Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090205a.jpg" width="353">
U.S. labor market conditions became more bleak last week as initial claims for unemployment insurance jumped 35,000 to 626,000. Moreover, the prior week&#39;s modest increase was revised up slightly and the latest level by far surpassed Consensus expectations for 580,000 initial claims. Initial claims continue to be the highest since late during the sharp recession of 1981-82. During that recession, real GDP fell by 2.9% peak-to-trough.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090205b.jpg" width="353">
The Labor Department indicated that the largest increases in initial claims for the week ending January 24 were in Wisconsin (+1,355), Rhode Island (+689), Virginia (+682), Oklahoma (+406), and Puerto Rico (+314), while the largest decreases were in Florida (-14,703), California (-12,074), Michigan (-11,639), Georgia (-9,949), and Ohio (-9,926).
Labor market stress was further indicated by a rise in continuing claims for unemployment insurance to another record level. The series dates back to 1966. During the week of January 24 they rose 20,000 on top of 151,000 and 102,000 increases during the prior two weeks. The four-week average of continuing claims rose 44,000 to 4,672,000. Continuing claims provide some indication of workers&#39; ability to find employment and they lag the initial claims figures by one week.
Though the latest level of continuing claims was a record, the labor force has grown as well. Therefore, the insured rate of unemployment was not at a new high. It remained stable at 3.6% which was, however, the highest since 1983. The highest insured unemployment rates in the week ending January 17 were in Michigan (8.9 percent), Idaho (6.6), Oregon (6.6), Pennsylvania (6.2), South Carolina (6.0), Wisconsin (6.0), Alaska (5.6), Nevada (5.5), Indiana (5.4), and Montana (5.3).

<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">01/31/09</th>
<th scope="col">01/24/09</th>
<th scope="col">01/17/09</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>626</td>
<td>591</td>
<td>585</td>
<td>78.3%</td>
<td>420</td>
<td>321</td>
<td>313</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>--</td>
<td>4,788</td>
<td>4,768</td>
<td>72.7%</td>
<td>3,342</td>
<td>2,552</td>
<td>2,459</td>
</tr>
</tbody>
</table>
</body>
</html>

U.S. labor market conditions became more bleak last week as initial claims for unemployment insurance jumped 35,000 to 626,000. Moreover, the prior week's modest increase was revised up slightly and the latest level by far surpassed [...]

U.S. Initial Claims For Jobless Insurance Highest Since 1982, Continuing Claims Reach Another Record

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090205a.jpg" width="353">
U.S. labor market conditions became more bleak last week as initial claims for unemployment insurance jumped 35,000 to 626,000. Moreover, the prior week&#39;s modest increase was revised up slightly and the latest level by far surpassed Consensus expectations for 580,000 initial claims. Initial claims continue to be the highest since late during the sharp recession of 1981-82. During that recession, real GDP fell by 2.9% peak-to-trough.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090205b.jpg" width="353">
The Labor Department indicated that the largest increases in initial claims for the week ending January 24 were in Wisconsin (+1,355), Rhode Island (+689), Virginia (+682), Oklahoma (+406), and Puerto Rico (+314), while the largest decreases were in Florida (-14,703), California (-12,074), Michigan (-11,639), Georgia (-9,949), and Ohio (-9,926).
Labor market stress was further indicated by a rise in continuing claims for unemployment insurance to another record level. The series dates back to 1966. During the week of January 24 they rose 20,000 on top of 151,000 and 102,000 increases during the prior two weeks. The four-week average of continuing claims rose 44,000 to 4,672,000. Continuing claims provide some indication of workers&#39; ability to find employment and they lag the initial claims figures by one week.
Though the latest level of continuing claims was a record, the labor force has grown as well. Therefore, the insured rate of unemployment was not at a new high. It remained stable at 3.6% which was, however, the highest since 1983. The highest insured unemployment rates in the week ending January 17 were in Michigan (8.9 percent), Idaho (6.6), Oregon (6.6), Pennsylvania (6.2), South Carolina (6.0), Wisconsin (6.0), Alaska (5.6), Nevada (5.5), Indiana (5.4), and Montana (5.3).

