Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050303a.jpg" width="353">
Non-farm labor productivity growth for 4Q04 was revised upward to 2.1%, reflecting an upward revision to output growth. Nevertheless, productivity growth for the full year of 4.0% was the lowest since 2001. The late year slowdown reduced 4Q/4Q growth to 2.8%. Consensus expectations had been for a revision to 1.4% growth for 4Q. Figures were revised back to 2000.
Output growth was revised up as expected to 3.7% (4.4% y/y) from 2.8% and reflected an accounting for higher exports to Canada. Growth in hours worked was revised down to 1.6% from 1.9%.
The upward revision to productivity lowered the estimate of unit labor cost growth to 1.3% from 2.3%. Annual growth of 0.4% followed two years of decline. Compensation growth was revised up to 3.4% (4.2% y/y) from 3.1%.
Productivity in the manufacturing sector was revised slightly higher to 5.8% (5.2% y/y) from 5.6%. Unit labor cost growth in the factory sector held at 0.4% (-0.5% y/y) but compensation growth was revised up.
International Risk-Sharing and the Transmission of Productivity Shocks from the Board of Governors of the Federal Reserve System is available <a href="http://www.federalreserve.gov/pubs/ifdp/2005/826/default.htm"> here</a>.

<table border="0" cellspacing="0" width="100%">
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EC/@EC02/@EC02.HTM">Non-farm Business Sector</a> (SAAR)</th>
<th scope="col">4Q &#39;04 (Revised)</th>
<th scope="col">4Q &#39;04 (Prelim.)</th>
<th scope="col">3Q &#39;04</th>
<th scope="col">Y/Y</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Output per Hour</td>
<td>2.1%</td>
<td>0.8%</td>
<td>1.3%</td>
<td>2.8%</td>
<td>4.0%</td>
<td>4.4%</td>
<td>4.3%</td>
</tr>
<tr>
<td class="firstcol">Compensation</td>
<td>3.4%</td>
<td>3.1%</td>
<td>5.4%</td>
<td>4.2%</td>
<td>4.4%</td>
<td>4.0%</td>
<td>3.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">Unit Labor Costs</td>
<td>1.3%</td>
<td>2.3%</td>
<td>4.0%</td>
<td>1.4%</td>
<td>0.4%</td>
<td>-0.4%</td>
<td>-1.1%</td>
</tr>
</tbody>
</table>
</body>
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Non-farm labor productivity growth for 4Q04 was revised upward to 2.1%, reflecting an upward revision to output growth. Nevertheless, productivity growth for the full year of 4.0% was the lowest since 2001. The late year slowdown [...]

U.S. Productivity Growth Revised Up

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050303c.jpg" width="353">
The Institute for Supply Management reported that the February Business Activity Index for the non-manufacturing sector rose to 59.8 from 59.2 the prior month. Consensus expectations had been for a decline to 57.0.
Since the series&#39; inception in 1997 there has been a 50% correlation between the Business Activity Index and the q/q change in real GDP for services plus construction.
The employment sub index jumped 7.4 points to a record high. 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.
The new orders index rose to 61.6, the high end of a tight range held for the last year.
Pricing power eased a bit m/m to the lowest level in nearly a year.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050303d.jpg" width="353">
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 only to July 1997, therefore its seasonal adjustment should be viewed tentatively.
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.
Financial Market Developments and Economic Activity during Current Account Adjustments in Industrial Economies from the Board of Governors of the Federal Reserve System is available <a href="http://www.federalreserve.gov/pubs/ifdp/2005/827/ifdp827.pdf"> here</a>.

<table border="0" cellspacing="0" width="100%">
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<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">Feb</th>
<th scope="col">Jan</th>
<th scope="col">Feb &#39;04</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Business Activity Index</td>
<td>59.8</td>
<td>59.2</td>
<td>60.8</td>
<td>62.4</td>
<td>58.2</td>
<td>55.1</td>
</tr>
<tr>
<td class="firstcol">Prices Index</td>
<td>66.4</td>
<td>66.6</td>
<td>58.0</td>
<td>69.0</td>
<td>56.8</td>
<td>54.0</td>
</tr>
</tbody>
</table>


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The Institute for Supply Management reported that the February Business Activity Index for the non-manufacturing sector rose to 59.8 from 59.2 the prior month. Consensus expectations had been for a decline to 57.0. Since the series' [...]

