Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081030d.jpg" width="353">
Initial claims for jobless insurance were stable last week at 479,000, near the high for this cycle. The figure was about as expected. The four-week moving average of initial claims fell slightly to 475,500 (44.2% y/y), still just off the cycle high.
The largest increases in initial claims for the week ending Oct. 18 were in Tennessee (+1,956), Oregon (+1,802), Indiana (+1,297), Virginia (+898), and Florida (+543), while the largest decreases were in New York (-6,080), Michigan (-5,894), Illinois (-3,795), Ohio (-2,923), and Kentucky (-2,494).
Continuing claims for unemployment insurance during the week of October 18 fell 12,000 after a revised 7,000 increase during the prior week, initially reported as a slight decline. The four-week average of continuing claims rose further to this cycle&#39;s high of 3,709,500, the highest level since early 2003. Continuing claims provide some indication of workers&#39; ability to find employment and they lag the initial claims figures by one week.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081030e.jpg" width="353">
The insured rate of unemployment was stable for the third week at 2.8%. That was this cycle&#39;s high and the highest since mid-2003. The high in that recessionary period was 3.0% reached in late June 2003.
What Exactly Is a Recession&#151;and Are We in One? from the Federal Reserve Bank of Cleveland can be found <a href="http://www.clevelandfed.org/research/trends/2008/1108/01ecoact.cfm">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">10/25/08</th>
<th scope="col">10/18/08</th>
<th scope="col">10/11/08</th>
<th scope="col">Y/Y</th>
<th scope="col">2007</th>
<th scope="col">2006&nbsp;</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Initial Claims</td>
<td>478</td>
<td>&nbsp;479</td>
<td>463</td>
<td>44.3%</td>
<td>322</td>
<td>313</td>
<td>331</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>--</td>
<td>3,715</td>
<td>3,727</td>
<td>43.0</td>
<td>2,552</td>
<td>2,459</td>
<td>2,662</td>
</tr>
</tbody>
</table>
</body>
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Initial claims for jobless insurance were stable last week at 479,000, near the high for this cycle. The figure was about as expected. The four-week moving average of initial claims fell slightly to 475,500 (44.2% y/y), still just off [...]

