Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060807a.jpg" width="353">
U.S. real GDP growth of 2.5% last quarter disappointed due to subtractions from the investment side of the ledger. A 0.1 percentage point subtraction due to lower business spending on equipment &amp; software (-1.0% AR, +6.9% y/y) was the first q/q subtraction exerted since early 2003 while a 0.4 point subtraction from residential investment (-6.3% AR, -0.2% y/y) was the third in a row.
The economy&#39;s mainstay, consumer spending, also slowed somewhat to a 2.5% growth rate in 2Q from 3.4% growth during the prior four quarters, but a recent recovery in consumer sentiment, roughly 2% growth in real disposable income, and a possible end to the hikes in interest rates combine to suggest positive growth.
It&#39;s the sizzle that has been removed from the U.S. economy&#39;s growth potential. Since late 2003, business spending on equipment &amp; software has been adding more than 0.5 percentage to GDP growth as residential investment added about the same amount.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060807b.jpg" width="353">
Unbridled expansion? Bubbles waiting to burst? Perhaps, but additions of this magnitude have been seen before in the case of housing, and actually have been quite moderate in the case of business investment.
During the last five years real housing investment grew at an annual rate of 6.2%. A comparable, and even stronger, period of growth in the 1980s indeed was followed by bust. The robust expansion during the 1990s, however, was followed merely by slower growth. As for business fixed investment, it&#39;s up only an average 3.5% during the last five years. Indeed, growth during the four quarters ending in 1Q was revised lower to 7.4% from 8.9% reported in June. While improved, that growth probably was restrained by a moderate, but continuing, expansion of business&#39; profit margins (which also were revised down). Arguing against a pending bust is that during the period, business net cash flow surged.
It&#39;s been said that forecasting is very difficult, especially when it&#39;s about the future. And now is certainly not the time to minimize the difficulties given higher oil prices, geopolitical risks and recent increases in interest rates. The current wisdom is that U.S. economic growth will continue at roughly a 3% pace next year despite somewhat slower growth in personal consumption, a halving of the growth in business investment and a further decline in housing. An improved foreign trade account is expected to be a modest offset to these diminutions. Stay tuned.
Forecasting Professional Forecasters from the Federal Reserve Board is available <a href="http://www.federalreserve.gov/pubs/feds/2006/200610/200610abs.html">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/@E7/@E701/@E701.HTM">Chained 2000$, % AR</a></th>
<th scope="col">2Q &#39;06</th>
<th scope="col">1Q &#39;06</th>
<th scope="col">Y/Y</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">GDP</td>
<td>2.5%</td>
<td>5.6%</td>
<td>3.5%</td>
<td>3.2%</td>
<td>3.9%</td>
<td>2.5%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Inventory Effect</td>
<td>0.4%</td>
<td>-0.0%</td>
<td>0.6%</td>
<td>-0.3%</td>
<td>0.4%</td>
<td>0.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">Final Sales</td>
<td>2.1%</td>
<td>5.6%</td>
<td>2.9%</td>
<td>3.5%</td>
<td>3.5%</td>
<td>2.5%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Foreign Trade Effect</td>
<td>&nbsp;0.3%</td>
<td>-0.0%</td>
<td>-0.1%</td>
<td>-0.1%</td>
<td>-0.5%</td>
<td>-0.3%</td>
</tr>
<tr class="odd">
<td class="firstcol">Domestic Final Demand</td>
<td>1.6%</td>
<td>5.4%</td>
<td>3.0%</td>
<td>3.6%</td>
<td>4.0%</td>
<td>2.8%</td>
</tr>
<tr>
<td class="firstcol">Chained GDP Price Index</td>
<td>3.3%</td>
<td>3.3%</td>
<td>3.3%</td>
<td>3.0%</td>
<td>2.8%</td>
<td>2.1%</td>
</tr>
</tbody>
</table>


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U.S. real GDP growth of 2.5% last quarter disappointed due to subtractions from the investment side of the ledger. A 0.1 percentage point subtraction due to lower business spending on equipment & software (-1.0% AR, +6.9% y/y) was the [...]