ISM Non-Manufacturing Index Higher

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050303c.jpg" width="353">
The Institute for Supply Management reported that the February Business Activity Index for the non-manufacturing sector rose to 59.8 from 59.2 the prior month. Consensus expectations had been for a decline to 57.0.
Since the series&#39; inception in 1997 there has been a 50% correlation between the Business Activity Index and the q/q change in real GDP for services plus construction.
The employment sub index jumped 7.4 points to a record high. 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.
The new orders index rose to 61.6, the high end of a tight range held for the last year.
Pricing power eased a bit m/m to the lowest level in nearly a year.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050303d.jpg" width="353">
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 only to July 1997, therefore its seasonal adjustment should be viewed tentatively.
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.
Financial Market Developments and Economic Activity during Current Account Adjustments in Industrial Economies from the Board of Governors of the Federal Reserve System is available <a href="http://www.federalreserve.gov/pubs/ifdp/2005/827/ifdp827.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/@EF/@EF03/@EF03.HTM">ISM Nonmanufacturing Survey</a></th>
<th scope="col">Feb</th>
<th scope="col">Jan</th>
<th scope="col">Feb &#39;04</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Business Activity Index</td>
<td>59.8</td>
<td>59.2</td>
<td>60.8</td>
<td>62.4</td>
<td>58.2</td>
<td>55.1</td>
</tr>
<tr>
<td class="firstcol">Prices Index</td>
<td>66.4</td>
<td>66.6</td>
<td>58.0</td>
<td>69.0</td>
<td>56.8</td>
<td>54.0</td>
</tr>
</tbody>
</table>
U.S. Productivity Growth Revised Up 
by <a href="/comment/Moeller.html">Tom Moeller</a> March 3, 2005


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050303a.jpg" width="353">
Non-farm labor productivity growth for 4Q04 was revised upward to 2.1%, reflecting an upward revision to output growth. Nevertheless, productivity growth for the full year of 4.0% was the lowest since 2001. The late year slowdown reduced 4Q/4Q growth to 2.8%. Consensus expectations had been for a revision to 1.4% growth for 4Q. Figures were revised back to 2000.
Output growth was revised up as expected to 3.7% (4.4% y/y) from 2.8% and reflected an accounting for higher exports to Canada. Growth in hours worked was revised down to 1.6% from 1.9%.
The upward revision to productivity lowered the estimate of unit labor cost growth to 1.3% from 2.3%. Annual growth of 0.4% followed two years of decline. Compensation growth was revised up to 3.4% (4.2% y/y) from 3.1%.
Productivity in the manufacturing sector was revised slightly higher to 5.8% (5.2% y/y) from 5.6%. Unit labor cost growth in the factory sector held at 0.4% (-0.5% y/y) but compensation growth was revised up.
International Risk-Sharing and the Transmission of Productivity Shocks from the Board of Governors of the Federal Reserve System is available <a href="http://www.federalreserve.gov/pubs/ifdp/2005/826/default.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/@EC/@EC02/@EC02.HTM">Non-farm Business Sector</a> (SAAR)</th>
<th scope="col">4Q &#39;04 (Revised)</th>
<th scope="col">4Q &#39;04 (Prelim.)</th>
<th scope="col">3Q &#39;04</th>
<th scope="col">Y/Y</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Output per Hour</td>
<td>2.1%</td>
<td>0.8%</td>
<td>1.3%</td>
<td>2.8%</td>
<td>4.0%</td>
<td>4.4%</td>
<td>4.3%</td>
</tr>
<tr>
<td class="firstcol">Compensation</td>
<td>3.4%</td>
<td>3.1%</td>
<td>5.4%</td>
<td>4.2%</td>
<td>4.4%</td>
<td>4.0%</td>
<td>3.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">Unit Labor Costs</td>
<td>1.3%</td>
<td>2.3%</td>
<td>4.0%</td>
<td>1.4%</td>
<td>0.4%</td>
<td>-0.4%</td>
<td>-1.1%</td>
</tr>
</tbody>
</table>
Initial Jobless Insurance Claims Slipped 
by <a href="/comment/Moeller.html">Tom Moeller</a> March 3, 2005


