Tom Moeller

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090605a.jpg" align="left" border="0" height="265" width="353">
The May figures from the Bureau of Labor Statistics indicated
moderation in the rate of job loss, though the labor market remains
quite weak. Nonfarm payrolls fell 345,000 last
month and that was the smallest monthly decline since last September.
The drop certainly compared favorably to Consensus expectations for a
520,000 decline and declines in employment during the prior two months
were revised shallower. During this recession so far employment has
fallen a total of 6.1 million, the record for a 17-month period. In
percentage terms, jobs are down 4.3% since the 2007 peak.
The unemployment rate continued to
reflect the labor market's distress with a rise to 9.4%, the highest
level since August of 1983. The cycle low in the rate occurred in
October 2006 (4.4%). Pumping up the rate last month was a 437,000
(-3.7% y/y) decline in employment versus a 130,000 (0.4% y/y) rise in
the labor force. These household sector figures additionally show that
long-term unemployment rose further. The average duration of
unemployment rose during May to a new record of 22.5 weeks from an
average of 17.8 weeks during 2008.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090605b.jpg" align="right" border="0" height="265" width="353">
Also from the household survey was an indication that 5.9
million people want a job now but are not in the labor force. That
figure is up 21.8% from last May and near the highest since 1995. In
tandem, the labor force participation rate, i.e., the number of
eligible workers who are in the labor force stands at 65.9% versus the
2000 high of 67.1%.
The latest data from the payroll survey give insight into real
GDP growth last quarter. Combined with the lessened decline in
employment is a slightly shorter length of the average workweek.
Aggregate hours worked fell at a 6.9% annual rate versus an 8.9% 1Q
drop. That drop was associated with a real GDP decline of 5.7%,.
Therefore, the 2Q GDP rate of decline likely eased. During the last
twenty years, there has been a 68% correlation between growth in hours
worked and in real GDP.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090605c.jpg" align="right" border="0" height="265" width="353">
The easing in the rate of job loss last month was due to
lessened declines in construction and in services jobs. After having
shed more than roughly 100,000 jobs during each of the prior six
months, the construction sector lost just 59,000 workers last month.
Service sector job loss moderated as well with a decline of 120,000.
That compares to declines between 196,000 and 399,000 since last
September. Losses eased sharply in the professional &amp; business
services sector, in the retail trade area and in the financial sector.
In contrast, the rate of job loss in the factory sector has barely
changed. Though the latest decline is improved from a slash of 262,000
jobs during January, the latest drop of 156,000 is close to the average
monthly losses since October. In the government sector, 7,000 jobs were
shed after a 92,000 worker gain during April.
Overall, 32.7% of industries posted job gains last month, up
from the March low of 19.6%. Over the last six months, however, just
14.6% posted job growth, a record low since 1990. In the factory sector
just 12.0% posted job gains and only 6.0% did over the last six months.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090605d.jpg" align="right" border="0" height="265" width="353">
The weakness in the job market has naturally lessened the
growth in workers' earning power. Average hourly earnings last month
inched up just 0.1%, the same as during April. These readings dropped
the year-to-year growth to 3.1%, the lowest since late 2005. However,
further slowing already has occurred as the three-month rate of growth
was just 1.7% (AR), its lowest since early-2004. Three-month growth in
factory sector earnings has dropped to 0.2% from a late-2008 rate of
5%. Growth in the nondurable sector's earnings has turned negative.
The figures referenced above are available in Haver's USECON
database. Additional detail can be found in the LABOR and
in the EMPL databases.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">Employment:
000s</th>
<th scope="col">May</th>
<th scope="col">April</th>
<th scope="col">March</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Payroll Employment</td>
<td>-345</td>
<td>-504</td>
<td>-652</td>
<td>-3.9%</td>
<td>-0.4%</td>
<td>1.1%</td>
<td>1.8%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Previous</td>
<td>--</td>
<td>-539</td>
<td>-699</td>
<td>--</td>
<td>--</td>
<td>--</td>
<td>--</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Manufacturing</td>
<td>-156</td>
<td>-154</td>
<td>-172</td>
<td>-11.6%</td>
<td>-3.3%</td>
<td>-2.0%</td>
<td>-0.5%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Construction</td>
<td>-59</td>
<td>-108</td>
<td>-123</td>
<td>-13.6%</td>
<td>-5.5%</td>
<td>-0.8%</td>
<td>4.9%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Service Producing</td>
<td>-120</td>
<td>-230</td>
<td>-340</td>
<td>-2.4%</td>
<td>0.2%</td>
<td>1.6%</td>
<td>1.8%</td>
</tr>
<tr>
<td class="firstcol">Average Weekly Hours</td>
<td>33.1</td>
<td>33.2</td>
<td>33.1</td>
<td>33.7 (May '08)</td>
<td>33.6</td>
<td>33.8</td>
<td>33.9</td>
</tr>
<tr class="odd">
<td class="firstcol">Average Hourly Earnings</td>
<td>0.1%</td>
<td>0.1%</td>
<td>0.2%</td>
<td>3.1%</td>
<td>3.8%</td>
<td>4.0%</td>
<td>3.9%</td>
</tr>
<tr>
<td class="firstcol">Unemployment Rate</td>
<td>9.4%</td>
<td>8.9%</td>
<td>8.5%</td>
<td>5.5% (May '08)</td>
<td>5.8%</td>
<td>4.6%</td>
<td>4.6%</td>
</tr>
</tbody>
</table>
UK PPI Prices: Decelerating Even
As They Accelerate! 
by <a href="/comment/Brusca.html">Robert
Brusca</a> June 5, 2009