<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">01/31/09</th>
<th scope="col">01/24/09</th>
<th scope="col">01/17/09</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>626</td>
<td>591</td>
<td>585</td>
<td>78.3%</td>
<td>420</td>
<td>321</td>
<td>313</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>--</td>
<td>4,788</td>
<td>4,768</td>
<td>72.7%</td>
<td>3,342</td>
<td>2,552</td>
<td>2,459</td>
</tr>
</tbody>
</table>
U.S. Worker Productivity Growth Up, Unit Costs Ease 
by <a href="/comment/Moeller.html">Tom Moeller</a> February 5, 2009


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090205c.jpg" width="353">
During last year&#39;s fourth quarter, labor productivity in the nonfarm business sector rose 3.2% (AR), up sharply from a 1.5% increase during 3Q. The rise pulled growth for the whole year up to 2.8% which doubled the gain during all of 2007. The rise far outpaced Consensus expectations for a 1.2% increase.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090205d.jpg" width="353">
As workers became more productive last quarter, that raised the growth in compensation to 5.0%. Year-to-year, however, the rise failed to translate into faster growth in worker pay. Growth in compensation per hour in fact decelerated last year to 3.4% which was the slowest since 1997.
The drop in compensation growth was the result of the recession. It lowered output by 5.5% during 4Q and growth for the full year to 1.0% from 2.0% in 2007 and from 3.2% in 2006. Hours worked fell by more, thus lifting productivity. They fell at an 8.4% rate last quarter and 1.8% for the full year.
The acceleration in productivity growth dropped the quarterly increase in unit labor costs to 1.8%. For the full year, the 0.5% gain in unit labor costs was the weakest in five years.
In the factory sector, however, the story was different. Productivity declined at a 3.0% rate which was near the rate of decline during the prior two quarters. For the year as a whole factory sector productivity did rise 1.3%. However, that only about matched the 2006 increase which was down sharply from a 4.9% rise in 2005 and gains of 6% to 7% in 2002 and 2003. Unit labor cost growth in the factory sector thus surged last quarter at a 13.3% rate and it rose at a quickened 2.5% rate for the year.

<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>3.2</td>
<td>1.5</td>
<td>2.7</td>
<td>2.8</td>
<td>1.4</td>
<td>1.0</td>
</tr>
<tr>
<td class="firstcol">Compensation per Hour</td>
<td>5.0</td>
<td>4.2</td>
<td>3.5</td>
<td>3.4</td>
<td>4.1</td>
<td>3.8</td>
</tr>
<tr class="odd">
<td class="firstcol">Unit Labor Costs</td>
<td>1.8</td>
<td>2.6</td>
<td>0.7</td>
<td>0.5</td>
<td>2.7</td>
<td>2.8</td>
</tr>
</tbody>
</table>
U.S. Factory Inventories Lower Still 
by <a href="/comment/Moeller.html">Tom Moeller</a> February 5, 2009


