Tom Moeller

The service sector continued to show signs of improvement during June. The Composite Index for the nonmanufacturing sector from the Institute for Supply Management (ISM) rose to 47.0 from an unrevised reading of 44.0 during May. [...]

U.S. ISM Nonmanufacturing IndexImproves To The Highest Level Since Last September

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090702e.jpg" width="353">
The Bureau of Labor Statistics indicated that the rate of job loss continued to moderate last month, just not by as much as had been anticipated. Nonfarm payrolls fell 467,000 during June after a 322,000 worker decline, revised from -345,000, during May. The June drop was deeper than the market&#39;s expectations for a 350,000 shortfall. During this recession so far employment has fallen by a total of 6.5 million, the record for an 18-month period. In percentage terms jobs are down 4.7% since the 2007 peak, also an 18-month record. The moderation is apparent in the 436,000 average monthly decline during the last three versus a peak three-month rate of 701,000 this past Winter.
The latest data from the payroll survey give insight into real GDP growth last quarter. Combined with the lessened decline in employment is a shorter length of the average workweek. Together, this measure of aggregate hours worked fell at a 7.9% annual rate versus an 8.9% 1Q drop. That drop was associated with negative 5.5% real GDP growth. Therefore the 2Q GDP rate of decline likely eased, perhaps sharply depending on productivity growth. During the last twenty years, there has been a 68% correlation between growth in hours worked and in real GDP.
Another indication of moderation in the economy&#39;s rate of decline was that the unemployment rate only ticked up slightly. The rise to 9.5% from 9.4% in May was, however, to the highest level since August of 1983. The rate&#39;s cycle low of 4.4% occurred in October 2006. Last month employment fell hard again, though here again the rate of decline eased. The 374,000 drop (-3.8% y/y) compared to a peak 1.2 million monthly decline this past January. The labor force fell 155,000 (0.3% y/y). Though the rate of job loss slowed, it also is increasingly difficult for the unemployed to find work. The average duration of unemployment rose during June to a new record of 24.5 weeks from an average of 17.8 weeks during 2008.
Also from the household survey was the continued indication that 5.9 million discouraged workers want a job now but are not in the labor force. That figure is up 19.5% from last June and near the highest since 1995. Finally, the labor force participation rate, i.e., the number of eligible workers who are in the labor force stands at 65.7%, down from the 2000 high of 67.1%.
Back in the establishment survey, the easing in the rate of job loss last month continued evident in slower declines in construction and in services jobs. The construction sector lost 79,000 workers last month after a 48,000 May decline. Monthly drops in excess of 100,000 were common during the prior six. Private service sector job loss also moderated, but just slightly. They fell 192,000 last month after a 97,000 decline May drop. These compare to declines between 196,000 and 399,000 since last September. Losses eased sharply in the retail trade area, in the financial sector and in leisure &amp; hospitality industries. The rate of job loss in the factory sector also eased, but just barely. Factory sector jobs fell 136,000 last month and by an average 147,000 during the last three. That compares with a 205,000 rate of job loss this Winter.
In the government sector there were 52,000 jobs lost last month and they&#39;re up just 4,000 this year. That&#39;s after the 162,000 worker increase during 2008.Jobs with the Federal government fell by 49,000 (+1.5% y/y) for the second consecutive monthly decline. The number of state gov&#39;t jobs fell 4,000 (+0.3% y/y) but local gov&#39;t jobs inched up 1,000. Nevertheless, local gov&#39;t jobs are down by 0.2% y/y, the first material decline since 1983. Should the federal government bail out the states? Lessons from past recessions from the Federal Reserve Bank of Chicago can be found <a href="http://www.chicagofed.org/publications/fedletter/cflaugust2009_265.pdf">here</a>.
Not only is the labor market weak in the major categories, but the full breadth of decline shows even greater distress. Overall, only 28.6% of industries posted job gains last month, up from the March low of 19.6%. However, over the last six months just 18.1% of firms posted job growth, up little from the record low since 1990. In the factory sector 13.9% of firms posted job gains and only 6.0% did over the last six months. Both these figures were up from the lows, but just slightly.
Workers&#39; earning power continued to suffer last month from all the hiring distress. Average hourly earnings were unchanged in June for the second month in the last three. That weakness pulled the three-month rate of growth to a record low of just 0.7% (AR). Earnings in the factory sector slipped for the second month and the three-month growth rate dropped to -0.2%. That&#39;s versus a late-2008 growth rate of 5.0%. Growth in the durable sector&#39;s earnings (NSA) has turned negative over the last three months as have earnings in the private service sector.
The figures referenced above are available in Haver&#39;s USECON database. Additional detail can be found in the LABOR and in the EMPL databases.

<table border="0" cellspacing="0" width="100%">
<tr>
<td><img border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090702f.jpg" width="353"><img border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090702g.jpg" width="353"><img border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090702h.jpg" width="353"></td>
</tr>
</table>
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">Employment: 000s</th>
<th scope="col">June</th>
<th scope="col">May</th>
<th scope="col">April</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Payroll Employment</td>
<td>-467</td>
<td>-322</td>
<td>-519</td>
<td>-4.1%</td>
<td>-0.4%</td>
<td>1.1%</td>
<td>1.8%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Previous</td>
<td>--</td>
<td>-345</td>
<td>-504</td>
<td>--</td>
<td>--</td>
<td>--</td>
<td>--</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Manufacturing</td>
<td>-136</td>
<td>-156</td>
<td>-150</td>
<td>-12.2%</td>
<td>-3.3%</td>
<td>-2.0%</td>
<td>-0.5%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Construction</td>
<td>-79</td>
<td>-48</td>
<td>-103</td>
<td>-13.7%</td>
<td>-5.5%</td>
<td>-0.8%</td>
<td>4.9%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Service Producing</td>
<td>-244</td>
<td>-107</td>
<td>-252</td>
<td>-2.6%</td>
<td>0.2%</td>
<td>1.6%</td>
<td>1.8%</td>
</tr>
<tr>
<td class="firstcol">Average Weekly Hours</td>
<td>33.0</td>
<td>33.1</td>
<td>33.1</td>
<td>33.6 (June &#39;08)</td>
<td>33.6</td>
<td>33.8</td>
<td>33.9</td>
</tr>
<tr class="odd">
<td class="firstcol">Average Hourly Earnings</td>
<td>0.0%</td>
<td>0.2%</td>
<td>0.0%</td>
<td>2.7%</td>
<td>3.8%</td>
<td>4.0%</td>
<td>3.9%</td>
</tr>
<tr>
<td class="firstcol">Unemployment Rate</td>
<td>9.5%</td>
<td>9.4%</td>
<td>8.9%</td>
<td>5.6% (June &#39;08)</td>
<td>5.8%</td>
<td>4.6%</td>
<td>4.6%</td>
</tr>
</tbody>
</table>
</body>
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The Bureau of Labor Statistics indicated that the rate of job loss continued to moderate last month, just not by as much as had been anticipated. Nonfarm payrolls fell 467,000 during June after a 322,000 worker decline, revised from [...]

U.S. Payrolls Decline Another 467,000 As Jobless Rate Increases To 9.5%

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090702a.jpg" align="right" border="0" height="265" width="353">There's no
breaking out from a sideways trend for sales of U.S. light vehicles.
Certainly that was the case last month as unit vehicle sales slipped
2.3% during June to 9.69 million units (AR). That followed a 6.4% rise
during May. Since February vehicle sales have risen all of 11.7% (3.0%
since January) and recouped just a fraction of last year's 35.6%
decline from December-to-December.&nbsp;Unit sales of
U.S. made light vehicles fell 3.7% to 6.99M units and
remained near the lowest since 1982 according to the Autodata
Corporation and Ward's Automotive News. (Seasonal adjustment of the
figures is provided by the U.S. Bureau of Economic Analysis). Sales of
domestically made light trucks fell 7.3% last month to 3.71M units
while auto sales ticked up 0.8% m/m to 3.27M units. Sales of domestic
vehicles YTD are down 17.3% following last year's 35.3% flop from
December-to-December.