U.S. Initial Claims for Unemployment Insurance Stable But High

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081030a.jpg" width="353">
U.S. real GDP fell a modest 0.3% (AR) last quarter after 2.8% growth during 2Q. Consensus expectations had been for a decline at a 0.5% rate. The decline last quarter mirrored a 0.2% decline during the fourth quarter of last year. The y/y rate of growth of 0.8% was the weakest since the end of the 2001 recession.
Real final sales to domestic purchasers were notably weak in 3Q as they posted a 1.8% (AR) decline. That was the largest quarterly decline since the end of the 1990-91 recession. The year-to-year dip of 0.1%, while modest, was the first since 1991.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081030b.jpg" width="353">
Real personal consumption declined at a 3.1% (0.0% y/y) annual rate, reversing a 1.2% rise during 2Q. The 2Q gain presumably was fueled by tax rebate checks but the lift seems to have been slight. Spending on autos &amp; light trucks fell at a 25.6% (-14.7% y/y) annual rate after declining at a 19.7% rate during 2Q. Spending on furniture &amp; other household equipment fell at a 7.6% rate (+2.7% y/y) and the decline reversed roughly half of the 2Q increase. Spending on apparel fell at an 11.0% rate (-0.4% y/y) and that reversed all of the 2Q jump. Spending on consumer services also weakened to a 0.6% growth rate. That about matched the 2Q rise but the y/y change of 1.3% was the weakest since 1981. Growth in real PCE subtracted 2.3 percentage points from 3Q real GDP growth after a 0.9 point add during 2Q.
Residential construction fell again, last quarter at a 19.1% (-21.3% y/y) annual rate after a 13.3% rate of decline during 2Q. The 3Q drop subtracted 0.7 percentage points from GDP growth.
Growth in business fixed investment fell for the first time since fourth quarter, 2006. The 1.0% decline (+1.8% y/y) followed 2.5% growth during 2Q, a 4.9% rise during 2007 and roughly 7.5% growth in 2006 and 2005. Equipment investment repeated its 2Q performance and declined at a 5.5% rate (-2.6% y/y). Conversely, structures investment was firm again and rose at a 7.9% annual rate (10.8% y/y).<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081030c.jpg" width="353">
An improved foreign trade deficit again was the main source of lift to GDP growth, though the 1.1 percentage point addition was almost a third of that in 2Q. Exports grew at a slower 5.9% rate (6.9% y/y), half that in 2Q. Growth in imports weakened with the slowdown in overall economic growth. They fell at a 1.9% rate (-3.1% y/y).
Inventory accumulation added 0.6 percentage points to GDP growth after three consecutive quarters of subtraction.
Spending by governments was strong again and the 5.8% (3.1% y/y) rise was the quickest since early 2003.
The GDP chain price index surged at a 4.2% annual rate. The accelerated rate of increase owed to a 5.4% jump in the PCE price index which was fueled by higher energy prices. Capital spending prices rose at an accelerated 4.2% rate (2.2% y/y) while the residential investment price deflator declined for the fourth straight quarter (-1.8% y/y).
Fed, Central Banks in Brazil, Mexico, Korea and Singapore, Announce Swap Lines and the Fed&#39;s announcement can be found <a href="http://www.federalreserve.gov/newsevents/press/monetary/20081029b.htm">here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E7/@E701/@E701.HTM">Chained 2000$, % AR</a></th>
<th scope="col">3Q &#39;08 (Advance)</th>
<th scope="col">2Q &#39;08</th>
<th scope="col">3Q Y/Y</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>-0.3</td>
<td>2.8</td>
<td>0.8</td>
<td>2.0</td>
<td>2.8</td>
<td>2.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Inventory Effect</td>
<td>0.6</td>
<td>-1.5</td>
<td>-0.4</td>
<td>-0.4</td>
<td>0.0</td>
<td>-0.2</td>
</tr>
<tr class="odd">
<td class="firstcol">Final Sales</td>
<td>-0.8</td>
<td>4.4</td>
<td>1.3</td>
<td>2.4</td>
<td>2.8</td>
<td>3.1</td>
</tr>
<tr>
<td class="firstcol">Foreign Trade Effect</td>
<td>1.1</td>
<td>2.9</td>
<td>1.7</td>
<td>0.6</td>
<td>0.2</td>
<td>0.0</td>
</tr>
<tr class="odd">
<td class="firstcol">Domestic Final Demand</td>
<td>-1.8</td>
<td>1.3</td>
<td>-0.1</td>
<td>1.8</td>
<td>2.6</td>
<td>3.1</td>
</tr>
<tr>
<td class="firstcol">Chained GDP Price Index</td>
<td>4.2</td>
<td>1.1</td>
<td>2.7</td>
<td>2.7</td>
<td>3.2</td>
<td>3.3</td>
</tr>
</tbody>
</table>


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U.S. real GDP fell a modest 0.3% (AR) last quarter after 2.8% growth during 2Q. Consensus expectations had been for a decline at a 0.5% rate. The decline last quarter mirrored a 0.2% decline during the fourth quarter of last year. The [...]