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090605e.jpg" align="left" border="0" height="265" width="353">
Shifting trends - The chart above is a
classic example of shifting trends. While the central banks tend to
focus on yr/yr prices viewing those changes are more &#8216;reliable,&#8217; there
is no doubt that shorter measures give more up to data. The Yr/Yr UK
PPI has just fallen for the first time since 2002. Yet the real story
is that prices are moving up again. Over three-months and six months
seasonally adjusted prices are accelerating sharply &#8211;yes from lower
lows than the Yr/Yr series but the key signal here is the acceleration.
Prices are not falling any more that is the sky. 
 

The Worm has Turned - Clearly the story
of falling prices told from the headline is yesterday&#8217;s news. Prices
are turning and the UK is on the cusp of change. It is the first
country in Europe to have its service sector survey say that activity
in that sector is expanding. Beware what you take as a barometer of
health I don&#8217;t think inflation is surging again but the worm has
turned. So don&#8217;t tail gate it. 
 


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="8" scope="col"> UK PPI
_Ex Construction</th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td colspan="3">%m/m</td>
<td colspan="4">%-SAAR</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>May-09</td>
<td>Apr-09</td>
<td>Mar-09</td>
<td>3-mo</td>
<td>6-mo</td>
<td>12-mo</td>
<td>12-moY-Ago</td>
</tr>
<tr class="even">
<td class="firstcol">MFG</td>
<td>0.3%</td>
<td>0.3%</td>
<td>-0.3%</td>
<td>1.1%</td>
<td>0.9%</td>
<td>-0.3%</td>
<td>9.0%</td>
</tr>
<tr class="even">
<td class="firstcol">Core</td>
<td>#N/A</td>
<td>-0.1%</td>
<td>0.4%</td>
<td>#N/A</td>
<td>#N/A</td>
<td>#N/A</td>
<td>2.3%</td>
</tr>
<tr class="even">
<td class="firstcol">1-MO Lagged Core</td>
<td>--</td>
<td>--</td>
<td>---</td>
<td>2.9%</td>
<td>7.2%</td>
<td>6.3%</td>
<td>2.2%</td>
</tr>
<tr>
<td colspan="8" class="firstcol">Core:
ex food beverages,
tobacco &amp; Petroleum</td>
</tr>
</tbody>
</table>
</body></html>

The May figures from the Bureau of Labor Statistics indicated moderation in the rate of job loss, though the labor market remains quite weak. Nonfarm payrolls fell 345,000 last month and that was the smallest monthly decline since [...]

U.S. Payroll Losses Slow AsUnemployment Rate Jumps

Robert Brusca

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090604e.jpg" align="left" border="0" height="265" width="353">
EMU area retail sales volume is still eroding but at a slow
pace. The volume drop in the past three months was just 0.2% per month
Retail sales have been declining in the Area but have not been as weak
as in the US. Passenger car registrations in Europe have begun to take
off as several nations&#8217; scrappage plans have encouraged consumers to
buy new vehicles. 
 

Europe&#8217;s consumers still face hurdles. Unemployment is rising
and is still probably in is early sages of increasing; France reported
a surge in unemployment in Q1 just today as its rate jumped to 9.1%
from 8% in Q4. Spain&#8217;s rate has climbed up over 18% to nearly 19%.
Consumer confidence is low throughout the Area, although it has been
edging up. Income preservation polices have helped consumers to hold
the line on spending. Sensitive cyclical surveys in the form of
purchaser indices show that MFG and Service sectors are coming up from
their lows. With these positive pulses in train any further damage to
consumption from rising unemployment could be limited. 
 


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr><th colspan="7" scope="col"> Euro Area Retail Sales Volume</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td colspan="3">M/M</td>
<td colspan="3">Saar</td>
</tr>
<tr>
<td class="firstcol">&nbsp;</td>
<td>Apr-09</td>
<td>Mar-09</td>
<td>Feb-09</td>
<td>3-Mo</td>
<td>6-MO</td>
<td>12-Mo</td>
</tr>
<tr class="odd">
<td class="firstcol">Zone Total</td>
<td>-0.2%</td>
<td>-0.2%</td>
<td>-0.2%</td>
<td>-2.5%</td>
<td>-2.9%</td>
<td>-2.6%</td>
</tr>
<tr class="odd">
<td class="firstcol">Food, Beverage, and Tobacco</td>
<td>-0.1%</td>
<td>-0.1%</td>
<td>-0.2%</td>
<td>-1.8%</td>
<td>-2.1%</td>
<td>-2.1%</td>
</tr>
<tr class="odd">
<td class="firstcol">Motor Vehicle Reg</td>
<td>5.9%</td>
<td>-1.7%</td>
<td>20.4%</td>
<td>146.8%</td>
<td>8.4%</td>
<td>-8.1%</td>
</tr>
<tr>
<td colspan="7" class="firstcol">Non-Food Country detail:
Volume</td>
</tr>
<tr class="odd">
<td class="firstcol">Germany</td>
<td>0.5%</td>
<td>-0.4%</td>
<td>0.0%</td>
<td>0.4%</td>
<td>-1.5%</td>
<td>-0.3%</td>
</tr>
<tr class="odd">
<td class="firstcol">UK (EU)</td>
<td>0.9%</td>
<td>1.2%</td>
<td>-2.1%</td>
<td>-0.4%</td>
<td>3.9%</td>
<td>2.7%</td>
</tr>
</tbody>
</table>
</body></html>

