Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090123b.jpg" width="353">
The 4Q 08 figures for Gross National Product will be available next Friday at 8:30 A.M. As always, the data will be a key gauge for measuring the current shape of the economy. And the news is not likely to be pleasant reading. It&#39;s easy to now generate an estimate that economic activity fell at a 5.1% annual rate last quarter, which indeed is the current Consensus forecast. The range of forecasts extends, however, from -2.0% to -7.5%.
By itself, the magnitude of the drop expected by Consensus would be the fastest since the middle of the 1981-82 recession. Peak-to-trough activity declined during that recession by 2.9% reflecting a pattern of sharp decline early, then nine months of stagnation. This time no such pattern is foreseen by Consensus estimates. Another sharp drop in GDP is expected for this quarter, 1Q09, then a slight decline in 2Q. A downturn following that pattern would make it severe and the harshest since the end of WWII.The Recession in Perspective from the Federal Reserve Bank of Minneapolis can be found <a href="http://www.minneapolisfed.org/publications_papers/studies/recession_perspective/index.cfm"> here</a>.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090123c.jpg" width="353">
The table below contains a set of estimates for the 4Q GDP components, generated mostly from the monthly data that already is available. As might be expected, consumer spending and housing lead the downturn. Developing estimates for the worst case outcome of a 7.5% decline in activity is relatively easy by just changing the expectation for consumer spending to -8.0%, perhaps due to weaker vehicle sales, and eliminating the addition from an improved trade deficit.
General expectations are for a subpar, 2H recovery with quarterly gains of 1.0% to 2.0%. Persistent declines in consumer spending coupled with further weakness in housing would easily unravel those expectations. Moreover, lagged declines in business investment and weaker exports due to recessions abroad could add to any lack of forward economic momentum. However, there is the potential for some upside. Pent-up demand for consumer durables could be unleashed with the huge amount of monetary stimulus already in place and an easing of tight credit conditions.
In this era of recession and weak growth, price inflation seems not to be an issue. Growth in the GDP chain prices is expected to drop to 1.0% by 2010 where it is expected to remain in 2011.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">U.S. GDP Components (%, AR)</th>
<th scope="col">4Q (Estimate)</th>
<th scope="col">GDP Weight</th>
<th scope="col">3Q</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">GDP</td>
<td>-5.1</td>
<td>&nbsp;</td>
<td>-0.5</td>
<td>2.0</td>
<td>2.8</td>
<td>2.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Personal Consumption Expenditures</td>
<td>-6.0</td>
<td>.70</td>
<td>-3.8</td>
<td>2.8</td>
<td>3.0</td>
<td>3.0</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Residential Investment</td>
<td>-20.0</td>
<td>.03</td>
<td>-16.1</td>
<td>-17.9</td>
<td>-7.1</td>
<td>6.3</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Business Investment</td>
<td>-15.0</td>
<td>.12</td>
<td>-1.7</td>
<td>4.9</td>
<td>7.5</td>
<td>7.2</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Government Spending</td>
<td>3.0</td>
<td>.17</td>
<td>5.8</td>
<td>2.1</td>
<td>1.7</td>
<td>0.4</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Inventories (Contribution to GDP Growth)</td>
<td>0.0</td>
<td>--</td>
<td>0.8</td>
<td>-0.4</td>
<td>-0.0</td>
<td>-0.1</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Net Exports (Contribution to GDP Growth)</td>
<td>1.0</td>
<td>--</td>
<td>1.1</td>
<td>0.6</td>
<td>-0.0</td>
<td>-0.2</td>
</tr>
</tbody>
</table>
</body>
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The 4Q 08 figures for Gross National Product will be available next Friday at 8:30 A.M. As always, the data will be a key gauge for measuring the current shape of the economy. And the news is not likely to be pleasant reading. It's [...]

