Tom Moeller

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080407b.jpg" border="0" height="265" width="312"><img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080407c.jpg" border="0" height="265" width="312">

The latest three month's employment data show that hiring
momentum has turned negative. The 0.7% annual rate of decline in
nonfarm payrolls through March is down from positive growth of 1.1%
last year and of 1.8% during 2006. Is a recession indicated? The latest
numbers hardly measure up to those at the depths of the last two
recessions. But they are indicative of the downward momentum at the
start of the 2001 and the 1990 downturns.
With the measure showing that total hiring momentum down the
Labor Department also provides a figure on just how far across
industries the weakness spreads. Diffusion indexes measure that breadth
of change amongst industry categories and on a three month basis, only
42.9% of payrolls were rising in March. In recession that figure falls
into the 30-40% range, so it's close to giving a downturn signal.
Of the 42.9%, virtually all of the employment gains have
occurred in three of the categories listed in each month's data
release: education &amp; health, leisure &amp; hospitality, and
government. Within the first category, education payrolls have grown at
a 4.0% rate during the last three months which is nearly double the
growth from 2003 to 2007. Health care &amp; social services
payrolls also have grown at a roughly steady, firm 2.6% rate. In the
second category, jobs in the leisure &amp; hospitality sector also
have grown recently but at a lesser 1.4% rate which is down from the
2.5% average growth during the last four years. Finally, in the
government sector growth in payrolls has been limited to the state and
local sectors. Federal government payrolls have been trending lower
since 2003.
Construction sector jobs have suffered due to the fallout from
the housing sector's decline. Within the total, residential sector jobs
have lately been falling at an 11.3% rate. The depth of that rate of
decline has been mitigated somewhat by just a 3.0% shortfall in
commercial sector employment. Jobs amongst specialty trade contractors,
by far the largest grouping in the construction total, have been
falling at a 6.0% rate and by nearly double that rate in the
residential subgroup.
In nearly all of the goods producing categories there has been
job loss. The few exceptions are computers &amp; peripherals,
communications equipment and machinery. To the downside, job losses
have been logged in the semiconductor, metals, electrical equipment,
plastics and the paper industries. Most notable are the job losses in
the motor vehicle, furniture, textile and the apparel industries where
loss rates have been near or above double digit.
In the private service sector industries the rate of job
creation also has been hit severely. Jobs have fallen hard in the
retail trade sector, the information and in the financial service
businesses. Additionally, cutbacks in real estate sector jobs aside
from rental &amp; leasing have been running at a 3.6% annual rate;
a record rate of decline for this series which dates back only to 1990.
Employment in the finance &amp; insurance businesses has been
ticking down at a 0.6% rate led by a 5.8% rate of decline in investment
funds &amp; trusts. That has been offset by payroll growth at
commercial banks and securities &amp; investment houses.
Professional &amp; business service service jobs have been falling
at a 2.1% rate, the quickest since 2003. Jobs in temporary help
agencies have plummeted at an 8.9% rate. The information sector also
has lost jobs at a 1.1% rate over the last three months but jobs in
motion pictures &amp; sound recording have posted gains at a 5.5%
rate.
The data behind the series in this report all can be found in
Haver's USECON data base.
Population Aging, Labor Demand, and the
Structure of Wages is a working paper from the Federal
Reserve Bank of Boston and it can be found <a href="http://www.bos.frb.org/economic/wp/wp2007/wp0708.pdf">
here</a>.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080407e.jpg" border="0" height="265" width="312"><img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080407d.jpg" border="0" height="265" width="312">

<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:
000s</a></th>
<th scope="col">% of Total Payrolls</th>
<th scope="col">March (000)</th>
<th scope="col">3-Month % (AR)</th>
<th scope="col">Y/Y %</th>
<th scope="col">2007 (%)</th>
<th scope="col">2006 (%)</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Payroll Employment</td>
<td></td>
<td>-80</td>
<td>-0.7</td>
<td>0.4</td>
<td>1.1</td>
<td>1.8</td>
</tr>
<tr>
<td class="firstcol">Private&nbsp;</td>
<td>84</td>
<td>-98</td>
<td>-1.0</td>
<td>0.3</td>
<td>1.3</td>
<td>1.9</td>
</tr>
<tr class="odd">
<td class="firstcol">
Goods Producing Industries</td>
<td>16</td>
<td>-93</td>
<td>-4.4</td>
<td>-2.8</td>
<td>-1.4</td>
<td>1.6</td>
</tr>
<tr>
<td class="firstcol">
Manufacturing</td>
<td>10</td>
<td>-48</td>
<td>-3.7</td>
<td>-2.2</td>
<td>-1.9</td>
<td>-0.5</td>
</tr>
<tr class="odd">
<td class="firstcol">
Construction</td>
<td>5</td>
<td>-51</td>
<td>-6.6</td>
<td>-4.6</td>
<td>-1.0</td>
<td>4.9</td>
</tr>
<tr>
<td class="firstcol">
Service Producing Industries</td>
<td>68</td>
<td>-5</td>
<td>-0.2</td>
<td>1.0</td>
<td>1.8</td>
<td>2.1</td>
</tr>
<tr class="odd">
<td class="firstcol">
Retail Trade</td>
<td>12</td>
<td>-12</td>
<td>-1.9</td>
<td>-0.7</td>
<td>0.9</td>
<td>0.5</td>
</tr>
<tr>
<td class="firstcol">
Information</td>
<td>2</td>
<td>-6</td>
<td>-1.1</td>
<td>-0.7</td>
<td>-0.3</td>
<td>-0.8</td>
</tr>
<tr class="odd">
<td class="firstcol">
Financial Activities</td>
<td>6</td>
<td>-5</td>
<td>-1.2</td>
<td>-1.3</td>
<td>-0.2</td>
<td>2.2</td>
</tr>
<tr>
<td class="firstcol">
Real Estate, Rental &amp; Leasing</td>
<td>2</td>
<td>-5</td>
<td>-2.8</td>
<td>-2.0</td>
<td>-0.5</td>
<td>1.8</td>
</tr>
<tr class="odd">
<td class="firstcol">
Professional &amp; Business</td>
<td>13</td>
<td>-35</td>
<td>-2.1</td>
<td>0.9</td>
<td>2.2</td>
<td>3.7</td>
</tr>
<tr>
<td class="firstcol">
Education, Health &amp; social services</td>
<td>14</td>
<td>42</td>
<td>2.9</td>
<td>3.0</td>
<td>2.8</td>
<td>2.6</td>
</tr>
<tr class="odd">
<td class="firstcol">
Leisure &amp; Hospitality</td>
<td>10</td>
<td>18</td>
<td>1.4</td>
<td>2.5</td>
<td>2.8</td>
<td>2.3</td>
</tr>
<tr>
<td class="firstcol"> Government</td>
<td>16</td>
<td>18</td>
<td>1.0</td>
<td>1.1</td>
<td>1.0</td>
<td>0.8</td>
</tr>
<tr class="odd">
<td class="firstcol">
Federal</td>
<td>2</td>
<td>2</td>
<td>-1.3</td>
<td>-0.1</td>
<td>-0.2</td>
<td>-0.0</td>
</tr>
<tr>
<td class="firstcol">
State</td>
<td>4</td>
<td>3</td>
<td>1.2</td>
<td>1.1</td>
<td>1.0</td>
<td>0.8</td>
</tr>
<tr class="odd">
<td class="firstcol">
Local</td>
<td>10</td>
<td>13</td>
<td>1.3</td>
<td>1.3</td>
<td>1.3</td>
<td>0.9</td>
</tr>
</tbody>
</table>
German Industrial Production
Surprises on the Upside: Warm Weather Boosts Construction Activity 
by <a href="/comment/Curley.html">Louise
Curley</a> April 7, 2008