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050303b.jpg" width="353">
Initial claims for unemployment insurance slipped 1,000 to 310,000 last week and the prior week&#39;s moderate rise was lessened. Consensus expectations had been for 315,000 claims.
The four week moving average of initial claims fell to 307,0000 (-13.6% y/y).
Continuing claims for unemployment insurance rose 12,000 and the prior week&#39;s decline was lessened to 52,000.
During the last ten years there has been a (negative) 75% correlation between the level of initial claims for unemployment insurance and the monthly change in payroll employment. There has been a (negative) 66% correlation with the level of continuing claims.
The insured rate of unemployment remained at 2.1%.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/WEEKLY/@W5/@W507/@W507.HTM">Unemployment Insurance (000s)</a></th>
<th scope="col">02/26/05</th>
<th scope="col">02/19/05</th>
<th scope="col">Y/Y</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Initial Claims</td>
<td>310</td>
<td>311</td>
<td>-9.4%</td>
<td>343</td>
<td>402</td>
<td>404</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>--</td>
<td>2,650</td>
<td>-15.8%</td>
<td>2,926</td>
<td>3,531</td>
<td>3,570</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/050302d.jpg" width="353">
Eurostat today reported Euro-Zone GDP for Q4 2004. It grew 0.2% (1.0% annualized) in that quarter; this was marginally stronger than in Q3, which is also shown as 0.2%, but annualizes to 0.6%. Q4 was 1.6% ahead of the year-earlier period and the year as a whole saw growth in the 12 countries of 1.8%. Both yearly growth rates were much improved over 2003, when Q4/Q4 was 0.8% and the overall year relative to 2002 was just 0.5%.
The growth improvement was spread across most expenditure segments. European consumers expanded their spending somewhat in Q4, relative to the performance in both Q3 and the year-ago quarter. Exports in the region picked-up considerably; so did imports, but on net, trade assisted growth in being a significantly smaller drag than it had been the year before. Investment firmed considerably. Among major components, only government consumption failed to accelerate, although it did continue to expand.
Several sectors contributed to Europe&#39;s growth. Value added in trade and transportation gained 2.6%, Q4/Q4, versus 0.4% in 2003. Construction activity expanded 0.8%, but it had contracted by 1% in 2003, again on a Q4/Q4 trend basis. Agriculture and related sectors surged 5.9%, a turnaround from a 2.0% contraction the prior year. Industry grew 1.2%, slightly ahead of 2003&#39;s 0.9%. However, industrial activity declined on a quarterly basis in both Q3 and Q4, leaving it on a weakening path as the year ended.

<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/G10/@G7/@G72/@G7204/@G7204.HTM">Euro-Zone: GDP by Industry</a> % Changes, SA data</th>
<th scope="col">Q4 2004</th>
<th scope="col">Q3 2004</th>
<th scope="col">Q4/Q4</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">GDP</td>
<td>0.2</td>
<td>0.2</td>
<td>1.6</td>
<td>1.8</td>
<td>0.5</td>
<td>0.9</td>
</tr>
<tr>
<td class="firstcol">Agriculture &amp; Related</td>
<td>0.5</td>
<td>0.9</td>
<td>5.9</td>
<td>5.0</td>
<td>-3.5</td>
<td>0.5</td>
</tr>
<tr class="odd">
<td class="firstcol">Industry</td>
<td>-0.6</td>
<td>-0.1</td>
<td>1.2</td>
<td>2.2</td>
<td>0.2</td>
<td>0.4</td>
</tr>
<tr>
<td class="firstcol">Construction</td>
<td>0.3</td>
<td>-0.7</td>
<td>0.8</td>
<td>0.8</td>
<td>-1.5</td>
<td>-1.2</td>
</tr>
<tr class="odd">
<td class="firstcol">Trade, Transport, Communication</td>
<td>0.2</td>
<td>0.5</td>
<td>2.6</td>
<td>2.4</td>
<td>0.4</td>
<td>1.2</td>
</tr>
<tr>
<td class="firstcol">Finance &amp; Real Estate</td>
<td>0.4</td>
<td>-0.1</td>
<td>1.5</td>
<td>1.5</td>
<td>1.3</td>
<td>0.8</td>
</tr>
<tr class="odd">
<td class="firstcol">Other Services</td>
<td>0.6</td>
<td>0.2</td>
<td>1.2</td>
<td>1.1</td>
<td>0.7</td>
<td>2.2</td>
</tr>
</tbody>
</table>
</body>
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Eurostat today reported Euro-Zone GDP for Q4 2004. It grew 0.2% (1.0% annualized) in that quarter; this was marginally stronger than in Q3, which is also shown as 0.2%, but annualizes to 0.6%. Q4 was 1.6% ahead of the year-earlier [...]