Forecast: Investment Spending on the Wane

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060807a.jpg" width="353">
U.S. real GDP growth of 2.5% last quarter disappointed due to subtractions from the investment side of the ledger. A 0.1 percentage point subtraction due to lower business spending on equipment &amp; software (-1.0% AR, +6.9% y/y) was the first q/q subtraction exerted since early 2003 while a 0.4 point subtraction from residential investment (-6.3% AR, -0.2% y/y) was the third in a row.
The economy&#39;s mainstay, consumer spending, also slowed somewhat to a 2.5% growth rate in 2Q from 3.4% growth during the prior four quarters, but a recent recovery in consumer sentiment, roughly 2% growth in real disposable income, and a possible end to the hikes in interest rates combine to suggest positive growth.
It&#39;s the sizzle that has been removed from the U.S. economy&#39;s growth potential. Since late 2003, business spending on equipment &amp; software has been adding more than 0.5 percentage to GDP growth as residential investment added about the same amount.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060807b.jpg" width="353">
Unbridled expansion? Bubbles waiting to burst? Perhaps, but additions of this magnitude have been seen before in the case of housing, and actually have been quite moderate in the case of business investment.
During the last five years real housing investment grew at an annual rate of 6.2%. A comparable, and even stronger, period of growth in the 1980s indeed was followed by bust. The robust expansion during the 1990s, however, was followed merely by slower growth. As for business fixed investment, it&#39;s up only an average 3.5% during the last five years. Indeed, growth during the four quarters ending in 1Q was revised lower to 7.4% from 8.9% reported in June. While improved, that growth probably was restrained by a moderate, but continuing, expansion of business&#39; profit margins (which also were revised down). Arguing against a pending bust is that during the period, business net cash flow surged.
It&#39;s been said that forecasting is very difficult, especially when it&#39;s about the future. And now is certainly not the time to minimize the difficulties given higher oil prices, geopolitical risks and recent increases in interest rates. The current wisdom is that U.S. economic growth will continue at roughly a 3% pace next year despite somewhat slower growth in personal consumption, a halving of the growth in business investment and a further decline in housing. An improved foreign trade account is expected to be a modest offset to these diminutions. Stay tuned.
Forecasting Professional Forecasters from the Federal Reserve Board is available <a href="http://www.federalreserve.gov/pubs/feds/2006/200610/200610abs.html"> 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/@E7/@E701/@E701.HTM">Chained 2000$, % AR</a></th>
<th scope="col">2Q &#39;06</th>
<th scope="col">1Q &#39;06</th>
<th scope="col">Y/Y</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">GDP</td>
<td>2.5%</td>
<td>5.6%</td>
<td>3.5%</td>
<td>3.2%</td>
<td>3.9%</td>
<td>2.5%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Inventory Effect</td>
<td>0.4%</td>
<td>-0.0%</td>
<td>0.6%</td>
<td>-0.3%</td>
<td>0.4%</td>
<td>0.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">Final Sales</td>
<td>2.1%</td>
<td>5.6%</td>
<td>2.9%</td>
<td>3.5%</td>
<td>3.5%</td>
<td>2.5%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Foreign Trade Effect</td>
<td>&nbsp;0.3%</td>
<td>-0.0%</td>
<td>-0.1%</td>
<td>-0.1%</td>
<td>-0.5%</td>
<td>-0.3%</td>
</tr>
<tr class="odd">
<td class="firstcol">Domestic Final Demand</td>
<td>1.6%</td>
<td>5.4%</td>
<td>3.0%</td>
<td>3.6%</td>
<td>4.0%</td>
<td>2.8%</td>
</tr>
<tr>
<td class="firstcol">Chained GDP Price Index</td>
<td>3.3%</td>
<td>3.3%</td>
<td>3.3%</td>
<td>3.0%</td>
<td>2.8%</td>
<td>2.1%</td>
</tr>
</tbody>
</table>
 Japan's Business Cycle Indicators  
by <a href="/comment/Curley.html">Louise Curley</a> August 7, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060807c.jpg" width="353">
The Japanese indexes of business conditions--the Diffusion Indexes and the Composite Indexes--are designed to facilitate the analysis of business cycles. The diffusion indexes aggregate the direction of changes of selected series to detect a business cycle phase, while the composite indexes aggregate the percentage changes of selected series to detect the volume of output as an indication of the strength or weakness of the cycle.
Both the Diffusion and the Composite indexes are classified as Leading, Coincident and Lagging. The leading indicators are generally used as predictors. They usually precede the coincident indicators by a few months. The lagging indicators are used to confirm turning points.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060807d.jpg" width="353">
As reported, the diffusion indexes are extremely volatile. For instance, the latest report for the leading diffusion index is 50% for June, down from 77.3% in May. If we take, instead, a three month moving average, the June figures is 60.6% or the same as May. (See the first chart which shows the monthly values of the leading diffusion index and the three months moving averages.) A value of a diffusion index above 50% indicates expansion while a value below indicates a contraction. The President of the ESRI (Economic and Social Research Institute) has determined that the current cycle is dated from the trough of the last cycle--January, 2002. Thus the current expansion has been in progress for 43 months. With the leading indicator steady and the coincident and lagging diffusion indexes still showing strength, the expansion is likely to continue, for a few months, at least. The longest expansion on record is that from October, 1965 to July, 1970 a total of 57 months.
The composite leading indicator also declined in June from 108.2 (2000=100) in May to 106.2. but the three month moving average for June was 107.3, compared with 106.5 in May. The coincident composite index is also an indicator of the phase of the cycle. If it is rising (falling), the economic cycle is considered to be in the expansion (contraction) phase. In addition, the quarterly average of the composite coincident index is a good indicator of real gross domestic product as shown in the second chart. (The correlation between the two is .85.) Thus rise in the composite coincident index suggests a continued rise in real GDP for the second quarter. The first estimate of the second quarter GDP is expected on August 11.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">Japan</th>
<th scope="col">Jun&nbsp; 06</th>
<th scope="col">May 06</th>
<th scope="col">Jun 05</th>
<th scope="col">M/M</th>
<th scope="col">Y/Y</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Diffusion Indexes&nbsp;(%)</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td class="firstcol">&nbsp; Leading Indicators&nbsp;</td>
<td>50.0</td>
<td>77.3</td>
<td>58.3</td>
<td>-27.3</td>
<td>-8.3*</td>
<td>55.2</td>
<td>59.4</td>
<td>59.7</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Coincident Indicators</td>
<td>88.9</td>
<td>80.0</td>
<td>100.0</td>
<td>8.9</td>
<td>-11.1*</td>
<td>71.6</td>
<td>61.4</td>
<td>74.6</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Lagging Indicators</td>
<td>75.0</td>
<td>80.0</td>
<td>83.3</td>
<td>-5.0</td>
<td>-8.2*</td>
<td>72.2</td>
<td>77.8</td>
<td>68.8</td>
</tr>
<tr class="odd">
<td class="firstcol">Composite Indicators (2000=100)</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td class="firstcol">&nbsp; Leading Indicators&nbsp;</td>
<td>106.2</td>
<td>108.2</td>
<td>102.5</td>
<td>-1.94</td>
<td>3.71</td>
<td>102.8</td>
<td>103.1</td>
<td>96.9</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Coincident Indicators</td>
<td>111.2</td>
<td>110.3</td>
<td>107.6</td>
<td>0.82</td>
<td>3.35</td>
<td>107.7</td>
<td>105.2</td>
<td>98.5</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Lagging Indicators</td>
<td>124.0</td>
<td>125.3</td>
<td>120.7</td>
<td>-1.04</td>
<td>2.73</td>
<td>119.8.</td>
<td>114.2</td>
<td>103.3</td>
</tr>
</tbody>
</table>


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Carol Stone, CBE

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060804d.jpg" width="353">
We last wrote about the Canadian labor force four months ago and we extolled the 31-year low in unemployment, 6.3% in March. After an uptick in April, the rate dropped to another 31-year low of 6.1% in both May and June. But July saw it climb back to 6.4%. Part of the rise is explained by an increase in participation, particularly among women. This increase in the number of people willing to work met with a modest decrease in employment by 5,500 after a 4,600 loss in June. The resulting employment rate (employment as a % of population) fell to 63.0%, the lowest since April.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060804e.jpg" width="353">
The press reports note that the fall in employment and the rise in unemployment were not expected and are therefore very dramatic. But these developments come in the wake of an extraordinary employment gain of 96,700 in May. That was the second largest monthly increase since 1976, with the largest in this span just a bit more, 97,000, in January 2002. So it is hard not to expect some pause to follow that big move. And what we have in these two latest months is minuscule, 0.03% each time, so it&#39;s more that employment stabilized rather than &quot;falling&quot;.
In the big May rise, several industry groups participated, particularly finance and related services, health care and public administration. There were also notable gains in professional services, culture &amp; recreation and accommodations &amp; food services. In the subsequent months, only one, professional services, lost all of its May increase. Others grew in at least one of June or July; accommodation and food services increased in both. The total services sector grew 1.1% in the last three months and is up 2.9% over a year ago.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060804f.jpg" width="353">
Goods-producing industries are not so strong, as a brief flurry in manufacturing back in the spring faded quickly. Mining and construction have stronger trends, but mining is small -- roughly 325,000 employees all together -- so 7% growth there over a year ago doesn&#39;t add many total workers. Construction has more impact, though, and it too is up more than 7% year-on-year, adding almost 72,000 workers. So there is diverse growth in Canadian employment opportunities and a two-month pause hardly indicates that these gains have stopped in their tracks. 