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090205e.jpg" width="353">
The correction of factory inventory levels has picked up steam. In December, the 1.4% decline followed a 0.5% November drop that was roughly double the initial estimate of -0.3%. On a three-month basis, the rate of decline accelerated to 9.7%. To be sure, these figures have been influenced by the decline in oil prices. However, a broad-based inventory correction in the factory sector still is underway. Less oil, factory inventories fell 0.5% during December. That lowered the three-month change to a negative 0.6% (AR) after 8% rates of growth earlier in 2008.
The commercial aircraft industry continued to dominate the nonoil industry figures with a positive 45.6% year-to-year growth rate. To the downside, automobile inventories have been reduced by 8.7% versus last year. Electrical equipment &amp; appliance inventories grew at a 0.5% rate in December versus double-digit growth early in 2007 and growth in machinery inventories has been nearly halved to 6%. Steep production cutbacks pulled furniture inventories down 5.2%. The computer industry bucked the trend and inventories rose at a 6.8% rate last year versus slight decumulation in 2007.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090205f.jpg" width="353">
Total factory orders dropped sharply again in December. The 3.9% decline was the fourth in a row between -3% and -7%, but that reflected the drop in oil prices (orders here equal shipments). Textile mill orders fell 4.2% (-18.2% y/y) and apparel orders fell 3.1% y/y. Orders for durable goods orders fell 3.0% reflecting the 43.8% drop in commercial aircraft orders. Less commercial aircraft, orders for durable goods fell 1.9% or 16.0% y/y.
Factory shipments dropped 2.9% due to lower oil prices. Less oil, shipments fell a lesser 1.3% but year-to-year they were down sharply by 7.4%. Automobile shipments were off by more than one quarter year-to-year and shipments of electrical equipment were off 9.7%. Electronic computer shipments fell 29.1% y/y with lower prices while shipments of furniture &amp; related products fell 12.5%.
Total unfilled orders fell 1.4%, but less the transportation sector where aircraft backlogs still are strong, unfilled orders fell 2.2%.
Why Do Firms Use Temporary Workers? from the Federal Reserve Bank of Chicago is available <a href="http://www.chicagofed.org/publications/fedletter/cflmarch2009_260.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">December</th>
<th scope="col">November</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>-1.4</td>
<td>-0.5</td>
<td>2.6</td>
<td>2.6</td>
<td>3.7</td>
<td>8.2&nbsp;</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Excluding Transportation</td>
<td>-2.3</td>
<td>-1.1</td>
<td>-0.0</td>
<td>-0.0</td>
<td>2.7</td>
<td>7.9</td>
</tr>
<tr class="odd">
<td class="firstcol">New Orders</td>
<td>-3.9</td>
<td>-6.5</td>
<td>-18.7</td>
<td>0.2</td>
<td>1.9</td>
<td>6.2</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Excluding Transportation</td>
<td>-4.4</td>
<td>-6.0</td>
<td>-15.2</td>
<td>3.2</td>
<td>1.2</td>
<td>7.4</td>
</tr>
<tr class="odd">
<td class="firstcol">Shipments</td>
<td>-2.9</td>
<td>-6.5</td>
<td>-12.8</td>
<td>1.8</td>
<td>1.2</td>
<td>5.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Excluding Transportation</td>
<td>-3.5</td>
<td>-6.8</td>
<td>-12.2</td>
<td>3.7</td>
<td>1.5</td>
<td>6.7</td>
</tr>
<tr class="odd">
<td class="firstcol">Unfilled Orders</td>
<td>-1.4</td>
<td>-0.9</td>
<td>3.7</td>
<td>3.7</td>
<td>17.1</td>
<td>15.3</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Excluding Transportation</td>
<td>-2.2</td>
<td>-1.4</td>
<td>-0.6</td>
<td>-0.6</td>
<td>8.2</td>
<td>16.0</td>
</tr>
</tbody>
</table>
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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090204i.jpg" align="left" border="0" height="265" width="353">
Challenger, Grey &amp; Christmas reported that January job
cut announcements soared to 241,749 following 166,348 layoffs during
December. The latest figure was the highest since early-2002.
Job cut announcements in the retail industry led overall with
53,968. The industrial goods industry was not far behind with 32,083
layoffs and in the computer industry there were 22,330 job cuts.
Announced were 22,063 layoffs in the pharmaceutical industry, 17,195
layoffs in the chemical industry and the electronics industry shed
11,050 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.
Challenger also reported that announced hiring plans were up
sharply from the prior three months.
The Challenger figures are available in Haver's SURVEYS
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/SURVEYS/@S3/@S301/@S301.HTM">Challenger,
Gray &amp; Christmas</a></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>
<td class="firstcol">Announced Job Cuts</td>
<td>241,749</td>
<td>166,348</td>
<td>222.4%</td>
<td>1,223,993</td>
<td>768,264</td>
<td>839,822</td>
</tr>
</tbody>
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Challenger, Grey & Christmas reported that January job cut announcements soared to 241,749 following 166,348 layoffs during December. The latest figure was the highest since early-2002. Job cut announcements in the retail industry led [...]