EMU area retail sales volume is still eroding but at a slow pace. The volume drop in the past three months was just 0.2% per month Retail sales have been declining in the Area but have not been as weak as in the US. Passenger car [...]

EMU Retail Sales Volumes Erode At Slow Pace

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090604c.jpg" width="353">
Labor productivity in the nonfarm business sector was revised higher for last quarter to 1.5% (AR) from the initial estimate of a 0.8% increase. The Consensus expectation was for revision to 1.2% growth. (Earlier figures also were revised slightly.) Productivity growth has weakened sharply with the current economic downturn. During the last nine months productivity has risen just 0.8% which is the weakest performance since early-2007. Nevertheless, any positive growth during a recessionary period contrasts with the declines in during the downturns of the 1950s through the 1980s.
Though productivity growth has slowed dramatically, businesses were quick in responding to the output shortfall by cutting employment and hours-worked. Output fell at a 7.6% annual rate last quarter after falling 8.8% during 4Q &#39;08. These declines marked the quickest back-to-back since early 1958. However, businesses responded quickly by cutting employment &amp; hours worked at a 9.0% rate last quarter and by 8.3% during 4Q.
The drop in productivity growth has hurt corporations&#39; bottom lines due to the fact that growth in compensation costs has remained firm. It rose an upwardly revised 4.6% last quarter and that left y/y growth at 4.1%. Annually, growth in compensation has been roughly stable near the 4% level since 2001.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090604d.jpg" width="353">
The combination of recently diminished productivity growth and stable, firm gains in compensation has increased costs. However, for last quarter growth in unit labor costs was revised down slightly to 3.0% following the 5.1% jump during 4Q. The increases raised the six-month growth in costs to a downwardly revised 4.0% versus just 0.9% during all of last year.
In the factory sector, the pressure on corporations&#39; bottom lines has been more intense. Worker productivity was revised up slightly but it still fell 2.7% during 1Q (-3.2% y/y), down for the fourth consecutive quarter. Year-to-year, the drop in productivity came as output fell faster (-13.9%) than hours worked (-11.0%). That decline in productivity growth has outpaced firms&#39; ability to cut compensation costs. In fact, there&#39;s been no cut at all. Compensation growth of 13.4% last quarter lifted the y/y gain to 8.4%, nearly double last year&#39;s 4.1% advance. As a result, unit labor cost growth in the factory sector surged again. The 1Q increase of 16.6% lifted the annual gain to 12.0% which compares to just a 3.2% gain during all of last year.
The productivity &amp; cost figures are available in Haver&#39;s USECON database.
Today&#39;s remarks at the Federal Reserve Board Conference on Financial Markets and Monetary Policy by Fed Chairman Ben S. Bernanke are available <a href="http://www.federalreserve.gov/newsevents/speech/bernanke20090604a.htm"> 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/USECON/@EC/@EC02/@EC02.HTM">Nonfarm Business Sector</a> (SAAR, %)</th>
<th scope="col">1Q &#39;09 (Revised)</th>
<th scope="col">4Q &#39;08</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Output per Hour</td>
<td>1.6</td>
<td>-0.6</td>
<td>1.9</td>
<td>2.8</td>
<td>1.4</td>
<td>0.9</td>
</tr>
<tr>
<td class="firstcol">Compensation per Hour</td>
<td>4.6</td>
<td>4.5</td>
<td>4.1</td>
<td>3.7</td>
<td>4.1</td>
<td>3.8</td>
</tr>
<tr class="odd">
<td class="firstcol">Unit Labor Costs</td>
<td>3.0</td>
<td>5.1</td>
<td>2.2</td>
<td>0.9</td>
<td>2.7</td>
<td>2.8</td>
</tr>
</tbody>
</table>
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Labor productivity in the nonfarm business sector was revised higher for last quarter to 1.5% (AR) from the initial estimate of a 0.8% increase. The Consensus expectation was for revision to 1.2% growth. (Earlier figures also were [...]