<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090702b.jpg" align="right" border="0" height="265" width="353">Imported
light vehicle sales
were a bit firmer and posted a 1.5% m/m June increase. Working the
other way versus domestic sales they are up 5.8% year-to-date after the
36.4% 2008 decline. Nevertheless, sales at 2.70M units remained near
their lowest level in roughly ten years. June sales of imported autos
rose 5.1% and were up by more than one-quarter from the December low
while sales of imported light trucks fell 5.3% and gave back most of a
May increase. Sales of imported vehicles YTD have increased 5.8% but
they more than halved last year Dec./Dec.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090702c.jpg" align="right" border="0" height="265" width="353">Overall,
import's share of the U.S. light vehicle market increased to
27.9% last month after reaching 26.3% during all of last year.
(Imported vehicles are those produced outside the United States.)
Imports' share of the U.S. car market totaled 35.9%, up slightly from
the 2008 average, while the share of the light truck market was 18.9%,
roughly equal to last year.
The U.S. vehicle sales
figures can be found in Haver's USECON database.
A View of the Economic Crisis and the Federal
Reserve&#8217;s Response is yesterday's speech by
Janet L. Yellen, President of the Federal Reserve Bank of San Francisco
and it can be found <a href="http://www.frbsf.org/news/speeches/2009/0630.pdf">here</a>.&nbsp;
<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/@ED/@ED09/@ED0901/@ED0901.HTM">Light
Vehicle Sales (SAAR, Mil. Units)</a></th>
<th scope="col">June</th>
<th scope="col">May</th>
<th scope="col">April</th>
<th scope="col">June Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>9.69</td>
<td>9.91</td>
<td>9.32</td>
<td>-29.2%</td>
<td>13.17</td>
<td>16.16</td>
<td>16.54</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Autos</td>
<td>5.11</td>
<td>4.99</td>
<td>4.81</td>
<td>-31.9</td>
<td>6.71</td>
<td>7.58</td>
<td>7.77</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Domestic</td>
<td>3.27</td>
<td>3.25</td>
<td>3.11</td>
<td>-30.5</td>
<td>4.42</td>
<td>5.07</td>
<td>5.31</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Imported</td>
<td>1.83</td>
<td>1.74</td>
<td>1.70</td>
<td>-34.3</td>
<td>2.29</td>
<td>2.52</td>
<td>2.45</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Light Trucks</td>
<td>4.58</td>
<td>4.92</td>
<td>4.51</td>
<td>-25.9</td>
<td>6.47</td>
<td>8.60</td>
<td>8.78</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Domestic</td>
<td>3.71</td>
<td>4.01</td>
<td>3.67</td>
<td>-26.5</td>
<td>5.29</td>
<td>7.10</td>
<td>7.42</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Imported</td>
<td>0.87</td>
<td>0.91</td>
<td>0.84</td>
<td>-23.3</td>
<td>1.18</td>
<td>1.47</td>
<td>1.37</td>
</tr>
</tbody>
</table>


</body></html>

There's no breaking out from a sideways trend for sales of U.S. light vehicles. Certainly that was the case last month as unit vehicle sales slipped 2.3% during June to 9.69 million units (AR). That followed a 6.4% rise during May. [...]

U.S. Light Vehicle Sales In June Hold A Steady, Sideways Movement

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090702a.jpg" align="right" border="0" height="265" width="353">There's no
breaking out from a sideways trend for sales of U.S. light vehicles.
Certainly that was the case last month as unit vehicle sales slipped
2.3% during June to 9.69 million units (AR). That followed a 6.4% rise
during May. Since February vehicle sales have risen all of 11.7% (3.0%
since January) and recouped just a fraction of last year's 35.6%
decline from December-to-December.&nbsp;
Unit sales of
U.S. made light vehicles fell 3.7% to 6.99M units and
remained near the lowest since 1982 according to the Autodata
Corporation and Ward's Automotive News. (Seasonal adjustment of the
figures is provided by the U.S. Bureau of Economic Analysis). Sales of
domestically made light trucks fell 7.3% last month to 3.71M units
while auto sales ticked up 0.8% m/m to 3.27M units. Sales of domestic
vehicles YTD are down 17.3% following last year's 35.3% flop from
December-to-December.

<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090702b.jpg" align="right" border="0" height="265" width="353">Imported
light vehicle sales
were a bit firmer and posted a 1.5% m/m June increase. Working the
other way versus domestic sales they are up 5.8% year-to-date after the
36.4% 2008 decline. Nevertheless, sales at 2.70M units remained near
their lowest level in roughly ten years. June sales of imported autos
rose 5.1% and were up by more than one-quarter from the December low
while sales of imported light trucks fell 5.3% and gave back most of a
May increase. Sales of imported vehicles YTD have increased 5.8% but
they more than halved last year Dec./Dec.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090702c.jpg" align="right" border="0" height="265" width="353">Overall,
import's share of the U.S. light vehicle market increased to
27.9% last month after reaching 26.3% during all of last year.
(Imported vehicles are those produced outside the United States.)
Imports' share of the U.S. car market totaled 35.9%, up slightly from
the 2008 average, while the share of the light truck market was 18.9%,
roughly equal to last year.
The U.S. vehicle sales
figures can be found in Haver's USECON database.
A View of the Economic Crisis and the Federal
Reserve&#8217;s Response is yesterday's speech by
Janet L. Yellen, President of the Federal Reserve Bank of San Francisco
and it can be found <a href="http://www.frbsf.org/news/speeches/2009/0630.pdf">here</a>.&nbsp;
<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/@ED/@ED09/@ED0901/@ED0901.HTM">Light
Vehicle Sales (SAAR, Mil. Units)</a></th>
<th scope="col">June</th>
<th scope="col">May</th>
<th scope="col">April</th>
<th scope="col">June Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>9.69</td>
<td>9.91</td>
<td>9.32</td>
<td>-29.2%</td>
<td>13.17</td>
<td>16.16</td>
<td>16.54</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Autos</td>
<td>5.11</td>
<td>4.99</td>
<td>4.81</td>
<td>-31.9</td>
<td>6.71</td>
<td>7.58</td>
<td>7.77</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Domestic</td>
<td>3.27</td>
<td>3.25</td>
<td>3.11</td>
<td>-30.5</td>
<td>4.42</td>
<td>5.07</td>
<td>5.31</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Imported</td>
<td>1.83</td>
<td>1.74</td>
<td>1.70</td>
<td>-34.3</td>
<td>2.29</td>
<td>2.52</td>
<td>2.45</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Light Trucks</td>
<td>4.58</td>
<td>4.92</td>
<td>4.51</td>
<td>-25.9</td>
<td>6.47</td>
<td>8.60</td>
<td>8.78</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Domestic</td>
<td>3.71</td>
<td>4.01</td>
<td>3.67</td>
<td>-26.5</td>
<td>5.29</td>
<td>7.10</td>
<td>7.42</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Imported</td>
<td>0.87</td>
<td>0.91</td>
<td>0.84</td>
<td>-23.3</td>
<td>1.18</td>
<td>1.47</td>
<td>1.37</td>
</tr>
</tbody>
</table>


U.S. Payrolls Decline Another
467,000 As Jobless Rate Increases To 9.5% 
by <a href="/comment/Moeller.html">Tom
Moeller</a> July 2, 2009