Challenger Layoffs Highest Since 2002

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090204g.jpg" width="353">
The January Composite Index for the nonmanufacturing sector from the Institute for Supply Management (ISM) rose for the second consecutive month. The rise to 42.9 raised the level to its highest since October and it was much firmer than Consensus expectations for a reading of 39.0. A level of the ISM indices below 50 indicates declining activity. Since the series&#39; inception in 1997 there has been a 48% correlation between the level of the business activity index for the nonmanufacturing sector and the Q/Q change in real GDP for the services and the construction sectors.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090204h.jpg" width="353">
The rise in the overall figure last month was led by improvement in the business activity sub-component, also its highest since October. The new orders sub-index increased as well to 41.6.
The employment index was relatively less robust and was about unchanged from December at 34.4, but that was still up moderately from the November low. Since the series&#39; inception in 1997 there has been a 56% correlation between the level of the ISM nonmanufacturing employment index and the m/m change in payroll employment in the service-producing plus the construction industries.
Pricing power firmed as well to a reading of 42.5 which was the highest since October. Since its inception ten years ago, there has been a 60% correlation between the price index and the q/q change in the GDP services chain price index.
Beginning with the January 2008 Nonmanufacturing <cite>Report On Business</cite>&reg;, the composite index is calculated as an indicator of the overall economic condition for the non-manufacturing sector. It is a composite index based on the diffusion indexes for four of the indicators (business activity, new orders, employment and supplier deliveries) with equal weights. The latest report from the ISM can be found <a href="http://www.ism.ws/ISMReport/NonMfgROB.cfm">here</a>.
ISM surveys more than 370 purchasing managers in more than 62 industries including law firms, hospitals, government and retailers. The nonmanufacturing survey dates back to July 1997.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EF/@EF03/@EF03.HTM">ISM Nonmanufacturing Survey</a></th>
<th scope="col">January</th>
<th scope="col">December</th>
<th scope="col">January &#39;08</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Composite Index</td>
<td>42.9</td>
<td>40.1</td>
<td>44.6</td>
<td>47.4</td>
<td>53.5</td>
<td>55.7</td>
</tr>
<tr>
<td class="firstcol">Prices Index</td>
<td>42.5</td>
<td>36.1</td>
<td>71.2</td>
<td>66.0</td>
<td>63.8</td>
<td>65.3</td>
</tr>
</tbody>
</table>


</html>

The January Composite Index for the nonmanufacturing sector from the Institute for Supply Management (ISM) rose for the second consecutive month. The rise to 42.9 raised the level to its highest since October and it was much firmer [...]

U.S. ISM Nonmanufacturing Index Moved Higher Again

Robert Brusca

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090204f.jpg" align="left" border="0" height="265" width="353">
The EMU Services PMIs from Market show continued weakness in
EMU and UK service sectors but not accelerating weakness. 
 

The signal for the Zone is just one month up from its low.
Country indices are low in their respective ranges, but generally they
are not on their bottoms. Germany for example saw its service sector
slip further this month; it now lies in the bottom 10 percentile of its
range. Italy and the UK each saw some of their weakness dissipate yet
they remain the worst tow countries with the lowest services diffusion
readings in this grouping. . The EU Commission&#8217;s measures on services
and confidence are generally a bit weaker and are at or nearer all time
lows compared to the Market treatment for services. 
 

The bounce in services in Europe is echoed by the bounce in
the US non-MFG ISM, the closest US measure to these European service
sector indices. The US ISM is in the bottom 23% of its range. Europe
and the US seem to be passing though this cycle with remarkably similar
impacts on their respective goods and services sectors. 
 

