Carol Stone, CBE

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<p></p>
<p>
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100114j.jpg" style="width: 353px; height: 265px;" align="right">
Business
inventories grew again in November, expanding for a second month by
0.4%.&nbsp;These two gains followed 13 consecutive monthly
declines.&nbsp; As in October, the November increase occurred at
wholesalers and manufacturers; retailers apart from motor vehicle
dealers continued to reduce their stocks of merchandise.&nbsp;
Business sales also grew in November and the resulting inventory/sales
ratio fell to 1.28 from 1.30 in October.</p><p> The manufacturing and
wholesale inventories gains were, as in October, largest for petroleum
and also food and farm products.&nbsp; We presume these are mostly
price-driven.&nbsp; In both sectors, there were also some buildup
in stocks of computer equipment and scattered increases in various
metals industries.</p><p>Total retail inventories resumed
downward movement in November after being flat in October.&nbsp;
Cuts were widespread in the nonautomotive segments, especially
including furniture, building materials, clothing and general
merchandise.&nbsp; Auto dealer inventories edged up, but just 0.1%,
after a 0.6% rise in October, and food stores saw marginal increases
both months.</p><p>Retailers' inventory/sales ratio fell to 1.37 from 1.40
in October and 1.60 a year earlier.&nbsp; Wholesalers' sales surged
3.3% in November, pushing their I/S ratio down to 1.14 from 1.17 the
month before.&nbsp; And manufacturers' shipments were up 1.0% in
November, so that their I/S ratio decreased to 1.32 from 1.34 in
October.&nbsp; As indicated in the graph, these stock adjustments
bring the relationship of stocks to sales back to the general range
that was prevailing in the months before the economy's mid-2008
collapse.&nbsp; With such tight inventory control techniques now in
wide use, it's hard to know whether the low inventory positions are so
undesirably "low" compared to sales by now that stronger production
schedules are guaranteed, but at least the necessary corrections do
seem to have been accomplished.</p><p> The business sales and inventory data
are available in Haver's <b>USECON</b> database.</p>
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100114k.jpg" style="width: 312px; height: 265px;">
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100114l.jpg" style="width: 312px; height: 265px;">
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><b>Business
Inventories (%)</b></th>
<th scope="col"><b>November</b></th>
<th scope="col"><b>October</b></th>
<th scope="col"><b>September</b></th>
<th scope="col"><b>Y/Y</b></th>
<th scope="col"><b>2008</b></th>
<th scope="col"><b>2007</b></th>
<th scope="col"><b>2006</b></th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>0.4</td>
<td>0.4</td>
<td>-0.5</td>
<td>-11.1</td>
<td>0.6</td>
<td>4.0</td>
<td>6.4</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Retail</td>
<td>-0.2</td>
<td>0.0</td>
<td>0.5</td>
<td>-12.0</td>
<td>-3.1</td>
<td>2.5</td>
<td>3.3</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Retail excl. Auto</td>
<td>-0.4</td>
<td>-0.2</td>
<td>-0.7</td>
<td>-6.6</td>
<td>-1.8</td>
<td>2.7</td>
<td>4.7</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Wholesale</td>
<td>1.5</td>
<td>0.6</td>
<td>-0.8</td>
<td>-11.0</td>
<td>3.1</td>
<td>6.2</td>
<td>8.2</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Manufacturing</td>
<td>0.2</td>
<td>0.6</td>
<td>-1.3</td>
<td>-10.3</td>
<td>2.1</td>
<td>3.7</td>
<td>8.2</td>
</tr>
</tbody>
</table>
</span></body></html>

Business inventories grew again in November, expanding for a second month by 0.4%. These two gains followed 13 consecutive monthly declines. As in October, the November increase occurred at wholesalers and manufacturers; retailers [...]

U.S. Business Inventories Show a Second Monthly Gain

Tom Moeller

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<p></p>
<p>
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100114g.jpg" style="width: 353px; height: 265px;" align="right">The
job
market again deteriorated just slightly last week. The Labor Department
reported that initial claims for jobless insurance rose 11,000 to
444,000 following a 1,000 increase during the prior week. Nevertheless,
claims remained near the lowest level since late in August, 2008 and
were down from the recession peak of 674,000 hit last March. Consensus
expectations has been for an unchanged 433,000. Despite the weekly
gains, the four-week moving average of initial claims also fell to a
new cycle-low of 440,750.</p>
<p>Continuing claims for unemployment insurance
during the latest week again fell sharply. The 211,000 drop was the
largest since late-November and part of a one-third decline since
late-June. Continuing claims were at the lowest level since mid-January
of last year. The overall decline is a function of the improved job
market but also reflects the exhaustion of 26 weeks of unemployment
benefits. Continuing claims provide an indication of workers' ability
to find employment. The four-week average of continuing claims fell to
4,855,00. This series dates back to 1966.&nbsp;·&nbsp;Extended
benefits for unemployment insurance ticked up slightly to 302,272
during the fourth week of December but remained down by one-half from
the peak reached during November of 597,688.</p>
<p> The insured rate of
unemployment also fell to a new low of 3.5%. The rate reached a high of
5.2% during late-June. During the last ten years, there has been a 93%
correlation between the level of the insured unemployment rate and the
overall rate of unemployment published by the Bureau of Labor
Statistics.</p>
<p>The highest insured unemployment rates in the
week ending December 26 were in Alaska (7.4 percent), Oregon (6.6),
Idaho (6.2), Wisconsin (6.2), Michigan (5.9), Montana (5.7), Nevada
(5.7), North Carolina (5.6), Pennsylvania (5.5), and Washington (5.4).
The lowest insured unemployment rates were in Virginia (2.1%), North
Dakota (2.5), Texas (2.6), Maryland (3.0), Florida (3.4), Wyoming
(3.4),&nbsp; Ohio (3.7), Maine (3.7), New York (4.0) and
Mississippi (4.2). These data are not seasonally adjusted but the
overall insured unemployment rate is.</p>
<p>The unemployment insurance
claims data is available in Haver's <b>WEEKLY</b> database
and the state data is in the <b>REGIONW</b> database.</p><p> <strong>Labor
Market Globalization in the Recession and Beyond </strong>from
the Federal Reserve Bank of Dallas is available <a href="http://dallasfed.org/research/eclett/2009/el0910.pdf">here</a>.<span>&nbsp;&nbsp;</span></p>
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100114h.jpg" style="width: 312px; height: 265px;">
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100114i.jpg" style="width: 312px; height: 265px;">
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><b><a ;="" href="http://www.haverselect.com/dlx/WEEKLY/@W5/@W507/@W507.HTM" style="color: black;">Unemployment Insurance (000s)</a></b></th>
<th scope="col"><b>1/8/10</b></th>
<th scope="col"><b>1/1/10</b></th>
<th scope="col"><b>12/25/09</b></th>
<th scope="col"><b>Y/Y</b></th>
<th scope="col"><b>2009</b></th>
<th scope="col"><b>2008</b></th>
<th scope="col"><b>2007</b></th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Initial Claims</td>
<td>444</td>
<td>433</td>
<td>432</td>
<td>-17.0%</td>
<td>573</td>
<td>419</td>
<td>321</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>--</td>
<td>4,596</td>
<td>4,807</td>
<td>2.4%</td>
<td>5,835</td>
<td>3,345</td>
<td>2,552</td>
</tr>
<tr class="odd">
<td class="firstcol">Insured Unemployment Rate (%)</td>
<td>--</td>
<td>3.5</td>
<td>3.6</td>
<td>3.5 (1/2009)</td>
<td>4.4</td>
<td>2.5</td>
<td>1.9</td>
</tr>
</tbody>
</table>
</span>
</body></html>