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080407a.jpg" align="left" border="0" height="265" width="353">
German industrial production rose in February in spite of the
disappointing trends in orders and sales noted by Robert Brusca last
week. The result, however, is less surprising when one looks at the
composition of production. It is primarily the manufacturing sector
which is affected by orders and sales and the increase from January to
February in manufacturing production was only 0.08%. Production in
electricity, gas and water increased 1.3%. The big increases were in
the small mining and quarrying sector--4.2% and in the more important
sector, construction--3.7%. The attached chart shows the month-to-month
percent changes in the manufacturing and construction components of
Industrial Production.
Construction activity which started up last year after almost
a decade of decline benefited from the unseasonally warm weather.
According to the German weather bureau the average temperature in
Germany in February was 3.70 Celsius (38.70
Fahrenheit) compared with the 1961-1990 average of 0.40
Celsius (32.70 Fahrenheit). 
 


<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">GERMAN
INDUSTRIAL PRODUCTION&nbsp;&nbsp; (2000=100)</th>
<th scope="col">Feb 08</th>
<th scope="col">Jan&nbsp; 08&nbsp;</th>
<th scope="col">Dec&nbsp; 07&nbsp;</th>
<th scope="col">Nov&nbsp;&nbsp;&nbsp;
07&nbsp;</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>121.5</td>
<td>121.0</td>
<td>119.3</td>
<td>117.6</td>
<td>116.0</td>
<td>109.8</td>
<td>103.8</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;Manufacturing&nbsp;</td>
<td>126.5</td>
<td>136.4</td>
<td>124.7</td>
<td>122.6</td>
<td>121.0</td>
<td>113.2</td>
<td>106.4</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;Mining and Quarrying</td>
<td>80.7</td>
<td>77.5</td>
<td>81.0</td>
<td>81.7</td>
<td>84.5</td>
<td>84.2</td>
<td>86.9</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;Electricity, gas and
water</td>
<td>98.4</td>
<td>97.1</td>
<td>103.2</td>
<td>106.4</td>
<td>102.5</td>
<td>105.9</td>
<td>104.8</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;Construction</td>
<td>95.5</td>
<td>95.6</td>
<td>82.7</td>
<td>80.9</td>
<td>83.2</td>
<td>81.0</td>
<td>76.1</td>
</tr>
<tr>
<td class="firstcol">&nbsp;MONTH TO
MONTH % CHANGE</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td class="firstcol">Total</td>
<td>0.41</td>
<td>1.42</td>
<td>1.45</td>
<td>-0.25</td>
<td style="background-color: rgb(204, 204, 204);"></td>
<td style="background-color: rgb(204, 204, 204);"></td>
<td style="background-color: rgb(204, 204, 204);"></td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;Manufacturing&nbsp;</td>
<td>0.08</td>
<td>1.36</td>
<td>1.71</td>
<td>-0.16</td>
<td style="background-color: rgb(204, 204, 204);"></td>
<td style="background-color: rgb(204, 204, 204);"></td>
<td style="background-color: rgb(204, 204, 204);"></td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;Mining and Quarrying</td>
<td>4.13</td>
<td>-4.32</td>
<td>-0.86</td>
<td>-2.74</td>
<td style="background-color: rgb(204, 204, 204);"></td>
<td style="background-color: rgb(204, 204, 204);"></td>
<td style="background-color: rgb(204, 204, 204);"></td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;Electricity, gas and
water</td>
<td>1.34</td>
<td>-5.91</td>
<td>-3.01</td>
<td>-0.75</td>
<td style="background-color: rgb(204, 204, 204);"></td>
<td style="background-color: rgb(204, 204, 204);"></td>
<td style="background-color: rgb(204, 204, 204);"></td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;Construction</td>
<td>3.69</td>
<td>11.77</td>
<td>2.22</td>
<td>-0.25</td>
<td style="background-color: rgb(204, 204, 204);"></td>
<td style="background-color: rgb(204, 204, 204);"></td>
<td style="background-color: rgb(204, 204, 204);"></td>
</tr>
</tbody>
</table>
</body></html>

The latest three month's employment data show that hiring momentum has turned negative. The 0.7% annual rate of decline in nonfarm payrolls through March is down from positive growth of 1.1% last year and of 1.8% during 2006. Is a [...]

U.S. Payrolls: Areas of Strength& Weakness

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<a href="http://"><img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080404b.jpg" align="left" border="0" height="265" width="353"></a>
For the third consecutive month the Bureau of Labor Statistic
reported that nonfarm payrolls fell. The 80,000 worker decline in March
was the largest of the three and the two prior months' declines were
revised deeper from the initial reports. Expectations had been for a
53,000 worker decline in March payrolls.
Has economic recession begun? When the job
figures are combined with a roughly stable level of hours worked, the
level of aggregate hours (employment times hours) fell in two of the
last three months and fell at an annual rate of 1.2% during 1Q. Over
the last thirty years there has been a 76% correlation between the q/q
change in aggregate hours worked and the change in real GDP. The 25%
that is left out of that correlation reflects productivity growth and
during the last three years it rose between 1.0% and 2.0%. When
aggregate hours and productivity are added they suggest no growth or
even a slight decline in 1Q real GDP.
From the household sector survey the unemployment
rate rose to 5.1%, its highest level since May of 2005. Job
creation did not keep up with growth in the labor force. Household
employment declined by 24,000 (-0.1% y/y) and jobs declined irregularly
in each month since early last year. The labor force, conversely, rose
410,000 last month. The annual rate of gain fell to 0.6% from 1.9%
early last year. Individuals who stopped looking for work did so at a
1.4% y/y rate in March, up from a zero rate of change at the end of
2006.<a href="http://"><img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080404d.jpg" align="right" border="0" height="265" width="353"></a>
From the establishment survey, aside from continued growth in
government sector jobs (+1.1% y/y), the figures for private nonfarm
payrolls painted a distressing picture of the job market. Private
sector payrolls fell 98,000 in March. It was the fourth consecutive
monthly decline and it followed a 109,000 drop in February. While the
y/y change in private payrolls still was a positive 0.3%, recent
momentum as indicated by the three month change, fell to a negative
1.0% (AR).
Factory sector job loss intensified last month to a 48,000
decline, nearly the largest monthly drop since 2003. The three month
rate of job loss deepened to -3.7%, also its fastest since 2003.
Construction sector employment declines continued to
accelerate. The m/m decline of 51,000 was the largest in nearly a year
and the three month growth rate stood at -6.6%, near its lowest since
late 1991.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080404c.jpg" align="left" border="0" height="265" width="353">
Hiring in the private service sector was more distressing
given its norm of positive job growth. Jobs in retail trade fell for
the sixth month in the last seven and the three month rate of change
deepened to -1.9%. Professional &amp; business services jobs fell
for the third straight month and the three month rate of change was
-2.1%. Temporary help services jobs again was quite weak and fell
21,600 pulling three month growth to -8.9% (AR). Jobs here have been
declining for more than a year. Employment in finance dropped by 5,000
and they're down 1.5% from the late 2006 peak. Weakness in the real
estate sector jobs fell 4,200 job last month and at a 3.6% rate over
the last three months.
Just as during February, the March employment figures
contained an indicator which portended even further weakness in overall
job creation. The one month diffusion index, which measures the breadth
of job gain or loss (50 is the break even level), indicated loss at
47.7%. The three month index was an even weaker 42.9% which was its
lowest since 2003.
Average hourly earnings rose a very steady
0.3%. Factory sector earnings rose 0.2% (2.9% y/y) and private
service-providing earnings rose 0.3% (4.1% y/y) for the second month.
The average duration of unemployment fell slightly to 16.2
weeks from 16.8 in February. Those figures are down from the averages
of the prior several years. 
 