<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/CANSIM/@C6/@C601/@C601.HTM">Canada (Seasonally Adjusted)</a></th>
<th scope="col">Jul 2006</th>
<th scope="col">June 2006</th>
<th scope="col">May 2006</th>
<th scope="col">Year Ago</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Unemployment Rate (%)</td>
<td>6.4</td>
<td>6.1</td>
<td>6.1</td>
<td>6.8</td>
<td>6.8</td>
<td>7.2</td>
<td>7.6</td>
</tr>
<tr>
<td class="firstcol">Participation Rate (%)</td>
<td>67.3</td>
<td>67.2</td>
<td>67.3</td>
<td>67.2</td>
<td>67.2</td>
<td>67.5</td>
<td>67.5</td>
</tr>
<tr class="odd">
<td class="firstcol">Employment (Change, 000s/%)</td>
<td>-5.5</td>
<td>-4.6</td>
<td>+96.7</td>
<td>2.0%</td>
<td>1.4%</td>
<td>1.8%</td>
<td>2.4%</td>
</tr>
<tr>
<td class="firstcol">Goods-Producing </td>
<td>-7.4</td>
<td>-34.7</td>
<td>-9.8</td>
<td>-0.6%</td>
<td>0.2%</td>
<td>1.7%</td>
<td>1.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">Service-Producing</td>
<td>+1.8</td>
<td>+30.2</td>
<td>+106.4</td>
<td>2.9%</td>
<td>2.1%</td>
<td>1.8%</td>
<td>2.7%</td>
</tr>
</tbody>
</table>
</body>
</html>

We last wrote about the Canadian labor force four months ago and we extolled the 31-year low in unemployment, 6.3% in March. After an uptick in April, the rate dropped to another 31-year low of 6.1% in both May and June. But July saw [...]

Pause in Canada Labor Market Advance

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060804c.jpg" width="353">
July nonfarm payrolls rose 113,000 and the increase fell short of Consensus expectations for a 142,000 gain. Revisions increased slightly the rise in June payrolls to 124,000 and the rise in May payrolls to 100,000.
Year to date payrolls have risen an average 140,000 per month versus an average of 165,000 last year and an average 175,000 during 2004.
Average hourly earnings rose the same 0.4% as a downwardly revised 0.4% June gain but exceeded expectations for a 0.3% rise. The increase in factory sector earnings moderated to 0.1% (1.5% y/y) from the 0.2% increase in June.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060804b.jpg" width="353">
From the household survey the unemployment rate rose to 4.8% versus an expected 4.6%. It was the highest level since February and the increase reflected a 34,000 (+1.6% y/y) decline in employment which followed a 387,000 jump during June. The labor force rose 213,000 (1.3% y/y) as the labor force participation rate remained up at 66.2% though the rate for adult males stayed low at 75.7%. The participation rate for females over 20 rose to a three year high of 60.8%.
The breadth of one month gain in private payrolls fell sharply to 53.2% in July, the lowest since last September. In the factory sector the one month breadth of gain fell to a less-than break even 45.2%.
Factory sector payrolls reversed most of the prior month&#39;s gain with a 15,000 decline. Jobs in the computer &amp; electronic products industry fell 8,200 (+0.2% y/y) and the number of motor vehicle &amp; parts jobs fell 7,900 (+0.4% y/y). <img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060804a.jpg" width="353">
Private service-producing jobs rose 115,000 (1.5% y/y), improved from an upwardly revised 86,000 June increase. Retail trade sector jobs continued weak and were unchanged (-0.6% y/y) after several months of decline. Financial sector jobs rose 6,000 (2.2% y/y) and professional &amp; business services employment rose 43,000 (2.7% y/y). Temporary help services jobs fell for the fifth month this year, by 2,400 (+3.1% y/y). Jobs in education &amp; health services rose 24,000 (2.1% y/y).
Construction employment rose 6,000 (3.0% y/y) following two months of moderate decline. Year to year growth in residential construction jobs moderated further to 2.9% from the peak of 6.0% last year and 7.0% during 2004. Growth in nonresidential construction jobs picked up to 5.5% from 1.7% last year and negative growth in 2004.
The workweek remained elevated at 33.9 hours in private industry versus the 2Q level of 33.9.
Click <a href="changes.pdf"> here</a> for The Unemployment Effects of Proposed Changes in Social Security&#39;s &quot;Normal Retirement Age.&quot; <span style="FONT-SIZE: 10pt; FONT-FAMILY: Verdana; mso-fareast-font-family: &#39;Times New Roman&#39;; mso-ansi-language: EN-US; mso-fareast-language: EN-US; mso-bidi-language: AR-SA; mso-bidi-font-family: &#39;Times New Roman&#39;">This paper was published by the National Association for Business Economics (<a href="http://www.nabe.com/">www.nabe.com</a>) in the April 2006 issue of the NABE journal Business Economics.
Participation Dynamics: The More, the Merrier is from the Federal Reserve Bank of St. Louis and it can be found <a href="http://research.stlouisfed.org/publications/iet/20060801/cover.pdf"> 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/@EB/@EB01/@EB01.HTM">Employment</a></th>
<th scope="col">July</th>
<th scope="col">June</th>
<th scope="col">Y/Y</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Payroll Employment</td>
<td>113,000</td>
<td>124,000</td>
<td>1.3%</td>
<td>1.5%</td>
<td>1.1%</td>
<td>-0.3%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Manufacturing</td>
<td>-15,000</td>
<td>22,000</td>
<td>0.1%</td>
<td>-0.6%</td>
<td>-1.3%</td>
<td>-4.9%</td>
</tr>
<tr class="odd">
<td class="firstcol">Average Weekly Hours</td>
<td>33.9</td>
<td>33.9</td>
<td>33.8 (July &#39;05)</td>
<td>33.8</td>
<td>33.7</td>
<td>33.7</td>
</tr>
<tr>
<td class="firstcol">Average Hourly Earnings</td>
<td>0.4%</td>
<td>0.4%</td>
<td>3.8%</td>
<td>2.8%</td>
<td>2.1%</td>
<td>2.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">Unemployment Rate</td>
<td>4.8%</td>
<td>4.6%</td>
<td>5.0% (July &#39;05)</td>
<td>5.1%</td>
<td>5.5%</td>
<td>6.0%</td>
</tr>
</tbody>
</table>
</body>
</html>

July nonfarm payrolls rose 113,000 and the increase fell short of Consensus expectations for a 142,000 gain. Revisions increased slightly the rise in June payrolls to 124,000 and the rise in May payrolls to 100,000. Year to date [...]