U.S. 3Q'08 GDP Fell Modestly

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081030a.jpg" align="left" border="0" height="265" width="353">
U.S. real GDP fell a modest 0.3% (AR)
last quarter after 2.8%
growth during 2Q. Consensus expectations had been for a decline at a
0.5% rate. The decline last quarter mirrored a 0.2% decline during the
fourth quarter of last year. The y/y rate of growth of 0.8% was the
weakest since the end of the 2001 recession.
Real final sales to domestic purchasers
were notably weak in
3Q as they posted a 1.8% (AR) decline. That was the largest quarterly
decline since the end of the 1990-91 recession. The year-to-year dip of
0.1%, while modest, was the first since 1991.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081030b.jpg" align="right" border="0" height="265" width="353">
Real personal consumption declined at a
3.1% (0.0% y/y)
annual rate, reversing a 1.2% rise during 2Q. The 2Q gain presumably
was fueled by tax rebate checks but the lift seems to have been slight.
Spending on autos &amp; light trucks fell at a 25.6% (-14.7% y/y)
annual rate after declining at a 19.7% rate during 2Q. Spending on
furniture &amp; other household equipment fell at a 7.6% rate
(+2.7%
y/y) and the decline reversed roughly half of the 2Q increase. Spending
on apparel fell at an 11.0% rate (-0.4% y/y) and that reversed all of
the 2Q jump. Spending on consumer services also weakened to a 0.6%
growth rate. That about matched the 2Q rise but the y/y change of 1.3%
was the weakest since 1981. Growth in real PCE subtracted 2.3
percentage points from 3Q real GDP growth after a 0.9 point add during
2Q.
Residential construction fell again, last
quarter at a 19.1%
(-21.3% y/y) annual rate after a 13.3% rate of decline during 2Q. The
3Q drop subtracted 0.7 percentage points from GDP growth.
Growth in business fixed investment fell
for the first time
since fourth quarter, 2006. The 1.0% decline (+1.8% y/y) followed 2.5%
growth during 2Q, a 4.9% rise during 2007 and roughly 7.5% growth in
2006 and 2005. Equipment investment repeated its 2Q performance and
declined at a 5.5% rate (-2.6% y/y). Conversely, structures investment
was firm again and rose at a 7.9% annual rate (10.8% y/y).<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081030c.jpg" align="left" border="0" height="265" width="353">
An improved foreign trade deficit again
was the main source
of lift to GDP growth, though the 1.1 percentage point addition was
almost a third of that in 2Q. Exports grew at a slower 5.9% rate (6.9%
y/y), half that in 2Q. Growth in imports weakened with the slowdown in
overall economic growth. They fell at a 1.9% rate (-3.1% y/y).
Inventory accumulation added 0.6 percentage
points to GDP growth after three consecutive quarters of subtraction.
Spending by governments was strong again
and the 5.8% (3.1% y/y) rise was the quickest since early 2003.
The GDP chain price index surged at a 4.2%
annual rate. The
accelerated rate of increase owed to a 5.4% jump in the PCE price index
which was fueled by higher energy prices. Capital spending prices rose
at an accelerated 4.2% rate (2.2% y/y) while the residential investment
price deflator declined for the fourth straight quarter (-1.8% y/y).
Fed, Central Banks in Brazil, Mexico, Korea and
Singapore, Announce Swap Lines and the Fed's announcement
can be found <a href="http://www.federalreserve.gov/newsevents/press/monetary/20081029b.htm">here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E7/@E701/@E701.HTM">Chained
2000$, % AR</a></th>
<th scope="col">3Q '08 (Advance)</th>
<th scope="col">2Q '08</th>
<th scope="col">3Q Y/Y</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>-0.3</td>
<td>2.8</td>
<td>0.8</td>
<td>2.0</td>
<td>2.8</td>
<td>2.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Inventory
Effect</td>
<td>0.6</td>
<td>-1.5</td>
<td>-0.4</td>
<td>-0.4</td>
<td>0.0</td>
<td>-0.2</td>
</tr>
<tr class="odd">
<td class="firstcol">Final Sales</td>
<td>-0.8</td>
<td>4.4</td>
<td>1.3</td>
<td>2.4</td>
<td>2.8</td>
<td>3.1</td>
</tr>
<tr>
<td class="firstcol">Foreign Trade Effect</td>
<td>1.1</td>
<td>2.9</td>
<td>1.7</td>
<td>0.6</td>
<td>0.2</td>
<td>0.0</td>
</tr>
<tr class="odd">
<td class="firstcol">Domestic Final Demand</td>
<td>-1.8</td>
<td>1.3</td>
<td>-0.1</td>
<td>1.8</td>
<td>2.6</td>
<td>3.1</td>
</tr>
<tr>
<td class="firstcol">Chained GDP Price Index</td>
<td>4.2</td>
<td>1.1</td>
<td>2.7</td>
<td>2.7</td>
<td>3.2</td>
<td>3.3</td>
</tr>
</tbody>
</table>
U.S. Initial Claims for
Unemployment Insurance Stable But High 
by <a href="/comment/Moeller.html">Tom
Moeller</a> October 30, 2008


