Tom Moeller

For March, the National Association of Realtors reported that pending sales of existing homes rose another 3.2% following their little revised 2.0% gain during February. While surprising, the gains failed to recoup a sharp 7.7% [...]

U.S. Pending Home Sales Rise For A Second Month

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090501e.jpg" width="353">
During March, the manufacturing sector continued to shed inventories at near a record rate. The 0.8% decline followed a revised 1.3% cutback during February. During the last three months the 12.1% annualized rate of stock-pile decumulation was near the record. The series dates back to 1958. That accelerated rate is in spite of a 1.0% rate of accumulation in petroleum inventories, now that prices have firmed. Excluding oil factory inventories fell at a 12.6% three-month rate that was only slightly exceeded in 2001.
The three-month rates of inventory destocking in several industries have been more than notable. Inventories of electrical equipment &amp; appliances have fallen at a 24.1% rate while textile product inventories were down at a 34.8% clip. Steep production cutbacks pulled furniture inventories down at a 21.8% rate since December while inventories of primary metals fell at a 32.5% pace. Lesser rates of decline were registered in the machinery industry (-12.3%) and by computers &amp; electronic products (-11.9%).
The Manufacturers&#39; Shipments, Inventories and Orders (MSIO) data is available in Haver&#39;s USECON database.
Inventory accelerator in general equilibrium from the Federal Reserve Bank of St. Louis is available <a href="http://research.stlouisfed.org/wp/2009/2009-010.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/@ED/@ED01/@ED0101/@ED01016/@ED01016.HTM">Factory Survey</a> (NAICS, %)</th>
<th scope="col">March</th>
<th scope="col">February</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">Inventories</td>
<td>-0.8</td>
<td>-1.3</td>
<td>-3.8</td>
<td>2.1</td>
<td>3.7</td>
<td>8.2&nbsp;</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Excluding Transportation</td>
<td>-0.8</td>
<td>-1.5</td>
<td>-6.4</td>
<td>-0.6</td>
<td>2.7</td>
<td>7.9</td>
</tr>
<tr class="odd">
<td class="firstcol">New Orders</td>
<td>-0.9</td>
<td>0.7</td>
<td>-21.6</td>
<td>0.1</td>
<td>1.9</td>
<td>6.2</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Excluding Transportation</td>
<td>-0.9</td>
<td>0.5</td>
<td>-19.0</td>
<td>3.1</td>
<td>1.2</td>
<td>7.4</td>
</tr>
<tr class="odd">
<td class="firstcol">Shipments</td>
<td>-1.2</td>
<td>-0.5</td>
<td>-17.1</td>
<td>1.7</td>
<td>1.2</td>
<td>5.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Excluding Transportation</td>
<td>-1.5</td>
<td>-0.6</td>
<td>-17.3</td>
<td>3.7</td>
<td>1.5</td>
<td>6.7</td>
</tr>
<tr class="odd">
<td class="firstcol">Unfilled Orders</td>
<td>-1.5</td>
<td>-1.7</td>
<td>-4.8</td>
<td>3.5</td>
<td>17.1</td>
<td>15.3</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Excluding Transportation</td>
<td>-1.5</td>
<td>-2.1</td>
<td>-8.7</td>
<td>-1.0</td>
<td>8.2</td>
<td>16.0</td>
</tr>
</tbody>
</table>
</body>
</html>

During March, the manufacturing sector continued to shed inventories at near a record rate. The 0.8% decline followed a revised 1.3% cutback during February. During the last three months the 12.1% annualized rate of stock-pile [...]

