Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090306a.jpg" width="353">
Hemorrhaging of workers continued last month in the U.S. labor market according to the Bureau of Labor Statistics. The unemployment rate jumped to 8.1% which was the highest level since December of 1983. The rate increase exceeded Consensus expectations of 7.9%. The latest rise was forced by a 351,000 drop in household employment (-3.0% y/y) that followed the plummet of 1,239,000 during January. The labor force recovered 498,000 (0.5% y/y) after a sharp January decline.
The labor force participation rate held roughly steady at 65.6%, close to its lowest since 1987. However, the number of potential workers who were not in labor force but wanted a job, i.e. the &quot;discouraged worker,&quot; rose by 18.2% y/y. Overall, the number of those who were unemployed last month rose 851,000. The figure was up 5.0 million, or 68.0%, during the last twelve months.
The average duration of unemployment held steady at 19.8 weeks, near the highest since 1983. The number of those unemployed for more than 27 weeks rose another 10.2%, more than doubling year-to-year.
From the establishment survey, nonfarm payrolls were slashed in February by near the most for any one month since 1949. The 651,000 cut followed declines during the prior two months that were much deeper than reported earlier (see table below). The February decline about matched Consensus expectations.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090306b.jpg" width="353">
Aggregate hours worked (employment time hours) fell 0.7% last month after a 0.6% January decline. So far in the first quarter aggregate hours worked are down at a 6.9% annual rate from 4Q08.
Private service sector employment dropped 384,000, close to the largest drop for any one month during the last 60 years. Over the last three months 1,431,000 jobs were shed, or 1.5% of the total. During that period 446,000 jobs (-2.6%) were lost from the professional &amp; business services sector and 129,000 jobs (-1.6%) were lost from the financial services sector. The leisure &amp; hospitality industry shed 102,000 jobs (-0.8%) during the last three months and 166,100 were cut (-1.1%) from the retail sector, close to the largest drop since 1958. About the only sector to show growth in jobs was health services where jobs rose 80,600 during the last three months, or by 0.6%. Jobs in education also rose a moderate 13,200 during that period (0.4%).
Factory sector jobs fell 168,000 last month and they have fallen 1,215,000 over the last twelve months (-8.9%). Production worker employment fell by 10.7% during that period with motor vehicle employment down 24.7% and furniture jobs down 17.7%. In the apparel sector, jobs fell 13.1% during the last twelve months.
Construction sector employment fell another 104,000 during February and over the last three months alone 320,000 jobs were cut, or by 4.6%. Hardest hit was the residential building sector where 43,400 jobs (-5.6%) were lost over the last three months alone. Over the last twelve months 826,000 jobs were shed (-11.1%) from the construction sector overall.
Comparing Current Payroll Employment Changes with Past Recessions from the Federal Reserve Bank of Cleveland is available <a href="http://www.clevelandfed.org/research/trends/2008/1108/04ecoact.cfm">here</a>.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090306c.jpg" width="353">
The weakness in private sector hiring has been barely dented by job gains in the government sector where payrolls rose 9,000 last month last month (0.7% y/y). Moreover, there has been no net-hiring by governments since this past summer. State &amp; local government hiring has been slightly negative since the summer while hiring by the federal government rose slightly.
The length of the average workweek remained stable during February at the reduced level of 33.3 hours. It continued as the shortest workweek on record and was down by five hours from the peak during the mid-1960s.
The one month diffusion index, which measures the breadth of job gain or loss (50 is the break-even level) remained near its lowest level of this cycle (23.8%). The three-month index reached a new cycle low of 16.8%. The three-month figure for the factory sector continued weaker at 5.4%.
Average hourly earnings rose 0.2% and that matched Consensus expectations. Earnings the construction industry fell 0.5% (+4.0% y/y) while in the factory sector they rose 0.5% (3.1% y/y) as employers held on to their most productive workers. Private services wages rose 0.5% (4.1% y/y).
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.
American International Group is yesterday&#39;s testimony by Fed Vice Chairman Donald L Kohn and it is available <a href="http://www.federalreserve.gov/newsevents/testimony/kohn20090305a.htm">here</a>.
Credit Market Competition and the Nature of Firms from the Federal Reserve Bank of New York can be found <a href="http://www.newyorkfed.org/research/staff_reports/sr366.pdf">here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EB/@EB01/@EB01.HTM">Employment: 000s</a></th>
<th scope="col">February</th>
<th scope="col">January</th>
<th scope="col">December</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>-651</td>
<td>-655</td>
<td>-681</td>
<td>-3.0%</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>-577</td>
<td>-597</td>
<td>--</td>
<td>-0.3%</td>
<td>1.1%</td>
<td>1.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Manufacturing</td>
<td>-168</td>
<td>-257</td>
<td>-180</td>
<td>-8.9%</td>
<td>-3.3%</td>
<td>-2.0%</td>
<td>-0.5%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Construction</td>
<td>-104</td>
<td>-118</td>
<td>-98</td>
<td>-11.1%</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>-375</td>
<td>-276</td>
<td>-399</td>
<td>-1.9%</td>
<td>0.2%</td>
<td>1.6%</td>
<td>1.8%</td>
</tr>
<tr>
<td class="firstcol">Average Weekly Hours</td>
<td>33.3</td>
<td>33.3</td>
<td>33.3</td>
<td>33.8 (Feb. &#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>0.2%</td>
<td>0.2%</td>
<td>0.3%</td>
<td>3.6%</td>
<td>3.8%</td>
<td>4.0%</td>
<td>3.9%</td>
</tr>
<tr>
<td class="firstcol">Unemployment Rate</td>
<td>8.1%</td>
<td>7.6%</td>
<td>7.2%</td>
<td>4.8% Feb. &#39;08)</td>
<td>5.8%</td>
<td>4.6%</td>
<td>4.6%</td>
</tr>
</tbody>
</table>
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Hemorrhaging of workers continued last month in the U.S. labor market according to the Bureau of Labor Statistics. The unemployment rate jumped to 8.1% which was the highest level since December of 1983. The rate increase exceeded [...]

U.S. Unemployment Rate of 8.1% Highest Since 1983. Payroll Loss Near the Biggest Since 1949