Euro-Zone GDP Grows 0.2% in Q4; Services, Construction, Agriculture Lead 2004 Gains

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050302c.jpg" width="353">
Challenger, Gray &amp; Christmas reported that job cut announcements rose 17.4% last month and reversed most of the decline in January.
Challenger also reported that announced hiring rose to 41,984 jobs, up sharply from 4Q.
During the last ten years there has been an 85% (inverse) correlation between the three month moving average of announced job cuts and the three month change payroll employment.
Increases in job cut announcements were notable last month in the telecommunications, transportation, insurance, energy and consumer goods industries.
Job cut announcements differ from layoffs. Many are achieved through attrition, early retirement or just never occur.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S3/@S301/@S301.HTM">Challenger, Gray &amp; Christmas</a></th>
<th scope="col">Feb</th>
<th scope="col">Jan</th>
<th scope="col">Y/Y</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Announced Job Cuts</td>
<td>108,387</td>
<td>92,351</td>
<td>40.3%</td>
<td>1,039,175</td>
<td>1,236,426</td>
<td>1,431,052</td>
</tr>
</tbody>
</table>
</body>
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Challenger, Gray & Christmas reported that job cut announcements rose 17.4% last month and reversed most of the decline in January. Challenger also reported that announced hiring rose to 41,984 jobs, up sharply from 4Q. During the [...]

Challenger Layoff Count Back Up

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050302b.jpg" width="353">
The Mortgage Bankers Association reported that mortgage applications fell 2.4% last week following two weeks of slight decline.
Applications to refinance plunged 9.9% w/w and reversed most of the gains of the prior three weeks.
Purchase applications did rise 5.3% but the average in February is up just slightly from January. During the last ten years there has been a 59% correlation between the y/y change in purchase applications and the change in new plus existing home sales.
The effective interest rate on a conventional 30-year mortgage rose to 5.98% versus 5.92% the prior week. The effective rate on a 15-year mortgage also rose to 5.59% last week.
The Mortgage Bankers Association surveys between 20 to 35 of the top lenders in the U.S. housing industry to derive its refinance, purchase and market indexes. The weekly survey accounts for more than 40% of all applications processed each week by mortgage lenders. Visit the Mortgage Bankers Association site <a href="http://www.mbaa.org">here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYW/@S5/@S5.HTM">MBA Mortgage Applications (3/16/90=100)</a></th>
<th scope="col">02/25/05</th>
<th scope="col">02/18/05</th>
<th scope="col">Y/Y</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total Market Index</td>
<td>710.1</td>
<td>727.9</td>
<td>-19.2%</td>
<td>735.1</td>
<td>1,067.9</td>
<td>799.7</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Purchase</td>
<td>440.0</td>
<td>417.8</td>
<td>4.1%</td>
<td>454.5</td>
<td>395.1</td>
<td>354.7</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Refinancing</td>
<td>2,281.1</td>
<td>2,532.0</td>
<td>-35.4%</td>
<td>2,366.8</td>
<td>4,981.8</td>
<td>3,388.0</td>
</tr>
</tbody>
</table>
</body>
</html>

The Mortgage Bankers Association reported that mortgage applications fell 2.4% last week following two weeks of slight decline. Applications to refinance plunged 9.9% w/w and reversed most of the gains of the prior three weeks. [...]

Mortgage Applications Lower With Fewer Refi's

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050302a.jpg" width="353">
Unit sales of light vehicles in February edged up 0.5% versus January to 16.30M according to Autodata Corporation. Versus last year sales fell 1.3% and so far in 1Q sales have averaged 16.26M, down from 17.25M in 4Q04.
Sales of light trucks rose a moderate 1.4% m/m but sales of imports posted a 5.3% (+2.0%) gain. Sales of domestic light trucks rose 0.8% (-1.7% y/y).
Total auto sales fell 0.6% following a 10.8% slide in January. Sales of domestic autos fell 2.6% (-3.2% y/y) while imported car sales rose 4.7% (3.5 y/y).
Imports&#39; share of the US market for new vehicles rose to 20.6% in February.
Fed Chairman Alan Greenspan&#39;s testimony titled Economic outlook and current fiscal issues can be found <a href="http://www.federalreserve.gov/boarddocs/testimony/2005/20050302/default.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/@ED/@ED09/@ED0901/@ED0901.HTM">Light Vehicle Sales (SAAR, Mil. Units)</a></th>
<th scope="col">Feb</th>
<th scope="col">Jan</th>
<th scope="col">Y/Y</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>16.30</td>
<td>16.22</td>
<td>-1.3%</td>
<td>16.88</td>
<td>16.63</td>
<td>16.81</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Autos</td>
<td>7.36</td>
<td>7.41</td>
<td>-1.4%</td>
<td>7.49</td>
<td>7.62</td>
<td>8.07</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Trucks</td>
<td>8.94</td>
<td>8.81</td>
<td>-1.2%</td>
<td>9.39</td>
<td>9.01</td>
<td>8.74</td>
</tr>
</tbody>
</table>
</body>
</html>