U.S. Factory Inventory Decumulation Continues Strong

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090501c.jpg" width="353">
Despite lower levels of employment, the University of Michigan&#39;s April reading of consumer sentiment added to its March improvement and rose to the highest level since September of last year. The gain in the index to a level of 65.1 was steeper than the mid-month indication of a rise to 61.9 and exceeded Consensus expectations for a reading of 61.7.
The expectations component of consumer sentiment continued to show the largest improvement in April with a 17.9% rise on top of the 5.9% March rise. Expectations for business conditions during the next five years moved up by more than one-quarter m/m to the highest level since September (+14.1% y/y). Expected conditions during the next year rose by roughly the same amount m/m and they&#39;re up by more than one-third y/y. Finally, the higher stock market lifted the expected change in personal finances. The reading made up declines early this year with a 11.5% m/m increase to the highest level since September.
The current economic conditions index made up the declines of the prior two months with a 7.9% rise which was near the gain indicated mid-month. Buying conditions for large household goods recouped the declines of earlier this year while the view of current personal finances improved with the stock market and lessened growth in debt.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090501d.jpg" width="353">
The opinion of government policy, which may eventually influence economic expectations, was roughly unchanged m/m but held onto its sharp February and March gains. The level was near the highest level since January of 2007. Twenty-one percent of respondents thought that a good job was being done by government, up from the four percent low of last December, while a much reduced 26 percent thought that a poor job was being done.
Probably reflecting the recent rise in oil prices, inflation expectations for the next year rose to 3.1% though they were as high as 7.0% last May. The median expected increase rose to 2.8% from 2.0%. The range of expectations is from slight price deflation to a 5.2% increase in prices. The expected inflation rate during the next five years rose slightly to 3.1%.
The University of Michigan survey data is not seasonally adjusted. The reading is based on telephone interviews with about 500 households at month-end; the mid-month results are based on about 300 interviews. The summary indexes are in Haver&#39;s USECON database with details in the proprietary UMSCA database.
Raising the credit bar, or getting clubbed by it? from the Federal Reserve Bank of Minneapolis can be found <a href="http://www.minneapolisfed.org/pubs/fedgaz/09-01/cover.pdf"> here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EF/@EF14/@EF1402/@EF1402.HTM">University of Michigan</a></th>
<th scope="col">Final-April</th>
<th scope="col">Mid-April</th>
<th scope="col">March</th>
<th scope="col">February</th>
<th scope="col">April 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">Consumer Sentiment</td>
<td>65.1</td>
<td>61.9</td>
<td>57.3</td>
<td>56.3</td>
<td>4.0%</td>
<td>63.8</td>
<td>85.6</td>
<td>87.3</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Current Conditions</td>
<td>68.3</td>
<td>66.6</td>
<td>63.3</td>
<td>65.5</td>
<td>-11.3</td>
<td>73.7</td>
<td>101.2</td>
<td>105.1</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Expectations</td>
<td>63.1</td>
<td>58.9</td>
<td>53.5</td>
<td>50.5</td>
<td>18.4</td>
<td>57.3</td>
<td>75.6</td>
<td>75.9</td>
</tr>
</tbody>
</table>
</body>
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Despite lower levels of employment, the University of Michigan's April reading of consumer sentiment added to its March improvement and rose to the highest level since September of last year. The gain in the index to a level of 65.1 [...]