Consensus Forecast for 4Q GDP: Activity Down 5%

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090123b.jpg" align="left" border="0" height="265" width="353">
The 4Q 08 figures for Gross National Product will be available
next Friday at 8:30 A.M. As always, the data will be a key gauge for
measuring the current shape of the economy. And the news is not likely
to be pleasant reading. It's easy to now generate an estimate that
economic activity fell at a 5.1% annual rate last quarter, which indeed
is the current Consensus forecast. The range of forecasts extends,
however, from -2.0% to -7.5%.
By itself, the magnitude of the drop expected by Consensus
would be the fastest since the middle of the 1981-82 recession.
Peak-to-trough activity declined during that recession by 2.9%
reflecting a pattern of sharp decline early, then nine months of
stagnation. This time no such pattern is foreseen by Consensus
estimates. Another sharp drop in GDP is expected for this quarter,
1Q09, then a slight decline in 2Q. A downturn following that pattern
would make it severe and the harshest since the end of WWII.The
Recession in Perspective from the Federal Reserve Bank of
Minneapolis can be found <a href="http://www.minneapolisfed.org/publications_papers/studies/recession_perspective/index.cfm">
here</a>.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090123c.jpg" align="right" border="0" height="265" width="353">
The table below contains a set of estimates for the 4Q GDP
components, generated mostly from the monthly data that already is
available. As might be expected, consumer spending and housing lead the
downturn. Developing estimates for the worst case outcome of a 7.5%
decline in activity is relatively easy by just changing the expectation
for consumer spending to -8.0%, perhaps due to weaker vehicle sales,
and eliminating the addition from an improved trade deficit.
General expectations are for a subpar, 2H recovery with
quarterly gains of 1.0% to 2.0%. Persistent declines in consumer
spending coupled with further weakness in housing would easily unravel
those expectations. Moreover, lagged declines in business investment
and weaker exports due to recessions abroad could add to any lack of
forward economic momentum. However, there is the potential for some
upside. Pent-up demand for consumer durables could be unleashed with
the huge amount of monetary stimulus already in place and an easing of
tight credit conditions.
In this era of recession and weak growth, price inflation
seems not to be an issue. Growth in the GDP chain prices is expected to
drop to 1.0% by 2010 where it is expected to remain in 2011.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">U.S.
GDP Components (%, AR)</th>
<th scope="col">4Q (Estimate)</th>
<th scope="col">GDP Weight</th>
<th scope="col">3Q</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">GDP</td>
<td>-5.1</td>
<td>&nbsp;</td>
<td>-0.5</td>
<td>2.0</td>
<td>2.8</td>
<td>2.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Personal Consumption
Expenditures</td>
<td>-6.0</td>
<td>.70</td>
<td>-3.8</td>
<td>2.8</td>
<td>3.0</td>
<td>3.0</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Residential
Investment</td>
<td>-20.0</td>
<td>.03</td>
<td>-16.1</td>
<td>-17.9</td>
<td>-7.1</td>
<td>6.3</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Business Investment</td>
<td>-15.0</td>
<td>.12</td>
<td>-1.7</td>
<td>4.9</td>
<td>7.5</td>
<td>7.2</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Government Spending</td>
<td>3.0</td>
<td>.17</td>
<td>5.8</td>
<td>2.1</td>
<td>1.7</td>
<td>0.4</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Inventories
(Contribution to GDP Growth)</td>
<td>0.0</td>
<td>--</td>
<td>0.8</td>
<td>-0.4</td>
<td>-0.0</td>
<td>-0.1</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Net Exports
(Contribution to GDP Growth)</td>
<td>1.0</td>
<td>--</td>
<td>1.1</td>
<td>0.6</td>
<td>-0.0</td>
<td>-0.2</td>
</tr>
</tbody>
</table>
 PMI Indices for EMU Bounce &#8211; Dead
Cat or Live
One?
 
by <a href="/comment/Brusca.html">Robert
Brusca</a> January 23, 2009


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090123a.jpg" align="left" border="0" height="265" width="353">
Hooray! The MFG and Services PMIs for Europe in January have
bounced. It&#8217;s too soon to call it a bottom but since they are bouncing
off historic- or near-historic lows, maybe we have seen the worst of
decay. Even if that is true it is a far cry from saying we are about to
embark on recovery. 
 

What it means - At a reading of 34 for MFG, the sector is
telling us that about 34% of the industries are expanding&#8230; (That is
strictly speaking an improper interpretation since the PMI reading is
all the &#8216;up&#8217; readings plus &#8216;half the unchanged responses&#8217; and there are
myriad ways to get that result. A given PMI reading does not tell you
how many, or which proportion, of industries are expanding. But the
reading of 34 is &#8216;as if&#8217; 34% were rising and the rest falling although
fewer may be rising and twice the residual might be unchanged. I will
use this short hand of treating the PMI as if it were an &#8216;up only&#8217;
index for simplicity but the reader should understand that the truth is
a bit more complex- I think nothing is lost by this expositional
device.). For services the reading of +42 is coming off that (shorter)
series&#8217; all-time low. 
 