<div> </div>


 

<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="grey4">
<td class="firstcol">&nbsp;</td>
<td>Jan-09</td>
<td> Dec-08</td>
<td> Nov-08</td>
<td> 3Mo</td>
<td> 6Mo</td>
<td> 12Mo</td>
<td> Percentile</td>
</tr>
<tr class="grey3">
<td class="firstcol"> Euro-13</td>
<td> 42.16</td>
<td> 42.06</td>
<td> 42.47</td>
<td> 42.23</td>
<td> 44.89</td>
<td> 47.77</td>
<td>0.5%</td>
</tr>
<tr class="grey3">
<td class="firstcol">Germany</td>
<td>45.20</td>
<td>46.57</td>
<td>45.14</td>
<td>45.64</td>
<td>47.81</td>
<td>50.40</td>
<td>10.7%</td>
</tr>
<tr class="grey3">
<td class="firstcol">France</td>
<td>42.56</td>
<td>40.57</td>
<td>46.17</td>
<td>43.10</td>
<td>45.84</td>
<td>49.27</td>
<td>8.0%</td>
</tr>
<tr class="grey3">
<td class="firstcol">Italy</td>
<td>41.10</td>
<td>40.30</td>
<td>39.46</td>
<td>40.29</td>
<td>44.07</td>
<td>46.03</td>
<td>7.0%</td>
</tr>
<tr class="grey3">
<td class="firstcol">Spain</td>
<td>31.84</td>
<td>32.10</td>
<td>28.23</td>
<td>30.72</td>
<td>33.24</td>
<td>37.17</td>
<td>11.1%</td>
</tr>
<tr class="grey3">
<td class="firstcol">Ireland</td>
<td>33.94</td>
<td>34.14</td>
<td>32.60</td>
<td>33.56</td>
<td>36.23</td>
<td>40.52</td>
<td>3.7%</td>
</tr>
<tr class="grey4">
<td class="firstcol" colspan="8"> EU
only</td>
</tr>
<tr class="grey3">
<td class="firstcol">UK (CIPs)</td>
<td>42.48</td>
<td>40.21</td>
<td>40.06</td>
<td>40.92</td>
<td>43.38</td>
<td>46.76</td>
<td>11.8%</td>
</tr>
<tr class="grey2">
<td class="firstcol">&nbsp; US NONFMG ISM</td>
<td>42.90</td>
<td>40.10</td>
<td>37.40</td>
<td>40.13</td>
<td>44.23</td>
<td>47.21</td>
<td>22.9%</td>
</tr>
<tr class="grey1">
<td colspan="8" class="firstcol"> EU Commission Indices for
EU and EMU</td>
</tr>
<tr class="grey4">
<td class="firstcol"> EU Index</td>
<td>Jan-09</td>
<td> Dec-08</td>
<td> Nov-08</td>
<td> 3Mo</td>
<td> 6Mo</td>
<td> 12Mo</td>
<td> Percentile</td>
</tr>
<tr class="grey3">
<td class="firstcol">EU Services</td>
<td>-28</td>
<td>-23</td>
<td>-18</td>
<td> -28.67</td>
<td> -24.67</td>
<td> -19.67</td>
<td>0.0%</td>
</tr>
<tr class="grey4">
<td class="firstcol"> EMU</td>
<td>Jan-09</td>
<td>Dec-08</td>
<td>Nov-08</td>
<td>3Mo</td>
<td>6Mo</td>
<td>12Mo</td>
<td>Percentile</td>
</tr>
<tr class="grey3">
<td class="firstcol">Services</td>
<td>-22</td>
<td>-17</td>
<td>-12</td>
<td> -17.00</td>
<td>-9.50</td>
<td> -2.58</td>
<td>0.0%</td>
</tr>
<tr class="grey3">
<td class="firstcol">Cons Confidence</td>
<td>-31</td>
<td>-30</td>
<td>-25</td>
<td> -28.67</td>
<td>-24.67</td>
<td> -8.28</td>
<td>0.0%</td>
</tr>
<tr class="grey1">
<td colspan="8" class="firstcol">
Consumer confidence by
country</td>
</tr>
<tr class="grey3">
<td class="firstcol">Germany-Ccon</td>
<td>-27</td>
<td>-22</td>
<td>-15</td>
<td> -21.33</td>
<td>-15.67</td>
<td> -9.50</td>
<td>0.0%</td>
</tr>
<tr class="grey3">
<td class="firstcol">France-Ccon</td>
<td>-35</td>
<td>-34</td>
<td>-29</td>
<td> -32.67</td>
<td>-29.50</td>
<td> -23.75</td>
<td>0.0%</td>
</tr>
<tr class="grey3">
<td class="firstcol">Ital-Ccon</td>
<td>-26</td>
<td>-30</td>
<td>-26</td>
<td> -27.33</td>
<td>-25.17</td>
<td> -24.17</td>
<td>12.5%</td>
</tr>
<tr class="grey3">
<td class="firstcol">Spain-Ccon</td>
<td>-44</td>
<td>-46</td>
<td>-44</td>
<td> -44.67</td>
<td>-42.33</td>
<td> -35.58</td>
<td>4.2%</td>
</tr>
<tr class="grey3">
<td class="firstcol">UK-Ccon</td>
<td>-35</td>
<td>-29</td>
<td>-27</td>
<td> -30.33</td>
<td>-27.50</td>
<td> -21.50</td>
<td>0.0%</td>
</tr>
<tr class="grey1">
<td colspan="8" class="firstcol">percentile
is over range since May
2000</td>
</tr>
</tbody>
</table>
</body></html>