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090306a.jpg" align="left" border="0" height="265" width="353">
Hemorrhaging of workers continued last month in the U.S. labor
market according to the Bureau of Labor Statistics. The unemployment
rate jumped to 8.1% which was the highest level since
December of 1983. The rate increase exceeded Consensus expectations of
7.9%. The latest rise was forced by a 351,000 drop in household
employment (-3.0% y/y) that followed the plummet of 1,239,000 during
January. The labor force recovered 498,000 (0.5% y/y) after a sharp
January decline.
The labor force participation rate held roughly steady at
65.6%, close to its lowest since 1987. However, the number of potential
workers who were not in labor force but wanted a job, i.e. the
"discouraged worker," rose by 18.2% y/y. Overall, the number of those
who were unemployed last month rose 851,000. The figure was up 5.0
million, or 68.0%, during the last twelve months.
The average duration of unemployment held steady at 19.8
weeks, near the highest since 1983. The number of those unemployed for
more than 27 weeks rose another 10.2%, more than doubling year-to-year.
From the establishment survey, nonfarm payrolls were slashed
in February by near the most for any one month since 1949. The 651,000
cut followed declines during the prior two months that were much deeper
than reported earlier (see table below). The February decline about
matched Consensus expectations.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090306b.jpg" align="right" border="0" height="265" width="353">
Aggregate hours worked (employment time hours) fell 0.7% last
month after a 0.6% January decline. So far in the first quarter
aggregate hours worked are down at a 6.9% annual rate from 4Q08.
Private service sector employment dropped 384,000, close to
the largest drop for any one month during the last 60 years. Over the
last three months 1,431,000 jobs were shed, or 1.5% of the total.
During that period 446,000 jobs (-2.6%) were lost from the professional
&amp; business services sector and 129,000 jobs (-1.6%) were lost
from the financial services sector. The leisure &amp; hospitality
industry shed 102,000 jobs (-0.8%) during the last three months and
166,100 were cut (-1.1%) from the retail sector, close to the largest
drop since 1958. About the only sector to show growth in jobs was
health services where jobs rose 80,600 during the last three months, or
by 0.6%. Jobs in education also rose a moderate 13,200 during that
period (0.4%).
Factory sector jobs fell 168,000 last month and they have
fallen 1,215,000 over the last twelve months (-8.9%). Production worker
employment fell by 10.7% during that period with motor vehicle
employment down 24.7% and furniture jobs down 17.7%. In the apparel
sector, jobs fell 13.1% during the last twelve months.
Construction sector employment fell another 104,000 during
February and over the last three months alone 320,000 jobs were cut, or
by 4.6%. Hardest hit was the residential building sector where 43,400
jobs (-5.6%) were lost over the last three months alone. Over the last
twelve months 826,000 jobs were shed (-11.1%) from the construction
sector overall.
Comparing Current Payroll Employment Changes with
Past Recessions from the Federal Reserve Bank of Cleveland
is available <a href="http://www.clevelandfed.org/research/trends/2008/1108/04ecoact.cfm">here</a>.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090306c.jpg" align="left" border="0" height="265" width="353">
The weakness in private sector hiring has been barely dented
by job gains in the government sector where payrolls rose 9,000 last
month last month (0.7% y/y). Moreover, there has been no net-hiring by
governments since this past summer. State &amp; local government
hiring has been slightly negative since the summer while hiring by the
federal government rose slightly.
The length of the average workweek remained stable during
February at the reduced level of 33.3 hours. It continued as the
shortest workweek on record and was down by five hours from the peak
during the mid-1960s.
The one month diffusion index, which
measures the breadth of job gain or loss (50 is the break-even level)
remained near its lowest level of this cycle (23.8%). The three-month
index reached a new cycle low of 16.8%. The three-month figure for the
factory sector continued weaker at 5.4%.
Average hourly earnings rose 0.2% and that
matched Consensus expectations. Earnings the construction industry fell
0.5% (+4.0% y/y) while in the factory sector they rose 0.5% (3.1% y/y)
as employers held on to their most productive workers. Private services
wages rose 0.5% (4.1% y/y).
The figures referenced above are available in Haver's USECON
database. Additional detail can be found in the LABOR and
in the EMPL databases.
American International Group is yesterday's
testimony by Fed Vice Chairman Donald L Kohn and it is available <a href="http://www.federalreserve.gov/newsevents/testimony/kohn20090305a.htm">here</a>.
Credit Market Competition and the Nature of Firms
from the Federal Reserve Bank of New York can be found <a href="http://www.newyorkfed.org/research/staff_reports/sr366.pdf">here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EB/@EB01/@EB01.HTM">Employment:
000s</a></th>
<th scope="col">February</th>
<th scope="col">January</th>
<th scope="col">December</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>-651</td>
<td>-655</td>
<td>-681</td>
<td>-3.0%</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>-577</td>
<td>-597</td>
<td>--</td>
<td>-0.3%</td>
<td>1.1%</td>
<td>1.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Manufacturing</td>
<td>-168</td>
<td>-257</td>
<td>-180</td>
<td>-8.9%</td>
<td>-3.3%</td>
<td>-2.0%</td>
<td>-0.5%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Construction</td>
<td>-104</td>
<td>-118</td>
<td>-98</td>
<td>-11.1%</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>-375</td>
<td>-276</td>
<td>-399</td>
<td>-1.9%</td>
<td>0.2%</td>
<td>1.6%</td>
<td>1.8%</td>
</tr>
<tr>
<td class="firstcol">Average Weekly Hours</td>
<td>33.3</td>
<td>33.3</td>
<td>33.3</td>
<td>33.8 (Feb. '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>0.2%</td>
<td>0.2%</td>
<td>0.3%</td>
<td>3.6%</td>
<td>3.8%</td>
<td>4.0%</td>
<td>3.9%</td>
</tr>
<tr>
<td class="firstcol">Unemployment Rate</td>
<td>8.1%</td>
<td>7.6%</td>
<td>7.2%</td>
<td>4.8% Feb. '08)</td>
<td>5.8%</td>
<td>4.6%</td>
<td>4.6%</td>
</tr>
</tbody>
</table>
OECD LEI's Show Severe And
Worsening Downturn 
by <a href="/comment/Brusca.html">Robert
Brusca</a> March 6, 2009


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090306d.jpg" align="left" border="0" height="265" width="353">
The plunge in the US, Japan and European LEIs is quite
characteristic of recession as the chart on top demonstrates. However,
the severity of the declines is unusual. In the past 40-Years only the
1973-75 downturn produced larger declines for the US. Japan&#8217;s decline
is already steeper than its 1973-75 recession drop; Europe&#8217;s is about
the same and the US drop is not (yet?) as severe. 
 
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090306e.jpg" align="right" border="0" height="265" width="353">
However the OECD framework shows that the declines across most
regions are accelerating. Across 6-mo intervals all the main groups are
declining increasingly rapidly over each of the last two six month
segments (bottom panel of table). Separate progressive growth rates
(top panel of table) show that that over three months the growth rate
in Europe has showed some recovery compared to its performance over six
months. But that &#8216;improvement&#8217; is not by much. 
 

The chart below shows that the OECD and US Conference Board
indices (LEIs) have different views of the US situation. In past deep
downturns the Conference Board index fell by more. In this episode- -
at least at this point of the downturn &#8211; the OECD index is showing a
substantially sharper US decline and one that is accelerating instead
of moderating as in the US treatment from the Conference Board Index. 
 
 
 

On balance the OECD signal for the US is much worse than from
the US own LEI that has actually stated to turn up (less down) in
January. More topical data from Europe for February suggests that
conditions there continue to weaken. The LEI signal is not infallible
and may not always give the most prescient look ahead. But it is only
one index- a single number- and only so much can be expected from it.
History is quite kind to the LEI gauge as the frame work has a very
good and consistent cyclical signal. For the moment the message is
quite clear that the OECD is not signaling that the worst is over. It
is signaling that we are still in the middle of a difficult and severe
downturn- quite severe by the standards of the past 40 years &#8211; and that
continued vigilance is recommended. It&#8217;s a very good thing that the ECB
joined the BOE in rate cuts this past week. Clearly the cut was needed. 
 

As for the US discrepancy in the LEI signals that obviously
bears some watching. 