Lots of weakness ahead - In any event it is clear that these
two measures can rise for some time and still not get back to neutral
(a reading of 50 is neutral- half the sectors expanding, half
contracting). 
 

&#8216;Neutral&#8217; is not &#8216;normal&#8217; - And of course &#8216;neutral&#8217; is not the
same as &#8216;normal&#8217;. When you put your car in &#8216;neutral&#8217; is neither in
&#8216;drive&#8217; nor &#8216;reverse&#8217;. If we were to average what gear your car were in
most of the time the average would not be close to neutral. Similarly,
since July 1998 when the services measure was launched it has averaged
54.2. Over the same span the MFG index has averaged 52. On balance more
sectors are expanding than contracting in normal times. So the current
readings are a very great distance away from being &#8216;normal&#8217; and it
should take a good deal of time to get back to normal. 
 

Diffusion increases do not necessarily mean that output
increases - When these diffusion indices rise, until they surpass a
reading of 50, they are indicating contraction at a slower pace but
still contraction and not expansion.. For now the PMIs are saying that
the worst &#8211; most severe phase of the contraction - is behind us, not
that recession is ending. And that is the message only if the December
bottoms stay in place and are not replaced by new weaker readings. 
 

More weakness ahead - Rest &#8216;assured&#8217; that more declines lies
ahead for conventional economic variables even if the diffusion indices
continue to rise from their lows. 
 

Diffusing as Mr Sensitivity - Diffusion readings are very
valuable because they are so timely and because they are sensitive.
Formally the PMI indices are measures are gauges of the BREADTH not of
its strength. But everyone treats theses measure of breadth as if they
are of strength. Financial experts are well aware that is not so. For
stock markets analysts (for example) always looked at big &#8216;up&#8217; or
&#8216;down&#8217; days in the stock indices to see if the breadth reinforced the
trend or not. Breadth in fact is not the same as strength &#8211; but they
are highly correlated. So again be careful how use diffusion data. They
often are the first whiff of slowdown or of bottoming. But they are
indicators and are not real economic variables so be careful how you
interpret them. 
 


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="3" scope="col">FLASH
Readings</th>
</tr>
<tr>
<th colspan="3" scope="col">Markit
PMIs for the Euro
Area </th>
</tr>
</thead>
<tbody>
<tr class="even">
<td colspan="3">Markit PMIs for the Euro
Area 15</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>MFG</td>
<td>Services</td>
</tr>
<tr>
<td class="firstcol">Jan-09</td>
<td>34.53</td>
<td>42.47</td>
</tr>
<tr>
<td class="firstcol">Dec-08</td>
<td>33.87</td>
<td>42.06</td>
</tr>
<tr>
<td class="firstcol">Nov-08</td>
<td>35.58</td>
<td>42.47</td>
</tr>
<tr>
<td class="firstcol">Oct-08</td>
<td>41.10</td>
<td>45.76</td>
</tr>
<tr class="odd">
<td colspan="3">Averages</td>
</tr>
<tr>
<td class="firstcol">3-Mo</td>
<td>36.85</td>
<td>42.62</td>
</tr>
<tr>
<td class="firstcol">6-Mo</td>
<td>41.74</td>
<td>45.19</td>
</tr>
<tr>
<td class="firstcol">12-Mo</td>
<td>46.51</td>
<td>47.93</td>
</tr>
<tr class="odd">
<td colspan="3">126-Mo Range</td>
</tr>
<tr>
<td class="firstcol">High</td>
<td>60.47</td>
<td>62.36</td>
</tr>
<tr>
<td class="firstcol">Low</td>
<td>33.87</td>
<td>42.06</td>
</tr>
<tr>
<td class="firstcol">% Range</td>
<td>2.5%</td>
<td>2.0%</td>
</tr>
</tbody>
</table>
</body></html>

Consensus Forecast for 4Q GDP:Activity Down 5%

Robert Brusca

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090122i.jpg" align="left" border="0" height="265" width="353">
E-Zone orders are dropping sharply in November. Based on some
more topical country level reports, it is not surprising that the EMU
orders series made another sharp fall &#8211; and more those lie ahead.
Today, in fact, the UK CBI survey of industry posted another sharply
weaker result with its up minus down diffusion index falling to -48 in
January compared to -35 in December. That&#8217;s right, in January.
Diffusion data are generally out a month or more ahead of the actual
underlying series that they describe and, as such, they provide a road
map of where we are headed. Still, the variables themselves tell the
actual story of industry. 
 