The job market again deteriorated just slightly last week. The Labor Department reported that initial claims for jobless insurance rose 11,000 to 444,000 following a 1,000 increase during the prior week. Nevertheless, claims remained [...]

U.S. Initial Jobless Insurance Claims Higher Again

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<p></p>
<p>
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100114e.jpg" style="width: 353px; height: 265px;" align="right">
The yearend
weakness in oil prices was modest but enough to hold overall monthly
import prices stable. The zero change in December import prices matched
Consensus expectations. For the year as whole, however, the picture was
more dramatic. Import prices fell 11.5% in 2009 and that reversed the
2008 increase. Excluding petroleum, import prices fell 4.1% last year
and reversed most of the 2008 increase.</p><p> Petroleum prices slipped 2.0%
last month following their 6.3% November increase. For the year
overall, the decline in prices reversed the climb in 2008. That pattern
masks, however, extreme volatility during the year. By yearend,
petroleum prices had nearly doubled the January trough. <b> </b>This
month, Brent crude oil prices have strengthened further to nearly $80
per barrel from a low just above $71 last month. </p><p>In addition, the
latest report from the U.S. Bureau of Labor Statistics indicated that
non-oil import prices rose 0.5% after a similar gain during November.
The lower value of the dollar has now helped lift these prices at a
6.8% annual rate during the last three months, reversing a 7.3% y/y
decline as of July. <img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100114f.jpg" style="width: 353px; height: 265px;" align="right">
(During the last ten years, there has been a
negative 81% correlation between the nominal trade-weighted exchange
value of the US dollar vs. major currencies and the y/y change in
non-oil import prices.)</p><p> Excluding petroleum, last year
prices reversed most of the 2008 increase and the decline breaks down
as follows: Prices for iron &amp; steel mill products fell 28.5%
and reversed all the 2008 increase. Chemical prices fell 12.4% after a
24.0% 2008 increase. Food &amp; beverage prices slipped 2.8% after
a double-digit 2008 gain. Prices for nonauto consumer goods were weak
and slipped 0.3% after a 2.8% increase. That decline reflected a 0.6%
decline in durable consumer goods prices which reversed strong gains in
the prior two years. Home entertainment equipment prices fell 4.1% last
year and extended a decline dating back to 1996. Furniture prices
nudged up 0.6% after a 7.1% 2008 increase. Finally, apparel prices
slipped 0.1% after strong gains in 2007 and 2008.&nbsp;</p><p> Total
export prices fell 4.6% last year following strong gains dating back to
2003. The decline reflected a 12.8% drop in agricultural export prices
and a 3.7% drop in "non-ag" prices. These declines reversed just some
of the strength through 2008.</p><p>The import and export price
series can be found in Haver's <b>USECON </b>database.
Detailed figures are available in the <b>USINT</b>
database.</p><p><b><span class="heading1">Risks
to Sustained Economic Recovery (With Lessons Learned from Winston
Churchill and Teddy Roosevelt)</span> </b>from the Federal
Reserve Bank of Dallas can be found <a href="http://dallasfed.org/news/speeches/fisher/2010/fs100112.cfm">here</a>.&nbsp;</p>



<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><b><a href="http://www.haverselect.com/dlx/USECON/@E8/@E807/@E807.HTM" style="color: white;">Import/Export Prices (NSA, %)</a></b></th>
<th scope="col"><b>December</b></th>
<th scope="col"><b>November</b></th>
<th scope="col"><b>October</b></th>
<th scope="col"><b>Y/Y</b></th>
<th scope="col"><b>2009</b></th>
<th scope="col"><b>2008</b></th>
<th scope="col"><b>2007</b></th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Import - All Commodities</td>
<td>0.0</td>
<td>1.6</td>
<td>0.9</td>
<td>8.6</td>
<td>-11.5</td>
<td>11.5</td>
<td>4.2</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Petroleum</td>
<td>-2.0</td>
<td>6.3</td>
<td>2.4</td>
<td>78.4</td>
<td>-35.9</td>
<td>37.7</td>
<td>11.6</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Nonpetroleum</td>
<td>0.5</td>
<td>0.6</td>
<td>0.5</td>
<td>-0.2</td>
<td>-4.1</td>
<td>5.3</td>
<td>2.7</td>
</tr>
<tr class="odd">
<td class="firstcol">Export - All Commodities</td>
<td>0.6</td>
<td>0.9</td>
<td>0.0</td>
<td>3.4</td>
<td>-4.6</td>
<td>6.0</td>
<td>4.9</td>
</tr>
</tbody>
</table>
</span></body></html>

The yearend weakness in oil prices was modest but enough to hold overall monthly import prices stable. The zero change in December import prices matched Consensus expectations. For the year as whole, however, the picture was more [...]