Central Bank Commitment and Communication
is yesterday's speech by Fed GovernorFrederic S. Mishkin and it can be
found <a href="http://www.federalreserve.gov/newsevents/speech/mishkin20080403a.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/USECON/@EB/@EB01/@EB01.HTM">Employment:
000s</a></th>
<th scope="col">March</th>
<th scope="col">February</th>
<th scope="col">January</th>
<th scope="col">Y/Y</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Payroll Employment</td>
<td>-80</td>
<td>-76</td>
<td>-76</td>
<td>0.4%</td>
<td>1.1%</td>
<td>1.8%</td>
<td>1.7%</td>
</tr>
<tr>
<td class="firstcol">
Previous</td>
<td>--</td>
<td>-63</td>
<td>-22</td>
<td>--</td>
<td>1.3%</td>
<td>1.9%</td>
<td>1.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Manufacturing</td>
<td>-48</td>
<td>-46</td>
<td>-35</td>
<td>-2.2%</td>
<td>-1.9%</td>
<td>-0.5%</td>
<td>-0.6%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Construction</td>
<td>-51</td>
<td>-37</td>
<td>-39</td>
<td>-4.6%</td>
<td>-1.0%</td>
<td>4.9%</td>
<td>5.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">Average Weekly Hours</td>
<td>33.8</td>
<td>33.7</td>
<td>33.7</td>
<td>33.9&nbsp; (Mar'07)</td>
<td>33.8</td>
<td>33.9</td>
<td>33.8</td>
</tr>
<tr>
<td class="firstcol">Average Hourly Earnings</td>
<td>0.3%</td>
<td>0.3%</td>
<td>0.3%</td>
<td>3.6%</td>
<td>4.0%</td>
<td>3.9%</td>
<td>2.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">Unemployment Rate</td>
<td>5.1%</td>
<td>4.8%</td>
<td>4.9%</td>
<td>4.4% (Mar'07)</td>
<td>4.6%</td>
<td>4.6%</td>
<td>5.1%</td>
</tr>
</tbody>
</table>
</body></html>

For the third consecutive month the Bureau of Labor Statistic reported that nonfarm payrolls fell. The 80,000 worker decline in March was the largest of the three and the two prior months' declines were revised deeper from the initial [...]

U.S. Payrolls Down For Third Month, Unemployment Up

Robert Brusca

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080404a.jpg" align="left" border="0" height="265" width="353">
German foreign orders is a very volatile series &#8211; even when
expressed as Yr/Yr gains. While both the domestic and foreign orders
series are ragged, each shows a tendency for orders growth to
decelerate (see graph). Foreign orders are off especially sharply but
the series is so volatile it is difficult to know what to make of the
drop off.

The drop off in the quarter to date (two months out of three)
shows total orders off at a 4.8% pace, foreign orders off at a 9.9%
pace and domestic orders UP at a 1.1% pace.

The message in the foreign/domestic split is that the weakness
is being imported. Further, the foreign orders from outside the Euro
Area are the weakest portion of foreign orders. That places the blame
for weakness back on the strong euro.

Still, the trends for both domestic and foreign orders are
clearly lower and become weaker as the sequential data in the table
tells us. And Germany has been one of the strongest economies in the
Euro Area and it is the largest Euro Area member economy. The weakening
in this key economy&#8217;s orders is something to be wary of since so far
the service sector data have been weaker than the Manufacturing sector
which now seems to be emitting new weakening signs of its own.


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr><th colspan="8" scope="col"> German Orders and Sales By Sector and Origin</th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">Real and SA</td>
<td colspan="3">% M/M</td>
<td colspan="4">% Saar</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>Feb-08</td>
<td>Jan-08</td>
<td>Dec-07</td>
<td>3-Mo</td>
<td>6-Mo</td>
<td>12-Mo</td>
<td>YrAgo</td>
</tr>
<tr>
<td class="firstcol">Total Orders</td>
<td>-0.5%</td>
<td>-0.7%</td>
<td>-1.2%</td>
<td>-9.3%</td>
<td>-4.7%</td>
<td>5.4%</td>
<td>10.4%</td>
</tr>
<tr>
<td class="firstcol">Foreign</td>
<td>-1.1%</td>
<td>-0.4%</td>
<td>-2.3%</td>
<td>-14.2%</td>
<td>-7.4%</td>
<td>5.7%</td>
<td>11.7%</td>
</tr>
<tr>
<td class="firstcol">Domestic</td>
<td>0.0%</td>
<td>-0.9%</td>
<td>-0.1%</td>
<td>-3.7%</td>
<td>-1.9%</td>
<td>5.1%</td>
<td>8.9%</td>
</tr>
<tr class="odd">
<td colspan="8" class="firstcol">Sector Sales</td>
</tr>
<tr>
<td class="firstcol">MFG/Mining</td>
<td>0.1%</td>
<td>2.1%</td>
<td>1.0%</td>
<td>13.3%</td>
<td>6.4%</td>
<td>6.4%</td>
<td>7.7%</td>
</tr>
<tr>
<td class="firstcol">Consumer Goods</td>
<td>-1.2%</td>
<td>1.0%</td>
<td>-0.1%</td>
<td>-1.1%</td>
<td>-0.6%</td>
<td>0.6%</td>
<td>3.2%</td>
</tr>
<tr>
<td class="firstcol">Consumer Durables</td>
<td>-0.9%</td>
<td>0.8%</td>
<td>1.0%</td>
<td>3.8%</td>
<td>1.9%</td>
<td>-0.2%</td>
<td>5.1%</td>
</tr>
<tr>
<td class="firstcol">Consumer Nondurables</td>
<td>-1.4%</td>
<td>1.1%</td>
<td>-0.4%</td>
<td>-2.6%</td>
<td>-1.3%</td>
<td>0.7%</td>
<td>2.7%</td>
</tr>
<tr>
<td class="firstcol">Capital Goods</td>
<td>-0.6%</td>
<td>4.2%</td>
<td>0.8%</td>
<td>19.1%</td>
<td>9.2%</td>
<td>9.8%</td>
<td>7.8%</td>
</tr>
<tr>
<td class="firstcol">Intermediate Goods</td>
<td>1.5%</td>
<td>0.2%</td>
<td>1.6%</td>
<td>14.0%</td>
<td>6.7%</td>
<td>5.6%</td>
<td>10.2%</td>
</tr>
<tr>
<td class="firstcol">All Manufacturing Sales</td>
<td>-0.1%</td>
<td>2.1%</td>
<td>1.1%</td>
<td>13.1%</td>
<td>6.3%</td>
<td>6.1%</td>
<td>7.2%</td>
</tr>
</tbody>
</table>
</body></html>

German foreign orders is a very volatile series – even when expressed as Yr/Yr gains. While both the domestic and foreign orders series are ragged, each shows a tendency for orders growth to decelerate (see graph). Foreign orders are [...]

