Tom Moeller

The current recession in economic activity intensified last quarter. Real GDP contracted at a 3.8% annual rate. Although, the rate of decline was less than the generally expected 5.4%, it was the deepest quarterly drop since the last, [...]

U.S. Recession Intensifies; 3.8%Drop in Real GDP Is Sharpest Since 1982

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090129e.jpg" width="353">
Last month, sales of new single-family homes fell to their lowest level in the series&#39; history which dates back to 1963. The 14.7% m/m December decline to 331,000 followed a downwardly revised November. December-to-December, new home sales were off by half and down by three-quarters from their peak during July 2005. They fell short of Consensus expectations for 400,000.
December-to-December sales fell hard around the country, down by one-third to one-half.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090129f.jpg" width="353">
The median price for a new single-family home continued to fall hard to $206,500 as homebuilders attempted to move inventory. In fact, that effort has been quite successful and the inventory of unsold homes is down by more than one-quarter during the last year to its lowest level since 2003. In each of the country&#39;s regions, the inventory is down by roughly one-quarter during the last year.
The month&#39;s supply of new homes for sale surged to 12.9, a record.
New Adjustable-Rate Mortgages and the Libor Surprise From the Federal Reserve Bank of Cleveland can be found <a href="http://www.clevelandfed.org/research/commentary/2009/012109.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">US New Homes</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">Total Sales (SAAR, 000s)</td>
<td>331</td>
<td>388</td>
<td>-44.8</td>
<td>479</td>
<td>768</td>
<td>1,049</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Northeast</td>
<td>28</td>
<td>39</td>
<td>&nbsp;-50.0</td>
<td>35</td>
<td>64</td>
<td>64</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Midwest</td>
<td>51</td>
<td>54</td>
<td>-31.1</td>
<td>69</td>
<td>118</td>
<td>161</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; South</td>
<td>181</td>
<td>206</td>
<td>-46.0</td>
<td>264</td>
<td>408</td>
<td>559</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; West</td>
<td>71</td>
<td>89</td>
<td>-47.4</td>
<td>111</td>
<td>178</td>
<td>266</td>
</tr>
<tr>
<td class="firstcol">Median Price (NSA, $)</td>
<td>206,500</td>
<td>219,700</td>
<td>-9.3</td>
<td>228,350</td>
<td>243,742</td>
<td>243,067</td>
</tr>
</tbody>
</table>


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Last month, sales of new single-family homes fell to their lowest level in the series' history which dates back to 1963. The 14.7% m/m December decline to 331,000 followed a downwardly revised November. December-to-December, new home [...]

December U.S. New Home Sales Lowest Since 1963

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090129c.jpg" width="353">
The factory sector continued to be hard hit by recession last month. New orders for durable goods fell during December for the fourth month in the last five. The 2.6% drop followed declines of 3.7% in November and 8.5% during October. But since July new orders have plummeted 19.0%, the largest five-month drop since 1975. The December decline far exceeded Consensus expectations for a 2.0% shortfall.
Lower new orders for computers &amp; electronic products led last month&#39;s decline with a 7.2% drop (-10.0% y/y). Orders for just computers &amp; related products were quite weak, down 3.0% for the month and off 19.6% during the last twelve months. New orders for communications equipment also were down by a significant 4.9% (-9.9% y/y).
Severe weakness showed through in other industries. Orders for primary metals fell 6.9% last month and they&#39;re down 28.7% during the last twelve. Machinery orders fell hard for the fourth month in the last five and they are off 18.3% for the year. Electrical equipment bookings actually rose 9.4% last month but they&#39;re down by that amount December-to-December.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090129d.jpg" width="353">
Capital equipment orders fell just 1.1%, but the 23.8% y/y decline reflected a 27.0% y/y drop in orders for nondefense capital goods. That decline was due to the severe weakness in aircraft orders which nearly halved last year. Still, without aircraft, nondefense capital goods orders were down a sharp 11.2% y/y to their lowest level since 2005. During the last ten years there has been an 80% correlation between the y/y change in nondefense capital goods orders and the change in equipment &amp; software spending in the GDP accounts. The correlation of the GDP figure with capital goods shipments is, as one would expect, a larger 92%.
Reflecting this weakness in new orders was overall shipments of durable goods. They fell 0.7% last month and were down 9.5% for the year. For comparison, industrial production of durable goods fell 12.8% during 2008. During the last ten years there has been an 81% correlation between the twelve-month change in shipments of durable goods and the change in durables industrial production. Less transportation, shipments of durable goods fell 1.4% last month, off 7.0% for the year. 
Lower orders have led inventories to back up. Inventories of manufactured durables rose 0.4% in December and the 7.0% y/y rate of increase has been fairly stable since the summer. That has been accompanied by lower order backlogs which have fallen sharply during the last three months. The year-to-year rise of 3.9% is the weakest since 2005.

<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/@ED0101.HTM">NAICS Classification</a> (%)</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">Durable Goods Orders</td>
<td>-2.6</td>
<td>-3.7</td>
<td>-21.1</td>
<td>-5.6</td>
<td>1.4</td>
<td>6.2</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp; Excluding Transportation</td>
<td>-3.6</td>
<td>-1.7</td>
<td>-14.0</td>
<td>-1.0</td>
<td>-0.3</td>
<td>9.1</td>
</tr>
<tr class="odd">
<td class="firstcol">Nondefense Capital Goods</td>
<td>-5.9</td>
<td>-4.6</td>
<td>-27.2</td>
<td>-6.4</td>
<td>3.5</td>
<td>9.4</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Excluding Aircraft</td>
<td>-2.8</td>
<td>1.7</td>
<td>-11.2</td>
<td>0.1</td>
<td>-2.7</td>
<td>10.7</td>
</tr>
</tbody>
</table>
</body>
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The factory sector continued to be hard hit by recession last month. New orders for durable goods fell during December for the fourth month in the last five. The 2.6% drop followed declines of 3.7% in November and 8.5% during October. [...]