U.S. Import Prices Are Stable As Oil Costs Slip

Robert Brusca

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<p></p>
<p><img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100114d.jpg" align="left" border="0" height="265" width="353"></p>
<p>German inflation, while beginning to edge up at year-end in
its HICP and CPI formats has registered the lowest annual pace in
20-years. The small two-line panel at the table top shows overall
statistics for the German CPI (as opposed to the harmonized HICP
treatment) where the core measure is available for December (the core
reading is not yet available for the HICP format). In terms of the
Germany&#8217;s CPI while the headline rate rose at year end, the core rate&#8217;s
3-month pace was still declining.</p>
<p>Diffusion measures the breadth of inflation&#8217;s acceleration
regardless of the pace across categories. Calculated on the various
3-mo 6-mo and 12-mo periods, inflation rates of the HICP across
categories reveal that inflation is not accelerating. The diffusion
reading of 45.5% over three months is below the neutral mark of 50%..
That statistic means, roughly, that inflation is only accelerating in
45.5% of the categories over three months (compared to six months) and
that it is decelerating in 54.5% of the categories. Thus even with the
bump up in overall inflation, diffusion tells us that inflation forces
are not widespread. And, of course, inflation is low to boot.</p>
<p>While the Bundesbank and the ECB are headline
inflation-watchers it must be some solace to them that the Core rate
remains so subdued and so steady. In the last cycle the core rate
proved to be a very good signal about inflation and how entrenched it
had become. Headline inflation failed as an inflation siren as it
howled too shrilly in the recession as oil and other commodity prices
soared. But the core rate remained pretty low and stable even as the
headline soared. The Fed, which takes its cue more from the core rate
(it does not target inflation however) had the flexibility to cut rates
when it chose. The ECB, in contrast, needed to cut rates as part of
international deal on the &#8216;expectation&#8217; that inflation would recede. Of
course, it did recede, but central banks do not like to be cutting
rates with inflation over their stated targets.</p>
<p>Nonetheless it is a good end to 2009 on the inflation side.
The bump up in headline inflation at year- end is oil- related and it
appears to have exerted no pull on core prices. These developments
leave us in good stead to take a fresh a look at 2010. So far 2010 is
looking like a year in which growth will be a hotter topic than
inflation.</p>
</span>
<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="8" scope="col">German HICP </th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td colspan="3">Mo/Mo %</td>
<td colspan="3">Saar %</td>
<td>Yr/Yr</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>Dec-09</td>
<td>Nov-09</td>
<td>Oct-09</td>
<td>3-Mo</td>
<td>6-Mo</td>
<td>12-Mo</td>
<td>Yr Ago</td>
</tr>
<tr>
<td class="firstcol">HICP Total</td>
<td>0.3%</td>
<td>0.1%</td>
<td>0.2%</td>
<td>2.3%</td>
<td>0.9%</td>
<td>0.8%</td>
<td>1.1%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Core</td>
<td>#N/A</td>
<td>-0.2%</td>
<td>0.1%</td>
<td>#N/A</td>
<td>#N/A</td>
<td>#N/A</td>
<td>1.3%</td>
</tr>
<tr class="odd">
<td colspan="8" class="firstcol"><span style="font-weight: bold;">CPI</span> </td>
</tr>
<tr>
<td class="firstcol">All</td>
<td>0.2%</td>
<td>0.1%</td>
<td>0.2%</td>
<td style="color: red;">1.9%</td>
<td>0.7%</td>
<td>0.8%</td>
<td>1.1%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;
CPIxF&amp;E</td>
<td>0.2%</td>
<td>-0.1%</td>
<td>0.0%</td>
<td>0.4%</td>
<td style="color: red;">1.1%</td>
<td>1.0%</td>
<td>1.3%</td>
</tr>
<tr>
<td class="firstcol">Food</td>
<td>-0.2%</td>
<td>0.5%</td>
<td>-0.1%</td>
<td style="color: red;">0.7%</td>
<td>-2.3%</td>
<td>-2.0%</td>
<td>1.9%</td>
</tr>
<tr>
<td class="firstcol">Alcohol</td>
<td>-0.3%</td>
<td>-0.5%</td>
<td>0.0%</td>
<td>-2.9%</td>
<td>-2.0%</td>
<td>-0.9%</td>
<td>0.7%</td>
</tr>
<tr>
<td class="firstcol">Clothing &amp;
Shoes</td>
<td>2.3%</td>
<td>-1.4%</td>
<td>0.2%</td>
<td>3.9%</td>
<td style="color: red;">3.9%</td>
<td style="color: red;">2.5%</td>
<td>0.7%</td>
</tr>
<tr>
<td class="firstcol">Rent &amp;Util</td>
<td>0.0%</td>
<td>0.2%</td>
<td>-0.1%</td>
<td style="color: red;">0.4%</td>
<td>-0.2%</td>
<td>-0.2%</td>
<td>2.5%</td>
</tr>
<tr>
<td class="firstcol">Health Care</td>
<td>0.1%</td>
<td>0.1%</td>
<td>0.0%</td>
<td>0.8%</td>
<td>0.8%</td>
<td>0.8%</td>
<td>1.8%</td>
</tr>
<tr>
<td class="firstcol">Transport</td>
<td>-0.3%</td>
<td>2.1%</td>
<td>0.0%</td>
<td style="color: red;">7.5%</td>
<td style="color: red;">5.6%</td>
<td style="color: red;">4.1%</td>
<td>-2.8%</td>
</tr>
<tr>
<td class="firstcol">Communication</td>
<td>0.0%</td>
<td>-0.4%</td>
<td>0.1%</td>
<td>-1.3%</td>
<td style="color: red;">-0.9%</td>
<td><span style="color: red;">-1.8%</span></td>
<td>-3.3%</td>
</tr>
<tr>
<td class="firstcol">Rec
&amp;Culture</td>
<td>-0.1%</td>
<td>-0.4%</td>
<td>0.2%</td>
<td>-1.2%</td>
<td>0.2%</td>
<td>0.5%</td>
<td>1.2%</td>
</tr>
<tr>
<td class="firstcol">Education</td>
<td>0.7%</td>
<td>1.5%</td>
<td>0.2%</td>
<td style="color: red;">9.8%</td>
<td style="color: red;">5.9%</td>
<td style="color: red;">-1.1%</td>
<td>-3.8%</td>
</tr>
<tr>
<td class="firstcol">Restaurant
&amp; Hotel</td>
<td>0.7%</td>
<td>-0.4%</td>
<td>0.5%</td>
<td style="color: red;">3.4%</td>
<td style="color: red;">2.4%</td>
<td>1.9%</td>
<td>2.6%</td>
</tr>
<tr>
<td class="firstcol">Other</td>
<td>0.4%</td>
<td>-0.4%</td>
<td>0.7%</td>
<td>3.0%</td>
<td style="color: red;">3.0%</td>
<td style="color: red;">2.1%</td>
<td>1.7%</td>
</tr>
<tr>
<td class="firstcol">Diffusion</td>
<td>--</td>
<td>--</td>
<td>--</td>
<td>45.5%</td>
<td style="color: red;">54.5%</td>
<td>45.5%</td>
<td>&nbsp;--</td>
</tr>
<tr class="grey1">
<td class="firstcol">Type:</td>
<td colspan="3">Diffusion: Current
Compared to</td>
<td>6-mo</td>
<td>12-mo</td>
<td>Yr-Ago</td>
<td>&nbsp;</td>
</tr>
</tbody>
</table>
</body></html>

German inflation, while beginning to edge up at year-end in its HICP and CPI formats has registered the lowest annual pace in 20-years. The small two-line panel at the table top shows overall statistics for the German CPI (as opposed [...]