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090702e.jpg" align="left" border="0" height="265" width="353">
The Bureau of Labor Statistics indicated that the rate of job
loss continued to moderate last month, just not by as much as had been
anticipated. Nonfarm payrolls fell 467,000 during
June after a 322,000 worker decline, revised from -345,000, during May.
The June drop was deeper than the market's expectations for a 350,000
shortfall. During this recession so far employment has fallen by a
total of 6.5 million, the record for an 18-month period. In percentage
terms jobs are down 4.7% since the 2007 peak, also an 18-month record.
The moderation is apparent in the 436,000 average monthly decline
during the last three versus a peak three-month rate of 701,000 this
past Winter.
The latest data from the payroll survey give insight into real
GDP growth last quarter. Combined with the lessened decline in
employment is a shorter length of the average workweek. Together, this
measure of aggregate hours worked fell at a 7.9% annual rate versus an
8.9% 1Q drop. That drop was associated with negative 5.5% real GDP
growth. Therefore the 2Q GDP rate of decline likely eased, perhaps
sharply depending on productivity growth. During the last twenty years,
there has been a 68% correlation between growth in hours worked and in
real GDP.
Another indication of moderation in the economy's rate of
decline was that the unemployment rate only ticked
up slightly. The rise to 9.5% from 9.4% in May was, however, to the
highest level since August of 1983. The rate's cycle low of 4.4%
occurred in October 2006. Last month employment fell hard again, though
here again the rate of decline eased. The 374,000 drop (-3.8% y/y)
compared to a peak 1.2 million monthly decline this past January. The
labor force fell 155,000 (0.3% y/y). Though the rate of job loss
slowed, it also is increasingly difficult for the unemployed to find
work. The average duration of unemployment rose during June to a new
record of 24.5 weeks from an average of 17.8 weeks during 2008.
Also from the household survey was the continued indication
that 5.9 million discouraged workers want a job now but are not in the
labor force. That figure is up 19.5% from last June and near the
highest since 1995. Finally, the labor force participation rate, i.e.,
the number of eligible workers who are in the labor force stands at
65.7%, down from the 2000 high of 67.1%.
Back in the establishment survey, the easing in the rate of
job loss last month continued evident in slower declines in
construction and in services jobs. The construction sector lost 79,000
workers last month after a 48,000 May decline. Monthly drops in excess
of 100,000 were common during the prior six. Private service sector job
loss also moderated, but just slightly. They fell 192,000 last month
after a 97,000 decline May drop. These compare to declines between
196,000 and 399,000 since last September. Losses eased sharply in the
retail trade area, in the financial sector and in leisure &amp;
hospitality industries. The rate of job loss in the factory sector also
eased, but just barely. Factory sector jobs fell 136,000 last month and
by an average 147,000 during the last three. That compares with a
205,000 rate of job loss this Winter.
In the government sector there were 52,000 jobs lost last
month and they're up just 4,000 this year. That's after the 162,000
worker increase during 2008.Jobs with the Federal government fell by
49,000 (+1.5% y/y) for the second consecutive monthly decline. The
number of state gov't jobs fell 4,000 (+0.3% y/y) but local gov't jobs
inched up 1,000. Nevertheless, local gov't jobs are down by 0.2% y/y,
the first material decline since 1983. Should the federal
government bail out the states? Lessons from past recessions
from the Federal Reserve Bank of Chicago can be found <a href="http://www.chicagofed.org/publications/fedletter/cflaugust2009_265.pdf">here</a>.
Not only is the labor market weak in the major categories, but
the full breadth of decline shows even greater distress. Overall, only
28.6% of industries posted job gains last month, up from the March low
of 19.6%. However, over the last six months just 18.1% of firms posted
job growth, up little from the record low since 1990. In the factory
sector 13.9% of firms posted job gains and only 6.0% did over the last
six months. Both these figures were up from the lows, but just slightly.
Workers' earning power continued to suffer last month from all
the hiring distress. Average hourly earnings were unchanged in June for
the second month in the last three. That weakness pulled the
three-month rate of growth to a record low of just 0.7% (AR). Earnings
in the factory sector slipped for the second month and the three-month
growth rate dropped to -0.2%. That's versus a late-2008 growth rate of
5.0%. Growth in the durable sector's earnings (NSA) has turned negative
over the last three months as have earnings in the private service
sector.
The figures referenced above are available in Haver's USECON
database. Additional detail can be found in the LABOR and
in the EMPL databases.

<table border="0" cellspacing="0" width="100%">
<tbody>
<tr>
<td><img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090702f.jpg" border="0" height="265" width="353"><img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090702g.jpg" border="0" height="265" width="353"><img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090702h.jpg" border="0" height="265" width="353"></td>
</tr>
</tbody>
</table>
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">Employment:
000s</th>
<th scope="col">June</th>
<th scope="col">May</th>
<th scope="col">April</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Payroll Employment</td>
<td>-467</td>
<td>-322</td>
<td>-519</td>
<td>-4.1%</td>
<td>-0.4%</td>
<td>1.1%</td>
<td>1.8%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Previous</td>
<td>--</td>
<td>-345</td>
<td>-504</td>
<td>--</td>
<td>--</td>
<td>--</td>
<td>--</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Manufacturing</td>
<td>-136</td>
<td>-156</td>
<td>-150</td>
<td>-12.2%</td>
<td>-3.3%</td>
<td>-2.0%</td>
<td>-0.5%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Construction</td>
<td>-79</td>
<td>-48</td>
<td>-103</td>
<td>-13.7%</td>
<td>-5.5%</td>
<td>-0.8%</td>
<td>4.9%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Service Producing</td>
<td>-244</td>
<td>-107</td>
<td>-252</td>
<td>-2.6%</td>
<td>0.2%</td>
<td>1.6%</td>
<td>1.8%</td>
</tr>
<tr>
<td class="firstcol">Average Weekly Hours</td>
<td>33.0</td>
<td>33.1</td>
<td>33.1</td>
<td>33.6 (June '08)</td>
<td>33.6</td>
<td>33.8</td>
<td>33.9</td>
</tr>
<tr class="odd">
<td class="firstcol">Average Hourly Earnings</td>
<td>0.0%</td>
<td>0.2%</td>
<td>0.0%</td>
<td>2.7%</td>
<td>3.8%</td>
<td>4.0%</td>
<td>3.9%</td>
</tr>
<tr>
<td class="firstcol">Unemployment Rate</td>
<td>9.5%</td>
<td>9.4%</td>
<td>8.9%</td>
<td>5.6% (June '08)</td>
<td>5.8%</td>
<td>4.6%</td>
<td>4.6%</td>
</tr>
</tbody>
</table>
</body></html>

U.S. Light Vehicle Sales In JuneHold A Steady, Sideways Movement

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/090701k.jpg" width="353">
Construction outlays fell 0.9% in May, reverting to a decline after April&#39;s limp 0.6% increase. That was revised from a 0.8% rise and March was revised to a 0.4% decrease from a 0.4% increase reported last month. This report included annual revisions, which began in January 2007; the level in 2007 was revised up slightly. For 2008, several months are lower than before, but the steepness of the late-year decline was moderated, leaving recent levels basically unchanged from previous reports.
Private nonresidential building outlays remain a main support to overall construction, with a 0.5% gain in May following 1.3% in April. However, the historical revisions cut earlier months, and the sector has shown year-to-year declines now since January. May was down 3.3% from a year ago.This masks divergent trends among divisions: communications are off 28.3% from May 2008 but transportation is now up 5.9%, its first year/year increase this year after a steep drop during the winter. Office construction, with a tiny 0.1% rise in May, may be stabilizing after a continuous month/month contraction since last September; year-on-year, it is off 18.2%. The most traditional forms of private nonresidential construction, power plants and manufacturing facilities, are expanding, with power up 12.0% from a year ago and manufacturing a strong 55.6%. <img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090701l.jpg" width="353">
Residential building activity continues weak. It fell 3.4% month-to-month in May and April&#39;s previously reported 0.7% increase was revised to a 0.3% cut. Year-on-year, it is off 33.9%. The best we can say is that this last figure is a bit less severe than April&#39;s initially reported 35% drop. Single-family home construction is down 54.1% y/y, although May&#39;s monthly performance was down &quot;just&quot; 4.5%, the smallest decline since last August.
Public construction edged down in May by 0.6%, while April&#39;s previously reported 0.6% decrease was revised to a 0.2% rise and March&#39;s 1.0% increase is now calculated at 2.2%. Year-on-year, public sector activity is up 3.4%, little different from the prior report of 3.3%. By type, spending on highways and streets is ratcheting lower, with May down 1.3% from April and 0.5% from May 2008. Education, the other big category, has, by contrast, been gaining in most months so far this year; May was up 0.4% on the month and 4.7% on the year. School-building has, with occasional interruption, sustained an uptrend through much of the last five or six years.
The construction put-in-place figures are available in Haver&#39;s USECON database.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">Construction (%)</th>
<th scope="col">May</th>
<th scope="col">April</th>
<th scope="col">March</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>-0.9</td>
<td>0.6</td>
<td>-0.4</td>
<td>-11.6</td>
<td>-6.9</td>
<td>-1.6</td>
<td>6.3</td>
</tr>
<tr>
<td class="firstcol">Private</td>
<td>-1.0</td>
<td>0.8</td>
<td>-1.6</td>
<td>-17.4</td>
<td>-11.1</td>
<td>-5.7</td>
<td>5.5</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Residential</td>
<td>-3.4</td>
<td>-0.3</td>
<td>-4.6</td>
<td>-33.9</td>
<td>-29.1</td>
<td>-19.7</td>
<td>1.0</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Nonresidential</td>
<td>0.5</td>
<td>0.2</td>
<td>0.4</td>
<td>-3.3</td>
<td>13.2</td>
<td>23.1</td>
<td>16.2</td>
</tr>
<tr>
<td class="firstcol">Public</td>
<td>-0.6</td>
<td>-0.6</td>
<td>2.2</td>
<td>3.4</td>
<td>5.6</td>
<td>13.1</td>
<td>9.3</td>
</tr>
</tbody>
</table>
</body>
</html>

Construction outlays fell 0.9% in May, reverting to a decline after April's limp 0.6% increase. That was revised from a 0.8% rise and March was revised to a 0.4% decrease from a 0.4% increase reported last month. This report included [...]