In November the EMU series is telling us of increased pain in
the zone. The carnage is widespread. For Germany, France, Italy and the
UK Yr/Yr orders are dropping in November by 20% or more from November
of one year ago. In the quarter to date (Q4) the country level growth
rates for orders are more like a negative 50% at an annual rate
compared to Q3 2008. 
 

The weakness is spread more or less equally across domestic
and foreign orders in the EMU series. Foreign orders are down by more
over 12-months but the drop in November is worse for domestic orders. 
 

For the moment we are in the worst of the grip of the
downturn. As we admit this, the international banking crisis is not
getting any better. The &#8216;Dutch boys&#8217; with their fingers in the dikes
are calling out for more recruits --for more stop-gap plans. Others are
crying out for a more permanent solution and for mindful attention to
what all this interventionism will mean for the future. The US has just
completed its transition to new leadership. Japan is eroding faster
after showing some resilience. The strength in the yen is finally
creating more distress there. The data from the industrial sector in
EMU are telling. The pressure on the financial sector is bad and it is
going to get worse. We were already in a financial mess before this
recession began. Now the recession is global in nature and it is going
to spawn and spread the usual credit mess that comes hand in hand with
recession- and this recession is severe. So be prepared, because things
will get worse... That is the main message from the day&#8217;s weak
industrial data in Europe. 


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr><th colspan="10" scope="col">E-zone-13 and UK Industrial Orders And Sales</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Saar except m/m</td>
<td colspan="3">Mo/Mo</td>
<td>Nov-08</td>
<td>Oct-08</td>
<td>Nov-08</td>
<td>Oct-08</td>
<td>Nov-08</td>
<td>Oct-08</td>
</tr>
<tr>
<td class="firstcol">Ezone Detail</td>
<td>Nov-08</td>
<td>Oct-08</td>
<td>Sep-08</td>
<td>3-Mo</td>
<td>3-Mo</td>
<td>6-mo</td>
<td>6-mo</td>
<td>12-mo</td>
<td>12-mo</td>
</tr>
<tr>
<td class="firstcol">MFG Orders</td>
<td>-4.5%</td>
<td>-5.7%</td>
<td>-5.4%</td>
<td>-47.3%</td>
<td>-40.3%</td>
<td>-27.6%</td>
<td>-28.3%</td>
<td>-21.0%</td>
<td>-15.2%</td>
</tr>
<tr>
<td class="firstcol">MFG Sales</td>
<td>-0.9%</td>
<td>-1.9%</td>
<td>-1.9%</td>
<td>-17.0%</td>
<td>-17.0%</td>
<td>-10.5%</td>
<td>-8.6%</td>
<td>-2.6%</td>
<td>-1.7%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Consumer</td>
<td>0.1%</td>
<td>0.0%</td>
<td>-0.2%</td>
<td>-0.3%</td>
<td>-1.4%</td>
<td>-0.7%</td>
<td>-1.2%</td>
<td>-0.5%</td>
<td>-0.6%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Capital</td>
<td>-0.3%</td>
<td>-0.6%</td>
<td>-0.6%</td>
<td>-5.8%</td>
<td>-6.7%</td>
<td>-5.3%</td>
<td>-5.2%</td>
<td>-1.5%</td>
<td>-1.2%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Intermediate</td>
<td>-7.0%</td>
<td>-5.5%</td>
<td>-6.0%</td>
<td>-53.6%</td>
<td>-38.7%</td>
<td>-28.6%</td>
<td>-26.9%</td>
<td>-20.5%</td>
<td>-12.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">Memo:MFG</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol">Total Orders</td>
<td>-4.5%</td>
<td>-5.7%</td>
<td>-5.4%</td>
<td>-47.3%</td>
<td>-40.3%</td>
<td>-27.6%</td>
<td>-28.3%</td>
<td>-21.0%</td>
<td>-15.2%</td>
</tr>
<tr>
<td class="firstcol">E-13 Domestic MFG orders</td>
<td>-7.0%</td>
<td>-5.5%</td>
<td>-6.0%</td>
<td>-53.6%</td>
<td>-38.7%</td>
<td>-28.6%</td>
<td>-26.9%</td>
<td>-20.5%</td>
<td>-12.2%</td>
</tr>
<tr>
<td class="firstcol">E-13 Foreign MFG orders</td>
<td>-3.5%</td>
<td>-6.9%</td>
<td>-5.9%</td>
<td>-48.9%</td>
<td>-46.5%</td>
<td>-30.3%</td>
<td>-32.3%</td>
<td>-24.8%</td>
<td>-18.9%</td>
</tr>
<tr>
<td class="firstcol">Countries:</td>
<td>Nov-08</td>
<td>Oct-08</td>
<td>Sep-08</td>
<td>3-Mo</td>
<td>3-Mo</td>
<td>6-mo</td>
<td>6-mo</td>
<td>12-mo</td>
<td>12-mo</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Germany (MFG):</td>
<td>-7.2%</td>
<td>-7.1%</td>
<td>-8.0%</td>
<td>-60.3%</td>
<td>-39.7%</td>
<td>-37.5%</td>
<td>-29.6%</td>
<td>-24.4%</td>
<td>-16.6%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; France(Ind):</td>
<td>-5.7%</td>
<td>-11.8%</td>
<td>0.6%</td>
<td>-50.8%</td>
<td>-55.2%</td>
<td>-33.7%</td>
<td>-38.5%</td>
<td>-25.5%</td>
<td>-18.8%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Italy (Ind):</td>
<td>-6.3%</td>
<td>-6.6%</td>
<td>-3.8%</td>
<td>-49.7%</td>
<td>-39.0%</td>
<td>-27.2%</td>
<td>-23.2%</td>
<td>-21.1%</td>
<td>-12.1%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; UK (Engineering Ind):</td>
<td>-8.4%</td>
<td>-24.0%</td>
<td>28.8%</td>
<td>-35.6%</td>
<td>-35.3%</td>
<td>-38.9%</td>
<td>-35.2%</td>
<td>-21.7%</td>
<td>-8.9%</td>
</tr>
</tbody>
</table>
</body></html>