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081030d.jpg" align="left" border="0" height="265" width="353">
Initial claims for jobless insurance were stable last week at
479,000, near the high for this cycle. The figure was about as
expected. The four-week moving average of initial claims fell slightly
to 475,500 (44.2% y/y), still just off the cycle high.
The largest increases in initial claims for the week ending
Oct. 18
were in Tennessee (+1,956), Oregon (+1,802), Indiana (+1,297), Virginia
(+898), and Florida (+543), while the largest decreases were in New
York (-6,080), Michigan (-5,894), Illinois (-3,795), Ohio (-2,923), and
Kentucky (-2,494).
Continuing claims for unemployment insurance during the week
of
October 18 fell 12,000 after a revised 7,000 increase during the prior
week, initially reported as a slight decline. The four-week average of
continuing claims rose further to this cycle's high of 3,709,500, the
highest level since early 2003. Continuing claims provide some
indication of workers' ability to find employment and they lag the
initial claims figures by one week.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081030e.jpg" align="right" border="0" height="265" width="353">
The insured rate of unemployment was stable for the third week
at
2.8%. That was this cycle's high and the highest since mid-2003. The
high in that recessionary period was 3.0% reached in late June 2003.
What Exactly Is a Recession&#8212;and Are We in One? from
the Federal Reserve Bank of Cleveland can be found <a href="http://www.clevelandfed.org/research/trends/2008/1108/01ecoact.cfm">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">10/25/08</th>
<th scope="col">10/18/08</th>
<th scope="col">10/11/08</th>
<th scope="col">Y/Y</th>
<th scope="col">2007</th>
<th scope="col">2006&nbsp;</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Initial Claims</td>
<td>478</td>
<td>&nbsp;479</td>
<td>463</td>
<td>44.3%</td>
<td>322</td>
<td>313</td>
<td>331</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>--</td>
<td>3,715</td>
<td>3,727</td>
<td>43.0</td>
<td>2,552</td>
<td>2,459</td>
<td>2,662</td>
</tr>
</tbody>
</table>
EU Indices Are Scraping Low
Levels: It Will Get Worse&#8230; 
by <a href="/comment/Brusca.html">Robert
Brusca</a> October 30, 2008


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081030f.jpg" align="left" border="0" height="265" width="353">
The news this month for the EU/EMU region is bad. The EU
reading is
in the bottom 10% of its range of value. The EMU reading is a bit
better, in the bottom 17% of its range. Both are quite weak. The drop
in the index is the largest since the data have been collected in 1991. All sectors made larger falls in Oct
compared to Sept. The main
EMU countries also saw large drops in their respective overall
sentiment indices.
By sector, services is relatively the hardest hit standing at
the
lowest point of its range since that survey began. But that only goes
back to October of 1996 instead of 1991 as for the other surveys. Still
this result parallels the sort of readings we have been getting in the
US with a very weak service sector checking in.
Is
this more than coincidence? You bet! This crisis is hitting
intrinsically domestic sectors harder like real estate and finance.
Typically banks populate every community; the same with real estate
businesses. These sectors are not like mining or autos or textiles that
may have a particular regional representation. The troubled sectors in
this cycle are spread everywhere and the troubled asset class &#8216;housing&#8217;
is everywhere, as well. It&#8217;s as true in Europe as in the US.INDUSTRY 
 