U.S. Payrolls & Wages Moderate

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060804c.jpg" width="353">
July nonfarm payrolls rose 113,000 and the increase fell short of Consensus expectations for a 142,000 gain. Revisions increased slightly the rise in June payrolls to 124,000 and the rise in May payrolls to 100,000.
Year to date payrolls have risen an average 140,000 per month versus an average of 165,000 last year and an average 175,000 during 2004.
Average hourly earnings rose the same 0.4% as a downwardly revised 0.4% June gain but exceeded expectations for a 0.3% rise. The increase in factory sector earnings moderated to 0.1% (1.5% y/y) from the 0.2% increase in June.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060804b.jpg" width="353">
From the household survey the unemployment rate rose to 4.8% versus an expected 4.6%. It was the highest level since February and the increase reflected a 34,000 (+1.6% y/y) decline in employment which followed a 387,000 jump during June. The labor force rose 213,000 (1.3% y/y) as the labor force participation rate remained up at 66.2% though the rate for adult males stayed low at 75.7%. The participation rate for females over 20 rose to a three year high of 60.8%.
The breadth of one month gain in private payrolls fell sharply to 53.2% in July, the lowest since last September. In the factory sector the one month breadth of gain fell to a less-than break even 45.2%.
Factory sector payrolls reversed most of the prior month&#39;s gain with a 15,000 decline. Jobs in the computer &amp; electronic products industry fell 8,200 (+0.2% y/y) and the number of motor vehicle &amp; parts jobs fell 7,900 (+0.4% y/y). <img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060804a.jpg" width="353">
Private service-producing jobs rose 115,000 (1.5% y/y), improved from an upwardly revised 86,000 June increase. Retail trade sector jobs continued weak and were unchanged (-0.6% y/y) after several months of decline. Financial sector jobs rose 6,000 (2.2% y/y) and professional &amp; business services employment rose 43,000 (2.7% y/y). Temporary help services jobs fell for the fifth month this year, by 2,400 (+3.1% y/y). Jobs in education &amp; health services rose 24,000 (2.1% y/y).
Construction employment rose 6,000 (3.0% y/y) following two months of moderate decline. Year to year growth in residential construction jobs moderated further to 2.9% from the peak of 6.0% last year and 7.0% during 2004. Growth in nonresidential construction jobs picked up to 5.5% from 1.7% last year and negative growth in 2004.
The workweek remained elevated at 33.9 hours in private industry versus the 2Q level of 33.9.
Click <a href="changes.pdf"> here</a> for The Unemployment Effects of Proposed Changes in Social Security&#39;s &quot;Normal Retirement Age.&quot; <span style="FONT-SIZE: 10pt; FONT-FAMILY: Verdana; mso-fareast-font-family: &#39;Times New Roman&#39;; mso-ansi-language: EN-US; mso-fareast-language: EN-US; mso-bidi-language: AR-SA; mso-bidi-font-family: &#39;Times New Roman&#39;">This paper was published by the National Association for Business Economics (<a href="http://www.nabe.com/">www.nabe.com</a>) in the April 2006 issue of the NABE journal Business Economics.
Participation Dynamics: The More, the Merrier is from the Federal Reserve Bank of St. Louis and it can be found <a href="http://research.stlouisfed.org/publications/iet/20060801/cover.pdf"> 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/@EB/@EB01/@EB01.HTM">Employment</a></th>
<th scope="col">July</th>
<th scope="col">June</th>
<th scope="col">Y/Y</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Payroll Employment</td>
<td>113,000</td>
<td>124,000</td>
<td>1.3%</td>
<td>1.5%</td>
<td>1.1%</td>
<td>-0.3%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Manufacturing</td>
<td>-15,000</td>
<td>22,000</td>
<td>0.1%</td>
<td>-0.6%</td>
<td>-1.3%</td>
<td>-4.9%</td>
</tr>
<tr class="odd">
<td class="firstcol">Average Weekly Hours</td>
<td>33.9</td>
<td>33.9</td>
<td>33.8 (July &#39;05)</td>
<td>33.8</td>
<td>33.7</td>
<td>33.7</td>
</tr>
<tr>
<td class="firstcol">Average Hourly Earnings</td>
<td>0.4%</td>
<td>0.4%</td>
<td>3.8%</td>
<td>2.8%</td>
<td>2.1%</td>
<td>2.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">Unemployment Rate</td>
<td>4.8%</td>
<td>4.6%</td>
<td>5.0% (July &#39;05)</td>
<td>5.1%</td>
<td>5.5%</td>
<td>6.0%</td>
</tr>
</tbody>
</table>
Pause in Canada Labor Market Advance 
by <a href="/comment/Stone.html">Carol Stone</a> August 4, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060804d.jpg" width="353">
We last wrote about the Canadian labor force four months ago and we extolled the 31-year low in unemployment, 6.3% in March. After an uptick in April, the rate dropped to another 31-year low of 6.1% in both May and June. But July saw it climb back to 6.4%. Part of the rise is explained by an increase in participation, particularly among women. This increase in the number of people willing to work met with a modest decrease in employment by 5,500 after a 4,600 loss in June. The resulting employment rate (employment as a % of population) fell to 63.0%, the lowest since April.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060804e.jpg" width="353">
The press reports note that the fall in employment and the rise in unemployment were not expected and are therefore very dramatic. But these developments come in the wake of an extraordinary employment gain of 96,700 in May. That was the second largest monthly increase since 1976, with the largest in this span just a bit more, 97,000, in January 2002. So it is hard not to expect some pause to follow that big move. And what we have in these two latest months is minuscule, 0.03% each time, so it&#39;s more that employment stabilized rather than &quot;falling&quot;.
In the big May rise, several industry groups participated, particularly finance and related services, health care and public administration. There were also notable gains in professional services, culture &amp; recreation and accommodations &amp; food services. In the subsequent months, only one, professional services, lost all of its May increase. Others grew in at least one of June or July; accommodation and food services increased in both. The total services sector grew 1.1% in the last three months and is up 2.9% over a year ago.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060804f.jpg" width="353">
Goods-producing industries are not so strong, as a brief flurry in manufacturing back in the spring faded quickly. Mining and construction have stronger trends, but mining is small -- roughly 325,000 employees all together -- so 7% growth there over a year ago doesn&#39;t add many total workers. Construction has more impact, though, and it too is up more than 7% year-on-year, adding almost 72,000 workers. So there is diverse growth in Canadian employment opportunities and a two-month pause hardly indicates that these gains have stopped in their tracks. 