E-Zone orders are dropping sharply in November. Based on some more topical country level reports, it is not surprising that the EMU orders series made another sharp fall – and more those lie ahead. Today, in fact, the UK CBI survey of [...]

E-Zone Orders Drop Sharply...Again

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090122g.jpg" width="353">
At 589,000 last week, initial claims for unemployment insurance rose another 62,000 to their highest level since late during the sharp recession of 1981-82. During that recession, real GDP fell by 2.9% peak-to-trough. The latest increase in initial claims followed a 57,000 increase during the prior period and it exceeded Consensus expectations for a rise to 548,000.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090122h.jpg" width="353">
The latest initial claims figure is for the January survey period for nonfarm payrolls and claims were up 5.9% from the December period. During the last ten years there has been a negative 84% correlation between the level of claims and the month-to-month change in nonfarm payrolls.
The Labor Department indicated that the largest increases in initial claims for the week ending January 10 were in Michigan (+34,639), California (+22,573), Florida (+20,658), North Carolina (+15,637), and Pennsylvania (+13,848), while the largest decreases were in South Carolina (-2,682), Massachusetts (-1,882), New York (-1,852), Iowa (-1,593), and Oregon (-856).
Continuing claims for unemployment insurance during the week of January 10 recovered nearly all of the prior week&#39;s decline with a 97,000 increase. That also lifted continuing claims to their highest since late 1982. The four-week average of continuing claims rose 58,800 to 4,559,750. Continuing claims provide some indication of workers&#39; ability to find employment and they lag the initial claims figures by one week.
The insured rate of unemployment remained stable for the fourth week at this cycle&#39;s high of 3.4%, the highest since 1983. The highest insured unemployment rates in the week ending January 3 were in Michigan (7.5 percent), Oregon (7.5), Idaho (6.7), Wisconsin (6.7), Pennsylvania (6.6), Indiana (5.7), Kentucky (5.7), North Carolina (5.7), South Carolina (5.6), and Rhode Island (5.5).
The Tech Pulse Index: Recent Trends in Tech-Sector Activity from the Federal Reserve Bank of San Francisco is available <a href="http://www.frbsf.org/publications/economics/letter/2009/el2009-03.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">01/17/09</th>
<th scope="col">01/10/09</th>
<th scope="col">01/03/09</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>589</td>
<td>527</td>
<td>470</td>
<td>81.8%</td>
<td>420</td>
<td>321</td>
<td>313</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>--</td>
<td>4,607</td>
<td>4,510</td>
<td>71.8%</td>
<td>3,342</td>
<td>2,552</td>
<td>2,459</td>
</tr>
</tbody>
</table>
</body>
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At 589,000 last week, initial claims for unemployment insurance rose another 62,000 to their highest level since late during the sharp recession of 1981-82. During that recession, real GDP fell by 2.9% peak-to-trough. The latest [...]