German Orders Fall in January and February - Is Euro to Blame?

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080404a.jpg" align="left" border="0" height="265" width="353">
German foreign orders is a very volatile series &#8211; even when
expressed as Yr/Yr gains. While both the domestic and foreign orders
series are ragged, each shows a tendency for orders growth to
decelerate (see graph). Foreign orders are off especially sharply but
the series is so volatile it is difficult to know what to make of the
drop off.

The drop off in the quarter to date (two months out of three)
shows total orders off at a 4.8% pace, foreign orders off at a 9.9%
pace and domestic orders UP at a 1.1% pace.

The message in the foreign/domestic split is that the weakness
is being imported. Further, the foreign orders from outside the Euro
Area are the weakest portion of foreign orders. That places the blame
for weakness back on the strong euro.

Still, the trends for both domestic and foreign orders are
clearly lower and become weaker as the sequential data in the table
tells us. And Germany has been one of the strongest economies in the
Euro Area and it is the largest Euro Area member economy. The weakening
in this key economy&#8217;s orders is something to be wary of since so far
the service sector data have been weaker than the Manufacturing sector
which now seems to be emitting new weakening signs of its own.


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="8" scope="col"> German
Orders and Sales By Sector and Origin</th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">Real and SA</td>
<td colspan="3">% M/M</td>
<td colspan="4">% Saar</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>Feb-08</td>
<td>Jan-08</td>
<td>Dec-07</td>
<td>3-Mo</td>
<td>6-Mo</td>
<td>12-Mo</td>
<td>YrAgo</td>
</tr>
<tr>
<td class="firstcol">Total Orders</td>
<td>-0.5%</td>
<td>-0.7%</td>
<td>-1.2%</td>
<td>-9.3%</td>
<td>-4.7%</td>
<td>5.4%</td>
<td>10.4%</td>
</tr>
<tr>
<td class="firstcol">Foreign</td>
<td>-1.1%</td>
<td>-0.4%</td>
<td>-2.3%</td>
<td>-14.2%</td>
<td>-7.4%</td>
<td>5.7%</td>
<td>11.7%</td>
</tr>
<tr>
<td class="firstcol">Domestic</td>
<td>0.0%</td>
<td>-0.9%</td>
<td>-0.1%</td>
<td>-3.7%</td>
<td>-1.9%</td>
<td>5.1%</td>
<td>8.9%</td>
</tr>
<tr class="odd">
<td colspan="8" class="firstcol">Sector
Sales</td>
</tr>
<tr>
<td class="firstcol">MFG/Mining</td>
<td>0.1%</td>
<td>2.1%</td>
<td>1.0%</td>
<td>13.3%</td>
<td>6.4%</td>
<td>6.4%</td>
<td>7.7%</td>
</tr>
<tr>
<td class="firstcol">Consumer Goods</td>
<td>-1.2%</td>
<td>1.0%</td>
<td>-0.1%</td>
<td>-1.1%</td>
<td>-0.6%</td>
<td>0.6%</td>
<td>3.2%</td>
</tr>
<tr>
<td class="firstcol">Consumer Durables</td>
<td>-0.9%</td>
<td>0.8%</td>
<td>1.0%</td>
<td>3.8%</td>
<td>1.9%</td>
<td>-0.2%</td>
<td>5.1%</td>
</tr>
<tr>
<td class="firstcol">Consumer Nondurables</td>
<td>-1.4%</td>
<td>1.1%</td>
<td>-0.4%</td>
<td>-2.6%</td>
<td>-1.3%</td>
<td>0.7%</td>
<td>2.7%</td>
</tr>
<tr>
<td class="firstcol">Capital Goods</td>
<td>-0.6%</td>
<td>4.2%</td>
<td>0.8%</td>
<td>19.1%</td>
<td>9.2%</td>
<td>9.8%</td>
<td>7.8%</td>
</tr>
<tr>
<td class="firstcol">Intermediate Goods</td>
<td>1.5%</td>
<td>0.2%</td>
<td>1.6%</td>
<td>14.0%</td>
<td>6.7%</td>
<td>5.6%</td>
<td>10.2%</td>
</tr>
<tr>
<td class="firstcol">All Manufacturing Sales</td>
<td>-0.1%</td>
<td>2.1%</td>
<td>1.1%</td>
<td>13.1%</td>
<td>6.3%</td>
<td>6.1%</td>
<td>7.2%</td>
</tr>
</tbody>
</table>
U.S. Payrolls Down For Third
Month, Unemployment Up 
by <a href="/comment/Moeller.html">Tom
Moeller</a> April 4, 2008


<a href="http://"><img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080404b.jpg" align="left" border="0" height="265" width="353"></a>
For the third consecutive month the Bureau of Labor Statistic
reported that nonfarm payrolls fell. The 80,000 worker decline in March
was the largest of the three and the two prior months' declines were
revised deeper from the initial reports. Expectations had been for a
53,000 worker decline in March payrolls.
Has economic recession begun? When the job
figures are combined with a roughly stable level of hours worked, the
level of aggregate hours (employment times hours) fell in two of the
last three months and fell at an annual rate of 1.2% during 1Q. Over
the last thirty years there has been a 76% correlation between the q/q
change in aggregate hours worked and the change in real GDP. The 25%
that is left out of that correlation reflects productivity growth and
during the last three years it rose between 1.0% and 2.0%. When
aggregate hours and productivity are added they suggest no growth or
even a slight decline in 1Q real GDP.
From the household sector survey the unemployment
rate rose to 5.1%, its highest level since May of 2005. Job
creation did not keep up with growth in the labor force. Household
employment declined by 24,000 (-0.1% y/y) and jobs declined irregularly
in each month since early last year. The labor force, conversely, rose
410,000 last month. The annual rate of gain fell to 0.6% from 1.9%
early last year. Individuals who stopped looking for work did so at a
1.4% y/y rate in March, up from a zero rate of change at the end of
2006.<a href="http://"><img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080404d.jpg" align="right" border="0" height="265" width="353"></a>
From the establishment survey, aside from continued growth in
government sector jobs (+1.1% y/y), the figures for private nonfarm
payrolls painted a distressing picture of the job market. Private
sector payrolls fell 98,000 in March. It was the fourth consecutive
monthly decline and it followed a 109,000 drop in February. While the
y/y change in private payrolls still was a positive 0.3%, recent
momentum as indicated by the three month change, fell to a negative
1.0% (AR).
Factory sector job loss intensified last month to a 48,000
decline, nearly the largest monthly drop since 2003. The three month
rate of job loss deepened to -3.7%, also its fastest since 2003.
Construction sector employment declines continued to
accelerate. The m/m decline of 51,000 was the largest in nearly a year
and the three month growth rate stood at -6.6%, near its lowest since
late 1991.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080404c.jpg" align="left" border="0" height="265" width="353">
Hiring in the private service sector was more distressing
given its norm of positive job growth. Jobs in retail trade fell for
the sixth month in the last seven and the three month rate of change
deepened to -1.9%. Professional &amp; business services jobs fell
for the third straight month and the three month rate of change was
-2.1%. Temporary help services jobs again was quite weak and fell
21,600 pulling three month growth to -8.9% (AR). Jobs here have been
declining for more than a year. Employment in finance dropped by 5,000
and they're down 1.5% from the late 2006 peak. Weakness in the real
estate sector jobs fell 4,200 job last month and at a 3.6% rate over
the last three months.
Just as during February, the March employment figures
contained an indicator which portended even further weakness in overall
job creation. The one month diffusion index, which measures the breadth
of job gain or loss (50 is the break even level), indicated loss at
47.7%. The three month index was an even weaker 42.9% which was its
lowest since 2003.
Average hourly earnings rose a very steady
0.3%. Factory sector earnings rose 0.2% (2.9% y/y) and private
service-providing earnings rose 0.3% (4.1% y/y) for the second month.
The average duration of unemployment fell slightly to 16.2
weeks from 16.8 in February. Those figures are down from the averages
of the prior several years. 
 