U.S. Durable Goods Orders Slumped Further

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090129a.jpg" width="353">
The labor market remained under pressure last week as indicated by another rise in continuing claims for unemployment insurance. During the week of January 17 they rose 159,000 and that followed an upwardly revised 102,000 increase during the prior period. To emphasize the labor market&#39;s weakness, the latest increase raised continuing claims above their 1982 high to a new record for the series which dates back to 1966. The four-week average of continuing claims rose 66,500 to 4,630,000. 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 did, however, rise to 3.6%, the highest since 1983. The highest insured unemployment rates in the week ending January 10 were in Michigan (7.3 percent), Oregon (6.7), Idaho (6.5), South Carolina (6.0), Pennsylvania (5.8), Wisconsin (5.7), Indiana (5.5), Nevada (5.3), Montana (5.2), Puerto Rico (5.2), and Rhode Island (5.2).
Initial claims for unemployment insurance also pointed to severe labor market weakness with a 3,000 rise to 588,000 during last week. The prior week&#39;s gain was revised down slightly but the latest level surpassed Consensus expectations for 575,000 claims. It was 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/090129b.jpg" width="353">
The Labor Department indicated that the largest increases in initial claims for the week ending January 17 were in Florida (+6,500), California (+1,826), Puerto Rico (+1,308), Texas (+537), and Massachusetts (+86), while the largest decreases were in Michigan (-33,365), North Carolina (-25,516), Georgia (-12,635), New York (-12,432), and Pennsylvania (-10,077).
World Growth Grinds to Virtual Halt, IMF Urges Decisive Global Policy Response. The report from the International Monetary Fund can be found <a href="http://www.imf.org/external/pubs/ft/survey/so/2009/RES012809A.htm">here</a>.
Behavior of Libor in the Current Financial Crisis from the Federal Reserve Bank of San Francisco can be found <a href="http://www.frbsf.org/publications/economics/letter/2009/el2009-04.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">01/24/09</th>
<th scope="col">01/17/09</th>
<th scope="col">01/10/09</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>588</td>
<td>585</td>
<td>527</td>
<td>60.7%</td>
<td>420</td>
<td>321</td>
<td>313</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>--</td>
<td>4,776</td>
<td>4,617</td>
<td>76.7%</td>
<td>3,342</td>
<td>2,552</td>
<td>2,459</td>
</tr>
</tbody>
</table>
</body>
</html>

The labor market remained under pressure last week as indicated by another rise in continuing claims for unemployment insurance. During the week of January 17 they rose 159,000 and that followed an upwardly revised 102,000 increase [...]

U.S. Weekly Continuing Claims For Jobless Insurance At Record High

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090129c.jpg" width="353">
The factory sector continued to be hard hit by recession last month. New orders for durable goods fell during December for the fourth month in the last five. The 2.6% drop followed declines of 3.7% in November and 8.5% during October. But since July new orders have plummeted 19.0%, the largest five-month drop since 1975. The December decline far exceeded Consensus expectations for a 2.0% shortfall.
Lower new orders for computers &amp; electronic products led last month&#39;s decline with a 7.2% drop (-10.0% y/y). Orders for just computers &amp; related products were quite weak, down 3.0% for the month and off 19.6% during the last twelve months. New orders for communications equipment also were down by a significant 4.9% (-9.9% y/y).
Severe weakness showed through in other industries. Orders for primary metals fell 6.9% last month and they&#39;re down 28.7% during the last twelve. Machinery orders fell hard for the fourth month in the last five and they are off 18.3% for the year. Electrical equipment bookings actually rose 9.4% last month but they&#39;re down by that amount December-to-December.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090129d.jpg" width="353">
Capital equipment orders fell just 1.1%, but the 23.8% y/y decline reflected a 27.0% y/y drop in orders for nondefense capital goods. That decline was due to the severe weakness in aircraft orders which nearly halved last year. Still, without aircraft, nondefense capital goods orders were down a sharp 11.2% y/y to their lowest level since 2005. During the last ten years there has been an 80% correlation between the y/y change in nondefense capital goods orders and the change in equipment &amp; software spending in the GDP accounts. The correlation of the GDP figure with capital goods shipments is, as one would expect, a larger 92%.
Reflecting this weakness in new orders was overall shipments of durable goods. They fell 0.7% last month and were down 9.5% for the year. For comparison, industrial production of durable goods fell 12.8% during 2008. During the last ten years there has been an 81% correlation between the twelve-month change in shipments of durable goods and the change in durables industrial production. Less transportation, shipments of durable goods fell 1.4% last month, off 7.0% for the year. 
Lower orders have led inventories to back up. Inventories of manufactured durables rose 0.4% in December and the 7.0% y/y rate of increase has been fairly stable since the summer. That has been accompanied by lower order backlogs which have fallen sharply during the last three months. The year-to-year rise of 3.9% is the weakest since 2005.

<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/@ED0101.HTM">NAICS Classification</a> (%)</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">Durable Goods Orders</td>
<td>-2.6</td>
<td>-3.7</td>
<td>-21.1</td>
<td>-5.6</td>
<td>1.4</td>
<td>6.2</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp; Excluding Transportation</td>
<td>-3.6</td>
<td>-1.7</td>
<td>-14.0</td>
<td>-1.0</td>
<td>-0.3</td>
<td>9.1</td>
</tr>
<tr class="odd">
<td class="firstcol">Nondefense Capital Goods</td>
<td>-5.9</td>
<td>-4.6</td>
<td>-27.2</td>
<td>-6.4</td>
<td>3.5</td>
<td>9.4</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Excluding Aircraft</td>
<td>-2.8</td>
<td>1.7</td>
<td>-11.2</td>
<td>0.1</td>
<td>-2.7</td>
<td>10.7</td>
</tr>
</tbody>
</table>
December U.S. New Home Sales Lowest Since 1963 
by <a href="/comment/Moeller.html">Tom Moeller</a> January 29, 2009