The EMU Services PMIs from Market show continued weakness in EMU and UK service sectors but not accelerating weakness. The signal for the Zone is just one month up from its low. Country indices are low in their respective ranges, but [...]

EMU Services PMI's Slow Descent Signal In January

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090204e.jpg" align="left" border="0" height="265" width="353">
The chart at top shows the Yr/Yr trend in EMU consumer
spending. It is working its way lower, lead by a declining trend in
consumer spending plans. The Yr/Yr drops seem to have stopped to hover
around the -2% pace, Yr/Yr. But the table shows that more recently
downward momentum seems to have picked up. Over six months the sales
volume is only lower at a 1.2% annual rate but over three-months that
is down to a -4.4% pace. The drop in the pace of nonfood items has
accelerated even more sharply over the recent 3-months as economic
conditions have worsened. Despite some really poor consumer sentiment
surveys spending in the UK is holding up. In Germany, though,
conditions are poor. 
 

<div> </div>


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="7" scope="col">Ezone (15)
Retail Sales Volume</th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td>Dec-08</td>
<td>Nov-08</td>
<td>Oct-08</td>
<td>3-Mo</td>
<td>6-MO</td>
<td>12-Mo</td>
</tr>
<tr class="odd">
<td class="firstcol">Zone-15 Total</td>
<td>0.0%</td>
<td>-0.1%</td>
<td>-1.0%</td>
<td>-4.4%</td>
<td>-1.2%</td>
<td>-1.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">Food</td>
<td>0.2%</td>
<td>-0.1%</td>
<td>-0.7%</td>
<td>-2.2%</td>
<td>0.0%</td>
<td>-1.1%</td>
</tr>
<tr class="odd">
<td class="firstcol">NonFood</td>
<td>-0.4%</td>
<td>-0.2%</td>
<td>-1.1%</td>
<td>-6.6%</td>
<td>-2.2%</td>
<td>-2.3%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Textiles</td>
<td>#N/A</td>
<td>-0.5%</td>
<td>-3.1%</td>
<td>-4.3%</td>
<td>-6.6%</td>
<td>-2.1%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Books news,
etc</td>
<td>#N/A</td>
<td>-1.1%</td>
<td>-1.1%</td>
<td>-9.0%</td>
<td>-5.0%</td>
<td>-3.9%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Pharma</td>
<td>#N/A</td>
<td>0.2%</td>
<td>-0.6%</td>
<td>-1.6%</td>
<td>1.1%</td>
<td>0.6%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Other
NonSpec</td>
<td>#N/A</td>
<td>0.3%</td>
<td>0.1%</td>
<td>-0.6%</td>
<td>-3.6%</td>
<td>-2.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Mail Order</td>
<td>#N/A</td>
<td>-0.1%</td>
<td>-1.9%</td>
<td>-4.3%</td>
<td>-1.9%</td>
<td>-0.6%</td>
</tr>
<tr>
<td colspan="7" class="firstcol">Country
detail; Volume</td>
</tr>
<tr class="odd">
<td class="firstcol">Germany: VolxAuto</td>
<td>-0.2%</td>
<td>-0.1%</td>
<td>-0.9%</td>
<td>-4.6%</td>
<td>0.6%</td>
<td>0.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">Italy (Total; Value)</td>
<td>#N/A</td>
<td>-0.2%</td>
<td>-0.4%</td>
<td>-1.5%</td>
<td>-1.5%</td>
<td>-1.3%</td>
</tr>
<tr class="odd">
<td class="firstcol">UK (EU): Vol</td>
<td>1.6%</td>
<td>0.3%</td>
<td>-0.2%</td>
<td>6.7%</td>
<td>6.2%</td>
<td>3.9%</td>
</tr>
<tr class="even">
<td colspan="7" class="firstcol">Shaded areas
calculated on a
one-month lag due to lagging data</td>
</tr>
<tr class="even">
<td colspan="7" class="firstcol">The EA 13 countries are Austria,
Belgium, Finland, France, Germany,</td>
</tr>
<tr>
<td colspan="7" class="firstcol">Greece,
Ireland, Italy, Luxembourg,
the Netherlands, Portugal, Slovenia</td>
</tr>
</tbody>
</table>
</body></html>