Michigan Consumer Sentiment Improves Further To Highest Since September

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090501a.jpg" width="353">
The manufacturing sector showed a sign of modest improvement following several months of sharp decline in overall activity. The April composite index for the factory sector from the Institute for Supply Management rose to 40.1 from 36.3 in March. The latest figure still indicates a lower level of activity, as does any below the break-even point of 50, but the rate of decline appears to be slowing after having reached its nadir in December. Consensus expectations were for an April reading of 38.0.
The composite index hovered for much of last year near 50, then it fell sharply in October. The production component started its decline in September. That&#39;s when factory sector output started what&#39;s been a sharp downturn with a 3.6% m/m drop, as reported by the Federal Reserve.
During the last ten years there has been an 84% correlation between the level of the production component of the composite index and the three-month growth in factory sector industrial production. It is appropriate to correlate the ISM index level with factory sector output growth because the ISM index is a diffusion index. It measures growth by using all of the positive changes in activity added to one half of the zero change in activity measures.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090501b.jpg" width="353">
Improvement in the April components of the overall ISM index was broad-based. The new orders figure rose to 47.2 which was the highest level since last August. The improvement came as 31% of survey participants reported higher orders versus a December low of 5% while 29% reported lower orders. That was half the percentage at yearend. Even the export order index improved modestly to 44.0 versus the December reading of 35.5. During the last ten years there has been a 53% correlation between the index and the q/q change in real exports of goods in the GDP accounts.
The production component, at 40.4, was at its highest level since last September. A lessened 34% of firms reported lower production, which was near half the level this past December. The gain came despite a heightened rate of inventory decumulation. At another quite-low index level of 33.6, the inventory figure was near the lowest level since 1982.
The separate index of prices paid improved just slightly but it remained near the record low. During the last twenty years there has been a 79% correlation between the price index and the three-month change in the PPI for intermediate goods.
The ISM data is available in Haver&#39;s USECON database.
The propagation of regional recessions from the Federal Reserve Bank of St. Louis is available <a href="http://research.stlouisfed.org/wp/2009/2009-013.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/SURVEYS/@S2/@S201/@S201.HTM">ISM Mfg</a></th>
<th scope="col">April</th>
<th scope="col">March</th>
<th scope="col">April &#39;08</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">Composite Index</td>
<td>40.1</td>
<td>36.3</td>
<td>48.6</td>
<td>45.5</td>
<td>51.1</td>
<td>53.1</td>
</tr>
<tr>
<td class="firstcol">&nbsp; New Orders Index</td>
<td>47.2</td>
<td>41.2</td>
<td>46.4</td>
<td>42.1</td>
<td>54.3</td>
<td>55.4</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Employment Index</td>
<td>34.4</td>
<td>28.1</td>
<td>45.8</td>
<td>43.2</td>
<td>50.5</td>
<td>51.7</td>
</tr>
<tr>
<td class="firstcol">Prices Paid Index (NSA)</td>
<td>32.0</td>
<td>31.0</td>
<td>84.5</td>
<td>66.5</td>
<td>64.6</td>
<td>65.0</td>
</tr>
</tbody>
</table>
</body>
</html>

The manufacturing sector showed a sign of modest improvement following several months of sharp decline in overall activity. The April composite index for the factory sector from the Institute for Supply Management rose to 40.1 from [...]

ISM Index Suggests Modest Slowing Of Factory Sector Downturn

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090501a.jpg" width="353">
The manufacturing sector showed a sign of modest improvement following several months of sharp decline in overall activity. The April composite index for the factory sector from the Institute for Supply Management rose to 40.1 from 36.3 in March. The latest figure still indicates a lower level of activity, as does any below the break-even point of 50, but the rate of decline appears to be slowing after having reached its nadir in December. Consensus expectations were for an April reading of 38.0.
The composite index hovered for much of last year near 50, then it fell sharply in October. The production component started its decline in September. That&#39;s when factory sector output started what&#39;s been a sharp downturn with a 3.6% m/m drop, as reported by the Federal Reserve.
During the last ten years there has been an 84% correlation between the level of the production component of the composite index and the three-month growth in factory sector industrial production. It is appropriate to correlate the ISM index level with factory sector output growth because the ISM index is a diffusion index. It measures growth by using all of the positive changes in activity added to one half of the zero change in activity measures.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090501b.jpg" width="353">
Improvement in the April components of the overall ISM index was broad-based. The new orders figure rose to 47.2 which was the highest level since last August. The improvement came as 31% of survey participants reported higher orders versus a December low of 5% while 29% reported lower orders. That was half the percentage at yearend. Even the export order index improved modestly to 44.0 versus the December reading of 35.5. During the last ten years there has been a 53% correlation between the index and the q/q change in real exports of goods in the GDP accounts.
The production component, at 40.4, was at its highest level since last September. A lessened 34% of firms reported lower production, which was near half the level this past December. The gain came despite a heightened rate of inventory decumulation. At another quite-low index level of 33.6, the inventory figure was near the lowest level since 1982.
The separate index of prices paid improved just slightly but it remained near the record low. During the last twenty years there has been a 79% correlation between the price index and the three-month change in the PPI for intermediate goods.
The ISM data is available in Haver&#39;s USECON database.
The propagation of regional recessions from the Federal Reserve Bank of St. Louis is available <a href="http://research.stlouisfed.org/wp/2009/2009-013.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/SURVEYS/@S2/@S201/@S201.HTM">ISM Mfg</a></th>
<th scope="col">April</th>
<th scope="col">March</th>
<th scope="col">April &#39;08</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">Composite Index</td>
<td>40.1</td>
<td>36.3</td>
<td>48.6</td>
<td>45.5</td>
<td>51.1</td>
<td>53.1</td>
</tr>
<tr>
<td class="firstcol">&nbsp; New Orders Index</td>
<td>47.2</td>
<td>41.2</td>
<td>46.4</td>
<td>42.1</td>
<td>54.3</td>
<td>55.4</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Employment Index</td>
<td>34.4</td>
<td>28.1</td>
<td>45.8</td>
<td>43.2</td>
<td>50.5</td>
<td>51.7</td>
</tr>
<tr>
<td class="firstcol">Prices Paid Index (NSA)</td>
<td>32.0</td>
<td>31.0</td>
<td>84.5</td>
<td>66.5</td>
<td>64.6</td>
<td>65.0</td>
</tr>
</tbody>
</table>
Michigan Consumer Sentiment Improves Further To Highest Since September 
by <a href="/comment/Moeller.html">Tom Moeller</a> May 1, 2009