Unit sales of light vehicles in February edged up 0.5% versus January to 16.30M according to Autodata Corporation. Versus last year sales fell 1.3% and so far in 1Q sales have averaged 16.26M, down from 17.25M in 4Q04. Sales of light [...]

U.S. Light Vehicle Sales Lackluster

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050302a.jpg" width="353">
Unit sales of light vehicles in February edged up 0.5% versus January to 16.30M according to Autodata Corporation. Versus last year sales fell 1.3% and so far in 1Q sales have averaged 16.26M, down from 17.25M in 4Q04.
Sales of light trucks rose a moderate 1.4% m/m but sales of imports posted a 5.3% (+2.0%) gain. Sales of domestic light trucks rose 0.8% (-1.7% y/y).
Total auto sales fell 0.6% following a 10.8% slide in January. Sales of domestic autos fell 2.6% (-3.2% y/y) while imported car sales rose 4.7% (3.5 y/y).
Imports&#39; share of the US market for new vehicles rose to 20.6% in February.
Fed Chairman Alan Greenspan&#39;s testimony titled Economic outlook and current fiscal issues can be found <a href="http://www.federalreserve.gov/boarddocs/testimony/2005/20050302/default.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/@ED/@ED09/@ED0901/@ED0901.HTM">Light Vehicle Sales (SAAR, Mil. Units)</a></th>
<th scope="col">Feb</th>
<th scope="col">Jan</th>
<th scope="col">Y/Y</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>16.30</td>
<td>16.22</td>
<td>-1.3%</td>
<td>16.88</td>
<td>16.63</td>
<td>16.81</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Autos</td>
<td>7.36</td>
<td>7.41</td>
<td>-1.4%</td>
<td>7.49</td>
<td>7.62</td>
<td>8.07</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Trucks</td>
<td>8.94</td>
<td>8.81</td>
<td>-1.2%</td>
<td>9.39</td>
<td>9.01</td>
<td>8.74</td>
</tr>
</tbody>
</table>
Mortgage Applications Lower With Fewer Refi's 
by <a href="/comment/Moeller.html">Tom Moeller</a> March 2, 2005


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050302b.jpg" width="353">
The Mortgage Bankers Association reported that mortgage applications fell 2.4% last week following two weeks of slight decline.
Applications to refinance plunged 9.9% w/w and reversed most of the gains of the prior three weeks.
Purchase applications did rise 5.3% but the average in February is up just slightly from January. During the last ten years there has been a 59% correlation between the y/y change in purchase applications and the change in new plus existing home sales.
The effective interest rate on a conventional 30-year mortgage rose to 5.98% versus 5.92% the prior week. The effective rate on a 15-year mortgage also rose to 5.59% last week.
The Mortgage Bankers Association surveys between 20 to 35 of the top lenders in the U.S. housing industry to derive its refinance, purchase and market indexes. The weekly survey accounts for more than 40% of all applications processed each week by mortgage lenders. Visit the Mortgage Bankers Association site <a href="http://www.mbaa.org">here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYW/@S5/@S5.HTM">MBA Mortgage Applications (3/16/90=100)</a></th>
<th scope="col">02/25/05</th>
<th scope="col">02/18/05</th>
<th scope="col">Y/Y</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total Market Index</td>
<td>710.1</td>
<td>727.9</td>
<td>-19.2%</td>
<td>735.1</td>
<td>1,067.9</td>
<td>799.7</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Purchase</td>
<td>440.0</td>
<td>417.8</td>
<td>4.1%</td>
<td>454.5</td>
<td>395.1</td>
<td>354.7</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Refinancing</td>
<td>2,281.1</td>
<td>2,532.0</td>
<td>-35.4%</td>
<td>2,366.8</td>
<td>4,981.8</td>
<td>3,388.0</td>
</tr>
</tbody>
</table>
Challenger Layoff Count Back Up 
by <a href="/comment/Moeller.html">Tom Moeller</a> March 2, 2005