The chart at top shows the Yr/Yr trend in EMU consumer spending. It is working its way lower, lead by a declining trend in consumer spending plans. The Yr/Yr drops seem to have stopped to hover around the -2% pace, Yr/Yr. But the [...]

EMU Consumer Spending Tanks Along With Spending Plans

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090204c.jpg" width="353">
Consumers&#39; aversion to purchasing autos continued last month. U.S. sales of light vehicles fell a surprising 7.1% m/m to 9.57M (SAAR) from 10.31M during December. Sales of 10.2M had been expected for January. The latest figure was the lowest since 1982 according to the Autodata Corporation and Ward&#39;s Automotive News. (Seasonal adjustment of the figures is provided by the U.S. Bureau of Economic Analysis). The decline pulled the comparison versus a year ago to -37.7% which was its worst since the data became available in the late 1960s.
Sales of domestically-made light vehicles were particularly hard hit as they posted a 12.2% decline from December to 6.75M units. The level is now 42.4% below that in January 2008. Sales of domestically made autos fell a hard 20.8% m/m, enough to pull the comparison versus a year earlier to -43.7%. Light truck sales fell 4.6% for the month (-41.4% y/y).<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090204d.jpg" width="353">
Imported light vehicle sales outperformed the domestics again last month as they posted a 7.6% increase. Moreover, while sales fell 22.8% year-to-year, the decline is roughly half that for U.S. made vehicles. Sales of imported light trucks were the strongest as they increased 6.0% from January. The increase enabled sales of imported light trucks to grab 21.4% of total market share, a record and double the share of ten years earlier. Sales of imported autos also firmed and rose 8.5% (-23.0% y/y) after two months of decline.
Higher truck sales pulled import&#39;s share of the U.S. light vehicle market to a record 29.5%, up three percentage points from the 2008 average. (Imported vehicles are those produced outside the U.S. and do not include vehicles with the nameplate of a foreign manufacturer produced within the U.S.)

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@ED/@ED09/@ED0901/@ED0901.HTM">Light Vehicle Sales (SAAR, Mil. Units)</a></th>
<th scope="col">January</th>
<th scope="col">December</th>
<th scope="col">Jan. / Jan.</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>9.57</td>
<td>10.31</td>
<td>-37.7%</td>
<td>13.17</td>
<td>16.16</td>
<td>16.54</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Autos</td>
<td>4.60</td>
<td>5.21</td>
<td>-37.2</td>
<td>6.71</td>
<td>7.58</td>
<td>7.77</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp; Domestic</td>
<td>2.84</td>
<td>3.59</td>
<td>-43.7</td>
<td>4.42</td>
<td>5.07</td>
<td>5.31</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp; Imported</td>
<td>1.76</td>
<td>1.62</td>
<td>-23.0</td>
<td>2.29</td>
<td>2.52</td>
<td>2.45</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Light Trucks</td>
<td>4.97</td>
<td>5.10</td>
<td>-38.2</td>
<td>6.47</td>
<td>8.60</td>
<td>8.78</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp; Domestic</td>
<td>3.91</td>
<td>4.10</td>
<td>-41.4</td>
<td>5.29</td>
<td>7.10</td>
<td>7.42</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp; Imported</td>
<td>1.06</td>
<td>1.00</td>
<td>-22.6</td>
<td>1.18</td>
<td>1.47</td>
<td>1.37</td>
</tr>
</tbody>
</table>