U.S. Weekly Claims For Jobless Insurance Highest Since 1982

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090122e.jpg" width="353">
Regular gasoline prices moved higher last week for the third consecutive period. They rose six cents to an average $1.85 per gallon after the prior week&#39;s ten cent gain, according to the U.S. Department of Energy survey. The latest level was the highest price since late November. Yesterday, the spot market price for regular gasoline was up again to $1.20 per gallon which was its highest level since late-November.
Weekly gasoline prices can be found in Haver&#39;s WEEKLY database. Daily prices are in the DAILY database.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090122f.jpg" width="353">
Demand continued quite weak for gasoline in reaction to the economy&#39;s weakness. The U.S. Department of Energy reported that the demand for gasoline fell by 3.9% during the latest four weeks, nearly the fastest rate of decline since late-1995 (the latest four weeks versus the same four weeks in 2008). The demand for all petroleum products also fell sharply, by 4.0%. These numbers are available in Haver&#39;s OILWKLY database.
The source for that reduced demand for gasoline is the cutback in vehicle miles driven which have fallen 3.5% during the twelve months ended October. The decline of roughly this magnitude, sustained as it has been for most of last year, is unprecedented. These Department of Transportation figures are available in Haver&#39;s OGJ database.
The price for a barrel of West Texas Intermediate crude oil retraced most of the gains during the prior two weeks and fell to $36.91 per barrel. Prices reached their high of $145.66 last July. In futures trading yesterday, the one-month price for crude oil moved back up to $43.55.
Last week, prices for natural gas slipped to $5.40 per mmbtu (-35.0% y/y). The latest average price was almost 50% below natural gas prices in early-July of $13.19/mmbtu.
Understanding Monetary Policy Implementation from the Federal Reserve Bank of Richmond can be found <a href="http://www.richmondfed.org/publications/research/economic_quarterly/2008/summer/pdf/ennis.pdf">here.</a>

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/WEEKLY/@W4/@W4.HTM">Weekly Prices</a></th>
<th scope="col">01/19/09</th>
<th scope="col">01/12/09</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>
<td class="firstcol">Retail Regular Gasoline ($ per Gallon)</td>
<td>1.85</td>
<td>1.78</td>
<td>-38.8%</td>
<td>3.25</td>
<td>2.80</td>
<td>2.57</td>
</tr>
<tr>
<td class="firstcol">Light Sweet Crude Oil, WTI&nbsp; ($ per bbl.)</td>
<td>36.91</td>
<td>44.51</td>
<td>-59.7%</td>
<td>100.16</td>
<td>72.25</td>
<td>66.12</td>
</tr>
</tbody>
</table>
</body>
</html>

Regular gasoline prices moved higher last week for the third consecutive period. They rose six cents to an average $1.85 per gallon after the prior week's ten cent gain, according to the U.S. Department of Energy survey. The latest [...]

U.S. Gasoline Prices Up Again

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090122c.jpg" align="left" border="0" height="265" width="353">
The January Housing Market Index (HMI) from the National
Association of Home Builders again reached a record low. At a level of
8 it was more than half below the year-ago figure. The index is
compiled from survey questions asking builders to rate market
conditions as &#8220;good&#8221;, &#8220;fair&#8221;, &#8220;poor&#8221; or &#8220;very high&#8221; to &#8220;very low&#8221;.
Numerical results over 50 indicate a predominance of
&#8220;good&#8221; readings. <img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090122d.jpg" align="right" border="0" height="265" width="353">
Since 1990, the year-to-year change in this index has had a
correlation of 72% with the year-to-year percentage change in new
single-family home sales.
The Home Builders Association indicated that its sub-index of
present sales conditions also fell to a record low of 6. That was down
from last year's average level of 16, 2007's average of 27, 2006's
average of 45 and 2005's average of 73.
Builders&#8217; expectations for sales in six months ticked up
slightly month-to-month to a level of 17 but that remained down sharply
from prior years. The &#8220;traffic" of
prospective buyers also ticked up slightly from the record low reached
in December.
Index readings were mixed last month in the country's regions.
In the West the index fell hard month-to-month to a new low. It was
down slightly in the Northeast, stable month-to-month in the Midwest
and up in the South. Year-to-year, the sharpest decline was in the West.
Not only are builders disturbed by the market for new homes,
but the assessment of conditions for remodeling a home also reached a
record low during the third quarter. Expectations also fell to a record
low.
The NAHB has compiled the Housing Market Index since 1985.
The weights assigned to the individual index components
are .5920 for single family detached sales, present time; .1358 for
single family detached sales, next six months; and .2722 for traffic of
prospective buyers. The results, along with other housing and
remodeling indexes from NAHB Economics, are included in Haver&#8217;s SURVEYS
database.
The Yield Curve, January 2009 from the
Federal Reserve Bank of Cleveland is available <a href="http://www.clevelandfed.org/research/trends/2009/0209/01monpol.cfm">here.</a>