U.S. Construction Spending Holding Steady

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090701h.jpg" align="right" border="0" height="265" width="353">While
a turn to positive growth in employment still is not at hand, the June
report from the payroll processor ADP in their National Employment
Report again showed an easing in the rate of contraction. It indicated
that private nonfarm payrolls fell 473,000 last month after a revised
485,000 May decline that was shallower than reported initially. The
latest reading was the seventeenth consecutive monthly decline, but the
annualized rate of decline in payrolls eased somewhat to 5.2% during
the last three months from its peak of 7.1% in March.ADP compiled the estimate from its
database of individual companies' payroll information. Macroeconomic
Advisers, LLC, the St. Louis economic consulting firm, developed the
methodology for transforming the raw data into an economic
indicator.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090701i.jpg" align="right" border="0" height="265" width="353">The
U.S. Bureau of Labor Statistics will report June payroll employment
tomorrow. For comparison, May's
485,000 worker decline in ADP's measure of private nonfarm payrolls was
accompanied by 338,000 job losses in the BLS measure of private sector
payrolls.According to
ADP and Macro-Advisers, the correlation between the monthly percentage
change in the ADP estimate and that in the BLS data is 0.90.
ADP reported that last month smaller
medium-sized payrolls remained in forefront of monthly job loss and
fell another 205,000 (-5.6% y/y) followed by a 177,000 (-4.2% y/y)
worker decline in small-sized payrolls. Large payrolls fell by 91,000
(-5.5% y/y). In the goods producing sector there were 250,000 fewer
jobs in June (-12.7% y/y). Details in the goods sector show that
medium-sized payrolls fell 108,000 (-13.2% y/y) followed by a 90,000
(-12.0% y/y) shortfall in small-sized payrolls. Large payrolls fell
52,000 (-12.8% y/y). In the manufacturing sector alone, payrolls fell
146,000 (-12.5% y/y).
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090701j.jpg" border="0" height="265" width="353">Declines in employment in
the service producing industry continued to
lag just slightly the factory sector's workforce contraction with a
223,000 (-3.1% y/y) decline, the fifteenth consecutive monthly decline.
Medium-sized service payrolls fell 97,000 (-3.5% y/y) and small-sized
payrolls dropped 87,000 (-2.7% y/y). Large service producing payrolls
dropped by 39,000 (-3.4% y/y).
The
ADP National Employment Report data is maintained in Haver's USECON
database; historical figures date back to December 2000. The figures in
this report cover only private sector jobs and exclude employment in
the public sector, which rose an average 11,083 during the last twelve
months.
The full ADP
National Employment Report can be found <a href="http://www.adpemploymentreport.com/pdf/FINAL_Report_June_09.pdf">here</a>
,and the ADP methodology is
explained <a href="http://www.adpemploymentreport.com/PDF/ADPNERMethodology.pdf" title="blocked::http://www.adpemploymentreport.com/PDF/ADPNERMethodology.pdf">here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EB/@EB25/@EB25.HTM">LAXEPA@USECON</a></th>
<th scope="col">June</th>
<th scope="col">May</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Nonfarm Private Payroll
Employment (m/m Chg.)</td>
<td>-473,000</td>
<td>-485,000</td>
<td>-4.9%</td>
<td>-0.4</td>
<td>1.2%</td>
<td>2.0%</td>
</tr>
</tbody>
</table>


</body></html>

While a turn to positive growth in employment still is not at hand, the June report from the payroll processor ADP in their National Employment Report again showed an easing in the rate of contraction. It indicated that private [...]

ADP Report: Rate Of Job Loss Lessens A Bit

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090701f.jpg" width="353">
The moderate rebound in housing activity continued last month. The National Association of Realtors reported that May pending sales of existing homes held roughly stable with April at the highest level since last September. Consensus expectations had been for a slight 0.5% increase in May sales.
Last month&#39;s stability in overall home sales was reflective of gains in two of the country&#39;s regions and declines in the other two. In the Northeast sales rose slightly to the highest level since November of 2007. In the West sales recovered further from the February low. Elsewhere, sales in the Midwest fell slightly but were at their highest since mid-2007 while sales in the South fell as well m/m.
The home sales figures are analogous to the new home sales data from the Commerce Department in that they measure existing home sales when the sales contract is signed, not at the time the sale is closed. The series dates back to 2001.
The latest monthly gains in home sales have been accompanied by some stability in home prices. The median sales price of an existing home increased 3.8% in May (-16.8% y/y) and prices have been flat-to-up slightly so far this year. That latest increase reduced slightly the affordability index of a home but it nevertheless remained up by 32.2% year-to-year and by three quarters from the 2006 low. The latest level was near the record high for the series which extends back to 1970.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090701g.jpg" width="353">
The Realtors Association indicated in an earlier report that the number of homes on the market and available for sale slipped m/m and was down 15.3% versus one year earlier. At the current sales rate there was a 9.6 months&#39; supply of homes on the market which was near the lowest since August 2007 but still up from the 8.9 months supply during all of 2007 and 6.5 months during 2006. At the high, there was a 10.4 months supply during all of last year.
The pending home sales data are available in Haver&#39;s PREALTOR database. The number of homes on the market and prices are in the REALTOR database.
Bank Credit Standards from the Federal Reserve Bank of Philadelphia is available <a href="http://www.philadelphiafed.org/research-and-data/publications/business-review/2009/q2/brq209_bank-credit-standards.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/WEEKLY/@W5/@W507/@W507.HTM">Pending Home Sales (2001=100)&nbsp;</a></th>
<th scope="col">May</th>
<th scope="col">April</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006&nbsp;</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>90.7</td>
<td>90.6</td>
<td>&nbsp;&nbsp; 6.7%</td>
<td>86.8</td>
<td>95.8</td>
<td>112.1&nbsp;</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Northeast</td>
<td>80.9</td>
<td>78.5</td>
<td>6.7</td>
<td>72.6</td>
<td>85.6</td>
<td>98.5</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Midwest</td>
<td>89.2</td>
<td>90.4</td>
<td>11.5</td>
<td>80.6</td>
<td>89.5</td>
<td>102.0</td>
</tr>
<tr>
<td class="firstcol">&nbsp; South</td>
<td>92.6</td>
<td>94.2</td>
<td>7.9</td>
<td>89.8</td>
<td>107.3</td>
<td>127.3</td>
</tr>
<tr>
<td class="firstcol">&nbsp; West</td>
<td>96.9</td>
<td>94.8</td>
<td>0.7</td>
<td>99.3</td>
<td>92.1</td>
<td>109.5</td>
</tr>
</tbody>
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The moderate rebound in housing activity continued last month. The National Association of Realtors reported that May pending sales of existing homes held roughly stable with April at the highest level since last September. Consensus [...]

U.S. Pending Home Sales Stable At Their Highest Level Since September

Robert Brusca

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090701e.jpg" align="left" border="0" height="265" width="353">
The percentile readings on the far right of the table tell the
real story. A bottom 12 percentile range result is about the strongest
reading for any component except for the outlook surveys where the
standing is a 20% to 30% result or worse for small firms. These are
still very weak numbers for Japan. 
 

Large-, small- and medium-sized firms all show some
improvement in the quarter. For small firms the outlook mostly
deteriorated, in contrast with the other firms&#8217; views. The closely
watched large firm survey shows MFG firms are doing better than non MFG
firms in terms the their respective range percentile readings, although
the raw readings make it seem as though the non MFG firms are doing
better. Their raw response while higher than those for MFG, sit lower
in its range that the MFG response sits in its range. 
 