German Posts Lowest Annual Inflation Rate In 20-Years

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<span id="articletext">
<p></p>
<p>
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100114a.jpg" style="width: 353px; height: 265px;" align="right">d less evident at the end of last year's holiday shopping
season. December retail sales slipped 0.3% last month though the
November increase was revised up to 1.8% from 1.3% reported last month.
The latest figure was weaker than Consensus expectation for a 0.5%
rise. Reinforcing the notion of a weak end to 2009 was a 0.3% decline
retail sales less autos after an upwardly revised 1.9% jump in November
sales. Aside from the monthly volatility, however, the trend in retail
spending improved. On a three-month basis, retail sales rose at an
11.3% annual rate through December, by far improved from the 29.7% rate
of decline one year earlier. Less autos, the rate of spending also
recovered to 7.1% from negative 28.9% at its depths.</p><p>Higher
gasoline prices obviously played a part in the retail sales picture.
Gasoline purchases rose 1.0% last month and they're up by one-third
from last year. <img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100114b.jpg" style="width: 353px; height: 265px;" align="right">
Yet without gasoline there still has been firming in
spending. Less autos &amp; gasoline retail sales fell 0.3% last
month after a 1.0% November jump. On a three-month basis, these sales
rose at a 3.1% rate, up from the worst of -12.2% at the end of 2008.</p><p>
It's been internet &amp; catalogue purchases that have shown the
bulk of the improvement in retail spending. These sales rose 1.4% in
December (10.3% y/y) after similar increases during the prior three
months. The three-month rate of gain rose to 21.2% from a negative
22.5% at the end of 2008.</p><p>Motor vehicle sales slipped 0.8%
last month after a 1.2% November increase and a 7.4% October gain.
Reflecting price discounts, these changes lag the increases in unit
vehicle sales. Elsewhere, discretionary "core" spending improved some
but <img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100114c.jpg" style="width: 353px; height: 265px;" align="right">
it's been less pronounced. Sales at furniture &amp; appliance
stores fell 1.2% during December (-2.2% y/y) after a 1.8% November
increase. The three-month rate of growth improved to -0.9% from -25.9%
at its worst. Sales at furniture stores alone rose 0.3% after a 0.7%
November gain and three-month growth improved to 0.3% from -21.6% at
its worst. Sales of electronics &amp; appliances fell 2.6% (-0.7%
y/y) and reversed all of the November increase. Three-month growth
slipped to -2.0%. In soft goods, apparel store sales slipped 0.6%
(+5.0% y/y) for the third consecutive monthly decline.&nbsp;General
merchandise store sales fell 0.8% (+2.1% y/y) while three-month growth
improved to 1.7% from -11.2% at its worst late in 2008.</p><p>The retail
sales data are available in Haver's <b>USECON</b>
database.</p><p>The Federal Reserve's most recent<b> Beige Book</b>
covering regional economic conditions an be found <a href="http://www.federalreserve.gov/fomc/beigebook/2010/20100113/default.htm">here</a>.&nbsp;</p>
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">&nbsp;</th>
<th scope="col"><b>December</b></th>
<th scope="col"><b>November</b></th>
<th scope="col"><b>October</b></th>
<th scope="col"><b>Y/Y</b></th>
<th scope="col"><b>2009</b></th>
<th scope="col"><b>2008</b></th>
<th scope="col"><b>2007</b></th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol"><a ;="" href="http://www.haverselect.com/dlx/usecon/@ED/@ED04/@ED0401/@ED0401.HTM" style="color: black;">Total Retail Sales &amp; Food
Services</a> (%)</td>
<td>-0.3</td>
<td>1.8</td>
<td>1.3</td>
<td>5.4</td>
<td>-6.0</td>
<td>-0.8</td>
<td>3.3</td>
</tr>
<tr>
<td class="firstcol"><b>&nbsp; </b>Excluding
Autos</td>
<td>-0.2</td>
<td>1.9</td>
<td>-0.0</td>
<td>5.2</td>
<td>-4.7</td>
<td>2.4</td>
<td>3.9</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Non-Auto Less Gasoline</td>
<td>-0.3</td>
<td>1.0</td>
<td>0.1</td>
<td>2.3</td>
<td>-1.8</td>
<td>1.6</td>
<td>3.6</td>
</tr>
</tbody>
</table>
</span></body></html>

d less evident at the end of last year's holiday shopping season. December retail sales slipped 0.3% last month though the November increase was revised up to 1.8% from 1.3% reported last month. The latest figure was weaker than [...]