</html>

Consumers' aversion to purchasing autos continued last month. U.S. sales of light vehicles fell a surprising 7.1% m/m to 9.57M (SAAR) from 10.31M during December. Sales of 10.2M had been expected for January. The latest figure was the [...]

January U.S. Light Vehicle Sales Lowest Since 1982

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090204a.jpg" width="353">
In its latest National Employment Report, the payroll processor ADP indicated that private nonfarm payrolls fell 522,000 during January after a revised 659,000 decline during December. The decline was the thirteenth consecutive monthly decline and during the last three months, payrolls have fallen at a 5.6% annual rate.
The U.S. Bureau of Labor Statistics will report on December payroll employment this Friday. Last month, the 659,000 worker decline (-2.2% y/y) in ADP&#39;s measure of private nonfarm payrolls was accompanied by a 531,000 worker decline (-2.4% y/y) in the BLS measure of private sector payrolls.According to ADP and Macro Advisers, the correlation between the monthly percentage change in the ADP estimate and that in the BLS data is 0.90. 
Employment in the service producing industry again fell hard. The 279,000 (-1.7% y/y) drop was the twelfth consecutive monthly decline. Medium sized payrolls fell 135,000 (-2.1% y/y) and small sized payrolls fell 101,000 (-1.3% y/y). Large service producing payrolls dropped by 43,000 (-2.0% y/y).<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090204b.jpg" width="353">
Weakness in goods producing payrolls added again to the service sector&#39;s decline with a 243,000 (-6.6% y/y) drop. Medium sized payrolls fell 120,000 (-6.8% y/y) followed by a 74,000 (-6.0% y/y) drop in small sized payrolls. Large payrolls fell 49,000 (-7.5% y/y). 
Employment in the manufacturing sector fell 160,000 (-6.3% y/y) in January. It has fallen in almost every month since 2001.
ADP compiled the estimate from its database of individual companies&#39; payroll information. Macroeconomic Advisers, LLC, the St. Louis economic consulting firm, developed the methodology for transforming the raw data into an economic indicator.
The ADP National Employment Report data is maintained in Haver&#39;s USECON database; historical figures date back to December 2000. The figures in this report cover only private sector jobs and exclude employment in the public sector, which rose an average 11,083 during the last twelve months. 
The full ADP National Employment Report can be found <a href="http://www.adpemploymentreport.com/pdf/final_report_january_09.pdf" title="blocked::http://www.adpemploymentreport.com/PDF/FINAL_Report_june_09.pdf">here</a>, and the ADP methodology is explained <a href="http://www.adpemploymentreport.com/PDF/ADPNERMethodology.pdf" title="blocked::http://www.adpemploymentreport.com/PDF/ADPNERMethodology.pdf">here</a>. <div> </div>

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EB/@EB25/@EB25.HTM">LAXEPA@USECON</a></th>
<th scope="col">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>
<td class="firstcol">Nonfarm Private Payroll Employment (m/m Chg.)</td>
<td>-522,000</td>
<td>-659,000</td>
<td>-2.7%</td>
<td>-0.4</td>
<td>1.2%</td>
<td>2.0%</td>
</tr>
</tbody>
</table>


</html>

In its latest National Employment Report, the payroll processor ADP indicated that private nonfarm payrolls fell 522,000 during January after a revised 659,000 decline during December. The decline was the thirteenth consecutive [...]

ADP Report: Payroll Employment Fell Another 522,000

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.

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**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.

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**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

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