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090501c.jpg" width="353">
Despite lower levels of employment, the University of Michigan&#39;s April reading of consumer sentiment added to its March improvement and rose to the highest level since September of last year. The gain in the index to a level of 65.1 was steeper than the mid-month indication of a rise to 61.9 and exceeded Consensus expectations for a reading of 61.7.
The expectations component of consumer sentiment continued to show the largest improvement in April with a 17.9% rise on top of the 5.9% March rise. Expectations for business conditions during the next five years moved up by more than one-quarter m/m to the highest level since September (+14.1% y/y). Expected conditions during the next year rose by roughly the same amount m/m and they&#39;re up by more than one-third y/y. Finally, the higher stock market lifted the expected change in personal finances. The reading made up declines early this year with a 11.5% m/m increase to the highest level since September.
The current economic conditions index made up the declines of the prior two months with a 7.9% rise which was near the gain indicated mid-month. Buying conditions for large household goods recouped the declines of earlier this year while the view of current personal finances improved with the stock market and lessened growth in debt.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090501d.jpg" width="353">
The opinion of government policy, which may eventually influence economic expectations, was roughly unchanged m/m but held onto its sharp February and March gains. The level was near the highest level since January of 2007. Twenty-one percent of respondents thought that a good job was being done by government, up from the four percent low of last December, while a much reduced 26 percent thought that a poor job was being done.
Probably reflecting the recent rise in oil prices, inflation expectations for the next year rose to 3.1% though they were as high as 7.0% last May. The median expected increase rose to 2.8% from 2.0%. The range of expectations is from slight price deflation to a 5.2% increase in prices. The expected inflation rate during the next five years rose slightly to 3.1%.
The University of Michigan survey data is not seasonally adjusted. The reading is based on telephone interviews with about 500 households at month-end; the mid-month results are based on about 300 interviews. The summary indexes are in Haver&#39;s USECON database with details in the proprietary UMSCA database.
Raising the credit bar, or getting clubbed by it? from the Federal Reserve Bank of Minneapolis can be found <a href="http://www.minneapolisfed.org/pubs/fedgaz/09-01/cover.pdf"> here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EF/@EF14/@EF1402/@EF1402.HTM">University of Michigan</a></th>
<th scope="col">Final-April</th>
<th scope="col">Mid-April</th>
<th scope="col">March</th>
<th scope="col">February</th>
<th scope="col">April 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">Consumer Sentiment</td>
<td>65.1</td>
<td>61.9</td>
<td>57.3</td>
<td>56.3</td>
<td>4.0%</td>
<td>63.8</td>
<td>85.6</td>
<td>87.3</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Current Conditions</td>
<td>68.3</td>
<td>66.6</td>
<td>63.3</td>
<td>65.5</td>
<td>-11.3</td>
<td>73.7</td>
<td>101.2</td>
<td>105.1</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Expectations</td>
<td>63.1</td>
<td>58.9</td>
<td>53.5</td>
<td>50.5</td>
<td>18.4</td>
<td>57.3</td>
<td>75.6</td>
<td>75.9</td>
</tr>
</tbody>
</table>
U.S. Factory Inventory Decumulation Continues Strong 
by <a href="/comment/Moeller.html">Tom Moeller</a> May 1, 2009