U.S. Worker Productivity Increase Stronger, But Underlying Cost Pressures Mount

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090604a.jpg" width="353">
The labor market is neither worsening nor improving significantly. It just remains quite soft. The latest indication of this is last week&#39;s slip in initial claims for unemployment insurance by 4,000 to 621,000 from an upwardly revised level of 625,000. Initial claims are down from their March peak of 674,000. However, the four-week average of claims, which smoothes out some of the volatility in the weekly numbers, rose slightly to 631,250. Though that was near the lowest level since mid-February it was up by two-thirds from the year ago level. The Consensus expectation was for 620,000 claims last week.
The Labor Department indicated that the largest increases in initial claims for the week ending May 23 were in Illinois (+3,881), Iowa (+2,312), South Carolina (+1,792), Texas (+1,548), and Wisconsin (+1,464), while the largest decreases were in North Carolina (-3,952), Michigan (-2,812), Ohio (-2,158), Tennessee (-2,053), and Connecticut (-1,320).
Continuing claims for unemployment insurance, which provide an indication of workers&#39; ability to find employment remained near the record high of 6,735,000, more than twice the year ago level. Further indicating that the job market remains weak, the four-week average of continuing claims also rose to another record of 6,687,500. The series dates back to 1966.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090604b.jpg" width="353">
Another indication of the labor market&#39;s softness was that the insured unemployment rate held at 5.0% for the third consecutive week. That level was more than double last May and the highest level since 1983. During the last ten years there has been a 93% correlation between the level of the insured unemployment rate and the overall rate of unemployment published by the Bureau of Labor Statistics.Clearly, the latest weekly figure understates labor market distress in some states.
The highest insured unemployment rates in the week ending May 16 were in Michigan (7.6 percent), Oregon (7.1), Puerto Rico (6.7), Nevada (6.4), Pennsylvania (6.2), Wisconsin (5.9), California (5.5), Arkansas (5.4), Idaho (5.4), and North Carolina (5.4). Even in states where the insured unemployment rate was relatively low such as Massachusetts (5.0), New York (4.3), Florida (3.9) Georgia (3.7), Texas (2.9), and Virginia (2.6), the level was double that of one year ago.
The unemployment insurance claims data is available in Haver&#39;s WEEKLY database and the state data is in the REGIONW database.
Yesterday&#39;s testimony by Fed Chairman Ben S. Bernanke can be found <a href="http://www.federalreserve.gov/newsevents/testimony/bernanke20090603a.htm"> here</a>.

<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/WEEKLY/@W5/@W507/@W507.HTM">Unemployment Insurance (000s)</a>&nbsp;</th>
<th scope="col">05/30/09</th>
<th scope="col">05/23/09</th>
<th scope="col">05/16/09</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006&nbsp;</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Initial Claims</td>
<td>621</td>
<td>625</td>
<td>636</td>
<td>67.8%</td>
<td>420</td>
<td>321</td>
<td>313</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>--</td>
<td>6,735</td>
<td>6,750</td>
<td>117.6%</td>
<td>3,342</td>
<td>2,552</td>
<td>2,459</td>
</tr>
</tbody>
</table>


</html>

The labor market is neither worsening nor improving significantly. It just remains quite soft. The latest indication of this is last week's slip in initial claims for unemployment insurance by 4,000 to 621,000 from an upwardly revised [...]

U.S. Initial Unemployment Insurance Claims Slip

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090604c.jpg" align="left" border="0" height="265" width="353">
Labor productivity in the nonfarm business sector was revised
higher for last quarter to 1.5% (AR) from the initial estimate of a
0.8% increase. The Consensus expectation was for revision to 1.2%
growth. (Earlier figures also were revised slightly.) Productivity
growth has weakened sharply with the current economic downturn. During
the last nine months productivity has risen just 0.8% which is the
weakest performance since early-2007. Nevertheless, any positive growth
during a recessionary period contrasts with the declines in during the
downturns of the 1950s through the 1980s.
Though productivity growth has slowed dramatically, businesses
were quick in responding to the output shortfall by cutting employment
and hours-worked. Output fell at a 7.6% annual rate last quarter after
falling 8.8% during 4Q '08. These declines marked the quickest
back-to-back since early 1958. However, businesses responded quickly by
cutting employment &amp; hours worked at a 9.0% rate last quarter
and by 8.3% during 4Q.
The drop in productivity growth has hurt corporations' bottom
lines due to the fact that growth in compensation costs has remained
firm. It rose an upwardly revised 4.6% last quarter and that left y/y
growth at 4.1%. Annually, growth in compensation has been roughly
stable near the 4% level since 2001.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090604d.jpg" align="right" border="0" height="265" width="353">
The combination of recently diminished productivity growth and
stable, firm gains in compensation has increased costs. However, for
last quarter growth in unit labor costs was revised down slightly to
3.0% following the 5.1% jump during 4Q. The increases raised the
six-month growth in costs to a downwardly revised 4.0% versus just 0.9%
during all of last year.
In the factory sector, the pressure on corporations' bottom
lines has been more intense. Worker productivity was revised up
slightly but it still fell 2.7% during 1Q (-3.2% y/y), down for the
fourth consecutive quarter. Year-to-year, the drop in productivity came
as output fell faster (-13.9%) than hours worked (-11.0%). That decline
in productivity growth has outpaced firms' ability to cut compensation
costs. In fact, there's been no cut at all. Compensation growth of
13.4% last quarter lifted the y/y gain to 8.4%, nearly double last
year's 4.1% advance. As a result, unit labor cost growth in the factory
sector surged again. The 1Q increase of 16.6% lifted the annual gain to
12.0% which compares to just a 3.2% gain during all of last year.
The productivity &amp; cost figures are available in
Haver's USECON database.
Today's remarks at the Federal Reserve Board
Conference on Financial Markets and Monetary Policy by Fed
Chairman Ben S. Bernanke are available <a href="http://www.federalreserve.gov/newsevents/speech/bernanke20090604a.htm">
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/USECON/@EC/@EC02/@EC02.HTM">Nonfarm
Business Sector</a> (SAAR, %)</th>
<th scope="col">1Q '09 (Revised)</th>
<th scope="col">4Q '08</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Output per Hour</td>
<td>1.6</td>
<td>-0.6</td>
<td>1.9</td>
<td>2.8</td>
<td>1.4</td>
<td>0.9</td>
</tr>
<tr>
<td class="firstcol">Compensation per Hour</td>
<td>4.6</td>
<td>4.5</td>
<td>4.1</td>
<td>3.7</td>
<td>4.1</td>
<td>3.8</td>
</tr>
<tr class="odd">
<td class="firstcol">Unit Labor Costs</td>
<td>3.0</td>
<td>5.1</td>
<td>2.2</td>
<td>0.9</td>
<td>2.7</td>
<td>2.8</td>
</tr>
</tbody>
</table>
U.S. Initial Unemployment
Insurance Claims Slip&nbsp; 
by <a href="/comment/Moeller.html">Tom
Moeller</a> June 4, 2009