Europe&#8217;s industry reading at -18 (EMU) is only in the 32nd
percentile of its range (bottom third of its range) and so is weak but
not desperately weak. Germany and France carry percentile positions for
their respective readings in the high thirty percentiles while Spain&#8217;s
is at the 33rd percentile and the UK is at the 27Th
percentile; Italy is looking desperate at the 17Th
percentile. These are weak readings but the most troubling for Italy.
The components of the industry index show that the production
trend
is the weakest relative reading standing in the bottom 3% of its
historic range. Production
expectations are better but still weak in their 12th
percentile. For some reason Europeans think that a worse time lies
behind it not ahead of it. That explains a lot about the government
attitudes. Europe has been in and seem to remain in DENIAL. Order volumes are still relatively
firm in their 44th
range percentile; export orders are in about the same relative range
position and that is also where the expected selling price resides.
Contrarily workers are more exposed with employment expectations in the
bottom 16 percentile of their range. If worker readings are RIGHT then
the rest of the readings are too high.CONFIDENCE
By main countries confidence readings are all over the map
except
that they are limited being to all over intrinsically weak territory.
The EU&#8217;s UK reading is in the bottom 2.9% of its all-time range. Among
large EMU nations Spain is weakest posting the lowest confidence
reading ever. It is followed by France with a bottom 5 percentile
reading. Germany&#8217;s percentile reading at the 43% mark and is similar to
its industrial sector reading but at 37.5 Italy&#8217;s percentile reading is
way above its industry percentile. So, Italian consumer confidence is
more upbeat than it is for Italian industry.
As for the reason for this angst, ee find over all EMU
responses on
&#8216;time to buy&#8217; are at the very worst for making major purchases now or
in the next 12 months. The economic situation in the past 12-months is
rated as the worst ever but looking ahead for the next 12-months the
out look is &#8216;only&#8217; a bottom 13% ordeal. Respondents may want to rethink
that one. The financial situation for this past and this next 12-months
each rate in their respective 12th percentile.
In short the readings really are weak. Unemployment expectations are
&#8216;only up to the 58th percentile of their range &#8211;
elevated, but not by much.RETAIL
The retail readings across EU countries are weakest in the UK,
residing in their bottom 3 range percentile followed by Spain (bottom
13%), Germany (bottom 26%), France (bottom 43%), and Italy (63rd
percentile &#8211; still above its range midpoint). Retailers are not as
downbeat as consumers and that could spell some troubles for them and
for their inventories. Retail orders are put in the bottom 14% of their
range. The expected business situation is only a bottom 38% rating
similar to the present business situation. And maybe the retailers are
just putting up a brave front since their orders are so weak. They may
be planning for something even weaker than what they say they expect&#8230; SERVICES
Service sector reading span the gamut form bad to worst. The
UK and
Italy have the worst service sector readings ever. Spain&#8217;s reading is
in the bottom 6% of its range. German is a bottom 25% reading; for
France the reading is a bottom one-third of range reading. All of
theses are weak. For EMU the
overall reading is
the worst ever. The business climate is a bottom 7% affair, but
expected demand is worse in the bottom 2% of its range. Current demand
is rated as in only the 16th percentile. Current and expected
employment readings are in the 20th percentile
of their
respective ranges, and the reading is lower for expected unemployment.
Things will get worse. Maybe industry workers are better protected by
unions that service sector workers.CONSTRUCTION
The construction sector is the least impacted off all. For
overall sentiment, construction stands in the 49th
percentile of its range. Of course that implies a raw reading of -20.
One issue for construction it that its participants have considered it
sub-par all along. So now the outlook is being impacted construction
respondents are not looking for things to get that much worse. Spain is
an exception having had a boom its current reading; it is a bottom 19th
percentile reading. For the UK the residential property bubble busting
has helped to drag its reading to the 31st
percentile. France and Germany still carry mid range readings at or
above their expected range midpoints. Italy&#8217;s sector has a relatively
strong construction reading in the 60th
percentile.