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="5" scope="col"> OECD
Trend-restored leading Indicators</th>
</tr>
<tr>
<th colspan="5" cope="col">Growth
progression-SAAR</th>
</tr>
</thead>
<tbody>
<tr class="grey3">
<td class="firstcol">&nbsp;</td>
<td> 3Mos</td>
<td> 6Mos</td>
<td> 12mos</td>
<td> Yr-Ago</td>
</tr>
<tr class="grey2">
<td class="firstcol">OECD</td>
<td> -12.8%</td>
<td> -9.9%</td>
<td> -5.6%</td>
<td> 1.3%</td>
</tr>
<tr class="grey2">
<td class="firstcol">OECD7</td>
<td> -14.7%</td>
<td> -11.3%</td>
<td> -6.6%</td>
<td> 0.7%</td>
</tr>
<tr class="grey2">
<td class="firstcol">OECD. Eur</td>
<td> -11.3%</td>
<td> -9.5%</td>
<td> -6.0%</td>
<td> 1.4%</td>
</tr>
<tr class="grey2">
<td class="firstcol">OECD. Japan</td>
<td> -14.1%</td>
<td> -9.9%</td>
<td> -4.0%</td>
<td> -1.9%</td>
</tr>
<tr class="grey2">
<td class="firstcol">OECD US</td>
<td> -17.4%</td>
<td> -12.8%</td>
<td> -7.6%</td>
<td> 1.2%</td>
</tr>
<tr class="grey1">
<td colspan="5" class="firstcol">
Six month readings at 6-Mo
Intervals:</td>
</tr>
<tr class="grey3">
<td class="firstcol">&nbsp;</td>
<td> Recent six</td>
<td> 6Mo Ago</td>
<td> 12Mo Ago</td>
<td> 18MO Ago</td>
</tr>
<tr class="grey2">
<td class="firstcol">OECD</td>
<td> -9.9%</td>
<td> -1.1%</td>
<td> -0.3%</td>
<td>3.0%</td>
</tr>
<tr class="grey2">
<td class="firstcol">OECD7</td>
<td> -11.3%</td>
<td> -1.6%</td>
<td> -1.1%</td>
<td>2.5%</td>
</tr>
<tr class="grey2">
<td class="firstcol">OECD. Eur</td>
<td> -9.5%</td>
<td> -2.2%</td>
<td> 0.5%</td>
<td> 2.3%</td>
</tr>
<tr class="grey2">
<td class="firstcol">OECD. Japan</td>
<td> -9.9%</td>
<td>2.2%</td>
<td> -2.6%</td>
<td> -1.2%</td>
</tr>
<tr class="grey2">
<td class="firstcol">OECD US</td>
<td> -12.8%</td>
<td> -2.1%</td>
<td> -1.4%</td>
<td>3.8%</td>
</tr>
<tr class="grey1">
<td colspan="5" class="firstcol">
Slowdowns indicated by
BOLD RED</td>
</tr>
</tbody>
</table>
</body></html>

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090305e.jpg" width="353">
Factory inventory levels continued to plummet during January. The 0.8% monthly decline was the fifth in a row and lowered inventories by 4.5% from their August peak. To be sure, these figures have been influenced by the decline in oil prices. However, excluding oil, factory inventories are down 1.2% from their peak, a decline not seen since 2003.
Lower inventories of automobiles have dominated the factory inventory decline. They fell 17.6% in January and by 20.0% over the last three months. Steep production cutbacks pulled furniture inventories down 5.2% over the last six months while inventories of electrical equipment are down 7.2% since September. <img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090305f.jpg" width="353">
Weaker factory shipments have prompted the inventory cutbacks with a 15.6% decline over the last year. Again, lower oil prices account for much of the decline but less oil, factory shipments have fallen 13.9% from their peak last July. Automobile shipments were off by more 36.1% from their summer peak while shipments of electrical equipment fell 19.8% during that period. Shipments of furniture &amp; related products fell 16.2% since the summer.
Total factory orders dropped 1.9% during January. The capital goods sector has been notably hard hit. Machinery orders dropped 3.0% in January and by 29.1% during the last six months. Orders for electrical equipment fell 7.3% during January alone and by 19.6% since July.
The Manufacturers&#39; Shipments, Inventories and Orders (MSIO) data is 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/@ED/@ED01/@ED0101/@ED01016/@ED01016.HTM">Factory Survey</a> (NAICS, %)</th>
<th scope="col">January</th>
<th scope="col">December</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>-1.9</td>
<td>0.0</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>-2.8</td>
<td>-2.7</td>
<td>-0.6</td>
<td>2.7</td>
<td>7.9</td>
</tr>
<tr class="odd">
<td class="firstcol">New Orders</td>
<td>-1.9</td>
<td>-4.9</td>
<td>-19.2</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>-4.4</td>
<td>-16.6</td>
<td>3.1</td>
<td>1.2</td>
<td>7.4</td>
</tr>
<tr class="odd">
<td class="firstcol">Shipments</td>
<td>-1.7</td>
<td>-3.3</td>
<td>-15.6</td>
<td>1.7</td>
<td>1.2</td>
<td>5.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Excluding Transportation</td>
<td>-1.6</td>
<td>-3.9</td>
<td>-14.6</td>
<td>3.7</td>
<td>1.5</td>
<td>6.7</td>
</tr>
<tr class="odd">
<td class="firstcol">Unfilled Orders</td>
<td>-1.7</td>
<td>-1.5</td>
<td>1.2</td>
<td>3.5</td>
<td>17.1</td>
<td>15.3</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Excluding Transportation</td>
<td>-2.1</td>
<td>-2.5</td>
<td>-3.8</td>
<td>-1.0</td>
<td>8.2</td>
<td>16.0</td>
</tr>
</tbody>
</table>
</body>
</html>

Factory inventory levels continued to plummet during January. The 0.8% monthly decline was the fifth in a row and lowered inventories by 4.5% from their August peak. To be sure, these figures have been influenced by the decline in oil [...]

U.S. Factory Inventories Fell A Fifth Month, Shipments Off 15.6% Y/Y

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090305c.jpg" width="353">
During last year&#39;s fourth quarter, labor productivity in the nonfarm business sector fell 0.4% (AR), revised down sharply from last month&#39;s indication of a 3.2% increase. The downward revision to 4Q08, however, was offset by upward revisions to prior quarters and for the year, growth was left unchanged at 2.8%, double the gain during all of 2007. The 4Q decline fell short of Consensus expectations for a revision to a 1.5% increase.
Growth in 4Q compensation totaled 5.3% which was upwardly revised from the 5.0% gain indicated last month. That increase bought annual growth in compensation to 3.7% from 4.1% in 2007. Annually, growth in compensation has been quite stable at or slightly below 4% since 2001.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090305d.jpg" width="353">
Growth in unit labor costs accelerated sharply last quarter as a result of the productivity revision. It was raised to 5.7% from the 1.8% gain indicated initially. However, though that increase raised growth for the whole year to 0.9% from the 0.5% increase indicated last month, it was still near the weakest in five years.
The downward revision to productivity growth stemmed from a deepened decline in output, now pegged at -8.7%. For the year, however, growth in output was left about unchanged at 0.8% which was the weakest since the recession of 2001. Hours worked fell by an unrevised 8.4% rate last quarter and 1.9% for the full year.
In the factory sector, productivity declined at a little revised 4.0% rate last quarter which was deeper than the rate of decline during the prior two quarters. For the year as a whole, however, manufacturing productivity did rise 1.5%. A decline of 2.5% is in the offing for 2009 due to the recession. Unit labor cost growth in the factory sector surged at a little revised 14.7% rate last quarter as a result of the sharp decline in productivity and it rose at a quickened 2.6% rate for the year. Compensation growth about doubled last quarter to 10.1% and it rose a quickened 4.1% for the whole year.
The productivity &amp; cost figures are available in Haver&#39;s USECON database.
Discussion of &#147;Oil and the Macroeconomy: Lessons for Monetary Policy&quot; by San Francisco Fed President Janet L. Yellen is available <a href="http://www.frbsf.org/news/speeches/2009/0227.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/@EC/@EC02/@EC02.HTM">Nonfarm Business Sector</a> (SAAR, %)</th>
<th scope="col">4Q &#39;08</th>
<th scope="col">3Q &#39;08</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">Output per Hour</td>
<td>-0.4</td>
<td>2.2</td>
<td>2.2</td>
<td>2.8</td>
<td>1.4</td>
<td>0.9</td>
</tr>
<tr>
<td class="firstcol">Compensation per Hour</td>
<td>5.3</td>
<td>5.7</td>
<td>4.1</td>
<td>3.7</td>
<td>4.1</td>
<td>3.8</td>
</tr>
<tr class="odd">
<td class="firstcol">Unit Labor Costs</td>
<td>5.7</td>
<td>3.5</td>
<td>1.8</td>
<td>0.9</td>
<td>2.7</td>
<td>2.8</td>
</tr>
</tbody>
</table>
</body>
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During last year's fourth quarter, labor productivity in the nonfarm business sector fell 0.4% (AR), revised down sharply from last month's indication of a 3.2% increase. The downward revision to 4Q08, however, was offset by upward [...]