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090604a.jpg" align="left" border="0" height="265" width="353">
The labor market is neither worsening nor improving
significantly. It just remains quite soft. The latest indication of
this is last week's slip in initial claims for unemployment insurance
by 4,000 to 621,000 from an upwardly revised level of 625,000. Initial
claims are down from their March peak of 674,000. However, the
four-week average of claims, which smoothes out some of the volatility
in the weekly numbers, rose slightly to 631,250. Though that was near
the lowest level since mid-February it was up by two-thirds from the
year ago level. The Consensus expectation was for 620,000 claims last
week.
The Labor Department indicated that the largest increases in
initial claims for the week ending May 23 were in Illinois (+3,881),
Iowa (+2,312), South Carolina (+1,792), Texas (+1,548), and Wisconsin
(+1,464), while the largest decreases were in North Carolina (-3,952),
Michigan (-2,812), Ohio (-2,158), Tennessee (-2,053), and Connecticut
(-1,320).
Continuing claims for unemployment insurance, which provide an
indication of workers' ability to find employment remained near the
record high of 6,735,000, more than twice the year ago level.
Further indicating that the job market remains weak, the
four-week average of continuing claims also rose to another record of
6,687,500. The series dates back to 1966.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090604b.jpg" align="right" border="0" height="265" width="353">
Another indication of the labor market's softness was that the
insured unemployment rate held at 5.0% for the third consecutive week.
That level was more than double last May and the highest level since
1983. During the last ten years there has been a 93% correlation
between the level of the insured unemployment rate and the overall rate
of unemployment published by the Bureau of Labor Statistics.Clearly,
the latest weekly figure understates labor market distress in some
states.
The highest insured unemployment rates in the week ending May
16 were in Michigan (7.6 percent), Oregon (7.1), Puerto Rico (6.7),
Nevada (6.4), Pennsylvania (6.2), Wisconsin (5.9), California (5.5),
Arkansas (5.4), Idaho (5.4), and North Carolina (5.4). Even in states
where the insured unemployment rate was relatively low such as
Massachusetts (5.0), New York (4.3), Florida (3.9) Georgia (3.7), Texas
(2.9), and Virginia (2.6), the level was double that of one year ago.
The unemployment insurance claims data is available in Haver's
WEEKLY database and the state data is in the REGIONW
database.
Yesterday's testimony by Fed
Chairman Ben S. Bernanke can be found <a href="http://www.federalreserve.gov/newsevents/testimony/bernanke20090603a.htm">
here</a>.

<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/WEEKLY/@W5/@W507/@W507.HTM">Unemployment
Insurance (000s)</a>&nbsp;</th>
<th scope="col">05/30/09</th>
<th scope="col">05/23/09</th>
<th scope="col">05/16/09</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006&nbsp;</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Initial Claims</td>
<td>621</td>
<td>625</td>
<td>636</td>
<td>67.8%</td>
<td>420</td>
<td>321</td>
<td>313</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>--</td>
<td>6,735</td>
<td>6,750</td>
<td>117.6%</td>
<td>3,342</td>
<td>2,552</td>
<td>2,459</td>
</tr>
</tbody>
</table>
EMU Retail Sales Volumes Erode At
Slow Pace 
by <a href="/comment/Brusca.html">Robert
Brusca</a> June 4, 2009


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090604e.jpg" align="left" border="0" height="265" width="353">
EMU area retail sales volume is still eroding but at a slow
pace. The volume drop in the past three months was just 0.2% per month
Retail sales have been declining in the Area but have not been as weak
as in the US. Passenger car registrations in Europe have begun to take
off as several nations&#8217; scrappage plans have encouraged consumers to
buy new vehicles. 
 