<table border="0" cellspacing="0" width="100%"> <colgroup></colgroup>
<thead><tr>
<th colspan="12" scope="col"> EU
Sectors and Country level Overall Sentiment</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">EU</td>
<td>Oct 
08</td>
<td>Sep 
08</td>
<td>Aug 
08</td>
<td>Jul 
08</td>
<td>%tile</td>
<td>Rank</td>
<td>Max</td>
<td>Min</td>
<td>Range</td>
<td>Mean</td>
<td>R-SQ 
w/Overall</td>
</tr>
<tr class="even">
<td class="firstcol">Overall</td>
<td>77.5</td>
<td>84.9</td>
<td>86.7</td>
<td>88.8</td>
<td>9.8</td>
<td>209</td>
<td>116</td>
<td>73</td>
<td>43</td>
<td>99</td>
<td>1.00</td>
</tr>
<tr>
<td class="firstcol">Industrial</td>
<td>-19</td>
<td>-13</td>
<td>-10</td>
<td>-7</td>
<td>23.5</td>
<td>204</td>
<td>7</td>
<td>-27</td>
<td>34</td>
<td>-7</td>
<td>0.86</td>
</tr>
<tr>
<td class="firstcol">Consumer Confidence</td>
<td>-23</td>
<td>-19</td>
<td>-19</td>
<td>-20</td>
<td>13.8</td>
<td>205</td>
<td>2</td>
<td>-27</td>
<td>29</td>
<td>-11</td>
<td>0.83</td>
</tr>
<tr>
<td class="firstcol">Retail</td>
<td>-16</td>
<td>-13</td>
<td>-14</td>
<td>-11</td>
<td>18.5</td>
<td>214</td>
<td>6</td>
<td>-21</td>
<td>27</td>
<td>-6</td>
<td>0.51</td>
</tr>
<tr>
<td class="firstcol">Construction</td>
<td>-25</td>
<td>-20</td>
<td>-18</td>
<td>-17</td>
<td>37.8</td>
<td>150</td>
<td>3</td>
<td>-42</td>
<td>45</td>
<td>-17</td>
<td>0.41</td>
</tr>
<tr>
<td class="firstcol">Services</td>
<td>-10</td>
<td>-4</td>
<td>-2</td>
<td>0</td>
<td>0.0</td>
<td>145</td>
<td>32</td>
<td>-10</td>
<td>42</td>
<td>16</td>
<td>0.81</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td colspan="3">% m/m</td>
<td>
Oct 
08</td>
<td colspan="2">Based on Level</td>
<td colspan="4">Level</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol">EMU</td>
<td>-8.1%</td>
<td>-1.1%</td>
<td>-1.1%</td>
<td>80.4</td>
<td>16.8</td>
<td>206</td>
<td>117</td>
<td>73</td>
<td>44</td>
<td>99</td>
<td>0.94</td>
</tr>
<tr>
<td class="firstcol">Germany</td>
<td>-5.1%</td>
<td>-1.4%</td>
<td>-2.7%</td>
<td>88.6</td>
<td>23.5</td>
<td>186</td>
<td>121</td>
<td>79</td>
<td>42</td>
<td>99</td>
<td>0.61</td>
</tr>
<tr>
<td class="firstcol">France</td>
<td>-7.0%</td>
<td>-0.6%</td>
<td>-0.1%</td>
<td>86.5</td>
<td>31.6</td>
<td>196</td>
<td>119</td>
<td>72</td>
<td>47</td>
<td>100</td>
<td>0.79</td>
</tr>
<tr>
<td class="firstcol">Italy</td>
<td>-6.9%</td>
<td>0.6%</td>
<td>2.7%</td>
<td>82.1</td>
<td>21.6</td>
<td>206</td>
<td>121</td>
<td>71</td>
<td>50</td>
<td>99</td>
<td>0.78</td>
</tr>
<tr>
<td class="firstcol">Spain</td>
<td>-5.0%</td>
<td>-2.0%</td>
<td>-4.3%</td>
<td>66.1</td>
<td>0.0</td>
<td>220</td>
<td>118</td>
<td>66</td>
<td>52</td>
<td>99</td>
<td>0.62</td>
</tr>
<tr>
<td class="firstcol">Memo: UK</td>
<td>-7.5%</td>
<td>-5.2%</td>
<td>-6.1%</td>
<td>70.4</td>
<td>3.4</td>
<td>219</td>
<td>118</td>
<td>69</td>
<td>50</td>
<td>100</td>
<td>0.42</td>
</tr>
<tr>
<td colspan="12" class="firstcol">Since 1990
except Services (Oct
1996) 247-Count; Services: 145-Count</td>
</tr>
<tr>
<td colspan="12" class="firstcol">Sentiment
is an index, sector
readings are net balance diffusion measures.</td>
</tr>
</tbody>
</table>
</body></html>