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090501e.jpg" width="353">
During March, the manufacturing sector continued to shed inventories at near a record rate. The 0.8% decline followed a revised 1.3% cutback during February. During the last three months the 12.1% annualized rate of stock-pile decumulation was near the record. The series dates back to 1958. That accelerated rate is in spite of a 1.0% rate of accumulation in petroleum inventories, now that prices have firmed. Excluding oil factory inventories fell at a 12.6% three-month rate that was only slightly exceeded in 2001.
The three-month rates of inventory destocking in several industries have been more than notable. Inventories of electrical equipment &amp; appliances have fallen at a 24.1% rate while textile product inventories were down at a 34.8% clip. Steep production cutbacks pulled furniture inventories down at a 21.8% rate since December while inventories of primary metals fell at a 32.5% pace. Lesser rates of decline were registered in the machinery industry (-12.3%) and by computers &amp; electronic products (-11.9%).
The Manufacturers&#39; Shipments, Inventories and Orders (MSIO) data is available in Haver&#39;s USECON database.
Inventory accelerator in general equilibrium from the Federal Reserve Bank of St. Louis is available <a href="http://research.stlouisfed.org/wp/2009/2009-010.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/@ED/@ED01/@ED0101/@ED01016/@ED01016.HTM">Factory Survey</a> (NAICS, %)</th>
<th scope="col">March</th>
<th scope="col">February</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">Inventories</td>
<td>-0.8</td>
<td>-1.3</td>
<td>-3.8</td>
<td>2.1</td>
<td>3.7</td>
<td>8.2&nbsp;</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Excluding Transportation</td>
<td>-0.8</td>
<td>-1.5</td>
<td>-6.4</td>
<td>-0.6</td>
<td>2.7</td>
<td>7.9</td>
</tr>
<tr class="odd">
<td class="firstcol">New Orders</td>
<td>-0.9</td>
<td>0.7</td>
<td>-21.6</td>
<td>0.1</td>
<td>1.9</td>
<td>6.2</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Excluding Transportation</td>
<td>-0.9</td>
<td>0.5</td>
<td>-19.0</td>
<td>3.1</td>
<td>1.2</td>
<td>7.4</td>
</tr>
<tr class="odd">
<td class="firstcol">Shipments</td>
<td>-1.2</td>
<td>-0.5</td>
<td>-17.1</td>
<td>1.7</td>
<td>1.2</td>
<td>5.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Excluding Transportation</td>
<td>-1.5</td>
<td>-0.6</td>
<td>-17.3</td>
<td>3.7</td>
<td>1.5</td>
<td>6.7</td>
</tr>
<tr class="odd">
<td class="firstcol">Unfilled Orders</td>
<td>-1.5</td>
<td>-1.7</td>
<td>-4.8</td>
<td>3.5</td>
<td>17.1</td>
<td>15.3</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Excluding Transportation</td>
<td>-1.5</td>
<td>-2.1</td>
<td>-8.7</td>
<td>-1.0</td>
<td>8.2</td>
<td>16.0</td>
</tr>
</tbody>
</table>
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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090430g.jpg" width="353">
Weak job markets continue to hold down the increase in labor compensation. For private industry workers, the employment cost index increased by 0.2% last quarter which was less than half the 4Q gain. The gain fell well short of Consensus expectations for a 0.5% rise. The weakness in compensation is more apparent, however, in the 2.0% year-to-year increase which was the weakest in the series&#39; history which dates back to 1981.
Compensation in manufacturing industries rose just 1.7% after a 2.3% gain last year while a severe slowdown in growth was evident in education &amp; health services. The 2.9% increase compared to more than 3% growth during the prior five years. Health care compensation growth also slowed to 2.6%, its weakest on record. <img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090430h.jpg" width="353">
Wage and salary growth decelerated even further last quarter. The 0.2% gain pulled y/y growth down to just 2.0% which was its weakest on record. Wages account for roughly 70% of the compensation index. Wages in the services industries grew a not seasonally adjusted 0.5% and the y/y gain of 2.3% also was a record low. Wages in the goods producing industries inched up just 0.1% (2.1% y/y) and that y/y growth compares to a recent peak of 4.0% in 2000.
Slower growth in benefit costs continued to hold down overall compensation costs. The quarterly increase slowed to 0.2% after an upwardly revised gain of 0.4% during 4Q. The 1.5% year-to-year rise was a record low. In the goods producing sector benefits rose 1.3% y/y after a 2.2% increase during 2008 and in services they nudged up just 0.1% (1.7% y/y), a four quarter gain that was near the weakest on record.
Health benefit costs rose 4.6% y/y which was near the slowest rate of growth since 1999.
The employment cost index figures are available in Haver&#39;s USECON database.