U.S. 4Q Worker Productivity Revised Down Sharply

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090305a.jpg" width="353">
Weakness in the U.S. labor market eased slightly last week. A 31,000 decline in initial claims for unemployment insurance reversed the gain recorded in the prior week, which had brought claims to a level not seen since 1982. The Labor Department indicated that initial claims for unemployment insurance fell last week to 639,000 from 670,000, a higher figure than initially reported. The latest reading was lower than Consensus expectations for 650,000 initial claims.
The Labor Department will release the February payroll employment figures tomorrow. For last month, claims averaged 642,000 versus the January average of 561,000. During the last ten years there has been an 83% correlation between the level of initial claims and the month-to-month change in nonfarm payrolls.
In the week ending February 21 the largest increases in claims were in Illinois (+3,791), Massachusetts (+3,438), Missouri (+3,027), Ohio (+2,731), and California (+2,677), while the largest decreases were in Florida (-3,586), Virginia (-3,490), New York (-3,420), Michigan (-3,373), and New Jersey (-2,266).
Continuing claims for unemployment insurance eased a slight 14,000 after two weeks of triple digit increase. At 5,106,000, the level of continuing claims remained near the record level. The series dates back to 1966. The four-week average of continuing claims rose 76,800 to 5,011,000. Continuing claims provide some indication of workers&#39; ability to find employment and they lag the initial claims figures by one week.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090305b.jpg" width="353">
Though the latest level of continuing claims was a record, the labor force has grown as well, by nearly 30% over the last twenty years. Therefore, the insured rate of unemployment was not at a new record and it remained stable week-to-week at 3.8% which was the highest since 1983. During the last ten years there has been a 93% correlation between the level of the insured unemployment rate and the overall rate of unemployment published by the Bureau of Labor Statistics. The highest insured rates of unemployment in the week ending February 14 were in Michigan (8.2 percent), Oregon (7.3), Idaho (7.1), Pennsylvania (6.7), Wisconsin (6.5), Rhode Island (6.2), Alaska (6.0), Nevada (6.0), Montana (5.8), and Puerto Rico (5.8).
The unemployment insurance claim data is available in Haver&#39;s WEEKLY database.
The Fed&#39;s latest Beige Book covering regional economic conditions can be found <a href="http://www.federalreserve.gov/fomc/beigebook/2009/20090304/fullreport20090304.pdf">here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/WEEKLY/@W5/@W507/@W507.HTM">Unemployment Insurance (000s)</a>&nbsp;</th>
<th scope="col">02/28/09</th>
<th scope="col">02/21/09</th>
<th scope="col">02/14/09</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>
<td class="firstcol">Initial Claims</td>
<td>639</td>
<td>670</td>
<td>631</td>
<td>85.8%</td>
<td>420</td>
<td>321</td>
<td>313</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>--</td>
<td>5,106</td>
<td>5,120</td>
<td>81.8%</td>
<td>3,342</td>
<td>2,552</td>
<td>2,459</td>
</tr>
</tbody>
</table>
</body>
</html>

Weakness in the U.S. labor market eased slightly last week. A 31,000 decline in initial claims for unemployment insurance reversed the gain recorded in the prior week, which had brought claims to a level not seen since 1982. The Labor [...]

U.S. Initial Claims For Jobless Insurance Fell Back

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090305c.jpg" width="353">
During last year&#39;s fourth quarter, labor productivity in the nonfarm business sector fell 0.4% (AR), revised down sharply from last month&#39;s indication of a 3.2% increase. The downward revision to 4Q08, however, was offset by upward revisions to prior quarters and for the year, growth was left unchanged at 2.8%, double the gain during all of 2007. The 4Q decline fell short of Consensus expectations for a revision to a 1.5% increase.
Growth in 4Q compensation totaled 5.3% which was upwardly revised from the 5.0% gain indicated last month. That increase bought annual growth in compensation to 3.7% from 4.1% in 2007. Annually, growth in compensation has been quite stable at or slightly below 4% since 2001.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090305d.jpg" width="353">
Growth in unit labor costs accelerated sharply last quarter as a result of the productivity revision. It was raised to 5.7% from the 1.8% gain indicated initially. However, though that increase raised growth for the whole year to 0.9% from the 0.5% increase indicated last month, it was still near the weakest in five years.
The downward revision to productivity growth stemmed from a deepened decline in output, now pegged at -8.7%. For the year, however, growth in output was left about unchanged at 0.8% which was the weakest since the recession of 2001. Hours worked fell by an unrevised 8.4% rate last quarter and 1.9% for the full year.
In the factory sector, productivity declined at a little revised 4.0% rate last quarter which was deeper than the rate of decline during the prior two quarters. For the year as a whole, however, manufacturing productivity did rise 1.5%. A decline of 2.5% is in the offing for 2009 due to the recession. Unit labor cost growth in the factory sector surged at a little revised 14.7% rate last quarter as a result of the sharp decline in productivity and it rose at a quickened 2.6% rate for the year. Compensation growth about doubled last quarter to 10.1% and it rose a quickened 4.1% for the whole year.
The productivity &amp; cost figures are available in Haver&#39;s USECON database.
Discussion of &#147;Oil and the Macroeconomy: Lessons for Monetary Policy&quot; by San Francisco Fed President Janet L. Yellen is available <a href="http://www.frbsf.org/news/speeches/2009/0227.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/@EC/@EC02/@EC02.HTM">Nonfarm Business Sector</a> (SAAR, %)</th>
<th scope="col">4Q &#39;08</th>
<th scope="col">3Q &#39;08</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">Output per Hour</td>
<td>-0.4</td>
<td>2.2</td>
<td>2.2</td>
<td>2.8</td>
<td>1.4</td>
<td>0.9</td>
</tr>
<tr>
<td class="firstcol">Compensation per Hour</td>
<td>5.3</td>
<td>5.7</td>
<td>4.1</td>
<td>3.7</td>
<td>4.1</td>
<td>3.8</td>
</tr>
<tr class="odd">
<td class="firstcol">Unit Labor Costs</td>
<td>5.7</td>
<td>3.5</td>
<td>1.8</td>
<td>0.9</td>
<td>2.7</td>
<td>2.8</td>
</tr>
</tbody>
</table>
U.S. Initial Claims For Jobless Insurance Fell Back 
by <a href="/comment/Moeller.html">Tom Moeller</a> March 5, 2009