Central Bank Commitment and Communication
is yesterday's speech by Fed GovernorFrederic S. Mishkin and it can be
found <a href="http://www.federalreserve.gov/newsevents/speech/mishkin20080403a.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/USECON/@EB/@EB01/@EB01.HTM">Employment:
000s</a></th>
<th scope="col">March</th>
<th scope="col">February</th>
<th scope="col">January</th>
<th scope="col">Y/Y</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Payroll Employment</td>
<td>-80</td>
<td>-76</td>
<td>-76</td>
<td>0.4%</td>
<td>1.1%</td>
<td>1.8%</td>
<td>1.7%</td>
</tr>
<tr>
<td class="firstcol">
Previous</td>
<td>--</td>
<td>-63</td>
<td>-22</td>
<td>--</td>
<td>1.3%</td>
<td>1.9%</td>
<td>1.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Manufacturing</td>
<td>-48</td>
<td>-46</td>
<td>-35</td>
<td>-2.2%</td>
<td>-1.9%</td>
<td>-0.5%</td>
<td>-0.6%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Construction</td>
<td>-51</td>
<td>-37</td>
<td>-39</td>
<td>-4.6%</td>
<td>-1.0%</td>
<td>4.9%</td>
<td>5.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">Average Weekly Hours</td>
<td>33.8</td>
<td>33.7</td>
<td>33.7</td>
<td>33.9&nbsp; (Mar'07)</td>
<td>33.8</td>
<td>33.9</td>
<td>33.8</td>
</tr>
<tr>
<td class="firstcol">Average Hourly Earnings</td>
<td>0.3%</td>
<td>0.3%</td>
<td>0.3%</td>
<td>3.6%</td>
<td>4.0%</td>
<td>3.9%</td>
<td>2.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">Unemployment Rate</td>
<td>5.1%</td>
<td>4.8%</td>
<td>4.9%</td>
<td>4.4% (Mar'07)</td>
<td>4.6%</td>
<td>4.6%</td>
<td>5.1%</td>
</tr>
</tbody>
</table>
</body></html>

German Orders Fall in January andFebruary - Is Euro to Blame?

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080403f.jpg" align="left" border="0" height="265" width="353">
The UK service sector index for March is a fresh release and
it shows a drop in the index to 52.11 from 54.05 in February. At that
level the service sector index lies in the 33rd
percentile of its range of values since 1995. The MFG sector lies at
the 50th percentile, its range midpoint over a
longer period going back to 1992. Construction, with an index available
over the same period as for services ,is in the lower ten percentile of
its range.
For business services the prices-charged index fell to 56.2
from 56.8 and shows less pressure than the MFG price indexes released
earlier.

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="8" scope="col"> MFG,
Construction and Services PMI CIPS/NTC</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td colspan="3">Monthly Readings</td>
<td colspan="3">Change Over:</td>
<td>Percentile</td>
</tr>
<tr>
<td class="firstcol"></td>
<td>Mar-08</td>
<td>Feb-08</td>
<td>Jan-08</td>
<td>3MO</td>
<td>6MO</td>
<td>12MO</td>
<td>of range</td>
</tr>
<tr>
<td class="firstcol">MFG</td>
<td>51.35</td>
<td>51.32</td>
<td>50.63</td>
<td>-1.04</td>
<td>-3.15</td>
<td>-3.34</td>
<td>50.3</td>
</tr>
<tr>
<td class="firstcol">Construction</td>
<td>47.19</td>
<td>52.44</td>
<td>53.87</td>
<td>-8.80</td>
<td>-13.06</td>
<td>-11.70</td>
<td>10.2</td>
</tr>
<tr>
<td class="firstcol">Services</td>
<td>52.11</td>
<td>54.05</td>
<td>52.46</td>
<td>-0.25</td>
<td>-4.58</td>
<td>-5.47</td>
<td>33.8</td>
</tr>
<tr class="grey2">
<td colspan="8" class="firstcol">MFG range
since January 1992;
Construction Since April 1997 Services Since July 1995.</td>
</tr>
</tbody>
</table>
</body></html>

The UK service sector index for March is a fresh release and it shows a drop in the index to 52.11 from 54.05 in February. At that level the service sector index lies in the 33rd percentile of its range of values since 1995. The MFG [...]

UK Service Sector Takes a Hit in March

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080403e.jpg" align="left" border="0" height="265" width="353">
Retail sales are clearly damaged goods in the Euro Area. The
drop in February sales was not expected. Two months into the new
quarter retail sales volume growth is dead flat. Trend spending growth
shows all negative numbers but the degree of decline is steadily
diminishing. High and rising food prices are affecting the volume of
sales for food. Outside of food, purchases are weak but are showing
some resilience with an increase over the recent three months. Nonfood
purchases are rising at a 1.8% annual rate in the current quarter. Both Germany and the UK are
demonstrating some resilience in the recent three months. 