Three non MFG sectors, wholesale, retail, and transportation,
managed to improve quarter-to-quarter. MFG improved as well. The rest
worsened. It&#8217;s a poor showing despite the improvement in the quarter. 
 
 


<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol" colspan="8">Tankan
Results Large Enterprises</th>
</tr>
</thead>
<tbody>
<tr class="grey4">
<td class="firstcol">&nbsp;</td>
<td colspan="4">Readings</td>
<td colspan="2">Averages</td>
<td>PERCENTILES</td>
</tr>
<tr class="grey3">
<td class="firstcol">&nbsp;</td>
<td>Q2-09</td>
<td>Q1-09</td>
<td>Q4-08</td>
<td>Q3-08</td>
<td>1-Y Avg</td>
<td>Since Q3'03</td>
<td>Since Q1'04</td>
</tr>
<tr class="grey4">
<td class="firstcol">MFG</td>
<td>-48.0</td>
<td>-58.0</td>
<td>-24.0</td>
<td>-3.0</td>
<td>-53.0</td>
<td>8.2</td>
<td>11.9%</td>
</tr>
<tr class="grey4">
<td class="firstcol">NonMFG</td>
<td>-29.0</td>
<td>-31.0</td>
<td>-9.0</td>
<td>1.0</td>
<td>-30.0</td>
<td>9.6</td>
<td>3.8%</td>
</tr>
<tr class="grey4">
<td class="firstcol">Total Industry</td>
<td>-39.0</td>
<td>-45.0</td>
<td>-16.0</td>
<td>0.0</td>
<td>-42.0</td>
<td>8.8</td>
<td>8.8%</td>
</tr>
<tr class="grey4">
<td class="firstcol">Construction</td>
<td>-29.0</td>
<td>-27.0</td>
<td>-10.0</td>
<td>-7.0</td>
<td>-28.0</td>
<td>-5.4</td>
<td>0.0%</td>
</tr>
<tr class="grey4">
<td class="firstcol">Real Estate</td>
<td>-24.0</td>
<td>-21.0</td>
<td>-7.0</td>
<td>5.0</td>
<td>-22.5</td>
<td>25.6</td>
<td>0.0%</td>
</tr>
<tr class="grey4">
<td class="firstcol">Wholesale</td>
<td>-41.0</td>
<td>-44.0</td>
<td>-7.0</td>
<td>11.0</td>
<td>-42.5</td>
<td>10.7</td>
<td>4.4%</td>
</tr>
<tr class="grey4">
<td class="firstcol">Retail</td>
<td>-39.0</td>
<td>-42.0</td>
<td>-18.0</td>
<td>-5.0</td>
<td>-40.5</td>
<td>0.7</td>
<td>5.2%</td>
</tr>
<tr class="grey4">
<td class="firstcol">Transportation</td>
<td>-43.0</td>
<td>-46.0</td>
<td>-7.0</td>
<td>6.0</td>
<td>-44.5</td>
<td>8.3</td>
<td>4.3%</td>
</tr>
<tr class="grey4">
<td class="firstcol">Services 4 Biz</td>
<td>-30.0</td>
<td>-21.0</td>
<td>-1.0</td>
<td>4.0</td>
<td>-25.5</td>
<td>17.4</td>
<td>0.0%</td>
</tr>
<tr class="grey4">
<td class="firstcol">Personal Serv</td>
<td>-11.0</td>
<td>-9.0</td>
<td>-11.0</td>
<td>6.0</td>
<td>-10.0</td>
<td>7.6</td>
<td>0.0%</td>
</tr>
<tr class="grey4">
<td class="firstcol">Restaurants &amp; Hotels</td>
<td>-46.0</td>
<td>-45.0</td>
<td>-32.0</td>
<td>-13.0</td>
<td>-45.5</td>
<td>-0.8</td>
<td>0.0%</td>
</tr>
<tr class="grey2">
<td colspan="8">Forecast</td>
</tr>
<tr class="grey3">
<td class="firstcol">&nbsp;</td>
<td>Q3-09</td>
<td>Q2-09</td>
<td>Q1-09</td>
<td>Q4-08</td>
<td>1-Y Avg</td>
<td>Since Q3'03</td>
<td>Since Q1'04</td>
</tr>
<tr class="grey4">
<td class="firstcol">MFG-OtLk</td>
<td>-30.0</td>
<td>-51.0</td>
<td>-36.0</td>
<td>-4.0</td>
<td>-30.3</td>
<td>7.9</td>
<td>28.8%</td>
</tr>
<tr class="grey4">
<td class="firstcol">NonMFG -Otlk</td>
<td>-21.0</td>
<td>-30.0</td>
<td>-14.0</td>
<td>-1.0</td>
<td>-16.5</td>
<td>9.8</td>
<td>17.0%</td>
</tr>
<tr class="grey4">
<td class="firstcol">All Industry-Otlk</td>
<td>-26.0</td>
<td>-41.0</td>
<td>-25.0</td>
<td>-2.0</td>
<td>-23.5</td>
<td>8.7</td>
<td>23.8%</td>
</tr>
<tr class="grey1">
<td colspan="8">Tankan Results Medium
Enterprises</td>
</tr>
<tr class="grey3">
<td class="firstcol">&nbsp;</td>
<td>Q2-09</td>
<td>Q1-09</td>
<td>Q4-08</td>
<td>1-Y Avg</td>
<td>1-Y Avg</td>
<td>Since Q3'03</td>
<td>Since Q1'04</td>
</tr>
<tr class="grey4">
<td class="firstcol">MFG</td>
<td>-55.0</td>
<td>-57.0</td>
<td>-24.0</td>
<td>-36.0</td>
<td>-36.0</td>
<td>-3.7</td>
<td>2.7%</td>
</tr>
<tr class="grey4">
<td class="firstcol">NonMFG</td>
<td>-36.0</td>
<td>-37.0</td>
<td>-21.0</td>
<td>-26.5</td>
<td>-26.5</td>
<td>-6.3</td>
<td>2.2%</td>
</tr>
<tr class="grey2">
<td colspan="8">Forecast</td>
</tr>
<tr class="grey3">
<td class="firstcol">&nbsp;</td>
<td>Q3-09</td>
<td>Q2-09</td>
<td>Q1-09</td>
<td>Q4-08</td>
<td>1-Y Avg</td>
<td>Since Q3'03</td>
<td>Since Q1'04</td>
</tr>
<tr class="grey4">
<td class="firstcol">MFG-OtLk</td>
<td>-46.0</td>
<td>-61.0</td>
<td>-45.0</td>
<td>-12.0</td>
<td>-41.0</td>
<td>-5.7</td>
<td>20.0%</td>
</tr>
<tr class="grey4">
<td class="firstcol">NonMFG -Otlk</td>
<td>-32.0</td>
<td>-45.0</td>
<td>-32.0</td>
<td>-17.0</td>
<td>-31.5</td>
<td>-8.1</td>
<td>25.0%</td>
</tr>
<tr class="grey4">
<td class="firstcol">All Industry-Otlk</td>
<td>-39.0</td>
<td>-51.0</td>
<td>-38.0</td>
<td>-15.0</td>
<td>-35.8</td>
<td>-7.3</td>
<td>19.7%</td>
</tr>
<tr class="grey1">
<td colspan="8">Tankan Results Small
Enterprises</td>
</tr>
<tr class="grey3">
<td class="firstcol">&nbsp;</td>
<td>Q3-09</td>
<td>Q2-09</td>
<td>Q1-09</td>
<td>Q4-08</td>
<td>1-Y Avg</td>
<td>Since Q3'03</td>
<td>Since Q1'04</td>
</tr>
<tr class="grey4">
<td class="firstcol">MFG</td>
<td>-57.0</td>
<td>-57.0</td>
<td>-29.0</td>
<td>-57.0</td>
<td>-57.0</td>
<td>-10.5</td>
<td>0.0%</td>
</tr>
<tr class="grey4">
<td class="firstcol">NonMFG</td>
<td>-44.0</td>
<td>-42.0</td>
<td>-29.0</td>
<td>-43.0</td>
<td>-43.0</td>
<td>-17.6</td>
<td>0.0%</td>
</tr>
<tr class="grey4">
<td class="firstcol">Total Industry</td>
<td>-44.0</td>
<td>-42.0</td>
<td>-29.0</td>
<td>-43.0</td>
<td>-43.0</td>
<td>-17.6</td>
<td>0.0%</td>
</tr>
<tr class="grey2">
<td colspan="8">Forecast</td>
</tr>
<tr class="grey3">
<td class="firstcol">&nbsp;</td>
<td>Q3-09</td>
<td>Q2-09</td>
<td>Q1-09</td>
<td>Q4-08</td>
<td>1-Y Avg</td>
<td>Since Q3'03</td>
<td>Since Q1'04</td>
</tr>
<tr class="grey4">
<td class="firstcol">MFG-OtLk</td>
<td>-53.0</td>
<td>-63.0</td>
<td>-48.0</td>
<td>-25.0</td>
<td>-47.3</td>
<td>-12.4</td>
<td>13.9%</td>
</tr>
<tr class="grey4">
<td class="firstcol">NonMFG -Otlk</td>
<td>-45.0</td>
<td>-52.0</td>
<td>-42.0</td>
<td>-31.0</td>
<td>-42.5</td>
<td>-21.6</td>
<td>15.9%</td>
</tr>
<tr class="grey4">
<td class="firstcol">All Industry-Otlk</td>
<td>-48.0</td>
<td>-56.0</td>
<td>-44.0</td>
<td>-29.0</td>
<td>-44.3</td>
<td>-18.3</td>
<td>14.8%</td>
</tr>
</tbody>
</table>
</body></html>