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090305a.jpg" width="353">
Weakness in the U.S. labor market eased slightly last week. A 31,000 decline in initial claims for unemployment insurance reversed the gain recorded in the prior week, which had brought claims to a level not seen since 1982. The Labor Department indicated that initial claims for unemployment insurance fell last week to 639,000 from 670,000, a higher figure than initially reported. The latest reading was lower than Consensus expectations for 650,000 initial claims.
The Labor Department will release the February payroll employment figures tomorrow. For last month, claims averaged 642,000 versus the January average of 561,000. During the last ten years there has been an 83% correlation between the level of initial claims and the month-to-month change in nonfarm payrolls.
In the week ending February 21 the largest increases in claims were in Illinois (+3,791), Massachusetts (+3,438), Missouri (+3,027), Ohio (+2,731), and California (+2,677), while the largest decreases were in Florida (-3,586), Virginia (-3,490), New York (-3,420), Michigan (-3,373), and New Jersey (-2,266).
Continuing claims for unemployment insurance eased a slight 14,000 after two weeks of triple digit increase. At 5,106,000, the level of continuing claims remained near the record level. The series dates back to 1966. The four-week average of continuing claims rose 76,800 to 5,011,000. Continuing claims provide some indication of workers&#39; ability to find employment and they lag the initial claims figures by one week.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090305b.jpg" width="353">
Though the latest level of continuing claims was a record, the labor force has grown as well, by nearly 30% over the last twenty years. Therefore, the insured rate of unemployment was not at a new record and it remained stable week-to-week at 3.8% which was the highest since 1983. During the last ten years there has been a 93% correlation between the level of the insured unemployment rate and the overall rate of unemployment published by the Bureau of Labor Statistics. The highest insured rates of unemployment in the week ending February 14 were in Michigan (8.2 percent), Oregon (7.3), Idaho (7.1), Pennsylvania (6.7), Wisconsin (6.5), Rhode Island (6.2), Alaska (6.0), Nevada (6.0), Montana (5.8), and Puerto Rico (5.8).
The unemployment insurance claim data is available in Haver&#39;s WEEKLY database.
The Fed&#39;s latest Beige Book covering regional economic conditions can be found <a href="http://www.federalreserve.gov/fomc/beigebook/2009/20090304/fullreport20090304.pdf">here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/WEEKLY/@W5/@W507/@W507.HTM">Unemployment Insurance (000s)</a>&nbsp;</th>
<th scope="col">02/28/09</th>
<th scope="col">02/21/09</th>
<th scope="col">02/14/09</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>
<td class="firstcol">Initial Claims</td>
<td>639</td>
<td>670</td>
<td>631</td>
<td>85.8%</td>
<td>420</td>
<td>321</td>
<td>313</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>--</td>
<td>5,106</td>
<td>5,120</td>
<td>81.8%</td>
<td>3,342</td>
<td>2,552</td>
<td>2,459</td>
</tr>
</tbody>
</table>
U.S. Factory Inventories Fell A Fifth Month, Shipments Off 15.6% Y/Y 
by <a href="/comment/Moeller.html">Tom Moeller</a> March 5, 2009


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090305e.jpg" width="353">
Factory inventory levels continued to plummet during January. The 0.8% monthly decline was the fifth in a row and lowered inventories by 4.5% from their August peak. To be sure, these figures have been influenced by the decline in oil prices. However, excluding oil, factory inventories are down 1.2% from their peak, a decline not seen since 2003.
Lower inventories of automobiles have dominated the factory inventory decline. They fell 17.6% in January and by 20.0% over the last three months. Steep production cutbacks pulled furniture inventories down 5.2% over the last six months while inventories of electrical equipment are down 7.2% since September. <img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090305f.jpg" width="353">
Weaker factory shipments have prompted the inventory cutbacks with a 15.6% decline over the last year. Again, lower oil prices account for much of the decline but less oil, factory shipments have fallen 13.9% from their peak last July. Automobile shipments were off by more 36.1% from their summer peak while shipments of electrical equipment fell 19.8% during that period. Shipments of furniture &amp; related products fell 16.2% since the summer.
Total factory orders dropped 1.9% during January. The capital goods sector has been notably hard hit. Machinery orders dropped 3.0% in January and by 29.1% during the last six months. Orders for electrical equipment fell 7.3% during January alone and by 19.6% since July.
The Manufacturers&#39; Shipments, Inventories and Orders (MSIO) data is 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/@ED/@ED01/@ED0101/@ED01016/@ED01016.HTM">Factory Survey</a> (NAICS, %)</th>
<th scope="col">January</th>
<th scope="col">December</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>-1.9</td>
<td>0.0</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>-2.8</td>
<td>-2.7</td>
<td>-0.6</td>
<td>2.7</td>
<td>7.9</td>
</tr>
<tr class="odd">
<td class="firstcol">New Orders</td>
<td>-1.9</td>
<td>-4.9</td>
<td>-19.2</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>-4.4</td>
<td>-16.6</td>
<td>3.1</td>
<td>1.2</td>
<td>7.4</td>
</tr>
<tr class="odd">
<td class="firstcol">Shipments</td>
<td>-1.7</td>
<td>-3.3</td>
<td>-15.6</td>
<td>1.7</td>
<td>1.2</td>
<td>5.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Excluding Transportation</td>
<td>-1.6</td>
<td>-3.9</td>
<td>-14.6</td>
<td>3.7</td>
<td>1.5</td>
<td>6.7</td>
</tr>
<tr class="odd">
<td class="firstcol">Unfilled Orders</td>
<td>-1.7</td>
<td>-1.5</td>
<td>1.2</td>
<td>3.5</td>
<td>17.1</td>
<td>15.3</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Excluding Transportation</td>
<td>-2.1</td>
<td>-2.5</td>
<td>-3.8</td>
<td>-1.0</td>
<td>8.2</td>
<td>16.0</td>
</tr>
</tbody>
</table>
</body>
</html>

Robert Brusca

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090304h.jpg" align="left" border="0" height="265" width="353">
This trend is not a friend - In our select
group of EMU members (see table) all show month-to-month deterioration
in services activity. Meanwhile, the UK continues to cut losses
relative to its November low. The US follows a pattern somewhat like
the UK with its non-MFG index doing some backtracking in February but
still forming a series of months with a rising profile from a November
(2008) low. 
 
Fate as her mistress - Europe is still slipping
lower, having just reached its cycle low in February. The tentative
evidence suggests that the US and UK are turning (or trying to turn a
corner) on the worst of times at least for their &#8216;Service&#8217; sector. In
the US the situation is complicated by lumping the troubled housing
sector in with services as &#8216;non-MFG&#8217;. 
 
The essential point here is that Europe is - as it usually is --
trailing the US by a few months. Typically it&#8217;s trailing by about six
months. 
 
Masters of illusion - There was a brief period in
2006 when the US seemed to be lagging and Europe seemed to growing. At
that time Euro-pride was at its zenith. For a time the euro currency
ran to unprecedented heights on the view that Europe was special and
perhaps even bullet-proof. In time, that fallacy revealed itself as
sub-prime became the catalyst to expose all sorts of bad market
practices including excess lending to Eastern Europe explaining in part
the brief suspended animation for Europe from incipient US weakness.
But now it&#8217;s all out in the open and Europe and the US are part of the
same cyclical downturn. Notions of de-coupling are colder and deader
than Iceland&#8217;s balance sheet. 
 
Europe continues to be beset with weakness from manufacturing
transmitted to services. The banking problems that Europe was initially
in denial about have simply taken a bit longer to emerge there, at
least in some respects. Remedy&#8217;s are in train, but so is more damage. 
 
Old fashioned, anyone? 
I find interesting the notion that the old fashioned business cycle is
back in play. The US is leading the cycle and Europe is following.
While some want to paint a picture of this cycle was something
unprecedented it is more like the 1973-75 and the 1981-82 cycles that
previously gripped the global economy. In 1977 the Economic Summit in
London failed to embrace a US-sponsored notion of a locomotive in which
stimulus across the G-7 would help bring world growth. By the Bonn
Summit in 1978 the G-7 was ready for this, but by then recovery had
started and Bonn only helped to inflation the recovery balloon beyond
its need. Against that patch of history this cycle is a bit more
understandable. Without any formal coordination we have a locomotive
process in train involving a US stimulus package various European
packages and large effort from a G-7 outsider, China. This is a
different version but it is more timely than what had been attempted in
1977/78. It is a good example of global enlightened self-interest. 
 
