally, China’s entrenched financial imbalances — persistent private sector surpluses, fiscal deficits, and external imbalances — remain a key source of domestic fragility and global distortion (chart 6).

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Charts of the Week: Fault Lines and Rate Cuts

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The U.S. trade deficit in goods and services (BOP basis) in April declined to $61.6 billion after increasing to a record $138.3 billion in March, revised from $140.5 billion and falling to 122.0 billion in February, revised from $123.2 billion, according to the U.S. Census Bureau. A $70 billion deficit was expected by the Action Economics Forecast Survey. Exports rose 3.0% (8.6% y/y) after rising 0.9% in March, revised from 0.2%, and increasing 2.3% in February, revised from 2.8%. This was accompanied by a 16.3% decline (+3.4% y/y) in imports which followed a 4.7% rise in March, revised from 4.4% and came after a 0.5% slip in February, revised from no change.

The trade deficit in goods (BOP basis) narrowed to $87.4 billion from a record $162.6 billion, revised from $163.2 billion, in March. Goods exports (customs value) rose 3.5% (9.9% y/y) in April, after increasing 2.6% in March. The latest increase reflected a 16.0% rise (24.0% y/y) in industrial supplies & materials exports which followed a 4.5% rise. Exports of “other” goods rose 4.7% (11.9% y/y) following a 7.5% gain, while capital goods exports increased 1.7% (11.9% y/y) following a 1.4% drop.  Working lower, auto exports fell 21.5% (-19.2% y/y) after increasing 7.0% in March. Foods, feeds & beverage exports declined 3.8% (-0.1% y/y) after rising 8.6%. Nonauto consumer goods exports were off 7.0% (-8.3% y/y) in April after slipping 0.3% March.

Imports of goods decreased 19.9% (+2.5% y/y) in April after a 5.7% March increase. Nonauto consumer goods imports were off 32.0% (+5.2% y/y) after a 27.6% March gain. Imports of industrial supplies & materials worked 31.0% lower (-5.5% y/y), down for the third straight month. Auto imports fell 20.0% (-19.7% y/y) after a 9.2% rise. Capital goods imports fell 3.0% (+16.5% y/y) and followed a 4.1% rise. Foods, feeds & beverage imports declined 4.4% (+5.7% y/y) following a 0.2% improvement. “Other” goods imports declined 3.3% (+5.1% y/y) after a 0.8% rise. Petroleum imports by end-use fell 11.5% (-23.8% y/y) after a 4.2% decline. Nonpetroleum imports fell 20.4% (+4.7% y/y) after rising 6.3% in March.

The inflation-adjusted goods trade deficit (customs value) narrowed to $85.6 billion in April after deepening to 150.1 billion in March. Real exports rose 3.1% (8.7% y/y) after a 2.9% March increase, while real imports slumped 19.9% (+2.2% y/y) in April following a 6.1% March increase.

The services trade surplus rose to $25.8 billion in April after decreasing to $24.3 billion in March. It reached a peak of $26.9 billion in March of last year. Service exports rose 2.1% (5.9% y/y) after a 0.9% decline in March. Construction services exports rose 2.4% (11.0% y/y) in April after increasing 2.0% in both of the prior two months. Travel services exports increased 8.0% (7.3% y/y) and financial exports increased 1.1% (3.6% y/y). Transport exports eased 0.7% (+6.0% y/y). Service imports rose 0.7% (8.3% y/y) in April following a 0.1% gain. Maintenance & repair services jumped 20.0% (12.7% y/y) after declines in each of the prior three months, while imported transport services fell 3.4% (+3.9% y/y) after a 0.8% rise. Imported travel services rose 2.0% (10.2% y/y) while charges for use of intellectual property rose 2.5% (4.6% y/y).

The U.S. goods trade deficit with China narrowed to a seasonally adjusted $19.7 billion in April from $24.2 billion in March. Exports to China declined 19.7% (-29.2% y/y) while imports weakened 18.9% (-19.2% y/y). The deficit with the European Union narrowed to $17.9 billion in April from the record $48.0 billion in March. Exports rose 2.8% (13.1% y/y) while imports dropped 35.6% (-0.6% y/y). The deficit with Japan narrowed to $5.8 billion from $6.1 billion in March. Exports rose 2.9% (10.9% y/y) and imports eased 0.3% (+6.2% y/y) in April.

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 are in **AS1REPNA**.

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- Tariff impositions prompt sharp decline in imports.
- Exports surge led by industrial supplies & materials.
- Petroleum product imports weaken as crude oil prices decline.

U.S. Trade Deficit Narrows Sharply in April as Imports Plummet

Economy in Brief: April 2015

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