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="7" scope="col"> Euro
Area 15 Retail Sales Volume</th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td>Feb-08</td>
<td>Jan-08</td>
<td>Dec-07</td>
<td>3-Mo</td>
<td>6-Mo</td>
<td>12-Mo</td>
</tr>
<tr class="odd">
<td class="firstcol">Euro Area 15 Total</td>
<td>-0.5%</td>
<td>0.5%</td>
<td>0.0%</td>
<td>-0.3%</td>
<td>-2.1%</td>
<td>-0.9%</td>
</tr>
<tr class="odd">
<td class="firstcol">Food</td>
<td>-0.2%</td>
<td>0.0%</td>
<td>-0.3%</td>
<td>-1.7%</td>
<td>-2.5%</td>
<td>-1.9%</td>
</tr>
<tr class="odd">
<td class="firstcol">Nonfood</td>
<td>-0.8%</td>
<td>0.9%</td>
<td>0.0%</td>
<td>0.3%</td>
<td>-1.8%</td>
<td>-0.3%</td>
</tr>
<tr class="odd">
<td class="firstcol">Textiles</td>
<td>#N/A</td>
<td>1.7%</td>
<td>0.2%</td>
<td>5.6%</td>
<td>-0.2%</td>
<td>2.5%</td>
</tr>
<tr class="odd">
<td class="firstcol">HH Goods</td>
<td>#N/A</td>
<td>0.7%</td>
<td>0.6%</td>
<td>1.9%</td>
<td>-2.0%</td>
<td>0.5%</td>
</tr>
<tr class="odd">
<td class="firstcol">Books newspapers</td>
<td>#N/A</td>
<td>1.2%</td>
<td>-0.4%</td>
<td>3.8%</td>
<td>0.5%</td>
<td>2.4%</td>
</tr>
<tr class="odd">
<td class="firstcol">Pharmaceutical</td>
<td>#N/A</td>
<td>0.3%</td>
<td>0.1%</td>
<td>1.8%</td>
<td>2.5%</td>
<td>3.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">Other nonspecialized stores</td>
<td>#N/A</td>
<td>0.8%</td>
<td>-0.1%</td>
<td>-0.1%</td>
<td>0.3%</td>
<td>1.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">Mail order</td>
<td>#N/A</td>
<td>0.2%</td>
<td>3.0%</td>
<td>7.6%</td>
<td>2.1%</td>
<td>4.4%</td>
</tr>
<tr class="even">
<td colspan="7" class="firstcol">Nonfood
Country Detail;
Volume</td>
</tr>
<tr class="odd">
<td class="firstcol">Germany</td>
<td>-0.6%</td>
<td>1.6%</td>
<td>-0.5%</td>
<td>1.7%</td>
<td>-2.0%</td>
<td>-1.1%</td>
</tr>
<tr class="odd">
<td class="firstcol">France</td>
<td>#N/A</td>
<td>0.6%</td>
<td>1.0%</td>
<td>#N/A</td>
<td>#N/A</td>
<td>#N/A</td>
</tr>
<tr class="odd">
<td class="firstcol">Italy (Total: Value)</td>
<td>#N/A</td>
<td>0.2%</td>
<td>0.0%</td>
<td>-0.4%</td>
<td>0.9%</td>
<td>0.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">UK (EU)</td>
<td>1.8%</td>
<td>1.0%</td>
<td>0.2%</td>
<td>12.8%</td>
<td>8.8%</td>
<td>8.3%</td>
</tr>
<tr class="odd">
<td colspan="7" class="firstcol">Shaded areas
calculated on a
one-month lag due to lagging data.</td>
</tr>
<tr class="grey2">
<td colspan="7" class="firstcol">The EA 15
countries are Austria,
Belgium, Cyprus, Finland, France, Germany, Greece, Ireland, Italy,
Luxembourg, Malta, the Netherlands, Portugal, Slovenia and Spain.</td>
</tr>
</tbody>
</table>
</body></html>

Retail sales are clearly damaged goods in the Euro Area. The drop in February sales was not expected. Two months into the new quarter retail sales volume growth is dead flat. Trend spending growth shows all negative numbers but the [...]

European Consumer Spending Weakens in February

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080403a.jpg" width="353">
The Institute for Supply Management reported that its Business Activity Index for the non-manufacturing sector improved again in March to 52.2. That was up from 50.8 in February and from 41.9 in January. Consensus expectations had been for a decline to 48.5.
Despite the March rise the index remained near its lowest level since early 2003. A level of 50 is the break even point between rising and falling activity in the service sector.
Since the series&#39; inception in 1997 there has been a 44% correlation between the level of the Business Activity Index in the non-manufacturing sector and the Q/Q change in real GDP for the services and the construction sectors. The correlation of the factory sector ISM index with the change in real GDP less just services is a higher 57%, though over the last ten years it only has been 34%.
The new orders sub index ticked up m/m to 50.2 from 49.6 in February.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080403b.jpg" width="353">
Conversely the employment sub-index remained unchanged m/m at 46.9, near its lowest level since late 2002. Since the series&#39; inception in 1997 there has been a 56% 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.
Pricing power increased as indicated by a rise in the prices paid index which recovered the February decline. Nevertheless, the index remained below the November &#39;07 high. Since 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.
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.
The Business Activity Index for the non-manufacturing sector reflects a question separate for the subgroups mentioned above. In contrast, the ISM manufacturing sector composite index is a weighted average of its five components.
Developments in Financial Markets is this morning&#39;s testimony by Fed Chairman Ben S. Bernanke and it is available <a href="http://www.federalreserve.gov/newsevents/testimony/bernanke20080403a.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/@EF/@EF03/@EF03.HTM">ISM Nonmanufacturing Survey</a></th>
<th scope="col">March</th>
<th scope="col">February</th>
<th scope="col">March &#39;07</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Business Activity Index</td>
<td>52.2</td>
<td>50.8</td>
<td>53.0</td>
<td>56.0</td>
<td>58.0</td>
<td>60.2</td>
</tr>
<tr>
<td class="firstcol">Prices Index</td>
<td>70.8</td>
<td>67.9</td>
<td>62.9</td>
<td>63.8</td>
<td>65.3</td>
<td>68.0</td>
</tr>
</tbody>
</table>


</html>

The Institute for Supply Management reported that its Business Activity Index for the non-manufacturing sector improved again in March to 52.2. That was up from 50.8 in February and from 41.9 in January. Consensus expectations had [...]

U.S. ISM Non-Manufacturing Index Improved Again

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080403c.jpg" width="353">
Initial unemployment insurance claims surged 38,000 last week to 407,000. A dip of 6,000 during the prior week was revised slightly from the 9,000 worker decline reported initially. The latest was near the highest level since September 2005. Consensus expectations had been for 365,000 initial claims last week.
The Labor Department indicated that the early Easter Holiday, and the associated difficulty of seasonally adjusting the data, may have boosted the figure. If so unemployment claims would fall sharply this week. Also, a strike at the American Axel company may be contributing to the rise in claims.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080403d.jpg" width="353">
Last week&#39;s level was the highest since September 2005. At that time payroll employment, as reported by the Bureau of Labor Statistics, was still growing by at least 100,000 per month.
A claims level below 400,000 typically has been associated with growth in nonfarm payrolls. During the last ten years there has been a (negative) 76% correlation between the level of initial claims and the m/m change in nonfarm payroll employment.
The four week moving average of initial claims rose to 374,500 (20.1% y/y).
Continuing claims for unemployment insurance surged by 97,000 after a revised 25,000 worker decline during the prior week. Insured unemployment was at its highest level since mid 2004. The figure provides some indication of workers&#39; ability to find employment.
The continuing claims numbers lag the initial claims figures by one week.
The insured rate of unemployment rose slightly to 2.2%.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/WEEKLY/@W5/@W507/@W507.HTM">Unemployment Insurance (000s)</a>&nbsp;</th>
<th scope="col">03/28/08</th>
<th scope="col">03/21/08</th>
<th scope="col">Y/Y</th>
<th scope="col">2007</th>
<th scope="col">2006&nbsp;</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Initial Claims</td>
<td>&nbsp;407</td>
<td>369</td>
<td>27.6%</td>
<td>322</td>
<td>313</td>
<td>331</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>--</td>
<td>2,937</td>
<td>18.0%</td>
<td>2,552</td>
<td>2,459</td>
<td>2,662</td>
</tr>
</tbody>
</table>
</body>
</html>

Initial unemployment insurance claims surged 38,000 last week to 407,000. A dip of 6,000 during the prior week was revised slightly from the 9,000 worker decline reported initially. The latest was near the highest level since [...]

U.S. Initial Claims for Jobless Insurance Rise Into Recession Zone?