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090129e.jpg" width="353">
Last month, sales of new single-family homes fell to their lowest level in the series&#39; history which dates back to 1963. The 14.7% m/m December decline to 331,000 followed a downwardly revised November. December-to-December, new home sales were off by half and down by three-quarters from their peak during July 2005. They fell short of Consensus expectations for 400,000.
December-to-December sales fell hard around the country, down by one-third to one-half.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090129f.jpg" width="353">
The median price for a new single-family home continued to fall hard to $206,500 as homebuilders attempted to move inventory. In fact, that effort has been quite successful and the inventory of unsold homes is down by more than one-quarter during the last year to its lowest level since 2003. In each of the country&#39;s regions, the inventory is down by roughly one-quarter during the last year.
The month&#39;s supply of new homes for sale surged to 12.9, a record.
New Adjustable-Rate Mortgages and the Libor Surprise From the Federal Reserve Bank of Cleveland can be found <a href="http://www.clevelandfed.org/research/commentary/2009/012109.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">US New Homes</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">Total Sales (SAAR, 000s)</td>
<td>331</td>
<td>388</td>
<td>-44.8</td>
<td>479</td>
<td>768</td>
<td>1,049</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Northeast</td>
<td>28</td>
<td>39</td>
<td>&nbsp;-50.0</td>
<td>35</td>
<td>64</td>
<td>64</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Midwest</td>
<td>51</td>
<td>54</td>
<td>-31.1</td>
<td>69</td>
<td>118</td>
<td>161</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; South</td>
<td>181</td>
<td>206</td>
<td>-46.0</td>
<td>264</td>
<td>408</td>
<td>559</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; West</td>
<td>71</td>
<td>89</td>
<td>-47.4</td>
<td>111</td>
<td>178</td>
<td>266</td>
</tr>
<tr>
<td class="firstcol">Median Price (NSA, $)</td>
<td>206,500</td>
<td>219,700</td>
<td>-9.3</td>
<td>228,350</td>
<td>243,742</td>
<td>243,067</td>
</tr>
</tbody>
</table>
U.S. Weekly Continuing Claims For Jobless Insurance At Record High 
by <a href="/comment/Moeller.html">Tom Moeller</a> January 29, 2009


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090129a.jpg" width="353">
The labor market remained under pressure last week as indicated by another rise in continuing claims for unemployment insurance. During the week of January 17 they rose 159,000 and that followed an upwardly revised 102,000 increase during the prior period. To emphasize the labor market&#39;s weakness, the latest increase raised continuing claims above their 1982 high to a new record for the series which dates back to 1966. The four-week average of continuing claims rose 66,500 to 4,630,000. 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 did, however, rise to 3.6%, the highest since 1983. The highest insured unemployment rates in the week ending January 10 were in Michigan (7.3 percent), Oregon (6.7), Idaho (6.5), South Carolina (6.0), Pennsylvania (5.8), Wisconsin (5.7), Indiana (5.5), Nevada (5.3), Montana (5.2), Puerto Rico (5.2), and Rhode Island (5.2).
Initial claims for unemployment insurance also pointed to severe labor market weakness with a 3,000 rise to 588,000 during last week. The prior week&#39;s gain was revised down slightly but the latest level surpassed Consensus expectations for 575,000 claims. It was 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/090129b.jpg" width="353">
The Labor Department indicated that the largest increases in initial claims for the week ending January 17 were in Florida (+6,500), California (+1,826), Puerto Rico (+1,308), Texas (+537), and Massachusetts (+86), while the largest decreases were in Michigan (-33,365), North Carolina (-25,516), Georgia (-12,635), New York (-12,432), and Pennsylvania (-10,077).
World Growth Grinds to Virtual Halt, IMF Urges Decisive Global Policy Response. The report from the International Monetary Fund can be found <a href="http://www.imf.org/external/pubs/ft/survey/so/2009/RES012809A.htm">here</a>.
Behavior of Libor in the Current Financial Crisis from the Federal Reserve Bank of San Francisco can be found <a href="http://www.frbsf.org/publications/economics/letter/2009/el2009-04.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">01/24/09</th>
<th scope="col">01/17/09</th>
<th scope="col">01/10/09</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>588</td>
<td>585</td>
<td>527</td>
<td>60.7%</td>
<td>420</td>
<td>321</td>
<td>313</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>--</td>
<td>4,776</td>
<td>4,617</td>
<td>76.7%</td>
<td>3,342</td>
<td>2,552</td>
<td>2,459</td>
</tr>
</tbody>
</table>