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050302c.jpg" width="353">
Challenger, Gray &amp; Christmas reported that job cut announcements rose 17.4% last month and reversed most of the decline in January.
Challenger also reported that announced hiring rose to 41,984 jobs, up sharply from 4Q.
During the last ten years there has been an 85% (inverse) correlation between the three month moving average of announced job cuts and the three month change payroll employment.
Increases in job cut announcements were notable last month in the telecommunications, transportation, insurance, energy and consumer goods industries.
Job cut announcements differ from layoffs. Many are achieved through attrition, early retirement or just never occur.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S3/@S301/@S301.HTM">Challenger, Gray &amp; Christmas</a></th>
<th scope="col">Feb</th>
<th scope="col">Jan</th>
<th scope="col">Y/Y</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Announced Job Cuts</td>
<td>108,387</td>
<td>92,351</td>
<td>40.3%</td>
<td>1,039,175</td>
<td>1,236,426</td>
<td>1,431,052</td>
</tr>
</tbody>
</table>
</body>
</html>

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

USD/EUR exchange rate uncoupling from interest rate differential

Widespread downgrading of 2025 GDP outlook

Trade and fiscal policy uncertainty has exploded with the new administration

Much lower US electricity costs gives it a competitive advantage

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

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

US policy gyrations boosting policy uncertainty worldwide

Expected tariff hikes have boosted inflation expectations

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

US economy expected to outperform other major economies in 2025

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

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

Heavy US manufacturing states underperforming while Sun Belt states outperforming

Rising long-term yields a global phenomenon

US financial market concerns shifting from growth to inflation

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

Policy uncertainty has surged since the US national elections.

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

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

Headline US PCE inflation elevated by sticky services prices

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

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The Industrial Materials Price Index from the Foundation for International Business and Economic Research (FIBER) rose 0.6% (-3.6% y/y) during the four weeks ended May 9, 2025. The improvement followed sharp declines in April.

Miscellaneous group prices increased 2.4% (5.9% y/y) over the last four weeks. Natural rubber price soared 13.9% (11.7% y/y). The price of tallow (used in the soap industry) rose 10.6% (41.3% y/y) in four weeks but the cost of framing lumber declined 5.6%, but rose 7.3% y/y.

Prices in the Metals group edged 0.2% higher (-7.3% y/y) over the most recent four weeks. Variation in pricing was wide. Copper scrap prices rose 7.4% (-3.3% y/y) while lead costs rose 4.0% in four weeks (-11.1% y/y). The cost of aluminum increased 2.3% in four weeks, off 4.4% y/y. Working lower, the cost of steel scrap declined 8.1% (-11.6% y/) in four weeks while tin prices followed with a 4.9% decline (-2.9% y/y). Zinc prices eased 0.7% in four weeks and declined 10.3% y/y.

Crude Oil & Benzene group prices edged 0.1% higher (-19.4% y/y) in four weeks. The cost of West Texas Intermediate crude oil weakened 4.0% to $58.50 per barrel and was 25.6% lower y/y. The cost of the petrol-chemical benzene, used for making plastics & synthetic fibers, strengthened 8.5% (-41.8% y/y) in the last four weeks. Excluding crude oil, the industrial commodity price index rose 0.9% (-2.1% y/y) during the last four weeks.

Textile group prices edged 0.9% lower (-0.5% y/y) during the last four weeks. Burlap costs declined 14.3% (+7.4% y/y) but the cost of cotton rose 4.5% (-7.7% y/y) over four weeks.

The Foundation for International Business and Economic Research (FIBER) develops economic measurement techniques as applied to business cycles and inflation in the U.S. and other market economies. The commodity price data can be found in Haver's **DAILY**, **WEEKLY**, **USECON** and **CMDTY** databases.

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- Metals prices are mixed.
- Crude oil prices fall sharply.
- Textile prices ease.

FIBER: Industrial Commodity Price Movement Diverges in Latest Four Weeks

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Wholesale trade inventories increased 0.4% (2.2% y/y) during March after rising 0.5% in February, revised from 0.3% after a 0.8% January rise. The increase compared to expectations for a 0.5% rise in the Informa Global Markets Survey and compared to a 0.6% gain in the advance report issued two weeks ago.