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081029f.jpg" width="353">
The Federal Open Market Committee today cut the Federal funds rate, as expected, to 1.00% from 1.50%. The discount rate also was cut to 1.25%. The latest Fed funds rate was its lowest since 2004.
The Fed indicated three specific reasons for lowering interest rates today. 1) A slowdown in U.S. economic growth due to slower consumer spending and weaker business investment spending 2) Financial market turmoil and 3) an expectation for moderation in inflation due to lower energy and other commodity prices as well as slower economic growth.
Credit market conditions were expected by the Fed to improve due to interest rate cuts around the world, &quot;extraordinary liquidity measures&quot; and actions to strengthen financial systems.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081029g.jpg" width="353">
The decision was unanimous amongst FOMC voters.
For the complete text of the Fed&#39;s latest press release please follow this <a href="http://www.federalreserve.gov/newsevents/press/monetary/20081029a.htm">link</a>.
How Economic News Moves Markets from the Federal Reserve Bank of New York can be found <a href="http://www.newyorkfed.org/research/current_issues/ci14-6.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">&nbsp;</th>
<th scope="col">Current</th>
<th scope="col">Last</th>
<th scope="col">September</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Federal Funds Rate, % (Target)</td>
<td>1.00</td>
<td>1.50</td>
<td>2.00</td>
<td>5.05</td>
<td>4.96</td>
<td>3.19</td>
</tr>
<tr>
<td class="firstcol">Discount Rate, %</td>
<td>1.25</td>
<td>1.75</td>
<td>2.25</td>
<td>5.86</td>
<td>5.96</td>
<td>4.19</td>
</tr>
</tbody>
</table>
</body>
</html>

The Federal Open Market Committee today cut the Federal funds rate, as expected, to 1.00% from 1.50%. The discount rate also was cut to 1.25%. The latest Fed funds rate was its lowest since 2004. The Fed indicated three specific [...]

FOMC Cut Funds Rate to 1.00%; The Lowest Since 2004

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<img align="left" border="0" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081029d.jpg">
The total number of mortgage applications rose 28.5% last week and that recovered all of the prior period&#39;s decline, according to the Mortgage Bankers Association. Nevertheless, the October average fell 20.0% from September and applications were two-thirds below their peak reached this past January.
Last week, applications for a mortgage to purchase a home made up most of the prior week&#39;s decline with an 8.5% rise. For October so far, however, purchase applications reversed most of the prior month&#39;s gain with a 13.3% decline. During the latest week purchase applications were down 43% from their 2005 peak.
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. Figures covering sales of existing single-family home will be available this Friday while single-family home sales will be published early next week.
Applications to refinance a home mortgage recovered most of the prior week&#39;s decline with a 28.5% increase but applications in October overall remained 20% below September. During September, applications to refinance had risen 61.9% from August as 15-year mortgage rates fell briefly to 5.54%.<img align="right" border="0" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081029e.jpg">
The effective interest rate on a conventional 15-year mortgage slipped last week to 6.30% following an average of 6.01% last month. For a 30-year mortgage, rates slipped w/w to 6.48%. Interest rates on 15 and 30 year mortgages are closely correlated (&gt;90%) with the rate on 10-year Treasury securities. For an adjustable rate 1-Year mortgage the rate also slipped w/w to 6.95% after having averaged 6.70% last month.
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.
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>.
The figures for weekly mortgage applications are available in Haver&#39;s SURVEYW database.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYW/@S5/@S5.HTM">MBA Mortgage Applications (3/16/90=100)</a></th>
<th scope="col">10/24/08</th>
<th scope="col">10/17/08</th>
<th scope="col">Y/Y</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">Total Market Index</td>
<td>476.7</td>
<td>408.1</td>
<td>-30.1%</td>
<td>652.6</td>
<td>584.2</td>
<td>708.6</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Purchase</td>
<td>303.1</td>
<td>279.3</td>
<td>-26.6%</td>
<td>424.9</td>
<td>406.9</td>
<td>470.9</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Refinancing</td>
<td>1,489.4</td>
<td>1,158.8</td>
<td>-33.8%</td>
<td>1,997.9</td>
<td>1,634.0</td>
<td>2,092.3</td>
</tr>
</tbody>
</table>
</body>
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The total number of mortgage applications rose 28.5% last week and that recovered all of the prior period's decline, according to the Mortgage Bankers Association. Nevertheless, the October average fell 20.0% from September and [...]