<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/CANSIM/@C6/@C601/@C601.HTM">Canada (Seasonally Adjusted)</a></th>
<th scope="col">Jul 2006</th>
<th scope="col">June 2006</th>
<th scope="col">May 2006</th>
<th scope="col">Year Ago</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Unemployment Rate (%)</td>
<td>6.4</td>
<td>6.1</td>
<td>6.1</td>
<td>6.8</td>
<td>6.8</td>
<td>7.2</td>
<td>7.6</td>
</tr>
<tr>
<td class="firstcol">Participation Rate (%)</td>
<td>67.3</td>
<td>67.2</td>
<td>67.3</td>
<td>67.2</td>
<td>67.2</td>
<td>67.5</td>
<td>67.5</td>
</tr>
<tr class="odd">
<td class="firstcol">Employment (Change, 000s/%)</td>
<td>-5.5</td>
<td>-4.6</td>
<td>+96.7</td>
<td>2.0%</td>
<td>1.4%</td>
<td>1.8%</td>
<td>2.4%</td>
</tr>
<tr>
<td class="firstcol">Goods-Producing </td>
<td>-7.4</td>
<td>-34.7</td>
<td>-9.8</td>
<td>-0.6%</td>
<td>0.2%</td>
<td>1.7%</td>
<td>1.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">Service-Producing</td>
<td>+1.8</td>
<td>+30.2</td>
<td>+106.4</td>
<td>2.9%</td>
<td>2.1%</td>
<td>1.8%</td>
<td>2.7%</td>
</tr>
</tbody>
</table>
</body>
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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060803e.jpg" width="353">
Inflation in Turkey has picked up a bit in recent months, but remains quite modest compared with Turkey&#39;s historical experience. The CPI in July was up 1.7% from June, seasonally adjusted (by Haver Analytics), and 11.7% from a year ago. June and May were both up about 10% from year-earlier levels. Our standard table shows only the last three years of data and for this period, these recent numbers would look a bit discouraging. Nonetheless, these are low. As recently as 2002, inflation ran just under 30% and from early 1994 to late 1998, the lowest 12-month reading was 75.7%, with numerous months above 100%.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060803f.jpg" width="353">
Since 2003, the Turkish Statistical Institute has published some detail data. As seen in the graph, food prices are one of the sources of the recent rise in inflation. Actually so are clothing prices, but at a much lower level: year-on-year changes were in fact negative in the first few months of 2006, but that index has stabilized and even risen slightly in May, June and July. Otherwise, we see that various measures of &quot;core&quot; inflation are not much affected by the exclusion of food, energy and administered prices.
Note that Turkey data offerings are contained in Haver&#39;s EMERGEMA database, which includes Middle Eastern and African countries.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060803g.jpg" width="353">
Haver is also accumulating a growing amount of data on other emerging markets. Late yesterday, the Statistical Office of Macedonia reported its consumer prices for June. These data are included in EMERGECW, along with other Central, Southern and Eastern European countries. Macedonia&#39;s total CPI began in 2000, with a standard breakdown starting in 2004. Over the time span available, inflation in that small nation (about the size of Vermont, according to the CIA&#39;s &quot;World Factbook&quot;) has been quite modest. In June, the total index was 3.1% above June 2005, also a pickup the couple of years. In 2005 overall, the index rose just 1.3% and it fell in 2004 by 2.1%. Among components, food, energy and home furnishings all saw price weakness through part or all of 2005, but they have since firmed. However, their rates generally remain lower than elsewhere, with housing and utilities costs rising 1.3% in June and transportation 10.0%. 

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">CPI% Changes</th>
<th scope="col">July 2006</th>
<th scope="col">June 2006</th>
<th scope="col">May 2006</th>
December/December
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">2005</td>
<td>2004</td>
<td>2003</td>
</tr>
<tr>
<td class="firstcol">Turkey: SA, Mo/Mo</td>
<td>1.7</td>
<td>1.2</td>
<td>2.1</td>
<td>--</td>
<td>--</td>
<td>--</td>
</tr>
<tr class="odd">
<td class="firstcol">NSA, Yr/Yr</td>
<td>11.7</td>
<td>10.1</td>
<td>9.9</td>
<td>7.7</td>
<td>9.4</td>
<td>12.7</td>
</tr>
<tr>
<td class="firstcol">Ex Energy</td>
<td>11.2</td>
<td>9.6</td>
<td>9.9</td>
<td>7.8</td>
<td>8.7</td>
<td>12.2*</td>
</tr>
<tr class="odd">
<td class="firstcol">Ex Energy, Others**</td>
<td>10.5</td>
<td>9.0</td>
<td>8.7</td>
<td>6.6</td>
<td>9.9</td>
<td>11.5*</td>
</tr>
<tr>
<td class="firstcol">&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">Macedonia</td>
<td>--</td>
<td>3.1</td>
<td>4.0</td>
<td>1.3</td>
<td>-2.1</td>
<td>2.5</td>
</tr>
</tbody>
</table>
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Inflation in Turkey has picked up a bit in recent months, but remains quite modest compared with Turkey's historical experience. The CPI in July was up 1.7% from June, seasonally adjusted (by Haver Analytics), and 11.7% from a year [...]