The percentile readings on the far right of the table tell the real story. A bottom 12 percentile range result is about the strongest reading for any component except for the outlook surveys where the standing is a 20% to 30% result [...]

Tankan Improves: Still In Slow-Motion

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

US production rebounded in Q2, but demand continued to slow

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

Negative US inflation surprises leading G10 down

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Winnie Tapasanun

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Industrial production (IP) rose a more-than-expected 0.4% m/m in December following a 0.4% rise in November (+0.2% initially) and a 0.3% decline in October (-0.1% previously), data from the Federal Reserve Board showed. December marked the third m/m gain in four months. A 0.1% m/m December increase had been expected in the Action Economics Forecast Survey. The year-on-year growth rate slowed to 2.0% in December, the lowest since September, from 2.5% in November; this compared with a 0.3% y/y decline in December 2024. The December IP index at 102.3 was 3.1% above a low of 99.2 in January 2024. IP rose 0.2% q/q in Q4 2025 after a 0.6% q/q gain in Q3 2025, increasing at a 0.7% annualized rate following a 2.3% Q3 annualized pace. In 2025, IP rose 1.3% after declines of 0.7% in 2024 and 0.2% in 2023.

By **industry groups**, manufacturing production grew 0.2% (2.0% y/y) in December, up for the third time in four months, following a 0.3% increase in November (0.0% initially) and a 0.6% drop in October (-0.4% previously). Durable goods production edged up 0.1% (3.1% y/y) in December, the first m/m increase since September, after a 0.1% downtick in November. Within durables, the following categories rose m/m in December, including output rises of 2.4% (3.5% y/y) in primary metals, 1.7% (1.3% y/y) in electrical equipment, appliances & components, 1.5% (17.2% y/y) in aerospace & miscellaneous transportation equipment, 0.8% (-2.2% y/y) in furniture & related products, 0.2% (4.8% y/y) in machinery, and 0.1% (7.4% y/y) in computer & electronic products. Notably, aircraft & parts production climbed 2.1% (30.0% y/y), the third m/m increase in four months, reversing a 2.1% November drop. To the downside, the following durable goods categories fell m/m in December, including drops of 2.3% (-5.5% y/y) in wood products, 1.1% (-2.8% y/y) in motor vehicles & parts, 1.1% (-1.0% y/y) in nonmetallic mineral products, 0.1% (+2.6% y/y) in fabricated metal products, and 0.1% (-3.7% y/y) in miscellaneous durables goods.

Nondurable goods production increased 0.3% (1.0% y/y) in December, the third m/m gain in four months, after a 0.8% rebound in November. The December increase reflected m/m output rises of 1.8% (2.1% y/y) in petroleum & coal products, 0.5% (1.9% y/y) in food, beverages & tobacco, and 0.3% (-0.2% y/y) in plastics & rubber products. In contrast, the following nondurable goods categories declined m/m in December, including output drops of 1.3% (-0.8% y/y) in textiles & product mills, 1.1% (-0.5% y/y) in apparel & leather goods, 0.3% (-3.1% y/y) in paper, 0.3% (-3.4% y/y) in printing & related support activities, and 0.1% (+1.6% y/y) in chemicals.

Utilities output recovered 2.6% (2.3% y/y) in December, the third m/m rise in four months, following a 0.3% decline in November (-0.4% initially), reflecting a 1.2% rebound (1.3% y/y) in electric utilities output and a 12.0% jump (8.7% y/y) in natural gas utilities output. Mining activity, however, fell 0.7% (+1.7% y/y), the third m/m slide in four months, after an unrevised 1.7% November gain.

By **market groups**, business equipment output advanced 0.8% (10.1% y/y) in December, up for the third time in four months, after a 0.3% increase in November. Consumer goods output rose 0.7% (0.7% y/y) after a 0.7% November rebound, reflecting a 0.7% decline (-3.5% y/y) in durable consumer goods and a 1.1% gain (1.8% y/y) in nondurable consumer goods. Materials production grew 0.2% (1.7% y/y), the third m/m increase in four months, after a 0.5% November rise. In contrast, construction supplies production fell 0.3% (+1.3% y/y) in December, the second m/m fall in three months, reversing a 0.3% increase in November.

In **special classifications**, factory output of selected high-tech industries increased 0.7% (10.9% y/y) in December, the third successive m/m gain, following a downwardly revised 0.5% rise in November (+1.1% initially). Manufacturing production excluding selected high-tech industries rose 0.2% (1.7% y/y) in December after a 0.3% gain in November, and manufacturing production excluding selected high-tech and motor vehicles & parts rose 0.3% (2.1% y/y) after a 0.4% increase; both measures posted their third m/m gain in four months.

Capacity utilization rose to 76.3% in December, the highest since July, from 76.1% in November (76.0% initially). The Action Economics Forecast Survey forecasted 76.0%. The December reading was 3.2 percentage points below its long-run (1972–2024) average. Manufacturing capacity utilization held at 75.6% in December and November (75.4% previously); the December rate was 2.6 percentage points below its long-run average.

Industrial production and capacity data are in Haver’s **USECON** database. Additional detail on production and capacity utilization can be found in the **IP** database. The expectations figures come from the **AS1REPNA** database.

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260116U23.jpg

- December IP +0.4% (+2.0% y/y), third m/m rise in four months, led by a 2.6% gain in utilities.
- Manufacturing +0.2% (+2.0% y/y), w/ durables +0.1% and nondurables +0.3%.
- Selected high-tech +0.7%, third consecutive m/m rise; motor vehicles -1.1%, fourth straight m/m fall.
- Mining -0.7%, third m/m decline in four months.
- Key categories in market groups mostly increase.
- Capacity utilization at a five-month-high 76.3%; mfg. capacity utilization steady at 75.6%.

U.S. Industrial Production Increases in December on Utilities Rebound

260116E.jpg

The European Monetary Union has concluded a year of weak-to-moderate growth with inflation largely toeing the line. As always, the inflation picture is more complicated than a simple statement. When we look at inflation, we look at the headline, we look at the core, to make sure that the volatile food & energy elements aren't dominating the index, and then we look across some of the main participants to see if the trend for inflation is shared broadly across the largest countries in the Monetary Union. When we apply those kinds of standards, the grading for the year is reduced. However, based on the headline alone, it was an excellent year for the ECB.

**Headline Inflation in 2025**
Headline inflation in 2025 rose by 2%, exactly on the target of the European Central Bank. It rose over six months at a 2% annual rate and then concluded the year over the last three months, rising at a 1.6% annual rate with some margin below the target set by the central bank itself.

**Country Headline Inflation Trends**
On a country basis, the performance is not nearly as good. While year-on-year results look pretty good, with Germany at 2%, France at 0.7% and Italy at 1.3%, Spain comes in at 3.1%. So the three largest monetary union economies come in at or below 2% with Spain as a rogue observation. When we look further at the sequence of inflation within the year, we see Germany at 2% over 12 months, rising to 3.1% over 6 months, rising further to 4% over 3 months. Inflation is accelerating at the end of the year even as Germany hits the target! This is something to keep an eye on. For France, the inflation rate also accelerates slightly but stays below the bar of 2% over three months, six months, and 12 months. For Italy, inflation is decelerating from 1.3% over 12 months to -0.3% over six months, and then inflation in Italy is contracting at a 1.9% annual rate over three months. Spanish inflation shows clear trouble with a 3.1% 12-month pace, rising to 4.6% at an annual rate over six months, and rising further to 5.9% at an annual rate over three months.