Largest October layoffs since 2003, led by technology

Subdued global shipping costs not yet pointing to supply chain problems

PMIs show still-elevated but slowing US inflation

AI boosting US investment in data centers

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

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

US financial markets have gotten used to elevated policy uncertainty

FOMC now expects more rate cuts going forward than in June

China gaining ASEAN exports while US exports slump

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

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

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

Equity market exuberance outpacing macroeconomic data

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

US production rebounded in Q2, but demand continued to slow

US leader, Germany trailer for real GDP growth over past 3 years

Negative US inflation surprises leading G10 down

Deflation continues in China

Incoming data surprising on downside in US; positive surprises elsewhere

FOMC expects more inflation and less growth than in March

With escalation of Israel/Iran conflict, geopolitical risk has recently surged while US trade policy uncertainty has ebbed

Renewed supply chain pressures point to a rebound in global inflation ahead

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

Apart from the US, productivity is moribund

Financial market concerns ebb even though policy uncertainty continues to soar

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The NFIB Small Business Optimism Index eased 0.6% (+4.8%) to 98.2 in October after falling 2.0% to a 98.8 in September and rising 0.5% to 100.8 in August, according to the Small Business Economic Trends survey conducted by the National Federation of Independent Business. Four of the ten index components increased last month while five fell and one was unchanged. The NFIB Small Business Uncertainty Index fell 12.0% (-20.0% y/y) last month to 88 after rising 7.5% in September.

The outlook for business conditions was mixed in the latest survey. The net balance of respondents planning to add to inventories declined to a six-month low of -2% from +1% in September. The net percent expecting the economy to improve fell to 20% last month after weakening to 23% in September. A lessened 6% expected higher real sales in six months, compared to 8% in September. A lessened 15% of respondents indicated that now was a good time to increase employment compared to 16% in September. Earnings trends deteriorated sharply.

Offsetting these declines, plans to make capital outlays rose to a ten-month high of 23% of firms after steadying at 21%. The index of expected credit conditions jumped to -3% from -7%. It remained up from a low of -11 in November 2023. A modestly increased 13% of respondents felt that now was a good time to expand. Inventories were assessed as being too low by a lessened 4% of respondents after 7% in September.

On the labor front, 49% of businesses reported few or no qualified workers to fill job openings in October, down slightly from 50% in September. That remained up, however, from a low of 43% in August. These readings remained below a high of 56% in August of 2024.

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The net percent raising their average selling prices fell to 21% last month compared to 24% in September. It had grown to 32% in February. The percentage planning to raise prices eased to 30% in October, down from a 32% high in June. Worker compensation deteriorated as a net 26% of respondents lifted compensation during the last three months versus 31% in the last survey. Compensation gains peaked at 50% of firms in January 2022. A steady net 19% of firms are making plans to raise worker compensation in the next three months, below the November 2024 high of 28%.

The quality of labor was reported by 27% of member firms as the single most important issue facing small businesses. That was increased from 18% in September, and the highest in five years. Moving lower, the cost of labor was ranked by 8% of respondents as the largest problem, compared to 11% in September, while financial & interest rates worries dropped to 2%, the lowest in two years. A lessened 12% cited inflation as the most important problem. Other major concerns were taxes (16%) and poor sales (10%). 

According to the Small Business Administration, there are 33 million small businesses in the United States, which employ 62 million workers. The NFIB surveys anywhere from 500 to 2000 respondents each month and the typical firm employs 10 people and reports gross sales of about $500,000 a year. The NFIB figures can be found in Haver’s **SURVEYS** database.

- Inventory, economy & employment concerns weigh on optimism.
- Percentage of respondents raising prices moves down; price expectations ease.
- Concerns about quality of labor surge but labor cost worries recede.

U.S. NFIB Small Business Optimism Index Slips in October

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Initial claims for unemployment insurance rose 9,379 during the week ended November 1 to 228,899 (3.4% y/y) and mostly reversed the prior week’s 12,643 decline to 219,520. The four-week moving average of initial claims eased to 225,213 from 226,766. The four-week average hit a low of 200,323 in January 2024.

Federal government employees filed 7,482 initial jobless insurance claims last week after 9,435 in the prior week. These figures are increased from 588 at the end of September.

Continuing claims for unemployment insurance rose to 1.964 million (4.4% y/y) in the week ended October 25 from 1.957 million in the prior week. The four-week moving average rose to 1.949 million from 1.940 million. It was the highest level since the last week of August.

Federal government employees continuing benefits rose to 30,649 in the week ended October 25 from 23,188 in the prior week. These figures are increased from 8,676 at the end of September.

Data on weekly unemployment claims are from the Department of Labor itself, not the Bureau of Labor Statistics. They begin in 1967 and are contained in Haver’s **WEEKLY** database and summarized monthly in **USECON**. Data for individual states are in **REGIONW** back to December 1986.

- Increase in initial claims reverses most of earlier decline.
- Continuing claims continue to increase.

U.S. Initial Claims for Unemployment Insurance Rise in Latest Week

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Industrial production for the European Monetary Union (EMU) is not yet available for the union as a whole; however, a number of European countries have reported production, and they give us a good sense of what's happening. In September, among the 13 European countries that reported in the table, all but four of them showed increases in industrial production. Declines were posted in Ireland where production fell by 9.4% in one month, Luxembourg where it fell by 6.1%, Malta where it fell by 1.7%, and in Finland where it fell by 0.4%. In the remaining nine countries, production increased. The median increase for monetary union members in the table was a rise of 0.8% month-to-month. 45.5% of the reporters in the monetary union showed production acceleration.

In August, there were 5 European members with production decreasing. Among European Monetary Union members, the median was a decline of 0.5% with 46.2% of the reporters showing output accelerating on the month. July had been a much worse month with 8 reporting European countries showing declines and with the monetary union median showing a decline of 0.3% and only 38.5% of the reporting EMU members showing output accelerating month-to-month.

There has been gradual moderate improvement in these monthly statistics both in terms of improvement in the median and improvement in the breadth as output has accelerated, with a step back in August.

Looking at the sequential data that compare three-month results to six-month results to 12-month results, we see a median annualized increase of 2.9% for output across monetary union members over three months; that's up from 0.8% over six months and compares to a 2.1% increase for monetary union members over twelve months. The breadth of increase over the period is above 50% on all the horizons and it's fairly steady over three months and six months at about a 54-percentile standing.

September data conclude the results for the third quarter. In this quarter-to-date calculation, 6 of the 13 reporters in the table shows output declining in the third quarter. Monetary Union members generate a median increase of 0.3% in terms of annualized quarter-to-quarter industrial output changes. The pattern and the monthly data seem to be slightly stronger than what we see in the quarter-to-date.

The final column of the table presents the queue standings that calculate the positioning of the year-over-year growth rates across country-reporters among growth rates back to late-2007. Ranked among this cluster of growth rates, only five of the current year-over-year rates stand at levels that are below their median growth rate for the period. Countries with below median growth rates (below a standing of 50%) for industrial production growth are Austria, Germany, Finland, Luxembourg, and Malta. Among these, only one belongs to the four largest economies in the monetary union—Germany, which is also the largest of them. Germany has the standing only its 39th percentile. The unweighted median ranking for the group of monetary union economies is at 57.3%, above the 50% mark and therefore above the historic median.

The industrial production data for the monetary union in September is somewhat encouraging but certainly not crystal clear. There continues to be a lot of weaknesses displayed in the data. While the aggregate ranking is above its historic median, it's not above it by very much and clearly the growth rates are still relatively weak. There still is not a clear trend of acceleration in the group. However, what's lacking in the data is any sign of real deterioration. There clearly is weakness across countries but not a sense of deterioration. The best news in the report may be that there's not any really bad news.

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Europe

Production in a Gradual Recovery in Europe Despite Recent Setbacks

Tian Yong Woon

This week, we review key developments across several Asian economies as the year nears its close. On balance, many of investors’ and policymakers’ worst fears did not materialize. Despite US tariffs, regional exports have shown resilience (chart 1), partly supported by stronger intra-Asia trade, even as exports to the US declined in some cases.