</html>

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090128e.jpg" align="right" border="0" height="265" width="353">
The
Federal Open Market Committee today left the Federal funds rate in a
"range from 0 to 1/4 percent." The discount also was left unchanged at
0.50%. The Fed funds rate remained the lowest ever and the lack of
action at this meeting was generally anticipated by economists.
Regarding economic growth, the Fed indicated that "the economy has
weakened further.&nbsp;Industrial production, housing starts, and
employment have continued to decline steeply, as consumers and
businesses have cut back spending ... The Committee anticipates that a
gradual recovery in economic activity will begin later this year, but
the downside risks to that outlook are significant." Regarding
inflation it was indicated that "the Committee sees some risk that
inflation could persist for a time below rates that best foster
economic growth and price stability in the longer term."<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090128f.jpg" align="right" border="0" height="265" width="353">
The Fed
emphasized its concern about the recent turmoil in the credit markets.
"The Federal Reserve will employ all available tools to promote the
resumption of sustainable economic growth and to preserve price
stability ... The Federal Reserve continues to purchase large
quantities of agency debt and mortgage-backed securities to provide
support to the mortgage and housing markets, and it stands ready to
expand the quantity of such purchases and the duration of the purchase
program as conditions warrant.&nbsp;The Committee also is prepared
to purchase longer-term Treasury securities if evolving circumstances
indicate that such transactions would be particularly effective in
improving conditions in private credit markets." The decision was
unanimous amongst FOMC voters except that Jeffrey M. Lacker, President
of the Federal Reserve Bank of Richmond, preferred to expand the
monetary base at this time by purchasing U.S. Treasury securities
rather than through targeted credit programs. For the complete text of
the Fed's latest press release please follow this&nbsp;<a href="http://www.federalreserve.gov/newsevents/press/monetary/20090128a.htm">link</a>.
Growth in economic liquidity has risen. <img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090128g.jpg" align="right" border="0" height="265" width="353">
The money stock measure M2 rose
at a 17.0% rate over the last three months, up from a 5% growth rate
earlier this year. The level of demand deposits has surged by
two-thirds since the Spring.&nbsp; In addition, the monetary base
has roughly doubled since last Spring.&nbsp;&nbsp;At the same
time, inflation expectations have fallen sharply. The Haver databases USECON,
WEEKLY and DAILY contain the figures
from the Federal Reserve Board.Need to Fix
Banking Sector for Stimulus to Work is a recent article
published in the IMF Survey Magazine: In the News
and it can be found <a href="http://www.imf.org/external/pubs/ft/survey/so/2009/NEW012609A.htm">here</a>.
Money, Liquidity, and Monetary Policy from the
Federal Reserve Bank of New York is available <a href="http://www.newyorkfed.org/research/staff_reports/sr360.pdf">here</a>.&nbsp;
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">&nbsp;</th>
<th scope="col">Current</th>
<th scope="col">Last</th>
<th scope="col">November</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Federal Funds Rate, % (Target)</td>
<td>0.00 - 0.25</td>
<td>0.00 - 0.25</td>
<td>0.39</td>
<td>1.93</td>
<td>5.02</td>
<td>4.96</td>
</tr>
<tr>
<td class="firstcol">Discount Rate, %</td>
<td>0.50</td>
<td>0.50</td>
<td>1.25</td>
<td>2.39</td>
<td>5.86</td>
<td>5.96</td>
</tr>
</tbody>
</table>
</body></html>

The Federal Open Market Committee today left the Federal funds rate in a "range from 0 to 1/4 percent." The discount also was left unchanged at 0.50%. The Fed funds rate remained the lowest ever and the lack of action at this meeting [...]

FOMC Leaves Rates Unchanged

Robert Brusca

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090128d.jpg" align="left" border="0" height="265" width="353">
While business sentiment is falling to new lows and very low
lows in Italy , the good news is that the pace of decline is letting
up. Italy &#8217;s businesses are clearly in bad shape and concerned. But
maybe the rate of deterioration and adverse assessment is slowing down.
In the table below we rank the various components of this
measure since 1996 and we find for just about very category there is a
new low being made. Inventories are the sole exception and there the
bad news is that inventories are generally regarded as high.
In Italy , Silvio Berlusconi's government has approved a
stimulus package to kick-start the economy with measures it says are
worth 80 billion Euros, but this program largely recycles existing
funds and the plan has failed to lift the pessimism that has imbued the
Italian economy.
The Italian results fit in with a new leading index result for
Europe that finds conditions are still set to deteriorate further.
Confidence a for businesses and consumers is still generally either
very low and stuck three or has declined across most of the e-Zone.

 