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S4/@S4.HTM">Nat'l
Association of Home Builders</a></th>
<th scope="col">January</th>
<th scope="col">December
&nbsp;</th>
<th scope="col">January '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 Housing Market Index</td>
<td>8</td>
<td>9</td>
<td>19</td>
<td>16</td>
<td>27</td>
<td>42</td>
</tr>
</tbody>
</table>
</body></html>

The January Housing Market Index (HMI) from the National Association of Home Builders again reached a record low. At a level of 8 it was more than half below the year-ago figure. The index is compiled from survey questions asking [...]

U.S. Home Builders' Survey At Record Low

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<img align="left" border="0" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090122a.jpg">
The pace of the downturn in the U.S. housing market accelerated at the end of last year. Housing starts fell to a record low in December of 550,000 units (SAAR) which was the lowest in the series&#39; history that extends back to 1959. November starts were revised slightly higher and Consensus expectations for December were for 608,000 starts.
Not only were the latest figures at their historic low but the rate of decline had been accelerating all year to the point where starts during 4Q were one quarter below the 3Q level. That is more than double the 3Q rate of decline and also the fastest on record.
Starts of single-family homes fell to their record low of 398,000 from an upwardly revised November. The level is down by three-quarters since the peak in early 2006. During the last three months, the annual rate of decline reached 72.8%. Permits to build single-family homes also fell to their record low, off by nearly one-third during the last three months. During the last ten years there has been an 84% correlation between the q/q change in single-family starts and their contribution to quarterly GDP growth.
Starts of multi-family homes fell 20.4% in November alone to their lowest level since early-1994. They are down by one-third since December 2007.<img align="right" border="0" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090122b.jpg">
By region, December starts of single-family units in the Midwest were the weakest last month. They were off by more than one-quarter from November and by nearly fifty percent year-to-year. Starts in the West fell 22.7% from November and they were also down by one-half from December of 2007. In the South starts fell by a lesser 9.7% during December. They too were off by one-half from their December 2007 level. In the Northeast starts actually posted a slight uptick during December but they were down by one-third from the year ago level.
Economic Outlook Symposium: Summary of 2008 results and forecasts for 2009 from the Federal Reserve Bank of Chicago can be found <a href="http://www.chicagofed.org/publications/fedletter/cflfebruary2009_259.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">Housing Starts (000s, SAAR)</th>
<th scope="col">December</th>
<th scope="col">November</th>
<th scope="col">October</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>550</td>
<td>651</td>
<td>767</td>
<td>-45.0%</td>
<td>902</td>
<td>1,341</td>
<td>1,812</td>
</tr>
<tr>
<td class="firstcol">Single-Family</td>
<td>398</td>
<td>460</td>
<td>536</td>
<td>-43.9</td>
<td>618</td>
<td>1,034</td>
<td>1,474</td>
</tr>
<tr>
<td class="firstcol">Multi-Family</td>
<td>152</td>
<td>191</td>
<td>231</td>
<td>-31.2</td>
<td>285</td>
<td>307</td>
<td>338</td>
</tr>
<tr class="odd">
<td class="firstcol">Building Permits</td>
<td>549</td>
<td>615</td>
<td>730</td>
<td>-50.6</td>
<td>880</td>
<td>1,389</td>
<td>1,844</td>
</tr>
</tbody>
</table>
</body>
</html>

The pace of the downturn in the U.S. housing market accelerated at the end of last year. Housing starts fell to a record low in December of 550,000 units (SAAR) which was the lowest in the series' history that extends back to 1959. [...]