U.S. Retail Sales Weaken At Yearend But 2009 Improved

U.S. Retail Sales Weaken AtYearend But 2009 Improved

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<span id="articletext">
<p></p>
<p><img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100113f.jpg" align="left" border="0" height="265" width="353"></p>
<p>Europe&#8217;s recovery remains on track in November as industrial
production has risen in all the large EMU states. The UK, an EU member,
only saw a very minor set back to MFG IP with output dropping by 0.1%
in November. Of the largest EMU states, the rise in the Italy was
disappointing at just 0.2%. The UK&#8217;s small drop actually out did
expectations.</p>
<p>Year-over-year the IP drops have been trimmed to the range of
-4% to -10% for this group of countries. Despite the set back to UK IP
in November at -5.4% it demonstrates one of the smaller Yr/Yr drops in
IP and exhibits a strong improvement from its result in October (-7.8%,
Yr/Yr). All large countries show an improvement in their Yr/Yr drop in
November compared to October and for most the difference is large.</p>
<p>The chart above shows how strong the recoveries have been.
Despite all that strength over the last 3- and 6-months, 2009 has been
a very bad year for Europe.</p>
<p>German GDP is just reported to have posted an outsized drop of
5% in 2009 as its exports and investment goods sectors were hard hit.
As it was, government programs produced a boost that kept the steep GDP
decline from being even larger. Public consumption rose by 2.7% from
2008 while private consumption edged ahead by just 0.2%.</p>
<p>The recovery in IP is however a good development. Germany&#8217;s
industrial sector depends on exports which fell by 14.7% in 2009.
Exports have begun to get traction again and IP is on the rise as a
result. 2010 promises to be a much better year, but then 2009 put all
of Europe in a very deep hole and the real question is not 'Will 2010
be better?' but, 'How much better will 2010 be?' That is not yet
resolved and is a point of some contention. So far, good strong growth
is in train and seems to have staying power. Perhaps more optimism is
warranted.</p>
</span>
<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="11" scope="col"><b>Main
Euro-Area Countries and UK IP in MFG</b> </th>
</tr>
</thead>
<tbody>
<tr class="grey3">
<td class="firstcol">&nbsp;</td>
<td colspan="3">Mo/Mo</td>
<td>Nov<br>
09</td>
<td>Oct<br>
09</td>
<td>Nov<br>
09</td>
<td>Oct<br>
09</td>
<td>Nov<br>
09</td>
<td>Oct<br>
09</td>
<td>&nbsp;</td>
</tr>
<tr class="even">
<td class="firstcol">MFG Only</td>
<td>Nov<br>
09</td>
<td>Oct<br>
09</td>
<td>Sep<br>
09</td>
<td>3Mo</td>
<td>3Mo</td>
<td>6mo</td>
<td>6mo</td>
<td>12mo</td>
<td>12mo</td>
<td>Q:4<br>
Date</td>
</tr>
<tr class="grey1">
<td class="firstcol"> Germany:</td>
<td>0.8%</td>
<td>-1.8%</td>
<td>3.6%</td>
<td>10.6%</td>
<td>16.6%</td>
<td>9.1%</td>
<td>18.6%</td>
<td>-9.1%</td>
<td>-13.7%</td>
<td>8.0%</td>
</tr>
<tr class="grey1">
<td class="firstcol">France:<br>
IPxConstruct'n</td>
<td>1.1%</td>
<td>-0.6%</td>
<td>-1.2%</td>
<td>-2.6%</td>
<td>4.2%</td>
<td>6.1%</td>
<td>8.6%</td>
<td>-3.8%</td>
<td>-8.0%</td>
<td>0.5%</td>
</tr>
<tr class="grey1">
<td class="firstcol">Italy</td>
<td>0.2%</td>
<td>1.0%</td>
<td>-5.2%</td>
<td>-15.3%</td>
<td>6.4%</td>
<td>7.0%</td>
<td>5.9%</td>
<td>-10.2%</td>
<td>-13.2%</td>
<td>-2.6%</td>
</tr>
<tr class="grey1">
<td class="firstcol">Spain</td>
<td>1.2%</td>
<td>-3.0%</td>
<td>0.5%</td>
<td>-5.5%</td>
<td>-20.2%</td>
<td>17.9%</td>
<td>-0.2%</td>
<td>-3.9%</td>
<td>-13.0%</td>
<td>-14.2%</td>
</tr>
<tr class="grey1">
<td class="firstcol">UK: EU
member</td>
<td>-0.1%</td>
<td>0.0%</td>
<td>1.6%</td>
<td>6.1%</td>
<td>-1.8%</td>
<td>0.9%</td>
<td>-0.4%</td>
<td>-5.4%</td>
<td>-7.8%</td>
<td>1.6%</td>
</tr>
</tbody>
</table>
</body></html>

Europe’s recovery remains on track in November as industrial production has risen in all the large EMU states. The UK, an EU member, only saw a very minor set back to MFG IP with output dropping by 0.1% in November. Of the largest EMU [...]

Industrial Output Is Making Continued Gains In Europe

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<span id="articletext">
<p></p>
<p>
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100113c.jpg" style="width: 353px; height: 265px;" align="right">Earlier
improvement in small business' optimism slipped again last month. The
National Federation of Independent Business (NFIB) reported their
December small business optimism index dipped 0.3% to 88.0. This second
consecutive slight decline followed several months of increase after
reaching a March low of 81.0.&nbsp;During the last ten years, there
has been an 85% correlation between the level of the NFIB index and the
two-quarter change in real GDP.</p>
<p> Credit conditions remained as tight as
they've been since the "credit crunch" recession of 1980. The
percentage of firms reporting that credit was harder to get was stable
m/m at a net 15 but that was roughly triple the percentage from 1994 to
2007. The percent borrowing at least once last quarter was stable at
33% but that was down from the high of 46% during 2006.</p>
<p>The percentage
of small businesses expecting the economy to improve dipped slightly
m/m to 2 after a sharp November decline. The latest was down from the
May high of 12. <img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100113d.jpg" style="width: 353px; height: 265px;" align="right">
The percentage which thought that now was a good time
to expand the business also slipped to 7 though it remained sharply
improved from this winter.</p>
<p> Hiring intentions have responded negatively
to recent weakness in overall business sentiment. The percentage of
firms planning to raise employment remained in a net-layoff region,
though it has improved from the March low. For now, the percentage of
firms with one or more job openings improved modestly to 10% during
December. During the last ten years there has been a 74% correlation
between the NFIB employment percentage and the six-month change in
nonfarm payrolls. Also stable in the negative region was the percentage
expecting credit conditions to ease.</p>
<p>On the pricing front deflation
continued. The percentage of firms <i>actually</i> raising
prices at -22% (indicating deflation) slipped from the prior several
months and was near the record low. During the last ten years there has
been a 60% correlation between the six-month change in the producer
price index and the level of the NFIB price index<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100113e.jpg" style="width: 353px; height: 265px;" align="right">
</p>
<p>The
percentage of firms <i>planning</i> to raise prices
slipped again to a net 3 though that remained up from the March low of
zero. Finally, the percentage planning to raise worker compensation
fell to 1.</p>
<p>The largest, single most important problems seen by
business were poor sales (34%), taxes (20%, near its highest level
since 2007), government requirements (13%), insurance cost &amp;
availability (7%), competition from large businesses (6%) and inflation
(2%).</p>
<p>About 24 million small businesses exist in the United
States. Small business creates 80% of all new jobs in America and the
NFIB figures can be found in Haver's <b>SURVEYS</b>
database.&nbsp;</p>
<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/SURVEYS/@S7/@S7.HTM"><b>Nat'l
Federation of Independent Business</b></a></th>
<th scope="col"><b>December</b></th>
<th scope="col"><b>November</b></th>
<th scope="col"><b>October</b></th>
<th scope="col"><b>Y/Y</b></th>
<th scope="col"><b>2009</b></th>
<th scope="col"><b>2008</b></th>
<th scope="col"><b>2007</b></th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Small Business Optimism Index
(SA, 1986=100)</td>
<td>88.0</td>
<td>88.3</td>
<td>89.1</td>
<td>3.3%</td>
<td>86.7</td>
<td>89.8</td>
<td>96.7</td>
</tr>
<tr>
<td class="firstcol">Percent of Firms Expecting
Economy To Improve</td>
<td>2</td>
<td>3</td>
<td>11</td>
<td>-13</td>
<td>-0</td>
<td>-10</td>
<td>-4</td>
</tr>
<tr class="odd">
<td class="firstcol">Percent of Firms With One or
More Job Openings</td>
<td>10</td>
<td>8</td>
<td>8</td>
<td>14</td>
<td>9</td>
<td>18</td>
<td>24</td>
</tr>
<tr>
<td class="firstcol">Percent of Firms Reporting That
Credit Was Harder To Get</td>
<td>15</td>
<td>15</td>
<td>14</td>
<td>12</td>
<td>14</td>
<td>9</td>
<td>6</td>
</tr>
<tr class="odd">
<td class="firstcol">Percent of Firms Raising Avg.
Selling Pric1es (Net)</td>
<td>-22</td>
<td>-17</td>
<td>-17</td>
<td>-6</td>
<td>-20</td>
<td>17</td>
<td>15</td>
</tr>
</tbody>
</table>
</span>
</body></html>

Earlier improvement in small business' optimism slipped again last month. The National Federation of Independent Business (NFIB) reported their December small business optimism index dipped 0.3% to 88.0. This second consecutive slight [...]