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="7" scope="col">Italy ISAE
Business Sentiment</th>
</tr>
</thead>
<tbody>
<tr class="grey6">
<td colspan="7">Since Oct 1996</td>
</tr>
<tr class="grey5">
<td class="firstcol">&nbsp;</td>
<td>Jan-09</td>
<td>Dec-08</td>
<td>Nov-08</td>
<td>Oct-08</td>
<td>Percentile</td>
<td>Rank</td>
</tr>
<tr class="grey4">
<td class="firstcol">Biz Confidence</td>
<td>65.5</td>
<td>66.8</td>
<td>71.7</td>
<td>76.5</td>
<td>0.0</td>
<td>148</td>
</tr>
<tr class="grey3">
<td class="firstcol">TOTAL INDUSTRY</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="grey5">
<td class="firstcol">&nbsp; Order books
&amp; Demand</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="grey2">
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Total</td>
<td>-58</td>
<td>-54</td>
<td>-45</td>
<td>-38</td>
<td>0.0</td>
<td>148</td>
</tr>
<tr class="grey2">
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Domestic</td>
<td>-63</td>
<td>-58</td>
<td>-47</td>
<td>-39</td>
<td>0.0</td>
<td>148</td>
</tr>
<tr class="grey2">
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Foreign</td>
<td>-59</td>
<td>-54</td>
<td>-44</td>
<td>-33</td>
<td>0.0</td>
<td>148&nbsp;&nbsp;</td>
</tr>
<tr class="grey4">
<td class="firstcol">&nbsp; Inventories</td>
<td>9</td>
<td>9</td>
<td>8</td>
<td>6</td>
<td>83.3</td>
<td>14&nbsp;&nbsp;&nbsp;&nbsp;</td>
</tr>
<tr class="grey4">
<td class="firstcol">&nbsp; Production</td>
<td>-55</td>
<td>-46</td>
<td>-37</td>
<td>-29</td>
<td>0.0</td>
<td>148</td>
</tr>
<tr class="grey3">
<td class="firstcol">INTERMEDIATE</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="grey5">
<td class="firstcol">&nbsp; Order books
&amp; Demand</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="grey2">
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Total</td>
<td>-74</td>
<td>-68</td>
<td>-52</td>
<td>-42</td>
<td>0.0</td>
<td>148</td>
</tr>
<tr class="grey2">
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Domestic</td>
<td>-74</td>
<td>-69</td>
<td>-53</td>
<td>-40</td>
<td>0.0</td>
<td>148</td>
</tr>
<tr class="grey2">
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Foreign</td>
<td>-73</td>
<td>-67</td>
<td>-50</td>
<td>-38</td>
<td>0.0</td>
<td>148</td>
</tr>
<tr class="grey4">
<td class="firstcol">&nbsp; Inventories</td>
<td>12</td>
<td>7</td>
<td>10</td>
<td>9</td>
<td>93.1</td>
<td>4&nbsp;</td>
</tr>
<tr class="grey4">
<td class="firstcol">&nbsp; Production</td>
<td>-65</td>
<td>-58</td>
<td>-43</td>
<td>-29</td>
<td>0.0</td>
<td>148</td>
</tr>
<tr class="grey3">
<td class="firstcol">INVESTMENT GOODS</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="grey5">
<td class="firstcol">&nbsp; Order books
&amp; Demand</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="grey2">
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Total</td>
<td>-62</td>
<td>-62</td>
<td>-52</td>
<td>-39</td>
<td>0.0</td>
<td>147</td>
</tr>
<tr class="grey2">
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Domestic</td>
<td>-65</td>
<td>-64</td>
<td>-56</td>
<td>-44</td>
<td>0.0</td>
<td>148</td>
</tr>
<tr class="grey2">
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Foreign</td>
<td>-54</td>
<td>-56</td>
<td>-45</td>
<td>-27</td>
<td>2.5</td>
<td>147</td>
</tr>
<tr class="grey4">
<td class="firstcol">&nbsp; Inventories</td>
<td>7</td>
<td>9</td>
<td>11</td>
<td>6</td>
<td>63.2</td>
<td>40</td>
</tr>
<tr class="grey4">
<td class="firstcol">&nbsp; Production</td>
<td>-54</td>
<td>-50</td>
<td>-41</td>
<td>-28</td>
<td>0.0</td>
<td>148</td>
</tr>
<tr class="grey3">
<td class="firstcol">CONSUMER GOODS</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="grey5">
<td class="firstcol">&nbsp; Order books
&amp; Demand</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="grey2">
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Total</td>
<td>-47</td>
<td>-36</td>
<td>-32</td>
<td>-33</td>
<td>0.0</td>
<td>148</td>
</tr>
<tr class="grey2">
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Domestic</td>
<td>-48</td>
<td>-39</td>
<td>-32</td>
<td>-34</td>
<td>0.0</td>
<td>148</td>
</tr>
<tr class="grey2">
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Foreign</td>
<td>-54</td>
<td>-42</td>
<td>-36</td>
<td>-32</td>
<td>0.0</td>
<td>148</td>
</tr>
<tr class="grey4">
<td class="firstcol">&nbsp; Inventories</td>
<td>7</td>
<td>10</td>
<td>5</td>
<td>3</td>
<td>69.2</td>
<td>35</td>
</tr>
<tr class="grey4">
<td class="firstcol">&nbsp; Production</td>
<td>-42</td>
<td>-28</td>
<td>-27</td>
<td>-29</td>
<td>0.0</td>
<td>148</td>
</tr>
<tr class="grey1">
<td colspan="4">Total number of months:</td>
<td>148</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
</tbody>
</table>
</body></html>

While business sentiment is falling to new lows and very low lows in Italy , the good news is that the pace of decline is letting up. Italy ’s businesses are clearly in bad shape and concerned. But maybe the rate of deterioration and [...]

Italy's Business Confidence Continues To Drop

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090128a.jpg" align="right" border="0" height="265" width="353">According to
the Mortgage Bankers Association, the total number of mortgage
applications fell by more than one-third last week and since their peak
two weeks ago are down by almost one-half.&nbsp; Applications had
been boosted by lower interest rates which have risen 25 to 30 basis
points on average.
The index of applications to refinance a home mortgage fell by more
than one-half during the last two periods.Applications for a mortgage
to purchase a home also fell but the decline only reversed an increase
during the prior week. Since their peak early last year applications
are down 25%.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090128b.jpg" align="right" border="0" height="265" width="353">
The effective interest rate on a conventional 15-year
mortgage was roughly stable week-to-week at 5.27% which was up from the
low of 4.92% during the week prior. For a 30-year mortgage, rates also
were roughly stable w/w at 5.43%, up from the low of 5.13% two weeks
ago. Interest rates on 15 and 30 year mortgages are closely correlated
(&gt;90%) with the rate on 10-year Treasury securities. For an
adjustable 1-Year mortgage, the rate also held about steady for the
fourth week at 5.97%, down a full percentage point from this past
Fall. During the last ten years there has been a (negative)
79% correlation between the level of applications for purchase and the
effective interest rate on a 30-year mortgage. Moreover, during the
last ten years there has been a 61% correlation between the y/y change
in purchase applications and the change in new plus existing single
family home sales.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090128c.jpg" align="right" border="0" height="265" width="353">
The figures for weekly mortgage applications are
available in Haver's SURVEYW
database.The Mortgage Bankers Association surveys between 20
to 35 of the top lenders in the U.S. housing industry to derive its
refinance, purchase and market indexes. The weekly survey covers
roughly 50% of all U.S. residential mortgage applications processed
each week by mortgage banks, commercial banks and thrifts. Visit the
Mortgage Bankers Association site <a href="http://www.mbaa.org">here</a>.&nbsp;The Congressional
Budget Office Cost Estimate of the American Recovery and Reinvestment
Act of 2009 can be found <a href="http://www.cbo.gov/ftpdocs/99xx/doc9968/hr1.pdf">here</a>.&nbsp;



<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/SURVEYW/@S5/@S5.HTM">MBA
Mortgage Applications (3/16/90=100)</a></th>
<th scope="col">01/23/09</th>
<th scope="col">01/16/09</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total Market Index</td>
<td>732.1</td>
<td>1,195.3</td>
<td>-30.6%</td>
<td>642.9</td>
<td>652.6</td>
<td>584.2</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Purchase</td>
<td>294.3</td>
<td>303.1</td>
<td>-18.7%</td>
<td>345.4</td>
<td>424.9</td>
<td>406.9</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Refinancing</td>
<td>3,373.9</td>
<td>6,491.8</td>
<td>-33.9%</td>
<td>2,394.1</td>
<td>1,997.9</td>
<td>1,634.0</td>
</tr>
</tbody>
</table>
</body></html>

According to the Mortgage Bankers Association, the total number of mortgage applications fell by more than one-third last week and since their peak two weeks ago are down by almost one-half. Applications had been boosted by lower [...]