The Bonn summit in 1978 declared: 
&#8216;We agreed on a comprehensive strategy covering growth, employment and
inflation, international monetary policy, energy, trade and other
issues of particular interest to developing countries. We must create
more jobs and fight inflation, strengthen international trading, reduce
payments imbalances, and achieve greater stability in exchange markets.
We are dealing with long term problems, which will only yield to
sustained efforts. This strategy is a coherent whole, whose parts are
interdependent. To this strategy, each of our countries can contribute;
from it, each can benefit.&#8217; 
 
Not depression neglect but hybrid recession forces at work
- The actions this time around are not much different except that they
include a lot of help to a very battered global financial system. If
the efforts to patch up the financial system bear fruit I expect the
various efforts at stimulus to be successful. For the moment I see a
lot more comparisons with 1973-75 and 81-82 than with the great
depression everyone is so fond of speaking about. Without timely action
on the financial sector, a key part of the service sector, I might be
compelled to change my mind. But having the financial patches in play
is crucial to the outlook. Having them, it strikes me that the
developing recovery processes are much better understood in terms of
the recent history of economic summitry than by dredging up the
horrible depressing dillies from the days of Depression when various
federal safety nets were not available and the lessons from our
then-current folly had not been learned. This recession has late cycle
weakness as did 1973-75. But it also has the financial chaos
characteristic of 1981-82. (It is worse than that this time, but
similar to 1981-82.) Like 1973-75 it also has an oil trigger. 
 
Bad summit/good summit - We may still employ summits
to try and get global attention to bear on this crisis. But what is
different this time is the willingness of countries to act
independently, yet in concert, without the need for a formal summit.
Yes, a summit still is coming. But it will likely not be that
successful. And this is because the leaders have learned to work
separately and with common purpose at the same time with a good measure
of success, taking pressure from the summit. Summits are too-grand and
too high-stakes, those factors ultimately constrain world economic
summit achievement. But summitry has undoubtedly brought the world
leaders closer, allowing them to think more alike as a global problem
emerges such as the one we are in the midst of trying to solve. 
 



<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr><th colspan="8" scope="col">NTC Services Indices for EU/EMU</th>
</tr>
</thead>
<tbody>
<tr class="grey5">
<td class="firstcol">&nbsp;</td>
<td>Feb-09</td>
<td>Jan-09</td>
<td>Dec-08</td>
<td>3Mo</td>
<td>6Mo</td>
<td>12Mo</td>
<td>Percentile</td>
</tr>
<tr class="grey4">
<td class="firstcol">Euro-13</td>
<td>39.24</td>
<td>42.16</td>
<td>42.06</td>
<td>41.15</td>
<td>43.36</td>
<td>46.69</td>
<td>0.0%</td>
</tr>
<tr class="grey4">
<td class="firstcol">Germany</td>
<td>41.32</td>
<td>45.20</td>
<td>46.57</td>
<td>44.36</td>
<td>46.13</td>
<td>49.49</td>
<td>0.0%</td>
</tr>
<tr class="grey4">
<td class="firstcol">France</td>
<td>40.18</td>
<td>42.56</td>
<td>40.57</td>
<td>41.10</td>
<td>44.53</td>
<td>47.77</td>
<td>0.0%</td>
</tr>
<tr class="grey4">
<td class="firstcol">Italy</td>
<td>37.85</td>
<td>41.10</td>
<td>40.30</td>
<td>39.75</td>
<td>42.30</td>
<td>45.26</td>
<td>0.0%</td>
</tr>
<tr class="grey4">
<td class="firstcol">Spain</td>
<td>31.73</td>
<td>31.84</td>
<td>32.10</td>
<td>31.89</td>
<td>32.04</td>
<td>35.97</td>
<td>10.9%</td>
</tr>
<tr class="grey4">
<td class="firstcol">Ireland</td>
<td>31.78</td>
<td>33.94</td>
<td>34.14</td>
<td>33.29</td>
<td>34.89</td>
<td>39.14</td>
<td>0.0%</td>
</tr>
<tr class="grey3">
<td class="firstcol">EU only</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="grey4">
<td class="firstcol">UK (CIPs)</td>
<td>43.24</td>
<td>42.48</td>
<td>40.21</td>
<td>41.98</td>
<td>42.39</td>
<td>45.86</td>
<td>15.5%</td>
</tr>
<tr class="grey2">
<td class="firstcol">US NONFMG ISM</td>
<td>41.60</td>
<td>42.90</td>
<td>40.10</td>
<td>41.53</td>
<td>42.77</td>
<td>46.53</td>
<td>17.5%</td>
</tr>
<tr class="grey3">
<td colspan="8" class="firstcol">EU Commission Indices for
EU and EMU</td>
</tr>
<tr class="grey5">
<td class="firstcol">EU Index</td>
<td>Feb-09</td>
<td>Jan-09</td>
<td>Dec-08</td>
<td>3Mo</td>
<td>6Mo</td>
<td>12Mo</td>
<td>Percentile</td>
</tr>
<tr class="grey4">
<td class="firstcol">EU Services</td>
<td>-29</td>
<td>-28</td>
<td>-23</td>
<td>-31.33</td>
<td>-27.00</td>
<td>-21.42</td>
<td>0.0%</td>
</tr>
<tr class="grey5">
<td class="firstcol">EMU</td>
<td>Feb-09</td>
<td>Jan-09</td>
<td>Dec-08</td>
<td>3Mo</td>
<td>6Mo</td>
<td>12Mo</td>
<td>Percentile</td>
</tr>
<tr class="grey4">
<td class="firstcol">Services</td>
<td>-23</td>
<td>-22</td>
<td>-17</td>
<td>-20.67</td>
<td>-13.50</td>
<td>-5.42</td>
<td>0.0%</td>
</tr>
<tr class="grey4">
<td class="firstcol">Cons Confidence</td>
<td>-33</td>
<td>-31</td>
<td>-30</td>
<td>-31.33</td>
<td>-27.00</td>
<td>-10.75</td>
<td>0.0%</td>
</tr>
<tr class="grey3">
<td colspan="8" class="firstcol">Consumer confidence by
country</td>
</tr>
<tr class="grey4">
<td class="firstcol">Germany</td>
<td>-29</td>
<td>-27</td>
<td>-22</td>
<td>-26.00</td>
<td>-19.00</td>
<td>-11.67</td>
<td>0.0%</td>
</tr>
<tr class="grey4">
<td class="firstcol">France</td>
<td>-36</td>
<td>-35</td>
<td>-34</td>
<td>-35.00</td>
<td>-31.67</td>
<td>-25.58</td>
<td>0.0%</td>
</tr>
<tr class="grey4">
<td class="firstcol">Ital</td>
<td>-28</td>
<td>-26</td>
<td>-30</td>
<td>-28.00</td>
<td>-25.83</td>
<td>-24.58</td>
<td>6.3%</td>
</tr>
<tr class="grey4">
<td class="firstcol">Spain</td>
<td>-48</td>
<td>-44</td>
<td>-46</td>
<td>-46.00</td>
<td>-44.17</td>
<td>-37.83</td>
<td>0.0%</td>
</tr>
<tr class="grey4">
<td class="firstcol">UK</td>
<td>-32</td>
<td>-35</td>
<td>-29</td>
<td>-32.00</td>
<td>-28.83</td>
<td>-23.42</td>
<td>7.9%</td>
</tr>
<tr class="grey1">
<td colspan="8" class="firstcol">percentile is over range since May
2000</td>
</tr>
</tbody>
</table>
</body></html>

This trend is not a friend - In our select group of EMU members (see table) all show month-to-month deterioration in services activity. Meanwhile, the UK continues to cut losses relative to its November low. The US follows a pattern [...]