Durable goods inventories rose 0.6% in March (1.5% y/y) after rising 0.5% in February. Machinery inventories, the largest sector, increased 0.6% (1.7% y/y) while inventories of motor vehicles & parts, the second largest grouping, rose 1.2% (0.8% y/y). Furniture inventories strengthened 2.7% (6.8% y/y) while electrical equipment inventories declined 1.0% (-3.1% y/y). Inventories of nondurable goods edged 0.1% higher (3.4% y/y). Drug inventories, which make up one-quarter of nondurable inventories, advanced 1.0% (4.6% y/y). Grocery inventories, the second largest category, rose 0.4% (8.3% y/y). Apparel inventories fell 0.8% (-6.5% y/y) and chemical inventories rose 2.1% both m/m and y/y. Petroleum inventories increased 0.7% (0.3% y/y).

Sales at the wholesale level rose 0.6% (6.1% y/y) in March after rising 2.0% in February and falling 0.9% in January. A 0.9% March rise had been expected in the Action Economics Forecast Survey.

Durable goods sales rose 1.0% (8.5% y/y) in March after strengthening 3.2% in February. Sales of electrical equipment & electronic goods, the largest sector, rose 2.5% (20.9% y/y), after a 2.3% rise. Professional and commercial equipment sales, which includes computers, rose 1.2% (11.9% y/y), while vehicle sales declined 1.0% (1.1% y/y). Sales of machinery improved 0.7% (4.2% y/y). Nondurable product sales rose 0.3% (3.9% y/y) in March after gaining 0.9% in February. Drug store sales, the largest category, increased 2.8% (13.4% y/y), while grocery store sales eased 0.2% (+4.3% y/y). Sales of apparel weakened 0.8% (+3.5% y/y) while paper sales declined 1.7% (0.5% y/y). Petroleum product sales fell 4.6% both m/m and y/y.

The inventory-to-sales (I/S) ratio at the wholesale level remained at 1.30 in March and has been moving lower for the last two years.

The wholesale I/S ratio for durable goods eased to 1.69 in March and also has been trending lower. The machinery ratio fell to 2.92 while motor vehicles rose to 1.78. The I/S ratio for nondurable goods slipped to 0.93 and remained down from 1.02 early in 2023. The drug industry ratio eased to 0.94. Apparel's I/S ratio held at 2.06, but remained below its 2.28 level one year earlier, and has been declining since early 2023. The petroleum industry I/S ratio rose to 0.33.

The wholesale trade figures are available in Haver's **USECON** database. The expectations figure for inventories is contained in the **MMSAMER** database. Expectations for sales are from the **AS1REPNA** database.

**Assessing Maximum Employment** from Federal Reserve Governor Adriana D. Kugler is available [here](https://www.federalreserve.gov/newsevents/speech/kugler20250509a.htm).

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- Inventories trend higher y/y.
- Sales increase broadly.
- Inventory-to-sales ratio steadies.

U.S. Wholesale Inventories & Sales Increase in March

250508N2.jpg

250508O2.jpg

Nonfarm labor productivity fell 0.8% (SAAR) during Q1’25 after increasing 1.7% in Q4’24, revised from 1.5%. A 0.6% decline had been expected in the Action Economics Forecast Survey. It was the first productivity decline since Q2’22. The y/y increase during Q1 fell to 1.4% from 2.1% in Q4. It was below a 3.3% high in the first quarter of last year. Productivity fell as real value-added output dropped 0.3% last quarter (+2.2% y/y) after increasing 2.5% in Q4, and hours worked lengthened 0.6% (0.8% y/y) following a 0.8% gain.

Compensation per hour increased 4.8% last quarter following a 3.7% Q4 rise. Despite the strength of these last two increases, y/y growth decelerated to 2.7% from a 6.8% high one year earlier. Nevertheless, the productivity decline raised unit labor costs by 5.7% (1.3% y/y) in Q1 versus expectations for a 5.2% increase. It followed a 2.0% gain during Q4 and was the strongest quarterly increase in a year.

Factory sector productivity surged 4.5% (1.5% y/y) during Q1’25 following three consecutive increases of roughly 0.5%. This strength was accompanied by a 6.2% rise (2.2% y/y) in hourly compensation which came after two consecutive increases of approximately 4.1%. The strength in productivity lowered the rise in unit labor costs to 1.6% from 3.8% in Q4. The y/y gain fell to 0.7% from 2.0% in Q4 and stood below the 6.2% y/y increase in Q1’24.

The productivity and labor cost data are available in Haver’s **USECON** database. The Action Economics expectations figures are in the **AS1REPNA** database.