<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/@EB08/@EB08.HTM">ECI - Private Industry Workers</a> (%)</th>
<th scope="col">1Q &#39;09</th>
<th scope="col">4Q &#39;08</th>
<th scope="col">1Q 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">Compensation</td>
<td>0.2</td>
<td>0.5</td>
<td>2.0</td>
<td>2.8</td>
<td>3.1</td>
<td>2.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Wages &amp; Salaries</td>
<td>0.2</td>
<td>0.5</td>
<td>2.0</td>
<td>3.0</td>
<td>3.4</td>
<td>2.9</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Benefit Costs</td>
<td>0.2</td>
<td>0.4</td>
<td>1.5</td>
<td>2.6</td>
<td>2.4</td>
<td>2.9</td>
</tr>
</tbody>
</table>


</html>

Weak job markets continue to hold down the increase in labor compensation. For private industry workers, the employment cost index increased by 0.2% last quarter which was less than half the 4Q gain. The gain fell well short of [...]

U.S. Employment Cost Index Increase Slackens To New Low

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090430d.jpg" width="353">
Any recovery in consumer spending will have to wait. The U.S. Bureau of Economic Analysis reported that personal spending during March fell another 0.2% and adjusted for inflation spending also fell 0.2%. These declines followed two months of increase but for all of the first quarter, real spending rose at just a 2.2% annual rate. That makes up little of the 4.3% decline during 4Q and the 3.8% 3Q drop.
Real spending on furniture &amp; appliances last month retraced the gains of January &amp; February with a 2.3% (-1.3% y/y) decline. Real spending on apparel also stuttered and fell 0.6%, reversing the February increase. Even real spending on services has been flat as it rose 0.1% last month after no change during February (+0.9% y/y). Any life in spending during March was limited to autos which rose 0.9%. That finished a quarter where spending made up half of the 4Q decline with a 4.8% increase.
The reason for the delay in a spending recovery is that income remains under extreme pressure from the soft job market. The 0.3% decline in March personal income was the fifth shortfall in the last six months and it fell short of expectations for a 0.2% decline. In addition, disposable personal income was flat for the second consecutive month. That followed the 1.6% jump which was the result of a 10.5% monthly drop in taxes. Adjusted for inflation, real disposable income also was flat last month after a 0.3% decline during February. For the quarter, real take-home pay rose at a 6.2% annual rate which was double the 4Q increase.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090430e.jpg" width="353">
The good news from the latest report was that despite weaker income growth, lower spending has worked to lift the savings rate. The rise to 4.2% during March lifted the quarter&#39;s rate also to 4.2% which was its highest level since 1998.
Reflecting the weakness in the job market, wages &amp; salaries fell another 0.5% (-1.2% y/y) and they have been flat or down in each of the last seven months. Over that period wages have fallen at a 3.2% annual rate, the quickest rate of decline since 1994. Private sector wages during that period were down at a 4.7% annual rate, still the worst since 1994. These declines contrast to wages in the government sector which continue to increase, at a 4.1% rate during the seven months.
Lower interest rates continued to pull interest income down, by 0.6% during each of the last three months (-6.1% y/y). In addition weak corporate profits lowered dividend income by 1.8%, about the monthly rate of decline since October (-10.2% y/y).<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090430f.jpg" width="353">