Europe&#8217;s consumers still face hurdles. Unemployment is rising
and is still probably in is early sages of increasing; France reported
a surge in unemployment in Q1 just today as its rate jumped to 9.1%
from 8% in Q4. Spain&#8217;s rate has climbed up over 18% to nearly 19%.
Consumer confidence is low throughout the Area, although it has been
edging up. Income preservation polices have helped consumers to hold
the line on spending. Sensitive cyclical surveys in the form of
purchaser indices show that MFG and Service sectors are coming up from
their lows. With these positive pulses in train any further damage to
consumption from rising unemployment could be limited. 
 


<table border="0" cellspacing="0" width="100%"> <colgroup></colgroup>
<thead><tr>
<th colspan="7" scope="col"> Euro
Area Retail Sales Volume</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td colspan="3">M/M</td>
<td colspan="3">Saar</td>
</tr>
<tr>
<td class="firstcol">&nbsp;</td>
<td>Apr-09</td>
<td>Mar-09</td>
<td>Feb-09</td>
<td>3-Mo</td>
<td>6-MO</td>
<td>12-Mo</td>
</tr>
<tr class="odd">
<td class="firstcol">Zone Total</td>
<td>-0.2%</td>
<td>-0.2%</td>
<td>-0.2%</td>
<td>-2.5%</td>
<td>-2.9%</td>
<td>-2.6%</td>
</tr>
<tr class="odd">
<td class="firstcol">Food, Beverage, and Tobacco</td>
<td>-0.1%</td>
<td>-0.1%</td>
<td>-0.2%</td>
<td>-1.8%</td>
<td>-2.1%</td>
<td>-2.1%</td>
</tr>
<tr class="odd">
<td class="firstcol">Motor Vehicle Reg</td>
<td>5.9%</td>
<td>-1.7%</td>
<td>20.4%</td>
<td>146.8%</td>
<td>8.4%</td>
<td>-8.1%</td>
</tr>
<tr>
<td colspan="7" class="firstcol">Non-Food
Country detail:
Volume</td>
</tr>
<tr class="odd">
<td class="firstcol">Germany</td>
<td>0.5%</td>
<td>-0.4%</td>
<td>0.0%</td>
<td>0.4%</td>
<td>-1.5%</td>
<td>-0.3%</td>
</tr>
<tr class="odd">
<td class="firstcol">UK (EU)</td>
<td>0.9%</td>
<td>1.2%</td>
<td>-2.1%</td>
<td>-0.4%</td>
<td>3.9%</td>
<td>2.7%</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/090603g.jpg" width="353">
Improvement in service sector activity is accompanying the factory sector&#39;s recent rise. The May Composite Index for the nonmanufacturing sector from the Institute for Supply Management (ISM) rose to 44.0 last month from an unrevised reading of 43.7 during April. The latest was the highest level since October of last year but it was slightly lower than Consensus expectations for a May reading of 45.0. A level of the ISM index below 50 indicates declining activity. Since the series&#39; inception in 1997 there has been a 60% correlation between the level of the business activity index in the nonmanufacturing sector and the Q/Q change in real GDP for the services and the construction sectors.
That latest rise came as the employment index rose to its highest level since October. Since the series&#39; inception in 1997 there has been a 56% correlation between the level of the ISM nonmanufacturing employment index and the m/m change in payroll employment in the service-producing plus the construction industries.Also to the upside was the supplier deliveries index. <img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090603h.jpg" width="353">
Countering these gains were declines in the business activity sub-index after two months of improvement. The new orders series also fell but just slightly. At 44.4 it remained well up from last November&#39;s low of 35.6.
Pricing power has shown moderate improvement this year in that earlier declines have not continued. The price index has been relatively stable in a range of 36 to 48 after reaching a high of 82.1 last Spring. Since its inception ten years ago, there has been a 60% correlation between the price index and the q/q change in the GDP services chain price index.
Beginning with the January 2008 Nonmanufacturing <cite>Report On Business</cite>&reg;, the composite index is calculated as an indicator of the overall economic condition for the non-manufacturing sector. It is a composite index based on the diffusion indices for four of the indicators (business activity, new orders, employment and supplier deliveries) with equal weights. The latest report from the ISM can be found <a href="http://www.ism.ws/ISMReport/NonMfgROB.cfm.">here</a>.
ISM surveys more than 370 purchasing managers in more than 62 industries including law firms, hospitals, government and retailers. The nonmanufacturing survey dates back to July 1997.

<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">May</th>
<th scope="col">April</th>
<th scope="col">May &#39;08</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Composite Index</td>
<td>44.0</td>
<td>43.7</td>
<td>51.2</td>
<td>47.4</td>
<td>53.5</td>
<td>55.7</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Business Activity</td>
<td>42.4</td>
<td>45.2</td>
<td>52.9</td>
<td>47.4</td>
<td>56.0</td>
<td>58.0</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp; Employment</td>
<td>39.0</td>
<td>37.0</td>
<td>48.3</td>
<td>43.8</td>
<td>52.0</td>
<td>53.8</td>
</tr>
<tr>
<td class="firstcol">Prices Index</td>
<td>46.9</td>
<td>40.0</td>
<td>75.6</td>
<td>66.0</td>
<td>63.8</td>
<td>65.3</td>
</tr>
</tbody>
</table>


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Improvement in service sector activity is accompanying the factory sector's recent rise. The May Composite Index for the nonmanufacturing sector from the Institute for Supply Management (ISM) rose to 44.0 last month from an unrevised [...]