U.S. Mortgage Applications Fall as Refinancing Boom Ends

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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Andrew Cates

**US trade with Europe** 
Geopolitical tensions surrounding Greenland have abruptly sharpened investor sensitivity to US trade and foreign-policy risk. What might once have been dismissed as rhetorical brinkmanship has taken on greater macro-financial relevance as Donald Trump has coupled renewed interest in Greenland’s strategic importance with explicit threats of higher tariffs on European imports. The first chart below highlights that the US is materially more exposed to EU goods than the EU is to US trade, making any escalation asymmetrically more costly for the US economy. Beyond the direct inflationary impact of higher tariffs, the more immediate risk lies in confidence effects and capital flows: early signs of capital reallocation away from US assets over the past 24 hours suggest that markets could be beginning to price a broader erosion of policy predictability. In this environment, tariffs risk functioning less as a targeted trade tool and more as a systemic confidence shock—tightening financial conditions, unsettling the dollar’s safe-haven status and increasing downside risks to US growth via weaker investment and higher risk premia.

260122Z1.jpg

**Japan’s JGB yields**
That said, recent capital outflows from US assets may owe as much to developments in Japan as to geopolitical and trade-related shocks. While tariff threats and policy unpredictability have clearly unsettled sentiment, an underappreciated driver of the sell-off in US Treasuries has been the sharp repricing in the Japanese government bond market. Renewed domestic political uncertainty and intensifying concerns over Japan’s debt dynamics have triggered a rapid rise in JGB yields, prompting portfolio rebalancing by Japanese investors and reducing the relative appeal of US duration. Given Japan’s role as one of the largest foreign holders of US Treasuries, yield gyrations at home can translate quickly into capital repatriation, hedging adjustments and reduced demand for US bonds. In this sense, recent moves in US yields may reflect less a direct reaction to geopolitical risk and more a globally transmitted capital-flow shock—originating in Japan but felt most acutely in US financial markets.

260122Z2.jpg

**Inflation expectations and oil prices**
Capital-flow dynamics may have also begun to spill over into how markets are pricing US inflation risk and monetary credibility. Historically, medium-term US inflation expectations have remained closely anchored to global energy prices, as illustrated by the strong co-movement between the 5-year forward inflation rate and Brent crude prices. More recently, however, that relationship has begun to fray: inflation expectations have proven notably resilient even as oil prices have softened, suggesting that markets are increasingly pricing political and policy risk rather than cost-push fundamentals alone. Renewed tariff threats under President Trump, combined with heightened geopolitical tensions involving Greenland and transatlantic relations, risk reinforcing concerns that future inflation outcomes could be shaped as much by political intervention as by macroeconomic conditions. Any perception that the Federal Reserve may face constraints on its operational independence would compound this shift—loosening inflation anchors, raising term premia and increasing the sensitivity of capital flows to US policy credibility.

260122Z3.jpg

**UK inflation** 
UK inflation data released this week show a small upside surprise in headline CPI at year-end. Headline CPI inflation specifically rose from 3.2% y/y in November to 3.4% in December, a little more than expected. The chart below shows that the pickup was driven by persistent underlying pressures—most notably in services. While a negative drag from energy prices has largely faded, services inflation continues to account for a disproportionate share of overall price growth, probably reflecting ongoing wage pressures and limited slack in parts of the domestic economy.

260122Z4.jpg

**Wage growth in the US and Europe** 
Labour-market data from the Indeed Hiring Lab reinforce the picture of persistent services-side pressure in the UK inflation mix. As the chart shows, UK posted wage growth remains elevated relative to both the euro area and the US, even though momentum has eased from its 2023 peak. At around the mid-5% range on a three-month moving average basis, UK wage growth is still running at a pace that is difficult to reconcile with a rapid return of services inflation to target. By contrast, posted wage growth in the euro area has slowed more decisively, while the US has seen a sharper deceleration from earlier extremes.

260122Z5.jpg

**China’s property market**
Finally, the Q4 GDP figures released in China this week sit uneasily alongside continued weakness in its domestic property sector, which remains a key drag on both investment and consumption. While Q4 growth of 4.5% y/y brought full-year GDP broadly in line with the authorities’ 5% target, the chart highlights how property-market adjustment is still running deep beneath the surface. Prices of existing homes across China’s 70 cities remain in year-on-year decline, while real estate investment continues to contract sharply, underscoring the scale and persistence of the sector’s retrenchment. This helps explain why fixed asset investment has softened further and why household demand remains subdued, despite more resilient industrial output.

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This week’s data and market moves have been framed by an abrupt escalation in geopolitical tensions surrounding Greenland, which has served as a catalyst for broader financial unease rather than a standalone shock. The episode has sharpened investor focus on US policy predictability, amplifying concerns already evident in the charts on EU–US trade exposure, where tariff threats risk feeding directly into confidence effects and capital flows. At the same time, recent turbulence in Japanese government bonds appears to have been an underappreciated driver of the sell-off in US Treasuries, highlighting how global capital reallocation—rather than geopolitics alone—has contributed to higher US yields. These forces intersect with growing questions around the durability of US monetary credibility, as inflation expectations have shown signs of decoupling from traditional oil-price anchors, raising the sensitivity of markets to any perceived constraints on the Federal Reserve. Beyond the US, UK data delivered a modest upside surprise in headline inflation, with persistent services and wage pressures reinforcing a cautious policy backdrop for the Bank of England. In China, meanwhile, Q4 GDP growth of 4.5% y/y kept full-year expansion aligned with the government’s target, but continued weakness in the property sector remains a significant drag on investment and household confidence. Taken together, the week’s developments point to a global outlook increasingly shaped by geopolitical risk, capital-flow dynamics and domestic  structural constraints, rather than by straightforward cyclical momentum alone.