In China, factors including importer front-loading, stronger exports to non-US markets, and government efforts to boost consumption—albeit with potentially one-off effects—have kept the economy on track to meet its 5% growth target this year (chart 2), barring a substantial slowdown in Q4. In Japan, political uncertainty has eased following Prime Minister Takaichi’s rise, though her pro-growth, pro-loose monetary stance has contributed to further yen weakness (chart 3). India, while still likely Asia’s fastest-growing major economy this year, has seen trade setbacks (chart 4) as US–India discussions continue, though recent progress suggests a deal may be near.

However, not all developments in Asia have avoided worst-case outcomes. For example, the Philippines, which has already been hit by a string of storms this year, continues to reel from the effects of Typhoons Fung-wong and Kalmaegi. These storms have highlighted corruption in the Philippines’ flood control systems, rattling investors and pressuring the peso (chart 5), in a manner reminiscent of the rupiah’s decline during Indonesia’s political turmoil earlier this year. In Thailand, political uncertainty continues ahead of general elections eyed at next March, while the expected full return of Chinese tourists has yet to materialize (chart 6).

**Trade in Asia**
For Asia, the year has ultimately not played out as bleakly as investors once feared, particularly on the trade front. Despite US President Trump’s tariffs and a persistent backdrop of uncertainty, export performance in several Asian economies has proven more resilient than expected. This is most clearly reflected in export growth readings for China and key Southeast Asian economies (chart 1), which have remained firm—and at times exceeded expectations—even as China’s shipments to the US fell sharply. Much of this resilience reflects a redirection of exports toward other markets, often within the region. India, however, has seen more limited gains, with exports in US dollar terms struggling to materially surpass last year’s levels.

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**China**
Among the main investor concerns earlier this year was China, which once again came under close scrutiny as President Trump sought to address issues ranging from the large US–China trade imbalance to intensifying AI competition and perceived overcapacity. Yet China’s growth—particularly on the export front—has proven more resilient than expected, with increased shipments to other markets more than offsetting reduced trade with the US. Earlier front-loading by importers ahead of anticipated tariff hikes also temporarily supported export figures. Domestically, government initiatives to stimulate consumption led to a brief lift in retail spending, though signs suggest these effects may be fading, indicating their largely one-off nature. Even so, China has maintained year-to-date growth above its 5% annual target (chart 2), keeping that goal within reach provided momentum does not weaken significantly in Q4. Meanwhile, the more conciliatory tone in recent US–China discussions, including the halving of US fentanyl-related tariffs, offers a modest further relief. That said, longer-term structural issues still loom, including the difficult shift toward a more consumption-led economy, demographic pressures, and questions around sustained overcapacity in key industries.

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**Japan**
In Japan, the political uncertainty that followed the Liberal Democratic Party’s weak election performances earlier in the year has largely eased with Takaichi’s appointment as the country’s first female Prime Minister. Attention now turns to her supplementary budget—reported to be around $65 billion—which aims to address the rising cost of living while also bolstering defence and diplomatic capabilities. Investors, however, are already contemplating the policy implications. In particular, expectations that Takaichi’s agenda could make it harder for the Bank of Japan to pursue further significant tightening have added renewed pressure on the yen, pushing it to multi-year lows (chart 3). And while a weaker yen could, in theory, support tourism, forthcoming measures to curb overtourism—such as Kyoto’s planned 900% increase in accommodation taxes—may act as offsetting factors.

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**India**
Turning to India, the economy remains on track to be the region’s fastest-growing major economy. Growth forecasts were downgraded earlier in the year by the IMF and Blue Chip survey panellists, but these revisions were later reversed. These early-year downgrades reflected India’s heavy exposure to US trade, a concern that materialized when the US raised its reciprocal tariff rate on India from 25% to 50%. This contrasts with the situation of many other Asian economies, who successfully negotiated lower rates below the “Liberation Day” baseline. Although India managed to expand exports to other trading partners, this gain resulted in only a muted net impact on overall exports and, in turn, GDP growth. That said, US–India discussions have made some progress over the year, particularly on previously contentious issues such as India’s purchases of Russian crude. While these developments bring India closer to a potential trade deal, the benefits are likely to materialize beyond this year, meaning current growth readings still largely reflect the impact of the steep US tariffs in place today.

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**The Philippines**
Moving to the Philippines, the country is grappling with the impact of Typhoon Fung-wong, which struck the northern regions on Sunday, forcing over a million people to evacuate and causing widespread landslides and damaged roads. Fung-wong follows a string of storms this year, including Typhoon Kalmaegi, which also inflicted substantial damage just a few days ago. The disasters have reignited concerns over longstanding corruption in the country’s flood control systems, spooking investors and prompting capital outflows, which have weighed on the Philippine peso (chart 5). The currency’s weakness has been compounded by the central bank’s ongoing easing, which has cut the policy rate from last year’s peak of 6.5% to 4.75%—nearly 200 basis points—and with markets still pricing in further cuts.

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**Thailand**
Lastly, Thailand’s economy continues to struggle to regain the footing it had before the pandemic, weighed down by both domestic and external factors. Politically, the country remains in a transitional phase, with new Prime Minister Anutin under scrutiny to deliver on his pledge to hold general elections soon. Deputy Prime Minister indications suggest March 29, 2026 as a likely date, leaving a period of uncertainty in the meantime, as the durability of policies enacted during this interim phase remains unclear. Externally, tourism—which should have been a key growth driver—has underperformed, as the return of Chinese visitors to pre-pandemic levels did not materialize, partly due to tourism-related scares. In contrast, Vietnam appears to have captured a larger share of Chinese tourists this year (chart 6).

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Asia

Economic Letter from Asia: As the Dust Settles

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Consumer credit outstanding increased $13.1 billion (2.3% y/y) in September after rising $3.1 billion in August, revised from $0.4 billion, and $17.7 billion in July, revised from $18.1 billion. A $10.0 billion rise had been expected in the Action Economics Forecast Survey.

Nonrevolving credit outstanding rose $11.4 billion (2.1% y/y) in September after increasing $9.2 billion in August, revised from $6.3 billion, and increasing $6.7 billion in July, revised from $6.9 billion. Nonrevolving credit held by depository institutions declined 6.8% y/y in September after falling 7.4% y/y in August. Finance company debt holdings fell 1.5% y/y after declining 1.3%, while credit union holdings rose an increased 12.8% y/y in September, the quickest growth since in two years. Nonrevolving debt of the federal government rose 3.6% y/y in September, the same as in August.

In September, revolving credit outstanding, which includes credit cards, rose $1.7 billion (2.6% y/y) after falling $6.1 billion in August, revised from a $6.0 billion decline, and rising $11.0 billion in July, revised from $11.2 billion. Revolving credit outstanding held by depository institutions fell 3.0% y/y. Revolving credit held by finance companies fell a steady 14.7% y/y in September, while credit union debt rose 4.5% y/y in September, up from 3.7% y/y in August.

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

**AI and the Economy** is the title of today’s speech by Federal Reserve Vice Chair Philip N. Jefferson and it can be found [here](https://www.federalreserve.gov/newsevents/speech/jefferson20251107a.htm).

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- Notable gain in credit usage follows prior month’s slowdown.
- Nonrevolving credit usage strengthens and revolving turns positive.

Economy in Brief: 2008

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