U.S. ISM Nonmanufacturing Index Improves Further

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090603f.jpg" align="left" border="0" height="265" width="353">
The real story this month is not that the services PMI in EMU
continued to improve, but that in the UK the PMI reading for the
services sector leapt over the neutral zone to score a positive reading
at 51.72. 
 

The UK is now showing the strongest service sector in EU. At
48.33 and still showing decline, France is in second place. Spain&#8216;s
service sector weakened this month, dropping from 42.30 to 39.14 and is
now below Ireland&#8217;s reading. 
 

The services reading for EMU is in the bottom 26% of its
range. But that is stronger than the services reading from the EU
Commission index for services; that reading is in the bottom 3.7% of is
range. Consumer confidence for EMU is also low in the bottom 8% of its
range. 
 

The news here is that the service sector, as is true for the
MFG sector, finds improvement is in train. That is good news and what
we have come to expect. Different surveys show different degrees of
change &#8211; that is not too surprising. Within the Zone we have countries
moving at different speeds- not surprising either&#8211;as well as in
different directions, and that is not good at all. The UK is the
strongest EU country in terms of its service sector, Spain with 18%
unemployment is seeing its service sector being dragged down. Were
Spain the UK its currency might drop to stimulate the economy, but
since Spain is In EMU and the UK is out, that possibility is not
Spain&#8217;s and the UK does not need such stimulus. Spain is a problem for
EMU and despite rhetoric to the contrary the Zone itself owns Spain
some assistance. In a currency union, even one with separate fiscal
responsibilities like fiscal Japanese lunch box there still are joint
responsibilities to the members. 


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr><th colspan="8" scope="col">Markit Services Indices for EU/EMU </th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td>May-09</td>
<td>Apr-09</td>
<td>Mar-09</td>
<td>3Mo</td>
<td>6Mo</td>
<td>12Mo</td>
<td>Percentile</td>
</tr>
<tr class="odd">
<td class="firstcol">Euro-Area</td>
<td>44.82</td>
<td>43.76</td>
<td>40.95</td>
<td>43.18</td>
<td>42.17</td>
<td>44.63</td>
<td>26.1%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Germany</td>
<td>45.17</td>
<td>43.76</td>
<td>42.30</td>
<td>43.74</td>
<td>44.05</td>
<td>47.05</td>
<td>19.6%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; France</td>
<td>48.33</td>
<td>46.52</td>
<td>43.64</td>
<td>46.16</td>
<td>43.63</td>
<td>45.94</td>
<td>36.5%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Italy</td>
<td>43.08</td>
<td>42.05</td>
<td>39.10</td>
<td>41.41</td>
<td>40.58</td>
<td>43.38</td>
<td>21.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Spain</td>
<td>39.14</td>
<td>42.30</td>
<td>34.11</td>
<td>38.52</td>
<td>35.20</td>
<td>35.04</td>
<td>33.9%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Ireland</td>
<td>39.49</td>
<td>32.16</td>
<td>35.69</td>
<td>35.78</td>
<td>34.53</td>
<td>36.65</td>
<td>22.4%</td>
</tr>
<tr class="even">
<td class="firstcol" colspan="8">EU only</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; UK (CIPs)</td>
<td>51.72</td>
<td>48.68</td>
<td>45.47</td>
<td>48.62</td>
<td>45.30</td>
<td>45.33</td>
<td>56.9%</td>
</tr>
<tr>
<td colspan="8" class="firstcol">EU Commission Indices for
EU and EMU</td>
</tr>
<tr class="even">
<td class="firstcol">EU Index</td>
<td>May-09</td>
<td>Apr-09</td>
<td>Mar-09</td>
<td>3Mo</td>
<td>6Mo</td>
<td>12Mo</td>
<td>Percentile</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; EU Services</td>
<td>-26</td>
<td>-30</td>
<td>-31</td>
<td>-32.00</td>
<td>-31.67</td>
<td>-26.17</td>
<td>8.3%</td>
</tr>
<tr class="even">
<td class="firstcol">EMU</td>
<td>May-09</td>
<td>Apr-09</td>
<td>Mar-09</td>
<td>3Mo</td>
<td>6Mo</td>
<td>12Mo</td>
<td>Percentile</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Services</td>
<td>-23</td>
<td>-24</td>
<td>-25</td>
<td>-24.00</td>
<td>-22.50</td>
<td>-14.04</td>
<td>3.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Cons Confidence</td>
<td>-31</td>
<td>-31</td>
<td>-34</td>
<td>-32.00</td>
<td>-31.67</td>
<td>-18.08</td>
<td>8.3%</td>
</tr>
<tr>
<td colspan="8" class="firstcol">Consumer Confidence By
Country</td>
</tr>
<tr class="odd">
<td class="firstcol">Germany-Ccon</td>
<td>-35</td>
<td>-34</td>
<td>-31</td>
<td>-33.33</td>
<td>-29.67</td>
<td>-19.50</td>
<td>0.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">France-Ccon</td>
<td>-33</td>
<td>-32</td>
<td>-36</td>
<td>-33.67</td>
<td>-34.33</td>
<td>-30.00</td>
<td>7.5%</td>
</tr>
<tr class="odd">
<td class="firstcol">Ital-Ccon</td>
<td>-26</td>
<td>-25</td>
<td>-31</td>
<td>-27.33</td>
<td>-27.67</td>
<td>-25.75</td>
<td>15.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">UK-Ccon</td>
<td>-22</td>
<td>-22</td>
<td>-28</td>
<td>-24.00</td>
<td>-28.00</td>
<td>-26.25</td>
<td>34.2%</td>
</tr>
<tr>
<td colspan="8" class="firstcol">Percentile is over range since May
2000</td>
</tr>
</tbody>
</table>
</body></html>