**Core Inflation**
For core inflation, the Monetary Union’s consolidated numbers are not yet compiled. However, for the four largest economies, we do have core or ex-energy inflation. For Germany, it's inflation excluding energy. On that basis, German inflation is 2.2% over 12 months, it rises to 2.7% over six months, then falls back to a 2% annual pace over three months All-in-all not a bad performance. For France, core inflation is below 2% over 12 months, six months, and three months. In Italy, once again, we see inflation decelerating: Italian inflation is 2% over 12 months - right on the ECB target. It falls to a 1.3% annual rate over six months and then falls further to a 0.3% annual rate over three months. For Spain, the core has another very difficult story for the Monetary Union. Inflation is 2.7% over 12 months, it rises to 3.1% over six months and stays at an annual rate of about 3% over three months. This is too high and it looks stubborn, particularly because it is the core.

260116.jpg

**Across the Big Four**
On balance, what we see is that the ECB grades-out well, based on headline inflation and based on its sequential performance for the European economic union as a whole. But large countries, show headline inflation building some steam particularly in the largest economy, Germany, and in Spain, the smallest of the BIG-4 economies. Inflation is once again mixed in the Monetary Union with German and Spanish inflation too high and with French and Italian inflation running either at or below the 2% mark and with Italy showing a tendency towards weaker prices for both the headline and the core. The change in prices over these various periods shows inflation gets the most help from oil prices over 12 months where Brent, measured in euros, falls by 22.6%; over six months Brent prices fall by 37% at an annual rate; and over three months Brent oil prices are unchanged, so that the headline isn't getting help at all from oil prices except through lagged effects.

**Summing Up**
Meanwhile, there are some signs of stronger growth taking root in Europe, especially in Germany with better industrial production being logged and with German industrial production looking significantly stronger than the PMI data, suggesting that perhaps PMI data are missing something about the rebound that is developing. Nonetheless, it was a good year for inflation and the ECB; however, it doesn't exactly end the year in the catbird’s seat. On the other hand, it does not end the year behind the curve. There are scattered pressures and needs among member countries which always makes monetary policy difficult. When some countries need higher interest rates and others need lower interest rates, the ECB is in a difficult spot. Clearly, Spain and Germany are experiencing different phenomenon than France and Italy. That could be the policy challenge for the year ahead.

Europe

Big Four Inflation in EMU 2025-Final

Andrew Cates

**The growth consensus for 2026** 
Consensus growth forecasts for 2026 have continued to firm over the past six months, with upward revisions most pronounced in economies that are more directly exposed to the global AI investment cycle. Taiwan stands out, reflecting its central role in advanced semiconductor manufacturing and the spillovers from sustained AI-related capex across the global tech supply chain. The US has also seen a sizeable upgrade, consistent with strong domestic investment in AI infrastructure and data-centre capacity, alongside resilient demand for high-value tech services. Elsewhere in Asia, upgrades to South Korea and, to a lesser extent, China and India point to a broader regional benefit from the AI-driven electronics and capital-goods cycle, even as underlying macro conditions remain mixed. Canada has also seen modest upward revisions, likely reflecting its close integration with US investment trends. By contrast, revisions across much of Europe and Japan have been more muted, while forecasts for Russia remain under downward pressure.

260115Z1.jpg

**The next steps for central bank policy** 
Based on responses to the special questions in the latest Blue Chip survey, the chart highlights how uncertain panelists remain about the precise timing of the next policy move, even where there is broad agreement on direction. Expectations for both the Fed and the Bank of England are now loosely centred on March 2026 as the most likely window for the next easing step, but the spread of responses points to limited conviction and a high sensitivity to incoming data. By contrast, panelists continue to see the ECB as largely through its easing cycle, with a clear majority expecting any further move only later, if at all. The Bank of Japan remains the clear outlier: while further tightening is still the central expectation, views are split on timing, with panelists divided between a March move and a hike pushed beyond April 2026—highlighting ongoing uncertainty over the durability of domestic inflation and wage dynamics.

260115Z2.jpg

**The UK economy and BoE policy** 
While Blue Chip panelists remain divided on the precise timing of the Bank of England’s next policy cut, the latest run of UK data is tilting market expectations toward an earlier move. Economic releases have increasingly fallen short of expectations, a pattern that has coincided with a steady decline in short-dated gilt yields. The negative surprise profile reflects a combination of weak household demand and softer labour-market indicators. This has generated downside momentum in the data, reinforcing the case—at least from a market perspective—for earlier or deeper policy easing.

260115Z3.jpg

**The impact of Artificial Intelligence**
Responses to the special questions in the latest Blue Chip survey also suggest that panelists are divided over the timing of AI’s macroeconomic impact in the US. A sizeable share already reports seeing noticeable effects, consistent with the rapid pace of AI-related investment and adoption over the past year. At the same time, a similarly large group expects AI’s impact to become more evident only over the next one to three years, implying a belief that productivity and growth effects will materialise with a lag. These views are notable given that a majority of panelists continue to judge anticipated AI-related gains as being overstated in financial markets, underscoring the risk of disappointment—and potential equity market volatility—if realised outcomes fail to match elevated expectations.

260115Z4.jpg

**US business formation and productivity growth**
The chart points to a renewed pick-up in US productivity growth alongside a marked step-up in business applications, a combination that has naturally fuelled interest in the role of AI. The acceleration in output per hour over the past year coincides with a surge in corporate formations, potentially reflecting both heightened investment in new technologies and the emergence of new, AI-enabled business models. That said, productivity growth has historically been highly cyclical, often strengthening late in the cycle or during periods of labour hoarding and cost discipline, before fading again. As such, while AI may be contributing at the margin, it remains too early to conclude that the recent improvement marks a durable, technology-driven shift rather than another cyclical upswing.

260115Z5.jpg

**China’s export growth**
This week’s China trade data revealed that its export growth has continued to rotate away from the US and toward Europe and ASEAN, a pattern that has become more pronounced over the past year. While exports to the US have fallen sharply on a year-on-year basis, shipments to both Europe and ASEAN have held up markedly better, and in recent months have returned to positive growth. This divergence is consistent with the tightening of US trade policy toward China, including higher tariffs, expanded export controls and broader efforts to “de-risk” supply chains. By contrast, trade with Europe and ASEAN appears to be benefiting from trade diversion and re-routing, as Chinese firms redirect exports toward markets where barriers remain lower and supply-chain integration is deeper.

260115Z6.jpg

The global backdrop remains unsettled, reflected in rising gold prices amid geopolitical tensions—most recently around Venezuela—and renewed political noise, including questions over Federal Reserve independence. At the same time, however, many major equity indices remain at or close to all-time highs, buoyed by optimism around AI and reinforced by a run of relatively benign US inflation readings. Against this mixed backdrop, the charts this week point to a global outlook that is becoming more differentiated rather than uniformly weaker. Blue Chip forecasts for 2026 growth have edged higher over the past six months, with upgrades concentrated in economies most exposed to the AI investment cycle, notably the US and parts of Asia (chart 1). Central bank expectations remain fluid: while panelists broadly anticipate easing by the Fed and Bank of England, conviction around timing is limited, and the Bank of Japan remains an outlier with further tightening still expected (chart 2). In the UK, that uncertainty sits alongside a deteriorating data flow, with negative economic surprises increasingly tilting market expectations toward an earlier BoE rate cut (chart 3). Turning to the US, special questions highlight a divide over whether AI is already having a noticeable macro impact or whether its effects will emerge more gradually, a tension that mirrors concerns about over-optimism in financial markets (chart4). That debate is echoed in the recent pick-up in US productivity growth and the step-change in business formation—developments that may reflect AI-related dynamics but which also warrant caution given the historically cyclical nature of productivity (chart 5). Finally, China’s trade data point to a continued re-orientation of export growth away from the US and toward Europe and ASEAN, consistent with evolving US trade policy and broader supply-chain realignment (chart 6).