U.S. Small Business Optimism Slips Again As Credit Remains Tight

US and China big leaders in adoption of AI models

Robust US demand for advanced technology products

China's export growth rotating away from the US

More pronounced upward revisions in countries more exposed to AI investment

Stable job openings and hiring rates point to cautious hiring

Global freight costs are on the rise while supply chain pressures are contained

Accelerating positive economic surprises in the G10 are boosting the global economy

Considerably more monetary ease expected from US and UK as Japan tightens

Tighter US immigration enforcement adversely impacting labor force

Economic policy uncertainty, while still elevated, is declining

Gradual disinflation and easier monetary policies across advanced economies

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

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Andrew Cates

**The Global Monetary Policy Consensus**
The latest Blue Chip Financial Forecasts survey points to a notably more balanced global monetary policy outlook over the coming year. In contrast to the pronounced easing bias that dominated much of the past two years, expectations are now more symmetric, with a similar number of central banks projected to raise rates as to ease policy. Japan is seen delivering further tightening, while Canada is expected to initiate an interest rate hike in coming months. In Australia’s case, this tightening guidance was reinforced this week, with the Reserve Bank lifting its policy rate by 25 basis points. Elsewhere, and in contrast, the euro area, UK and US are expected to move in the opposite direction.

260205Z1.jpg

**US manufacturing activity**
The second chart underscores the recent improvement in US economic momentum, highlighted by an unexpected surge in the January ISM manufacturing PMI. After spending much of the past year hovering below the 50 threshold consistent with stagnation, the index jumped sharply back into expansionary territory, signalling a renewed pickup in industrial activity. This rebound has coincided with a broader run of stronger-than-anticipated US economic data, as reflected in the upswing in the Citigroup Economic Surprise Index. Together, these developments point to a US economy that continues to display notable resilience, complicating expectations of monetary easing in the near term.

260205Z2.jpg

**US Bank Lending Standards and Financial Stress** 
The next chart turns to US financial conditions, highlighting the latest readings from the Senior Loan Officer Opinion Survey. The net proportion of banks tightening lending standards on corporate loans and mortgages is now more modest by historical standards, and well below the extremes seen during past episodes of financial stress. Some easing in credit headwinds has occurred alongside relatively subdued readings on the OFR Financial Stress Index, which continues to hover below its long-run average. Together, these indicators suggest that the US financial system has continued to avoid the kind of acute stress typically associated with sharp slowdowns in credit availability—helping to underpin the recent resilience in economic activity.

260205Z3.jpg

**Semiconductor Sales**
The fourth chart highlights the renewed surge in global semiconductor sales, with momentum strengthening sharply over recent months across the Americas, China and the broader Asia-Pacific region. After the cyclical downturn in 2022–23, sales have rebounded to fresh highs, reflecting a powerful revival in demand for advanced chips and related technologies. This upswing has taken place amid intense investor preoccupation with artificial intelligence, with expectations that AI adoption will drive a sustained wave of capital spending on data centres, cloud infrastructure and high-performance computing. In contrast, semiconductor sales in Europe remain comparatively subdued, reflecting the region’s smaller footprint in high-end chip manufacturing, weaker industrial demand, and the ongoing impact of slower economic growth. While semiconductors are inherently cyclical, markets have increasingly interpreted the current rebound elsewhere as structural rather than purely cyclical—underpinned by the belief that AI represents a transformative and durable source of demand growth.

260205Z4.jpg

**Large-Scale AI Models**
The next chart illustrates the rapid proliferation of large-scale AI models globally, with newly updated data for 2025 pointing to a further sharp acceleration in development activity. The United States continues to lead by a wide margin, while China has also seen a steep rise in model deployment in recent years, underscoring the intensifying technological competition between the two economies. Growth in the UK and other regions has been more modest by comparison, highlighting the increasingly concentrated nature of AI innovation. Taken together with the surge in semiconductor sales, these trends help explain the market’s strong preoccupation with AI as a potential driver of future productivity and investment cycles—although the geographic concentration of activity also raises questions about the uneven distribution of any resulting economic gains.

260205Z5.jpg

**An AI Bubble?** 
The final chart draws on the latest Blue Chip Financial Forecasts special questions, highlighting market participants’ perceptions of the economic gains likely to be delivered by artificial intelligence. While a sizeable share of respondents still believe that financial markets may be overestimating AI’s potential benefits, an increasing proportion now judge current expectations to be broadly accurate, with only a small minority viewing the gains as underestimated. Notably, this represents a softening in scepticism compared with the survey results from last month, when concerns about excessive market optimism were more pronounced. The shift suggests a growing acceptance that AI-related investment and innovation could translate into meaningful economic impacts—though uncertainty remains high around the scale, timing and distribution of these gains.

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Financial markets have experienced renewed gyrations in recent weeks, as shifting geopolitical risks, questions around Federal Reserve independence, renewed talk of US dollar “debasement,” and ongoing enthusiasm surrounding artificial intelligence have combined to drive volatility across asset classes. These cross-currents have also contributed to a degree of rotation away from high-flying technology stocks, as investors reassess valuations and the timing of anticipated AI-driven gains. Against this backdrop, the charts in this week’s COTW highlight several important themes. Policy rate expectations now appear more balanced globally, marking a clear shift away from the one-sided easing bias of the past two years (chart 1), even as resilient US data—underscored by the unexpected jump in the January ISM index and a run of positive economic surprises—continues to complicate the outlook for monetary easing (chart 2). At the same time, US financial conditions remain relatively benign, with limited evidence of widespread credit stress or aggressive tightening in lending standards (chart 3). Meanwhile, the sharp rebound in semiconductor sales and the accelerating rollout of large-scale AI models underscore why investors remain so focused on the AI narrative, even as Europe lags behind due to weaker industrial momentum and a smaller footprint in advanced chip production (charts 4 and 5). Finally, while some scepticism about AI’s ultimate economic impact persists, the latest survey results suggest a moderation in concerns that markets are materially overestimating its gains (chart 6). Taken together, these developments paint a picture of a US economy that remains more resilient than many had anticipated, set against a financial landscape increasingly shaped by powerful—if sometimes competing—narratives around geopolitics, policy, and technological transformation.