U.S. Housing Starts At Record Low

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

Our global data offering is unparalleled in terms of coverage, quality, and organization. We offer 290+ databases from 2500 government and private sources, a wealth of key survey and forecast data covering the world’s economies, and a robust offering of archive databases that drive machine learning for big data applications.

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Andrew Cates

**The Global Monetary Policy Consensus**
The latest Blue Chip Financial Forecasts survey points to a notably more balanced global monetary policy outlook over the coming year. In contrast to the pronounced easing bias that dominated much of the past two years, expectations are now more symmetric, with a similar number of central banks projected to raise rates as to ease policy. Japan is seen delivering further tightening, while Canada is expected to initiate an interest rate hike in coming months. In Australia’s case, this tightening guidance was reinforced this week, with the Reserve Bank lifting its policy rate by 25 basis points. Elsewhere, and in contrast, the euro area, UK and US are expected to move in the opposite direction.

260205Z1.jpg

**US manufacturing activity**
The second chart underscores the recent improvement in US economic momentum, highlighted by an unexpected surge in the January ISM manufacturing PMI. After spending much of the past year hovering below the 50 threshold consistent with stagnation, the index jumped sharply back into expansionary territory, signalling a renewed pickup in industrial activity. This rebound has coincided with a broader run of stronger-than-anticipated US economic data, as reflected in the upswing in the Citigroup Economic Surprise Index. Together, these developments point to a US economy that continues to display notable resilience, complicating expectations of monetary easing in the near term.

260205Z2.jpg

**US Bank Lending Standards and Financial Stress** 
The next chart turns to US financial conditions, highlighting the latest readings from the Senior Loan Officer Opinion Survey. The net proportion of banks tightening lending standards on corporate loans and mortgages is now more modest by historical standards, and well below the extremes seen during past episodes of financial stress. Some easing in credit headwinds has occurred alongside relatively subdued readings on the OFR Financial Stress Index, which continues to hover below its long-run average. Together, these indicators suggest that the US financial system has continued to avoid the kind of acute stress typically associated with sharp slowdowns in credit availability—helping to underpin the recent resilience in economic activity.

260205Z3.jpg

**Semiconductor Sales**
The fourth chart highlights the renewed surge in global semiconductor sales, with momentum strengthening sharply over recent months across the Americas, China and the broader Asia-Pacific region. After the cyclical downturn in 2022–23, sales have rebounded to fresh highs, reflecting a powerful revival in demand for advanced chips and related technologies. This upswing has taken place amid intense investor preoccupation with artificial intelligence, with expectations that AI adoption will drive a sustained wave of capital spending on data centres, cloud infrastructure and high-performance computing. In contrast, semiconductor sales in Europe remain comparatively subdued, reflecting the region’s smaller footprint in high-end chip manufacturing, weaker industrial demand, and the ongoing impact of slower economic growth. While semiconductors are inherently cyclical, markets have increasingly interpreted the current rebound elsewhere as structural rather than purely cyclical—underpinned by the belief that AI represents a transformative and durable source of demand growth.

260205Z4.jpg

**Large-Scale AI Models**
The next chart illustrates the rapid proliferation of large-scale AI models globally, with newly updated data for 2025 pointing to a further sharp acceleration in development activity. The United States continues to lead by a wide margin, while China has also seen a steep rise in model deployment in recent years, underscoring the intensifying technological competition between the two economies. Growth in the UK and other regions has been more modest by comparison, highlighting the increasingly concentrated nature of AI innovation. Taken together with the surge in semiconductor sales, these trends help explain the market’s strong preoccupation with AI as a potential driver of future productivity and investment cycles—although the geographic concentration of activity also raises questions about the uneven distribution of any resulting economic gains.

260205Z5.jpg

**An AI Bubble?** 
The final chart draws on the latest Blue Chip Financial Forecasts special questions, highlighting market participants’ perceptions of the economic gains likely to be delivered by artificial intelligence. While a sizeable share of respondents still believe that financial markets may be overestimating AI’s potential benefits, an increasing proportion now judge current expectations to be broadly accurate, with only a small minority viewing the gains as underestimated. Notably, this represents a softening in scepticism compared with the survey results from last month, when concerns about excessive market optimism were more pronounced. The shift suggests a growing acceptance that AI-related investment and innovation could translate into meaningful economic impacts—though uncertainty remains high around the scale, timing and distribution of these gains.

260205Z6.jpg

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

260206E.jpg

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.

260206.jpg

**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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