<iframe data-testid="embed-iframe" style="border-radius:12px" src="https://open.spotify.com/embed/episode/2mhM227WWeJJ6kRv7sJMiE?utm_source=generator" width="100%" height="152" frameBorder="0" allowfullscreen="" allow="autoplay; clipboard-write; encrypted-media; fullscreen; picture-in-picture" loading="lazy"></iframe>

Charts of the Week: Between Optimism and Uncertainty

Michael J. Moran

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260115K.jpg

The Bureau of Labor Statistics did not publish a report on export and import prices for October because of the government shutdown, and BLS was unable to construct statistics for October to include with the November report. The charts above have a gap in October, and the November figures are represented by a small dot.

Import prices have been remarkably stable in the past three years, as shown by the sideways movement in the level of the import price index (left chart). Focusing on percent changes (i.e. inflation rates) rather than the level of the index shows deflation in 2023 and early 2024 followed by higher prices more recently (right chart). Still, the net change in the past 12 months has totaled only 0.1% and the cumulative change in the past three years amounted to a decline of 0.4%.

A calm environment in the energy sector has helped to restrain import prices, as the price of crude oil showed little change in 2023 and 2024 and declined in 2025. Import prices excluding petroleum products have increased in recent years, but the changes have been modest: 0.9 in the past 12 months and 1.3% in the past three years.

The non-oil components of import prices have traced various patterns in recent years, but shifts have been largely offsetting. Prices of food and autos increased noticeably in 2023 and 2024, but they gave back much of those increases in 2025. Prices of capital goods were stable in 2023 and 2024, but they started to increase in 2025. Prices of consumer goods have been volatile, showing bursts of higher prices followed by discounting, leaving a modest net increase in the past three years.

The calm energy environment also seemed to play a role on the export side, as the industrial supply category showed little net change in prices over 2023 and 2024 before jumping in early 2025. Food prices followed a similar pattern, showing two years of restraint before moving higher in 2025. These two categories account for much of the upward movement in overall export prices in 2025. Prices of consumer goods also started to move higher in 2025 after little net change in the prior two years. Prices of capital goods and automobiles have traced reasonably steady upward paths.

Many observers might try to use the import component of this report to gain insight into the effect of tariffs on prices. That will be difficult because the figures from this report are pre-tariff; there will be no independent upward pressure on prices in this report because of tariffs. In fact, one should look for lower import prices in searching for a tariff effect. That is, if a foreign exporter were to absorb the tariff burden, that would be accomplished by reducing the pre-tariff price in order to keep the after-tariff price steady.

260115L.jpg

Some exporters to the US may have made such efforts. The nearby chart shows the month-to-month change in import prices in 2025, and May and June both showed lower prices. These months were especially important because they followed the announcement by President Trump of marked increases in tariffs in April. Also, some of the downward pressure occurred in components that would be sensitive to price (autos and consumer goods). Of course, May and June might be too soon after the announcement of draconian tariffs for foreign exporters to assess and change their pricing strategy.

The chart on monthly changes ends in September because the absence of an October reading prevents the calculation of the month-to-month changes for October and November. However, the two-month change from September to November is easily calculated, and the increase of 0.4% suggests little or no effort to absorb the burden of tariffs.

These import and export price series are not seasonally adjusted; they can be found in Haver’s **USECON** database. Detailed figures are available in the **USINT** database. The expectations figure from the Action Economics Forecast Survey is in the **AS1REPNA** database.

- Import prices have changed little in the past three years.
- Export prices were stable in 2023-24, but moved higher in 2025.

Import & Export Prices: Generally Modest Changes

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The Empire State Manufacturing Index of General Business Conditions rose to a higher-than-expected 7.7 in January following a 17.2-drop to -3.7 in December, according to the Empire State Manufacturing Survey released by the Federal Reserve Bank of New York. A reading of 1.0 for January had been expected in the Action Economics Forecast Survey. The positive January figure indicated that the business activity in New York State expanded for the third time in four months; it was an improvement from -7.4 in January 2025 and a low of -29.7 in January 2024, though still below a high of 16.8 in November 2024. The percentage of respondents reporting an increase in general business conditions was 34.2% in January, up from 31.7% in December; the percentage reporting a decrease was 26.5%, down from December’s 35.4%. The latest survey was conducted between January 2 and January 9.

The headline index reflects the answer to a single question concerning the state of economic activity and is not calculated from the components. Haver Analytics calculates a composite index from the five major components, which is comparable to the ISM manufacturing index. This calculated index increased to 51.2 in January following a 4.2-point decline to the neutral-level 50.0 in December (the lowest level since September); it was slightly up from 50.7 in January 2025 and well above a low of 43.0 in January 2024. The index is the average of five diffusion indexes: new orders, shipments, employment, supplier deliveries and inventories with equal weights (20% each).

In the latest survey, the new orders index rose to 6.6 in January after a 10.6-point drop to -1.0 in December, marking the third m/m gain in orders in four months and a sharp improvement from a low of -30.7 in January 2024. The shipments index jumped to 16.3 in January, the highest level since November 2024, following a 16.5-point fall to -5.0 in December; it was well above a low of -21.7 in April 2024. The unfilled orders index improved to -8.2 in January after a 9.1-point decrease to -14.9 in December, indicating that unfilled orders contracted for the eighth straight month but at a less severe pace; the index reached a low of -24.2 in January 2024. The inventories index fell to -2.1 in January, the lowest level since September, after a 2.7-point decline to 4.0 in December, signaling the first inventory contraction since October. Meanwhile, the delivery times index increased to 0.0 in January from -5.9 in December, with 12.4% of respondents reporting longer delivery times and an identical 12.4% reporting shorter times, indicating that delivery times were unchanged.

On the labor front, the number of employees index fell to -9.0 in January after a 1.0-point increase to 7.5 in December, indicating that employment contracted for the first time since September and reached its lowest level since January 2024. The index remained well below a peak of 24.9 in February 2022. In January, only 7.9% of respondents reported an increase in employment while a higher 16.8% reported a decline. The average workweek index dropped to -5.4 in January from 2.5 in December, turning negative for the first time since October and hitting the lowest level since April 2025.

Inflation pressures eased in January but remained high. The prices paid index fell to 42.8 in January, the lowest level since March 2025, after a 5.9-point decrease to 44.2 in December. Although still well below a peak of 84.9 in April 2022, the index remained above a low of 25.9 in December 2024 and a low of 20.8 in December 2023. In January, 44.5% of respondents reported higher prices paid while only 1.7% reported lower prices paid. The prices received index fell to 14.4 in January, the lowest reading since January 2025, from 25.4 in December. The index was up from a low of 7.5 in December 2024 and a low of 7.7 in July 2023 but far below a high of 51.9 in March 2022. In January, 18.9% of respondents reported higher prices received while 4.4% reported lower prices received.

Firms remained fairly optimistic about the future business outlook in the latest survey. The index for future business conditions eased to 30.3 in January after rising to 33.5 in December, with 50.6% of respondents expecting business conditions to improve over the next six months. Future new orders edged down to 33.3 in January from 34.5 in December, while future shipments rose to 34.9—the highest level since March 2022—from December’s 30.7. Growth in future employment strengthened to 14.9, the highest reading since November 2024, from December’s 7.8. Capital spending plans remained positive for the third consecutive month in January, with the future capital expenditures index rising to 10.3 from December’s 6.9. Expected prices paid fell to 52.6 in January from 55.4 in December and expected prices received fell to 36.5 from 41.6, with both measures at their lowest levels since December 2024.

The indexes in this report are diffusion indexes and measure the percentage of respondents indicating an increase minus the percentage indicating a decrease with zero separating expansion from contraction.

The New York Fed survey data are contained in Haver’s **SURVEYS** database. The expectations series is in Haver’s **AS1REPNA** database.

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- General Business Conditions Index up 11.4 pts. to 7.7 in January.
- Positive: Shipments (16.3, highest since Nov. ’24) and new orders (6.6).
- Negative: Employment (-9.0, lowest since Jan. ’24), unfilled orders (-8.2), and inventories (-2.1, a four-month low).
- Prices paid at a 10-month-low 42.8 and prices received at a one-year-low 14.4.
- Firms fairly optimistic: Future Business Conditions Index down to a still-positive 30.3; future prices paid at a one-year-low 52.6.