Charts of the Week: Balanced Policy, Resilient Data and AI Narratives

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With the December report, Germany’s production and some of the early European industrial production data reveal a good deal of chaos in terms of the embedded trends. On the month, German industrial production fell by 1.9%, with consumer goods output up by 0.5%, capital goods output falling by 5.3%, and intermediate goods output falling by 1.2%. Among the early reporters in the monetary union—France, Spain, and Portugal—only Spain showed an increase in manufacturing IP in December; however, Spanish industrial production is notoriously volatile.

**Broader IP trends in Germany and elsewhere in Europe**
As for other early industrial production reporters, both Sweden and Norway showed strong-to-solid gains in December and each of them showed two-months of gains in a row. Beyond that, sequential growth rates from 12-months to six-months to three-months show accelerating growth in German consumer goods output against decelerating growth for intermediate goods. Real manufacturing output and real sales show mixed results- no clear trends; however, real manufacturing orders in Germany are off the map strong. 

**German manufacturing/industrial Surveys**
German industrial surveys from the IFO for manufacturing shows persistent weakening as well as for IFO manufacturing expectations, and in the EU Commission industrial index in the last three months. More broadly, Germany shows some modest but ongoing step up all of these based on average levels from 12-months to six-months to three-months for IFO expectations and the EU Commission industrial readings with mixed results for other survey readings.

**IP trends in Europe**
For the early reporting EMU members France, Spain, and Portugal, who report industrial production trends, each show mixed monthly trends against ongoing decelerations for manufacturing output over the broader sequential periods (12-month, to 6-month, to 3-month). However, for other Europe, Sweden and Norway, manufacturing trends are steadily accelerating on this broader timeline.

**A feeling of ‘Deja- What?’**
These combinations of opposed trends mixed with a lack of trends leave us with this sense of confusion about what's going on in manufacturing. For Germany, the extreme strength in orders is reassuring since orders should be forward-looking rather than backward-looking or even contemporaneous. But orders can also be a fickle series and so we'll have to watch it to see if the trends for German orders hold up.

**Current quarter-What’s been happening now**
In addition, current quarter growth for Germany actually looks quite good with industrial production up 3.7% at an annual rate in the current quarter, led by output increases in manufacturing against a decline in the intermediate goods output. Real orders in the quarter are surging at a 44% growth rate, while real sales in manufacturing only had a 0.1% uptick at an annual rate. The industrial indicators for Germany in the quarter show weakness or flatness with the only exception being IFO manufacturing expectations that advanced by a small amount. The three EMU members who report industrial production data show positive growth in the just-completed quarter except for Portugal where industrial production is falling at a 2.9% rate in the fourth quarter. Sweden and Norway, European countries but not monetary union members, show a strong 22% annual rate gain in Sweden against the 3% annual rate decline in Norway.

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**Rankings**
**How growth rates stack up…**
Moving away from short-term trends, the rankings of growth rates of these various metrics using 12-month growth rates on data back to 2006, show below-median growth rates for German industrial production and all three of its major sectors. All of them have rankings below the 50% mark where the median resides. Germany’s manufacturing output growth rate is below its median as is the growth of real sales; and once again real manufacturing orders break out and show a stunning 90th percentile standing, extremely strong compared to other growth rates on this period.

**Indicator rankings are poor**
However, the survey based industrial indicators for Germany, ranked based on their index levels, are all extremely weak and much weaker than German sector or other German metrics. The strongest indicator reading is the 29th percentile standing for IFO manufacturing expectations while the current ZEW index, IFO manufacturing index, and the EU Commission industrial readings, all reside below their 15th percentile. The survey rankings suggest that industrial sentiment is in much worse shape than activity and growth.

**IP elsewhere in Europe**
However, the growth ranking of manufacturing industrial production for the reporting EMU members and other European members are all quite solid, with percentile standings ranging from the 66th up to the 93rd percentile.

**Summing up**
From these data, Germany emerges as the weak economy compared with historic norms based on industrial production growth and indicator readings. However, there's a glimpse of positivity from the growth of real orders, and at the same time, some concern about ongoing sentiment for manufacturing in Germany as distinct from actual performance.

Germany

German IP Reveals Chaotic Trends

Winnie Tapasanun

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**Total job openings** fell 5.6% m/m (-12.9% y/y) to 6.542 million in December after a downwardly revised 7.0% decline to 6.928 million in November (previously -4.1% m/m; 7.146 million), according to the Job Openings and Labor Turnover Survey. December marked the third consecutive m/m fall and the lowest level since September 2020. The job openings rate declined to 3.9% in December, the lowest since April 2020, from 4.2% in November, remaining below a record-high 7.4% in March 2022. This rate is calculated as the ratio of job openings to total nonfarm employment plus openings. Significantly, the drop in job openings also lowered the **ratio of job openings to unemployed individuals** to 0.872 in December—the lowest since March 2021—from 0.890 in November, down from 1.085 in December 2024 and a pre-pandemic 1.211 in February 2020. A reading of 0.872 implies there were about 0.87 open jobs per unemployed person—indicating fewer openings than unemployed workers. December was the fifth time in six months that this ratio remained below 1.0.

**Private sector job openings** fell 6.8% (-12.5% y/y) to 5.804 million in December after a 6.6% fall to 6.227 million in November, registering the third successive m/m decline and the lowest level since September 2020. The private sector job openings rate fell to 4.1% in December, the lowest since April 2020, from 4.4% in November. The December m/m decline in private sector openings reflected drops of 27.7% (-36.9% y/y) in financial activities, 20.2% (-25.5% y/y) in professional & business services, 14.4% (-5.1% y/y) in trade, transportation & utilities, and 5.2% (-12.4% y/y) in private educational & health services. To the upside, private sector openings in the following categories rose m/m in December: other services (21.1%; 11.0% y/y), mining & lodging (17.6%; 0.0% y/y), information (13.5%; -4.7% y/y), manufacturing (8.5%; 0.5% y/y), leisure & hospitality (7.5%; -17.2% y/y), and construction (2.8%; 42.4% y/y). Meanwhile, government job openings rose 5.3% (-15.6% y/y) in December, the first m/m rise in three months, after a 10.6% drop in November.