CPI Inflation in Turkey & Macedonia: Up, but Not High

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060803d.jpg" width="353">
Factory inventories rose 0.8% during June for the fifth month of firm accumulation this year. Year to date inventories have risen at a 7.8% annual rate, nearly double the rate of accumulation during all of last year.
Primary metals inventories rose 0.8% (6.2% y/y) and have been rising at a 17.2% annual rate so far this year. Inventories of computers &amp; electronic products rose 0.4% (8.4% y/y) and the year to date annual rate of accumulation has been 9.2%. Inventories of electrical equipment jumped 2.2% (9.3% y/y) but machinery inventories ticked up just 0.1% (5.7% y/y).
Total factory orders surged 1.2%. Durable goods orders jumped 2.9% that was little revised from the advance report of a 3.1% gain. Factory orders less transportation rose just 0.1% (7.8% y/y) due to a 0.7% drop in nondurables.
Factory shipments fell 0.3%. Less transportation shipments also fell 0.2% (8.0% y/y). Petroleum shipments fell 0.2% (+20.9% y/y) and factory shipments less transportation &amp; petroleum slipped 0.2% (+6.7% y/y).
Unfilled orders increased another 1.6% but less the transportation sector altogether backlogs still rose a strong 1.4% (14.2% y/y).<a href="http://research.stlouisfed.org/publications/review/05/07/Gali.pdf"> </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/@ED/@ED01/@ED0101/@ED01016/@ED01016.HTM">Factory Survey</a> (NAICS)</th>
<th scope="col">June</th>
<th scope="col">May</th>
<th scope="col">Y/Y</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Inventories</td>
<td>0.8%</td>
<td>0.7%</td>
<td>5.5%</td>
<td>4.0%</td>
<td>6.9%</td>
<td>-7.4%</td>
</tr>
<tr>
<td class="firstcol">New Orders</td>
<td>1.2%</td>
<td>1.0%</td>
<td>6.0%</td>
<td>8.5%</td>
<td>7.5%</td>
<td>0.9%</td>
</tr>
<tr class="odd">
<td class="firstcol">Shipments</td>
<td>-0.3%</td>
<td>2.5%</td>
<td>7.5%</td>
<td>7.1%</td>
<td>6.8%</td>
<td>0.2%</td>
</tr>
<tr>
<td class="firstcol">Unfilled Orders</td>
<td>1.6%</td>
<td>0.7%</td>
<td>19.3%</td>
<td>16.3%</td>
<td>4.5%</td>
<td>-1.0%</td>
</tr>
</tbody>
</table>
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Factory inventories rose 0.8% during June for the fifth month of firm accumulation this year. Year to date inventories have risen at a 7.8% annual rate, nearly double the rate of accumulation during all of last year. Primary metals [...]

U.S. Factory Inventory Accumulation Strong

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060803b.jpg" width="353">
The Institute for Supply Management (ISM) reported that the July Business Activity Index for the non-manufacturing sector fell for the third straight month. The 2.2 point m/m decline to 54.8 exceeded Consensus expectations for a drop to 57.0 and left the index at its lowest level since September 2005.
Since the series&#39; inception in 1997 there has been a 50% correlation between the level of the Business Activity Index and the q/q change in real GDP for services plus construction.
The new orders sub-index fell for the third consecutive month to the lowest level in three year. The employment index, however, recovered nearly half of a sharp six point decline in June. Since the series&#39; inception in 1997 there has been a 60% correlation between the level of the ISM non-manufacturing employment index and the m/m change in payroll employment in the service producing plus the construction industries.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060803c.jpg" width="353">
Pricing power also recovered a bit of its June decline and rose to 74.8, a level above the 2Q average. Since inception eight years ago, there has been a 70% correlation between the price index and the y/y change in the GDP services chain price index.
ISM surveys more than 370 purchasing managers in more than 62 industries including construction, law firms, hospitals, government and retailers. The non-manufacturing survey dates back to July 1997.
Business Activity Index for the non-manufacturing sector reflects a question separate from the subgroups mentioned above. In contrast, the NAPM manufacturing sector composite index is a weighted average five components.
Instability in U.S. Inflation: 1967-2005 from the Federal Reserve Bank of Atlanta can be found <a href="http://www.frbatlanta.org/invoke.cfm?objectid=F6A27989-5056-9F12-12B536A6D5EE7AED&amp;method=display"> 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/@EF/@EF03/@EF03.HTM">ISM Nonmanufacturing Survey</a></th>
<th scope="col">July</th>
<th scope="col">June</th>
<th scope="col">July &#39;05</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Business Activity Index</td>
<td>54.8</td>
<td>57.0</td>
<td>60.4</td>
<td>60.1</td>
<td>62.5</td>
<td>58.3</td>
</tr>
<tr>
<td class="firstcol">Prices Index</td>
<td>74.8</td>
<td>73.9</td>
<td>69.5</td>
<td>67.9</td>
<td>68.8</td>
<td>56.6</td>
</tr>
</tbody>
</table>


</html>

The Institute for Supply Management (ISM) reported that the July Business Activity Index for the non-manufacturing sector fell for the third straight month. The 2.2 point m/m decline to 54.8 exceeded Consensus expectations for a drop [...]

ISM Nonmanufacturing Index Off

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

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

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

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

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

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

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

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

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

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

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

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

U.S. Job Growth Is Firm in April but March Gain Is Lessened

Winnie Tapasanun

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Total factory orders rose a slightly less-than-expected 4.3% m/m in March after rises of 0.5% in February and 1.8% in January, data from the U.S. Census Bureau showed. A 4.5% m/m March increase had been expected in the Action Economics Forecast Survey. The March reading was the third successive monthly rise and the largest since July 2024. The year-on-year rate accelerated to 6.0% in March, the highest since November 2022, from 2.3% in February. Notably, orders for nondefense aircraft & parts soared 139.0% in March following a 7.4% drop in February and a 92.9% surge in January. Factory orders excluding defense rose 4.8% (5.9% y/y), the largest of three straight m/m/ rises, after a 0.4% February increase. Factory orders excluding the transportation sector fell 0.2% (+1.1% y/y), the first m/m fall since August, after rising 0.3% in February, January and December.

Durable goods orders jumped 9.2% (11.9% y/y) in March, the third consecutive m/m gain and the biggest since July 2024, on top of a 0.8% increase in February (matching +9.2% m/m in the advance report on April 24). The March jump reflected m/m orders increases of 27.1% (the largest m/m surge since July 2024; 31.2% y/y) in transportation equipment, 1.1% (4.9% y/y) in primary metals, 0.5% (-0.4% y/y) in furniture & related products, 0.1% (2.5% y/y) in fabricated metal products, and 0.1% (0.9% y/y) in machinery. To the downside, durable goods orders for computers & electronic products (-1.3%; +2.7% y/y) and electrical equipment, appliances & components (-1.0%; +4.2% y/y) declined m/m in March.