250508P2.jpg

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- Productivity declines with lower output.
- Compensation surge exacerbates labor market stress.
- Factory sector productivity surge lessens cost pressure.

U.S. Productivity Declines in Q1’25; Unit Labor Costs Surge

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The National Association of Realtors' Fixed Rate Mortgage Housing Affordability Index (HAI) rose 0.6% (3.2% y/y) in March to 103.2 after rising 0.9% to 102.6 in February and rising 0.8% in January to 101.7. The level of home affordability has risen 14.8% from its low of 89.9 in October 2023. It remains 42.4% below the high of 179.2 in April 2020.

The rise in affordability in March occurred as the median price of an existing single-family home rose 1.8% (2.9% y/y) to $408,000 which was offset by a decline in mortgage rates to 6.73% from 6.92% in February. The price compared to the record $432,900 in June 2024. The decline in mortgage rates compared to a recent low of 6.26% in September of last year and a 7.70% high during October of 2023. It remained well above a December 2020 low of 2.73%. These changes lowered the principal & interest payment by 0.2% (+1.1% y/y) to $2,113 per month. That was well above the most recent low of $984 in February 2020. Monthly mortgage payments averaged a lessened 24.2% of income during March. They remained up from a low of 14.0% of income in April 2020.

The rise in housing costs in March was accompanied by improvement in median family income. It increased 0.4% (4.4% y/y) to a record $104,705 after rising 0.4% in February and 0.7% in January.

Housing affordability improved m/m across the country in March. The index edged 0.1% higher (2.8% y/y) to 134.5 in the Midwest. It remains the most affordable region of the country. In the South, the index 0.9% (5.4% y/y) to 106.6 and the affordability index in the Northeast increased 2.1% (-2.6% y/y) to 95.7. In the West, where homes are the least affordable, the index rose 0.8% (3.3% y/y) to 71.8 in March.

The Housing Affordability Index (HAI) equals 100 when a median-income borrower qualifies for an 80% mortgage on a median-priced existing single-family home. The HAI had exceeded 100 in each month since July 1990 and reached its all-time high of 213.3 in January 2013; since then, it fell below 100 for the first time in June 2022.

Data on Housing Affordability can be found in Haver’s **REALTOR** database. Median home sales prices are also available in **USECON**. Higher frequency interest rate data are found in **SURVEYS**, **WEEKLY**, and **DAILY**.

250508H0.jpg

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- Home prices rise but mortgage rates decline.
- Median income improves.
- Affordability increases across the country.

U.S. Housing Affordability Improves Slightly in March

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Initial claims for unemployment insurance were 228,000 seasonally adjusted in the week ended May 3, down from 241,000 in the previous week, which was unrevised. For the latest week, the Action Economics Forecast Survey had expected a smaller decline to 233,000.

In the week ended April 26, the total number of unemployment insurance beneficiaries – also known as “continuing claims” – was 1.879 million, down from 1.908 million in the April 19 week.

The insured unemployment rate, that is, the number of beneficiaries as a percentage of covered employment, returned to its longstanding rate of 1.2% in the April 26 week; this rate has held that amount since continuously since the week of January 6, 2024, except for the prior week’s 1.3%.

As we do highlight in every week’s discussion, economic conditions vary widely across individual states and territories. In the week ended April 19, the highest unemployment rates were in New Jersey and Rhode Island (both at 2.48%), California (2.26%), Washington (2.14%) and New York (1.85%). The lowest were in Florida (0.36%), South Dakota (0.37%), Alabama (0.41%), Virginia (0.45%) and Nebraska (0.47%). Rates in other notable states include Illinois (1.78%), Pennsylvania (1.53%) and Texas (1.14%). These state data are not seasonally adjusted.

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. The expectations figure is from the Action Economics Forecast Survey in the **AS1REPNA** database.

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- Continued claims for unemployment insurance decreased 29, 000 in the week ended April 26.
- Insured unemployment rate returns to longstanding 1.2%.
- Across the states, the insured unemployment rate ranges from 0.36% to 2.48%.

Economy in Brief: March 2005

Jump to:

U.S. Productivity Growth Revised Up

ISM Non-Manufacturing Index Higher

ISM Non-Manufacturing Index Higher

Euro-Zone GDP Grows 0.2% in Q4; Services, Construction, Agriculture Lead 2004 Gains

Challenger Layoff Count Back Up

Mortgage Applications Lower With Fewer Refi's

U.S. Light Vehicle Sales Lackluster

U.S. Light Vehicle Sales Lackluster