**Total hiring** rebounded 3.4% (-1.5% y/y) to 5.293 million in December, the first m/m increase since September, following a 4.6% decrease to 5.121 million in November. The hiring rate edged up to 3.3% in December from 3.2% in November, though it remained below pre-pandemic levels. **Private sector hiring** rose 3.1% (-0.4% y/y) to 4.978 million in December, the third m/m rise in four months, after a 4.0% decline to 4.826 million in November. The private sector hiring rate rose to 3.7% in December from 3.5% in November, the same as in October and September. The December m/m increase in private sector hiring was led by a 32.1% jump (42.3% y/y) in information, followed by gains of 24.0% (-4.6% y/y) in financial activities, 23.5% (0.0% y/y) in mining & lodging, 6.5% (-4.8% y/y) in private educational & health services, 4.2% (-4.9% y/y) in trade, transportation & utilities, 3.6% (6.1% y/y) in construction, 3.4% (7.9% y/y) in leisure & hospitality, and 1.8% (-4.3% y/y) in manufacturing. To the downside, private sector hiring in professional & business services (-5.2%; +0.5% y/y) and other services (-4.3%; -16.5% y/y) declined m/m in December. Meanwhile, government hiring rebounded 6.4% (-16.3% y/y) in December, the first m/m rise since September, following a 13.5% drop in November.

**Total separations** rose 2.1% (3.3% y/y) to 5.251 million in December after a 1.5% rise to 5.144 million in November, marking the third m/m increase in four months and the highest level since September. The total separations rate edged up to 3.3% after holding at 3.2% in November and October. Private sector separations rose 1.6% (4.2% y/y) to 4.932 million in December, the highest level since June, while government sector separations jumped 10.4% (-9.1% y/y) to 319,000 following two consecutive m/m declines. **Total quits** (voluntary separations initiated by the employee) increased 0.3% (3.5% y/y) to 3.204 million in December, the third m/m rise in four months and the highest level since June, after a 7.4% rebound in November. The quits rate (a measure of workers’ willingness or ability to leave jobs) held at 2.0% in December and November, slightly below 2.3% in February 2020. Private sector quits eased 0.2% (+4.5% y/y) following an 8.4% November rebound. **Layoffs and discharges** (involuntary separations initiated by the employer) increased 3.6% (5.6% y/y) to 1.762 million in December, up for the third time in four months, after an 8.1% drop in November. The layoffs & discharges rate remained at 1.1% in December and November, marginally below 1.3% in February 2020. Private sector layoffs grew 4.3% (7.8% y/y) following a 7.3% November decrease.

The Job Openings and Labor Turnover Survey (JOLTS) data are available in Haver’s **USECON** database.

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- Job openings down 5.6% (-12.9% y/y) to 6.542 mil., third straight m/m decline.
- Hiring up 3.4% (-1.5% y/y) to 5.293 mil., first m/m increase since September.
- Separations rise to a three-month high; quits reach a six-month high; layoffs rebound.

U.S. JOLTS: Openings Drop to Lowest Level Since Sept. ’20; Hiring Rebounds in December

Sandy Batten

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Initial claims for unemployment insurance jumped 22,000 to 231,000 in the week ended January 31 following an unrevised 209,000 in the prior week. The four-week average rose to 212,250 from 206,250. The Action Economics Forecast Survey looked for 213,000 claims to have been filed. Winter Storm Fern and the accompanying very cold temperatures could have provided a temporary boost. Historically speaking, claims remain at low levels.

The total number of unemployment insurance beneficiaries—also known as “continuing claims”—increased by 25,000 to 1.844 million in the week ending January 24, from a downwardly revised 1.819 million in the prior week (previously 1.827 million). The insured unemployment rate remained at 1.2% in the week of January 24, unchanged from the previous eight weeks.

The insured unemployment rate varied greatly across individual states and territories. In the week ending January 17, the highest unemployment rates were in Rhode Island (2.83%), New Jersey (2.77%), Massachusetts (2.67%), Washington (2.54%), and Minnesota (2.45%). The lowest rates were in Florida (0.30%), North Carolina (0.42%), Louisiana (0.43%), Alabama (0.46%), and Arkansas (0.47). Rates in other notable states include Illinois (2.15%), California, (2.08%), New York (2.02%), Pennsylvania (1.91%), and Texas (1.09%). 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.

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- New claims jumped 22,000 to 231,000, the highest level since December 6.
- Continuing claims rose to 1.844 million from 1.819 million.

U.S. Initial Unemployment Claims Surged in Latest Week

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German real orders in December adjusted for inflation rose strongly again, gaining 7.8% month-to-month after rising 5.7% month-to-month in November. Foreign orders were up by 5.6% in December compared to 5.2% in November. Domestic orders surged by 10.7% in December after rising 6.4% in November and 10% in October.

**Real sales**
Real sales were mixed in December with overall sales falling 1.4% month-to-month mostly on weakness in capital goods sales.

**Broad categorical acceleration**
Many flows are accelerating this month. Sequential growth rates show acceleration. Total real orders accelerate from a year ago, to the current year, to six-months, and to three-months. Sales growth rates for consumer goods, consumer nondurables, and intermediate goods all show accelerations in gear. The exceptions are foreign orders that are not as strong over six months compared to their 12-month growth. And on the sales side, consumer durables sales and capital goods sales are weak.

**Quarter-to-quarter**
Quarterly annualized growth is complete for Q4 with this report. Foreign orders are the ‘weak flow’ expanding at a 13.6% annual rate – certainly not a weak growth rate. But domestic real orders are up at an astounding 101.9% annual rate. The net impact on the total real orders growth is to lift it to a pace of 44.1%. 

**Order ranking is very strong**
The table provides two rankings: one based on the level of variables and the other based on its year-on-year growth. The rankings this month for real orders overall, foreign, and domestic orders all reside in their top 80th to 90th percentiles- extremely strong based on level or growth. Sales do not follow suit. This gives us some reason to suspect that there is some lumpiness involved in the manufacturing data as distinct from strength. That will be something to watch. Overall mining and manufacturing sales growth is essentially at its historic median at a rank of 49.8. However, capital goods, intermediate goods and manufacturing sales all have rankings at or above their medians - as high as a 61-percentile standing for capital goods.

**Industrial confidence**
Industrial confidence for Germany, France, Italy and Spain (the EU’s big-four economies) show rankings based on these survey levels that are much lower at the 11th percentile for Germany, the 42nd and 36th percentiles, for France and Italy, respectively. Spain scores better with a 61.8 percentile standing on its industrial confidence measure. 

On balance, there is now an accelerating profile that is broad in sales trends and especially strong order trends. Perhaps Europe, under the pressure to stimulate its miliary capabilities, has a core of demand to help drive output ahead more consistently. This is something to watch in the coming months.