Nondurable goods orders, which equal nondurable goods shipments, fell 0.3% (+0.4% y/y) in March, the first m/m fall since September, after a 0.1% uptick in February. The March fall reflected m/m drops of 2.4% (-9.3% y/y) in petroleum & coal products and 0.9% (-1.2% y/y) in apparel. To the upside, the following nondurable goods shipments rose m/m in March: leather & allied products (1.5%; 8.6% y/y), beverage & tobacco products (0.7%; 5.8% y/y), paper products (0.6%; 2.3% y/y), printing (0.3%; 3.8% y/y), textile mills (0.3%; 0.8% y/y), chemical products (0.2%; 5.4% y/y), plastics & rubber products (0.2%; 0.4% y/y), food products (0.1%; 1.8% y/y), and textile products (0.1%; 2.1% y/y).

Total shipments slipped 0.1% (+2.0% y/y) in March, the first m/m easing since October, after a 0.7% increase in February. Excluding transportation, shipments were virtually unchanged m/m (+1.1% y/y) in March following six straight m/m gains. Shipments of durable goods industries inched up 0.1% (3.8% y/y) in March, the smallest of four consecutive m/m increases, after a 1.3% advance in February. This reflected m/m durable goods shipments rises of 1.2% (5.6% y/y) in primary metals, 0.9% (0.1% y/y) in furniture & related products, 0.8% (-0.2% y/y) in nonmetallic mineral products, 0.4% (0.0% y/y) in machinery, 0.3% (1.8% y/y) in fabricated metal products, 0.2% (4.5% y/y) in computers & electronic products, 0.2% (-2.1% y/y) in wood products, and 0.1% (3.0% y/y) in electrical equipment, appliances & components. In contrast, durable goods shipments for transportation equipment (-0.5%; +7.3% y/y) and miscellaneous durable goods (-0.1%; +2.9% y/y) fell m/m in March following three successive m/m increases.

Unfilled orders rose 2.0% (2.3% y/y) in March, up for the eighth month in nine, after a 0.1% uptick in February. Excluding transportation, unfilled orders dipped 0.1% (+0.7% y/y) in March, the first m/m easing since May 2024, after holding steady in February. Backlogs of durable goods rose 2.0% (2.3% y/y) in March, reflecting m/m rises of 3.1% (3.1% y/y) in transportation equipment and 0.2% (2.4% y/y) in electrical equipment, appliances & components.

Inventories edged up 0.1% (0.9% y/y) in March, the fifth straight m/m increase, after rising at the same pace in the prior two months. Excluding transportation, inventories were up 0.1% (0.5% y/y) in March, the fifth consecutive m/m rise. Durable goods inventories ticked up 0.1% (1.0% y/y) in March after holding steady in February and January; nondurable goods inventories edged up 0.1% (0.8% y/y), the fifth successive m/m increase.

The factory sector data are available in Haver’s **USECON** database. The Action Economics Forecast Survey is in the **AS1REPNA** database.

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- March manufacturers’ new orders +4.3% m/m; +6.0% y/y, highest since Nov. ’22.
- Durable goods orders (+9.2%) jump m/m, while nondurable goods orders (-0.3%) and shipments (-0.1%) decline m/m.
- Transportation equipt. orders +27.1% m/m, w/ a 139.0% m/m surge in nondefense aircraft & parts orders.
- Unfilled orders +2.0%, the eighth m/m rise in nine months.
- Inventories +0.1%, the fifth consecutive m/m increase.

U.S. Factory Orders Increase for the Third Straight Month in March

Robert Brusca

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The global manufacturing data showed broad weakening in April as conditions weakened across more than half of the contributing early reporters in the S&P survey of manufacturing. Of the 18 early reporting countries, more than half of them showed deceleration over six months and 12 months. Over three months, only 8 of 18 showed deterioration and that's about as good as it got in this report. In the current month, month-to-month changes showed more than half of the survey contributors showing weaker results than the month before. In the S&P framework, manufacturing improved month-to-month for the U.S.; however, looking at sequential averages for the U.S., U.K., European monetary union, Canada, and Japan, we see a steady weakening and results over 12 months, over six months versus 12 months, and for three months versus 6 months. The highly developed countries are not doing particularly well.

Asian economies are also showing slight deterioration but doing a little better than the developed countries in general.

Only five of the 18 reporting countries have queue percentile standings in their data back to January 2021 that are above their medians. Readings at or above the 50% mark are at or above the median standing. Canada is showing the weakest manufacturing result on record over this span, in terms of its queue percentile standing which is at 0 in the current month.

I showed the graphic for the Baltic dry goods index in this report rather than statistics on the manufacturing PMI data because the Baltic data, which reflect shipping volume for dry goods - that is excluding things like oil - is weak but it's only in the neighborhood where it's been for some time. There has been a great deal of talk about how tariffs may have impacted trade flows, expected trade flows, shipping, shipping rates, and the like. However, according to the Baltic dry goods index, there isn't much evidence that this is occurring right now and affecting the current data. That may still lie ahead but for now it's not baked in the cake.

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Globally Manufacturing Weakens

Andrew Cates

**China-US shipping activity** 
The economic fallout from escalating US-China trade tensions is becoming increasingly visible in the data. A clear example is the chart below, which highlights a sharp drop in vessel arrivals at the ports of Los Angeles and Long Beach, along with a notable decline in ships waiting offshore. These trends point to a tangible weakening in bilateral trade flows, as the effects of tit-for-tat tariffs imposed by both countries begin to bite. Given the outsized role the US and China play in global commerce, this slowdown is likely to reverberate through global supply chains, weighing on trade volumes, dampening demand, and curbing economic growth worldwide.

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**GDP growth in Q1**
Data this week showed that the US economy contracted, albeit modestly, in Q1 even as the euro area recorded a modest expansion—an unusual divergence. The contraction in US GDP can be largely attributed to a sharp increase in imports, as firms rushed to front-load purchases ahead of anticipated tariff hikes. In addition, domestic demand was subdued, with weaker contributions from both consumer spending and government consumption. This decoupling between the US and euro area economies is particularly striking given the current global focus on the US dollar. While the euro area has shown unexpected signs of resilience, the US downturn raises important questions about its underlying momentum, especially as trade dynamics and policy uncertainty continue to cloud the outlook.