EMU Services Contract as UK Sector Cuts Losses

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090304g.jpg" width="353">
Challenger, Grey &amp; Christmas reported that February job cut announcements eased slightly to 186,350 following 241,749 layoffs during January. Challenger also reported that announced hiring plans reversed much of the strong January gain.
Job cut announcements in the automotive sector surged to 61,288 and the financial business shed 13,550 jobs. Employment in the retail industry fell 18,759. Employment in the industrial goods industry again was quite weak and 19,462 jobs were lost while 3,960 were shed from the computer industry. From the pharmaceutical industry there were 8,806 layoffs and the electronics industry shed another 11,065 jobs
During the last ten years there has been a 67% (inverse) correlation between the three month moving average of announced job cuts and the three month change payroll employment.
Job cut announcements differ from layoffs. Many are achieved through attrition, early retirement or just never occur.
The Challenger figures are available in Haver&#39;s SURVEYS database.
The Term Structure of Inflation Expectations from the Federal Reserve Bank of New York is available <a href="http://www.newyorkfed.org/research/staff_reports/sr362.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/@S3/@S301/@S301.HTM">Challenger, Gray &amp; Christmas</a></th>
<th scope="col">February</th>
<th scope="col">January</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">Announced Job Cuts</td>
<td>186,350</td>
<td>241,749</td>
<td>158.5%</td>
<td>1,223,993</td>
<td>768,264</td>
<td>839,822</td>
</tr>
</tbody>
</table>
</body>
</html>

Challenger, Grey & Christmas reported that February job cut announcements eased slightly to 186,350 following 241,749 layoffs during January. Challenger also reported that announced hiring plans reversed much of the strong January [...]

Challenger Layoffs Eased Somewhat

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

US production rebounded in Q2, but demand continued to slow

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

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Sandy Batten

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Total construction spending fell 0.6% m/m (-1.5% y/y) in September to $2,164.3 billion following a 0.4% monthly gain in August. However, it rebounded in October, rising 0.5% m/m (-1.0% y/y) to $2,175.2 billion (saar). This is the ninth consecutive month that construction spending has been lower than a year ago. A 0.1% m/m decline in September and an unchanged reading in October had been expected in the Action Economics Forecast Survey. Over the first ten months of this year, construction spending amounted to $1,825.3 billion, 1.4% below the $1,851.4 billion for the same period in 2024.

Spending on private construction was at a seasonally adjusted annual rate of $1,651.3 billion in October, 0.6% above the September estimate of $1,640.8 billion (-3.0% y/y), which fell 0.9% m/m from August. Private residential construction was at a seasonally adjusted annual rate of $913.9 billion in October, up 1.3% m/m from September, which declined 1.4% from August. Private nonresidential construction was at a seasonally adjusted annual rate of $737.4 billion in October, down 0.2% m/m from September, which also had declined 0.2% in September from August.

The October increase in private residential investment was due entirely to a 4.5% m/m increase in spending on improvements, its largest monthly gain since April 2024, following a 2.2% monthly decline in September. Single family construction fell 1.3% m/m in October, its eight consecutive monthly decline, while multi-family construction slipped 0.2% m/m, its first monthly decline in five months. The decline in private nonresidential construction was more than accounted for by a 0.9% m/m drop in manufacturing construction, its ninth consecutive monthly decline.

The value of public construction spending edged up 0.1% m/m in October to $524.0 billion after having risen 0.4% m/m in September. Of particular importance, educational construction was at a seasonally adjusted annual rate of $114.8 billion, up 0.7% m/m in October on top of a 1.1% m/m increase in September. Highway construction was at a seasonally adjusted annual rate of $141.6 billion, 0.1% m/m above the September estimate after a 0.4% monthly decline in September from August. Spending on highways and educational facilities are by far the two largest components of public construction spending. Spending on water supply construction at $35.2 billion was also important in October, up 1.2% m/m on top of a 1.5% monthly gain in September.

The construction figures can be found in Haver’s **USECON** database. The expectations figure is from the Action Economics Forecast Survey in **AS1REPNA**.

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- Total construction spending fell 0.6% m/m in September but rebounded 0.5% m/m in October.
- Private construction spending slumped 0.9% m/m in September but rose 0.6% m/m in October.
- Private nonresidential construction fell for the fourth consecutive month while private residential construction posted a 1.3% m/m gain.

U.S. Construction Spending Slipped in September but Rebounded in October

Winnie Tapasanun

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The Pending Home Sales Index, a forward-looking measure of home sales based on contract signings, fell 9.3% m/m to 71.8 in December following unrevised increases of 3.3% in November and 2.4% in October, according to the National Association of Realtors (NAR). December marked the first m/m fall since July and the steepest since April 2020. The year-on-year rate was -3.0% in December, the first negative y/y reading since September, compared to +2.6% in November and -5.0% in December 2024. The index had fallen 42.6% since its October 2021 high of 125.1. In 2025, the PHSI declined 0.9% after drops of 3.0% in 2024 and 16.1% in 2023.

The m/m fall in December pending home sales occurred alongside a decline in the average 30-year mortgage rate to 6.20% in December, the lowest since September 2024, down from 6.24% in November and 6.25% in October. These rates, while below a peak of 7.62% in October 2023, had remained higher than a low of 5.22% in August 2022 and more than double a record-low 2.68% in December 2020.

Pending home sales decreased m/m in December across all four major regions. The Midwest recorded the sharpest drop, with sales plunging 14.9% (-9.8% y/y) in December—the first m/m decline since September and the deepest since April 2020—after a 1.3% increase in November. Sales in the West slumped 13.3% (-5.1% y/y), the third m/m decrease in four months, following a 9.2% November rebound. Sales in the Northeast slid 11.0% (-3.6% y/y), the first m/m slide since August, after a 1.8% November rise. Sales in the South fell 4.0% (+2.0% y/y), the first m/m fall since June, after a 2.5% November gain.

The pending home sales index measures sales at the time the contract for the purchase of an existing home is signed, similar to the Census Bureau's new home sales data. In contrast, the National Association of Realtors' existing home sales data are recorded when the sale is closed, which is usually a couple of months after the sales contract has been signed. In developing the pending home sales index, the NAR found that the level of monthly sales contract activity leads the level of closed existing home sales by about two months.

The series dates back to 2001 and are available in Haver's **PREALTOR** database. Weekly mortgage interest rates from the Mortgage Bankers Association can be found in the **WEEKLY** database.

- PHSI -9.3% m/m (-3.0% y/y) to 71.8 in Dec., lowest index level since July.
- Home sales m/m down in all four major regions, w/ the Midwest seeing the steepest drop (-14.9%).
- Home sales y/y down in the Northeast, Midwest, and West, but up in the South (+2.0%).

U.S. Pending Home Sales Drop in December Following Four Consecutive M/M Gains

Kathleen Stephansen, CBE

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Mortgage applications rose 14.1% w/w (76.8% y/y) in the week ending January 16, after soaring 28.5% w/w (55.1% y/y) in the week ending January 9, according to the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey. Applications for loans to purchase a house rose 5.1% w/w (19.1% y/y) in the week ending January 16, after rising 15.9% w/w (14.0% y/y) in the week ending January 9.  Applications for loan refinancing jumped 20.4% w/w (182.9% y/y) in the latest week, following a surge of 40.1% w/w (128.1% y/y) in the January 9 week.

The effective interest rate on a 30-year fixed-rate loan fell 3bps to 6.32% in the week ending January 16 from 6.35% in the week ending January 9. The rate on 15-year fixed-rate mortgages dropped 4bps to 5.71% in the latest week from 5.75% in the prior week. The 30-year Jumbo rate also fell 4bps to 6.50% in the January 16 week from 6.54% in the January 9 week. The rate on a 5-year ARM rose 5bps to 5.65% in the latest week from 5.60% in the January 9 week.

The share of applications for refinancing an existing loan rose to 61.9% of total applications in the January 16 week from 60.2% in the week ending January 9. The adjustable-rate mortgage (ARM) share of activity rose to 7.1% in the week ending January 16 from 7.0% in the week ending January 9.