Finally, the PCE chain price index benefited from a 4.3% seasonally adjusted decline in gasoline prices (-37.7% y/y) and fell slightly. Core pricing power repeated the gains of the prior two months with a 0.2% increase that reflected a 1.5% increase in &quot;other&quot; nondurable goods prices. Most other goods and services prices were flat or down. The latest gain in the overall price deflator exceeded Consensus expectations for a 0.1% rise.
The personal income &amp; consumption figures are available in Haver&#39;s USECON and USNA databases.
Ponds and Streams: Wealth and Income in the U.S., 1989 to 2007 from the Federal Reserve Board can be found <a href="http://www.federalreserve.gov/pubs/feds/2009/200913/200913pap.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/@E7/@E711/@E71102/@E71102.HTM">Disposition of Personal Income</a> (%)&nbsp;</th>
<th scope="col">March</th>
<th scope="col">February</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">Personal Income</td>
<td>-0.3</td>
<td>-0.2</td>
<td>0.3</td>
<td>3.8</td>
<td>6.1</td>
<td>7.1</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Disposable Personal Income</td>
<td>-0.0</td>
<td>0.0</td>
<td>3.0</td>
<td>4.6</td>
<td>5.5</td>
<td>6.4</td>
</tr>
<tr class="odd">
<td class="firstcol">Personal Consumption Expenditures</td>
<td>-0.2</td>
<td>0.4</td>
<td>-0.9</td>
<td>3.6</td>
<td>5.5</td>
<td>5.9</td>
</tr>
<tr>
<td class="firstcol">Saving Rate</td>
<td>4.2</td>
<td>4.0</td>
<td>0.2 (March &#39;08)</td>
<td>1.8</td>
<td>0.5</td>
<td>0.7</td>
</tr>
<tr class="odd">
<td class="firstcol">PCE Chain Price Index</td>
<td>-0.0</td>
<td>0.3</td>
<td>0.6</td>
<td>3.3</td>
<td>2.6</td>
<td>2.8</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Less food &amp; energy</td>
<td>0.2</td>
<td>0.2</td>
<td>1.8</td>
<td>2.2</td>
<td>2.2</td>
<td>2.3</td>
</tr>
</tbody>
</table>
</body>
</html>

Any recovery in consumer spending will have to wait. The U.S. Bureau of Economic Analysis reported that personal spending during March fell another 0.2% and adjusted for inflation spending also fell 0.2%. These declines followed two [...]

U.S. Personal Spending & Income Still Under Pressure

Robert Brusca

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090430c.jpg" align="left" border="0" height="265" width="353">
There is actually a bounce in output in Japan this month as
over MFG output rose by 1.6% in March. That bounce reduced the annual
rate of decline of Japan&#8217;s output to a pace of -53.1% over
three-months. So while the monthly gain seems impressive it is a gain
amid some pretty colossal losses. 
 

Despite the gain in output this month, a gain that is fairly
widespread, all the sector three-month growth rates are showing an
accelerated rate of decline compared to six month rates (or nearly the
same pace). Even though the bounce is discernable on the chart above
tit has not been strong enough to stabilize any trends in output. Over
the past year output is down a stunning 35%. In the quarter output is
falling at a 63% annual rate. 
 

Still the slight turn up in output at the end of the quarter
could be the start of turning these growth rates higher. The declines
are at such a horrific pace that even this small upturn will make it
likely that Q2 will show a slowing in the pace of the drop. Across
Europe and in the US signs that the pace of contraction is being
reduced are already more manifest than in Japan. Japan may be a
latecomer to this trend but the pickup in monthly IP, despite the fact
that data trends still swamp the gain, shows a significant boost that
could be the start of Japan&#8217;s turnaround. 
 