Charts of the Week: Seeing Green

Sandy Batten

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Real GDP increased 4.4% q/q saar in the third quarter of 2025 in the final estimate, up marginally from 4.3% in the first release. The Action Economics Forecast Survey expected no revision. Growth from a year ago was unrevised at 2.3% y/y. Growth of corporate profits was revised up to 4.5% q/q not annualized from 4.2% in the previous report.

The revision to GDP mostly reflected slightly stronger nonresidential fixed investment, a larger increase in exports and a smaller decrease in inventory investment. Nonresidential fixed investment increased a revised 3.2% q/q saar versus a 2.8% gain in the previous release. This reflected a smaller decline in structures, a smaller increase in equipment and a larger increase in intellectual property products than previously estimated. Residential investment was revised weaker with a 7.1% quarterly decline versus -5.1% in the previous estimate.

Upon revision, exports rose 9.6% q/q in Q3 versus 8.8% in the first estimate. Consequently, the trade deficit narrowed a little more than in the first estimate, resulting in net exports adding 1.62%-points to overall growth, 0.03%-point more previously estimated. The decline in inventory investment in Q3 was smaller than previously estimated, reducing the drag from inventories by 0.1%-point versus the previous estimate. The decline in inventories subtracted 0.12%-point in Q3 on top of a 3.44%-point subtraction in Q2.

Domestic demand growth remained solid in Q3 but was revised down 0.1%-point. Final sales to domestic purchasers grew a revised 2.8% q/q saar in Q3 versus 2.9% in the first estimate. Final sales to private domestic purchasers increased 2.9% q/q, down slightly from 3.0% previously.

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The primary driver of overall growth continued to be personal consumption expenditures. They increased an unrevised 3.5% q/q saar in Q3, adding 2.34%-points to total GDP growth. This reflected a 3.0% increase in spending on goods versus 3.1% previously and a 3.6% gain in spending on services versus 3.7% previously. The rise in government spending was unrevised at 2.2% q/q. However, spending by the federal government was revised slightly slower to 2.7% from 2.9% while spending by state and local governments was revised up slightly to 2.0% from 1.8%.

Key measures of inflation were unrevised. Inflation as measured by the GDP price index remained at 3.8% q/q saar in Q3, but this was up markedly from 2.1% in Q2. Similarly, PCE inflation in Q3 was unrevised at 2.8% versus 2.1% in Q2. Core PCE inflation was also unrevised at 2.9% in Q3.

The GDP data can be found in Haver’s **USECON** and **USNA** databases. **USNA** contains virtually all of the Bureau of Economic Analysis detail in the national accounts. The Action Economics consensus estimates can be found in **AS1REPNA**.

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- Real GDP grew 4.4% q/q saar in Q3 2025, up slightly from 4.3% previously reported.
- The modest upward revision was due mostly to slightly stronger nonresidential fixed investment, a larger increase in exports and a smaller decrease in inventories.
- Growth of domestic demand remained solid in Q3 but was revised down 0.1%-point.
- GDP and PCE inflation were unrevised at 3.8% and 2.8%, respectively. Both are meaningful accelerations from Q2.

U.S. Q3 GDP Growth Revised Slightly Faster

Kathleen Stephansen, CBE

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Initial claims for unemployment insurance edged up 1,000 to 200,000 in the week ending January 17, from 199,000 in the week ending January 10, revised from 198,000. The four-week moving average of initial claims was 201,500 in the January 17 week, down 3,750 from 205,250 in the January 10 week, revised from 205,000, and reaching the lowest level for this average since January 13, 2024, when it was 200,000.

Federal government employees initially filed 1010 (NSA) jobless insurance claims in the week ended January 10, after filing 646 (NSA) claims in the week ended January 3.

The total number of unemployment insurance beneficiaries – also known as “continuing claims” –decreased by 26,000 to 1.849 million in the week ended January 10 from 1.875 million in the week ending January 3, revised from 1.884 million. The four-week moving average was 1.871 million in the latest week, down from 1.887 million in the January 3 week, revised from 1.889 million. The insured unemployment rate remained at 1.2% in the week of January 10, unchanged from previous 6 weeks.

Federal government employees’ continuing benefits claims were 12,977 (NSA) in the week ending January 3, from 12,803 (NSA) in the week of December 27.

The insured unemployment rate varied greatly across individual states and territories. In the week ending January 3, the highest unemployment rates were in Rhode Island (3.27%), New Jersey (3.17%), Washington (2.85%), Minnesota (2.75%), Massachusetts (2.74%), Oregon (2.37%), Connecticut (2.31%), Montana (2.26%), California (2.21%), and Alaska (2.06%). The lowest rates were in Florida (0.29%), North Carolina (0.40%), and Louisiana (0.43%). Rates in other notable states include New York (2.28%), Pennsylvania (2.23%), Illinois (2.21%), and Texas (1.14%). 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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U.S. Initial Claims for Unemployment Insurance Edged Up in Latest Week

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The National Bank of Belgium index for January 2026 rose to +4 from -1 in December, stronger than its November 2025 reading of +2. The survey value is exceptionally strong, lying in the top 6% of all observations back to 1991, even as the survey contains significant variations that range from strong to quite weak across its various components. What is most notable is that the index itself is extremely high-ranking; the current situation appraisal is also quite high-ranking; and, that the forecast for unemployment embedded in this survey is at a 35-year low. Considering current circumstances, against the events of the last 35 years, that's a rather remarkable finding especially considering the world situation.