The average size of a mortgage loan rose 2.9% w/w (11.1% y/y) to $415,300 in the week ending January 16, after rising 6.3% w/w (9.9% y/y) to $403,600 in the week ending January 9. The average size of a purchase loan edged down 0.7% w/w (+1.3% y/y) to $437,100 in the latest week after rising 7.7% w/w (4.9% y/y) to $440,300 in the January 9 week. The average size of a loan to refinance a mortgage rose 6.0% w/w (39.4% y/y) to $401,900 in the week ending January 16, after rising 6.0% w/w (27.8% y/y) to $379,200 in the week ending January 9.

The Mortgage Bankers Association Survey covers 75% of all U.S. retail residential mortgage applications and has been conducted weekly since 1990. Respondents include mortgage bankers, commercial banks and thrifts. The base period and value for all indexes is March 16, 1990=100. The figures for weekly mortgage applications and interest rates are available in Haver’s **SURVEYS** database.

- Purchase and refinancing loan applications posted healthy rises in the latest week.
- Effective interest rate on 30-year fixed loans fell to 6.32%.
- Average loan size rose.

U.S. Mortgage Applications Continue to Surge in the Week of January 16

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The CBI (Confederation of British Industry) Industrial Trends Survey showed slight improvement in orders in January 2026 as the survey reading rose to -30 on a net basis from -32 in December and -37 in November. However, the 12-month average of the order series is -31 and so the improvement compared to conditions that prevailed over the last 12 months is not significant.

Export orders, on the other hand, deteriorated to -30 in January from -27 in December although that reading was slightly better than the -31 print in November. Once again, the -30 reading for January is only slightly better than the 12-month average of -32.

Stock-building slowed in January at +3 compared to +8 in December and +16 in November. That, actually, could be good news suggesting that industries are getting control of their inventories at a time when sales have been weak.

Looking ahead for output volume over the next three months improved to -14 in January from -17 in December and -30 in November, a substantial pick up over this period. But the reading for January at -14 is still slightly more negative than the 12-month average of -11.

The unequivocally stronger reading in the table, unfortunately, is for prices with average prices over the next three months at a +29 net reading, up from +19 in December and up from +7 in November. The reading of +29 in January compares to a 12-month average of +18 indicating a significant pickup compared to conditions that prevailed over the last 12 months.

Evaluating these readings by ranking the queue standings of the net values and data back to 1992 shows total orders have a 20th percentile standing, export orders have a 28.4 percentile standing, while the stocks of finished goods have a 9.8 percentile standing, and expected output - despite its recent improvement - is quite weak with an 8.3 percentile standing.  Average prices, on the other hand, are quite strong with a 91.7 percentile standing, indicating that the forces of inflation looking ahead are quite strong despite relatively weak demand and output conditions that are expected.

CBI data compared to annual growth rates in manufacturing and to the manufacturing PMI show rankings actually much better than the CBI survey. The manufacturing PMI has a 53.7 percentile standing that's only on data back over the last four years. The manufacturing production data have a 48.3 percentile standing, which is still very close to its 50-percentile standing, which would be its historic median. So, we have another case here of the accounting data being stronger than the survey data from the CBI. The strength in manufacturing industrial output does not compare favorably with the weakness portrayed in the CBI survey even though the manufacturing data are only up-to-date through November. The CBI data are up-to-date through January. And since CBI data generally show some stability or improvement from November to January, that data time mismatch with industrial production doesn't seem to be the reason for these readings being so vastly different. We’re going to have to keep an eye on other metrics for manufacturing to see which one of these surveys is giving us the best information.

For now, we don't know which of these series is the best and what we're looking at is a CBI series that is touting a great deal of economic weakness and portraying significant increases in prices over the next three months.

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United Kingdom

U.K. CBI Industrial Survey Flags Trouble Ahead

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The ZEW survey for January showed improvement all around with both economic expectations and macroeconomic conditions showing improvements in the United States, Germany, and the euro area.

The economic situation in January in the euro area improved to a reading of -18.1 from -28.5 in December. In Germany, the reading improved to -72.7 from -81 in December, while in the United States the reading improved to +17.7 from -0.6 in December. The message here clearly is the month-to-month improvement. Still, the January readings leave the assessments of conditions in these three areas as quite different. The percentile-queue standings place each one of these topical readings in their queue of data back to December 1992, expressing the standing in percentile terms. Viewed in this way, the euro area has a 57.2 percentile standing, the U.S. has nearly a 45-percentile standing, while Germany has a 22.6 percentile standing, leaving each of these areas in their own distinctive positions relative to their historic norms. The euro area has a firm and above-median ranking since the reading is above the 50th percentile (where the median is located). The U.S. is slightly weaker than that, with a reading that's marginally below its median. Germany has a reading between the lower quartile and the one-fifth mark of its historic data, branding it as weak.

Macroeconomic expectations find that Germany in January moved up to a positive reading of 59.6 from 45.8 in December. The U.S. also improved, moving up to -3 from -12 in December. The macro-expectations find Germany and the U.S. in very different places with German expectations in an 80.4 percentile of their queue, placing them in the top 20% while the U.S. has a 45-percentile standing, below its historic median and essentially the same relative position as its current situation ranking. In contrast, Germany has a weak current economic assessment versus a stronger expectations assessment.

Inflation expectations weaken across the board in January, with the euro area falling to -7.6 from -4.6 in December, Germany falling to -6.0 from -1.7 and the U.S. falling to 44.2 from 54.9. The ZEW experts see a disinflationary environment, and they see that despite the pickup in current conditions and improved macroeconomic expectations. Expectations in the U.S. have a 61.1 percentile standing; the German and the euro area readings are much weaker and closer together, with the German standing at its 31.2 percentile and the euro area at its 25.8 percentile.

On the back of these expectations, short-term interest rates in the euro area are less weak, with the January reading at -7.7, up from -10.8 in December. The U.S. has a -65.6 reading, stronger than Decembers -73.9. On a ranking basis, the euro area’s short-term rates have a 37.4 percentile standing The U.S. has a 9.3 percentile standing. The interest rate assessment is that short-term rates are going to be modest to lower over the outlook.

Long-term interest rates in Germany and the U.S. weaken slightly in January from December to 44.5 in January for Germany, compared to 49.2 in December, and in the U.S., there is a very modest ‘decimal point’ change to 44.1 in January from 44.9 in December. German long-term rates have a 58.8 percentile standing while the U.S. has rates at about a 50-percentile standing, placing them just about on top of their historic median. Neither one of these expectations has long-term expectations different from historic norms.

Stock market expectations from December to January, however, are little changed and mostly weaker, with the euro area gauge falling to 35.2 from 41.3 in December. The German gauge slips to 35.9 from 36.3 in December. The January gauge for the U.S. is ticking slightly higher to 31.5 January from 30.2 in December. The rankings for the January gauges show the U.S. above its median at a 59.3 percentile mark, the euro area slightly below its median with a 44.9 percentile reading; the German stock market still scores as the weakest at a 39.7 percentile standing.

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On balance, there are improvements expected in the macroeconomic realm as well as improvements detected in the current economic situation. Inflation is expected to remain tame; short-term interest rates are expected to continue declining, while long-term interest rates are going to be showing some pressure or in the case of the U.S. will continue to oscillate around current levels or firm slightly. Stock market conditions in the U.S. are modestly higher than their historic norms; however, the euro area stocks are in for modest weakness; German stocks weakened and are historically weak. Looking ahead, the thing to do is to watch the market metrics in particular to see how the recent U.S.-European rift over Greenland is going to play out in markets and how much it's going to affect expectations. That's the newest trend in play. How quickly they forget drug running boat sinkings, Maduro’s capture, threats on Iran, and cage rattling the Fed Chair. It’s all about Greenland now- at least for now, don’t blink!

Economy in Brief

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