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**The US dollar versus yield differentials**
Chart 3 below illustrates a sharp breakdown in the correlation between the US-Germany 10-year yield differential and the EUR/USD exchange rate. Historically, the dollar has moved closely with interest rate spreads, as yield-seeking capital flowed into US assets. But since early 2025—and more acutely following the April tariff actions—the dollar has weakened markedly even as the yield spread has narrowed only modestly. This decoupling underscores a critical shift: capital markets are reacting not just to monetary policy, but to rising trade and geopolitical uncertainty. In other words, the exchange rate is now being driven as much by risk sentiment as by interest rate arbitrage.

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**The US economy’s structural outperformance and the dollar**
A second dynamic, captured in the next chart, reveals a tight correlation between the US real effective exchange rate and the potential GDP growth differential between the US and euro area over the past 50-60 years. This raises the question: has dollar strength (until recently) merely been a reflection of US growth leadership—or are capital inflows themselves helping to sustain this growth outperformance? In effect, the tail may be wagging the dog. Global investors have long allocated capital to the US, attracted by its macroeconomic resilience, technological leadership, and deep, liquid financial markets. The danger now is that the US trade war may disrupt this equilibrium. A sharp or sustained reduction in capital inflows could undermine growth, weaken the dollar, and trigger broader financial instability. Moreover, reversing this dynamic is not straightforward—barring a credible structural resurgence in European (or Asian) growth, the global investment landscape remains tilted toward the US.

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**US competitiveness versus Europe, China and Japan** 
The next chart below examines relative unit labour costs across major economies since 2011. The US and China have seen a broadly similar trajectory, with steady increases in relative cost structures, while the euro area has remained flat and Japan has seen dramatic improvement. This suggests that, from a cost competitiveness standpoint, the US is not uniquely disadvantaged vis-à-vis China. However, as we discuss further below, this parallel erosion of cost competitiveness is occurring at much higher nominal wage levels in the US, which blunts its ability to regain export share through tariff-related shifts alone. The trade war strategy—absent a corresponding improvement in productivity or structural reforms—risks imposing costs without delivering material competitiveness gains.

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**Average wages in selected developed and developing economies**
This point is reinforced by the final chart, which shows estimates for average monthly wages across countries in 2024. US labour remains much more expensive than in peer or emerging economies. So even if China’s costs rise in tandem with the US, the global supply chain has ample alternatives. 'China plus one' strategies are accelerating, and the US remains structurally misaligned with low-cost production hubs. Tariffs aimed at reshoring supply chains are unlikely to deliver sustained gains unless accompanied by deep supply-side reforms, and risk further disincentivizing foreign direct investment if global firms perceive US trade policy as erratic or punitive.

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Financial markets found a measure of calm this week, buoyed by some subtle shifts in tone from US policymakers. A softening in the administration’s rhetoric around trade tariffs coupled with a less confrontational stance toward Federal Reserve Chair Jerome Powell, helped ease tensions that had roiled markets earlier in the month. Equities rebounded modestly, and volatility indicators edged lower, reflecting cautious optimism that the worst of the policy shocks may be behind us. But beneath the surface, significant downside risks persist. New shipping data point to a pronounced slowdown in US-China trade flows (chart 1), suggesting the damage from recent tariff escalations is already rippling through global supply chains. Meanwhile, incoming data for the US revealed an unexpected contraction in the economy in Q1 and further signs of weakness in the labour market (chart 2). The US dollar, in the meantime, while long supported by superior growth and yield differentials, has begun to decouple from traditional drivers (charts 3 and 4) suggesting growing pressure on capital flows. At the same time, structural imbalances are drawing renewed scrutiny: unit labour cost comparisons show the US steadily losing competitiveness (chart 5), while nominal wage disparities remain stark versus China and other Asian economies, further complicating any effort to restore trade balance without broader reforms (chart 6). In short, while markets may be drawing temporary comfort from a pause in tariff brinkmanship, the deeper economic and financial vulnerabilities exposed this month remain unresolved—and increasingly central to the global macro narrative.

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Charts of the Week: Tariff Truce, Tenuous Trust

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U.S. light vehicle sales dropped 2.9% (+6.5% y/y) to 17.31 million units (SAAR) in April after surging 10.8% to 17.82 million units in March. The retreat in April vehicle sales accompanied a 1.7% y/y rise in real disposable income through March, which compared to 2.0% growth last year.

Sales declines were broad-based last month. Light truck sales fell 1.3% (+9.9% y/y) during April to 14.34 million units (SAAR), after rising 12.4% in March. Purchases of domestically-made light trucks declined 1.2% (+11.9% y/y) to 11.02 million units, after jumping 12.5% in March. Sales of imported light trucks fell 1.8% (+4.4% y/y) to 3.32 million units, following an 11.6% March surge.

Trucks’ record 82.8% share of the light vehicle market last month compared to 81.5% in March and 80.3% in April of last year. The share averaged 80.3% during all of 2024 versus 53.3% ten years earlier.

Auto sales also declined last month, down 9.5% (-7.5%) to 2.97 million units (SAAR) following a 3.5% March rise. The decline reversed all of the increase over the prior two months. Purchases of domestically-produced cars fell 9.8% (-4.3% y/y) last month to 2.22 million units, after rising 3.8% in March. Sales of imported autos declined 9.6% (-15.7% y/y) to 0.75 million units, following a 2.5% March increase.

Imports' 23.5% share of the U.S. light vehicle market was little changed from 23.6% in March and compared to a May 2023 low of 22.9% and a high of 26.3% in November of 2023. Imports' share of the passenger car market held steady at 25.3% last month and compared to 27.7% in April of last year. It reached a high of 38.7% in September 2021. Imports' share of the light truck market eased to 23.2% last month after falling to 23.3% in March.

U.S. vehicle sales figures can be found in Haver's **USECON** database. Additional detail by manufacturer is in the I**NDUSTRY** database.

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- Light truck sales pull back, while auto sales tumble.
- Both domestic and imported sales decline.
- Imports' market share slips further.

Economy in Brief: August 2006

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Forecast: Investment Spending on the Wane

Forecast: Investment Spending on the Wane

Pause in Canada Labor Market Advance

U.S. Payrolls & Wages Moderate

U.S. Payrolls & Wages Moderate

CPI Inflation in Turkey & Macedonia: Up, but Not High

U.S. Factory Inventory Accumulation Strong

ISM Nonmanufacturing Index Off