<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr><th colspan="9" scope="col"> Japan Industrial Production Trends
</th></tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td colspan="3"> m/m %</td>
<td colspan="3"> Saar %</td>
<td> Yr/Yr</td>
<td> Qtr-2-Date</td>
</tr>
<tr class="odd">
<td class="firstcol">seas adjusted</td>
<td>Mar-09</td>
<td>Feb-09</td>
<td>Jan-09</td>
<td>3-mo</td>
<td>6-mo</td>
<td>12-mo</td>
<td>Yr-Ago</td>
<td>% AR</td>
</tr>
<tr>
<td class="firstcol">mining &amp; MFG</td>
<td>1.6%</td>
<td> -9.4%</td>
<td> -10.1%</td>
<td> -53.1%</td>
<td> -53.6%</td>
<td> -35.1%</td>
<td>2.5%</td>
<td>-63.3%</td>
</tr>
<tr>
<td class="firstcol">Total Industry</td>
<td>1.3%</td>
<td> -9.1%</td>
<td> -9.3%</td>
<td> -51.5%</td>
<td> -52.3%</td>
<td> -34.0%</td>
<td>2.5%</td>
<td>-61.6%</td>
</tr>
<tr>
<td class="firstcol">MFG</td>
<td>1.7%</td>
<td> -9.2%</td>
<td> -10.3%</td>
<td> -52.8%</td>
<td> -53.4%</td>
<td> -35.0%</td>
<td>2.7%</td>
<td>-63.3%</td>
</tr>
<tr>
<td class="firstcol">Textiles</td>
<td> -6.4%</td>
<td> -5.6%</td>
<td> -3.7%</td>
<td> -47.6%</td>
<td> -35.7%</td>
<td> -25.2%</td>
<td> -5.6%</td>
<td>-39.7%</td>
</tr>
<tr>
<td class="firstcol">T-port</td>
<td>3.9%</td>
<td> -25.0%</td>
<td> -17.7%</td>
<td> -83.1%</td>
<td> -79.3%</td>
<td> -57.0%</td>
<td>7.8%</td>
<td>-87.7%</td>
</tr>
<tr class="odd">
<td colspan="9" class="firstcol">Product Group</td>
</tr>
<tr>
<td class="firstcol">Consumer Gds</td>
<td>1.7%</td>
<td> -9.9%</td>
<td> -6.4%</td>
<td> -45.9%</td>
<td> -45.1%</td>
<td> -27.1%</td>
<td>2.5%</td>
<td>-56.3%</td>
</tr>
<tr>
<td class="firstcol">Intermediate Gds</td>
<td>3.2%</td>
<td> -9.3%</td>
<td> -12.8%</td>
<td> -55.6%</td>
<td> -59.8%</td>
<td> -40.0%</td>
<td>3.9%</td>
<td>-70.1%</td>
</tr>
<tr>
<td class="firstcol">Investment Gds</td>
<td> -2.6%</td>
<td> -9.9%</td>
<td> -7.3%</td>
<td> -56.2%</td>
<td> -50.8%</td>
<td> -33.1%</td>
<td> -1.9%</td>
<td>-58.1%</td>
</tr>
<tr>
<td class="firstcol">Mining</td>
<td> -3.6%</td>
<td> -2.6%</td>
<td> -2.6%</td>
<td> -30.2%</td>
<td> -20.1%</td>
<td> -10.4%</td>
<td> -2.7%</td>
<td>-15.4%</td>
</tr>
<tr>
<td class="firstcol">Electric&amp;Gas</td>
<td> -0.5%</td>
<td> -3.1%</td>
<td> -0.8%</td>
<td> -16.4%</td>
<td> -13.0%</td>
<td> -7.9%</td>
<td>0.7%</td>
<td>-20.3%</td>
</tr>
</tbody>
</table>
</body></html>

There is actually a bounce in output in Japan this month as over MFG output rose by 1.6% in March. That bounce reduced the annual rate of decline of Japan’s output to a pace of -53.1% over three-months. So while the monthly gain seems [...]

Japan IP Slows Its Rate Of Decline... In Monthly Trends Only

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.

Economy in Brief

Jump to:

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