**The times, they are a changin’ was Dylan 50 years early?** 
These have been remarkable times in a number of different ways with a clear transition from the circumstances of the post-war period under way. The solidarity of the NATO alliance is clearly in a situation in flux, revealed since Russia invaded Ukraine. Prior to that, the Europeans had resisted putting more money into the NATO pot as the United States had been frantically asking them while it funded most of the security umbrella. Now, in the wake of these new events, and with the changes to the global stage wrought by climate shifting, the U.S. finds Greenland to be a more important piece on the geopolitical chess board and wants to have more say there in order to protect its own flank as Arctic ice packs recede. This is after a period when NATO basically failed to engage in the front-line protections of its own doorstep that the U.S. had thought were necessary. Not surprisingly, the U.S. found that whole episode unsatisfactory and is now reluctant to give up control to NATO of what it regards as the protection of its own back door for the area around Greenland. But at last, Europe and the U.S. appear to have a deal or the makings of one, so, stay tuned. Maybe all civility is not lost.

**Geopolitical shifts meld with economic issues to change the landscape**
Geopolitical shifts are part of the problem because geopolitics and economics help shape one another. And there has been a great deal of economic turmoil as well. The U.S., after reassessing the Post War order, is bringing back to life tariffs, in order to try to get economic leverage after running 33 consecutive years of current account deficits under what people want to call a free trade system. The U.S. finds itself with a still very overvalued dollar and in a situation where its current account deficits are poised to continue to run high and perhaps get higher. Economists say tariffs are not the solution, but maybe they ARE the wake-up call that will lead to a solution? Europeans have also shifted to embracing a larger and larger government sector and ever larger fiscal deficits and more fiscal debt while absorbing migrants. This is constraining its ability to have any kind of a flexible macroeconomic policy and is a severe problem already for the U.K. and France. And these changes are wreaking havoc with what has been a very solid post-war Atlantic alliance.

**Views change**
But the changes that the U.S. has pushed on to the system from its geopolitical adventurism to its use of tariffs and other strong rhetorical comments have led economists to focus on the elevation of uncertainty in the economic system. Elevating uncertainty has an adverse impact on the economy and on growth. I mentioned this with the obvious caveat that this warning by economists seems to have been completely wrong. U.S. growth has turned out to be quite resilient and even strong. It is not the only adamant position that has proved to be wrong and malleable. Despite the reality of climate change, the view that once took carbon as the main and unequivocal climate change agent, itself is shifting. Opposition to carbon has dwindled, more as the U.S. is embracing nuclear power. Artificial intelligence is becoming a strong bet for stronger growth in the future, and this explains why there have been so many shifting views on energy since artificial intelligence requires massive amounts of energy and would make it impossible to make progress on carbon and to push ahead with the AI agenda at the same time. So, instead of delaying AI, the view on carbon had to go. So much for ‘science.’

**Why are Belgians so satisfied?**
The finding that in Belgium consumer confidence has risen sharply in this environment and fears of unemployment are the lowest they've been in 35 years is another shocking development in this pantheon of incredible and shocking changes. As the above discussion points out, a lot is changing and NATO is at odds with the U.S., its lynchpin. Yet, there is no clear increase in uncertainty in Belgium, while they maybe more in Brussels.

**The Belgian Survey: strong despite waffles**
Belgians do not read the economic situation over the next 12 months as that strong at a reading of -29 on the survey; it has weakened over the last few months, and the economic situation assessment is only at its 8.3 percentile, an extremely weak standing. Price trends are the opposite; they have eased somewhat in the recent months, but over the next 12 months the assessment still has a top 14-percentile evaluation. It is in this context that the unemployment forecast, which is the lowest in 35 years, emerges as surprising. The environment to make major household purchases over the next 12 months is only a mid-range at a 45.7 percentile standing. And people rate their financial situation over the next 12 months slightly better than at the end of last year but at only a 34.2 percentile standing. However, the appraisal of the current situation moved up sharply in January and has a 97.7 percentile standing, which is extremely strong.

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**Low unemployment fear spurs confidence**
The reason for consumer confidence to be strong is clear when you see how low concerns are about unemployment. But it's hard to understand why concerns about unemployment are so low with the rest of the economic metrics so varied in the survey. This is especially true with Belgium nestled in the heart of Europe and all of these concerns between the U.S. and NATO swirling around as well as a still very hot war occurring on Europe's border between Ukraine and Russia. Meanwhile, the U.S. position about this war continues to seem to back Ukraine a lot less than it should.

**Belgium is a good bellwether**
The Belgian survey is not the most important bit of economic activity. Belgium is not an extremely important country in Europe, although it's in the heart of the European Union, a member of the European Monetary Union, linked closely to Germany, and to other key European economies through trade, so that its performance likely is a good reflection of what's going on in Europe. It is not a European border country. It is in the heartland of Europe. That may explain a little bit why Belgians are not perhaps as nervous as Poles, are or Finns or the small Baltic countries, and others, with potentially more border proximity and vulnerability to the Russia-Ukraine conflict.

**Belgian optimism flies in out of the blue**
This is an observation. I think it's the kind of observation in this world economy that we find striking and unusual and will bear some further watching and some watching of other similar readings in Europe to see if there's evidence that there's some kind of new resilience that we might have missed. Economists seem hung-up broken-record style on uncertainty. Certainly, there's something here that economists have missed who have only seen these new actions by the U.S. as creating more uncertainty since we do not know what the new Greenland deal is. And uncertainty should create more adversity for growth except that it hasn't worked out that way. And it's a reminder that separating economics from geopolitics may take more than a crowbar. And also that uncertainty comes in many shapes and sizes while some may argue that there still is not a Greenland deal, what we see is a lowering of the temperature, a calming of the rhetoric and a sense that the parties have a horse trade they think they can do to resolve their differences. And while there is still uncertainty, there is also clear progress and a clear reduction in risk. Still, the times are changing.

Belgium

Belgian Consumer Confidence Up and Strong; Fear of Unemployment at 35-Year Low! Is That Possible?

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%).

Economy in Brief

Jump to:

U.S. Recession Intensifies; 3.8%Drop in Real GDP Is Sharpest Since 1982

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