The real story this month is not that the services PMI in EMU continued to improve, but that in the UK the PMI reading for the services sector leapt over the neutral zone to score a positive reading at 51.72. The UK is now showing the [...]

Markit's Service PMI Rises In EMU But Still Shows Contraction

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090603e.jpg" width="353">
The outplacement firm of Challenger, Grey &amp; Christmas indicated that job cut announcements eased for the fourth consecutive month. The announcement of 111,182 layoffs followed 132,590 during April. This cycle&#39;s largest layoff total occurred in January when there were 241,749 cuts. Challenger also reported, however, that announced hiring plans fell sharply after their jump during April.
Announcement of job cuts in the pharmaceutical industry fell even further after the sharp April decline to 698. Announcements in the retail industry also fell for the fourth consecutive month while job cuts in the real estate industry evaporated. Cuts in the retail industry fell as did cuts in the insurance and in the industrial goods sectors.
Picking up some steam were job cut announcements in the computer and in the construction sectors. The health care sector job cut announcements rose sharply.
During the last ten years there has been a 67% (inverse) correlation between the three month moving average of announced job cuts and the three month change payroll employment. Job cut announcements differ from layoffs. Many are achieved through attrition, early retirement or just never occur.
The Challenger figures are available in Haver&#39;s SURVEYS database.

<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">May</th>
<th scope="col">April</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Announced Job Cuts</td>
<td>111,182</td>
<td>132,590</td>
<td>7.4%</td>
<td>1,223,993</td>
<td>768,264</td>
<td>839,822</td>
</tr>
</tbody>
</table>
</body>
</html>

The outplacement firm of Challenger, Grey & Christmas indicated that job cut announcements eased for the fourth consecutive month. The announcement of 111,182 layoffs followed 132,590 during April. This cycle's largest layoff total [...]

Challenger Layoffs Continue To Indicate Job Market Improvement

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

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Not many respondents are showing absolute slowing. Only five this month. Only six over the last three months on average. The median total PMI score fell to 49.7 showing contraction in April from 51.1 in March. The average fared slightly better. The 12-months to 6-months to 3-months show a moderate but consistent slowing. The breadth of slowing is wide with 60.9% of survey respondents slowing over three months compared to six months.

The percentile standings show the most strength for the BRIC group with reading above 50% (that marks the median). All other groupings have standings below the 50% mark indicating that they are below their respective medians of the last four-plus years.

Over every horizon from 12-months to 6-months to 3-months, more than 50% of the respondents show a weakening (slowing) in their PMI responses.

Among the largest economies, only Italy has a composite PMI standing above its median (above 50%).

Only 9 of 24 respondents have PMI ranked percentile standings above the 50% mark. That underlines the weakness in composite conditions and the breadth of the weakness.
 
Services sectors no longer are providing the lift to offset ongoing weakness in manufacturing. The differences among countries are narrowing.

Economic conditions across countries may be narrowing for several reasons, one being that the COVID period and then the shock reaction to Russia's invasion from Ukraine put all countries on the same timeline as central banks have been leaning against the shockwaves from those 2 events. As a result of those events, inflation flared but has more recently been falling. Still, inflation continues to be over the top of targets with the European Monetary Union right now making the most progress and Japan facing more late cycle weakness with excessive inflation than other countries in the mix. More recently aggressive tariff policy the United States has put all countries on their back foot and puts everyone on notice that the future has become a lot more uncertain. Central banks that were progressing toward rate cuts now are worried about the possibility of more inflation from tariffs or from the possibility of recession from tariffs - tariffs up the ante on uncertainty as well as on risk. What we see in this month's PMI statistics is a gradual continued erosion as the perceived risk here is that things get steadily but slowly worse as firms, investors, and consumers began to pull in their horns and prepare for something bad to happen not knowing what that might be.

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Global Composite PMIs Erode

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.

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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.

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**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.

Economy in Brief: June 2009

Jump to:

U.S. Payroll Losses Slow AsUnemployment Rate Jumps

EMU Retail Sales Volumes Erode At Slow Pace

U.S. Worker Productivity Increase Stronger, But Underlying Cost Pressures Mount

U.S. Initial Unemployment Insurance Claims Slip

U.S. Worker Productivity Increase Stronger, But Underlying Cost Pressures Mount

U.S. ISM Nonmanufacturing Index Improves Further

Markit's Service PMI Rises In EMU But Still Shows Contraction

Challenger Layoffs Continue To Indicate Job Market Improvement