U.S. Mortgage Applications Recovered Last Week; Off Two-Thirds From Peak

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081029b.jpg" width="353">
During September, new orders for durable goods ticked up 0.8% after falling 5.5% during August, a decline revised from the -4.5% figure reported initially. Though the September rise in orders beat Consensus expectations for a 1.0% decline, there where few, if any, areas of strength. The gain mostly reflected a 21.8% (-16.6% y/y) jump in new orders for aircraft &amp; parts that offset most of a decline during August. (Nondefense aircraft orders rose 29.7% (-34.1% y/y).
Highlighting the weakness in durable goods orders last month was a 1.1% decline in new orders less the transportation sector altogether. That followed a 4.1% drop during August, initially reported at down 3.0%. The September decline about matched Consensus expectations but during the last three months, orders less the transportation sector fell at a 19.0% annual rate.
The rise in aircraft orders did lift overall orders for nondefense capital goods by 0.8%, but that followed a little-revised 7.7% plunge during August. Without aircraft, nondefense capital goods orders fell 1.4% after 2.2% drop during August. These declines lowered the three-month growth rate to -12.4%, the worst since early last year. During the last ten years there has been an 80% correlation between the y/y gain in nondefense capital goods orders and the rise 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%.
The industry detail highlights the recent weakness in factory orders. Orders for machinery ticked up just 0.5% after a 6.4% drop during August. That left the three-month growth rate at -9.5%.Primary metals orders fell sharply for the second consecutive month with a 4.5% (+1.6% y/y) drop which followed a downwardly revised 12.5% August plunge. New orders for electrical equipment increased 1.5% (1.1% y/y) after a 3.5% August decline. On a three-month basis these orders were down at a 35.0% annual rate.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081029c.jpg" width="353">
New orders for computers &amp; electronic products continued on their weaker trend-line with a 1.4% drop last month. On a three-month basis these orders fell at a 15.0% annual rate after their 2.1% decline during all of last year. Orders for just computers &amp; related products fell 2.8% and on a three-month basis they were off at a 47.9% annual rate. New orders for communications equipment also have been quite weak and they fell 14.6% last month. Three-month growth was -36.6% (AR) after last year&#39;s 7.5% decline.
Reflecting past weakness in new orders was a 0.2% rise in overall shipments of durable goods which made up little of a 4.2% August fall. During the last three months growth was a negative 7.6% (AR) after last year&#39;s negligible 0.1% uptick. For comparison, industrial production of durable goods during the last three months fell at a 13.5%. During the last ten years there has been a 62% correlation between the three-month change in shipments of durable goods and the change in durables industrial production. Less transportation, shipments of durable goods fell 0.4% following a 2.9% August drop. Three-month growth fell to -4.8% (AR).
Inventories of durable goods rose just 0.4% (8.1% y/y), the weakest monthly increase since last October. Three-month growth eased slightly to a still strong 8.8%. Less transportation, inventories rose a weaker 0.5% and the three-month growth rate eased slightly to 9.4% (AR) after the 1.4% rise during 2007.
Addressing the Credit Crisis is a speech given earlier this month by Dallas Fed President Richard W. Fisher and it can be found <a href="http://dallasfed.org/news/speeches/fisher/2008/fs081012.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/USECON/@ED/@ED01/@ED0101/@ED0101.HTM">NAICS Classification</a> (%)</th>
<th scope="col">September</th>
<th scope="col">August</th>
<th scope="col">Y/Y</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">Durable Goods Orders</td>
<td>0.8</td>
<td>-5.5</td>
<td>-3.6</td>
<td>1.4</td>
<td>6.2</td>
<td>10.2</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp; Excluding Transportation</td>
<td>-1.1</td>
<td>-4.1</td>
<td>-0.6</td>
<td>-0.3</td>
<td>9.1</td>
<td>9.1</td>
</tr>
<tr class="odd">
<td class="firstcol">Nondefense Capital Goods</td>
<td>0.8</td>
<td>-7.7</td>
<td>-7.2</td>
<td>3.5</td>
<td>9.4</td>
<td>17.3</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Excluding Aircraft</td>
<td>-1.4</td>
<td>-2.2</td>
<td>0.5</td>
<td>-2.7</td>
<td>10.7</td>
<td>11.6</td>
</tr>
</tbody>
</table>
</body>
</html>

During September, new orders for durable goods ticked up 0.8% after falling 5.5% during August, a decline revised from the -4.5% figure reported initially. Though the September rise in orders beat Consensus expectations for a 1.0% [...]

U.S. Durable Goods Orders Ticked Up

Robert Brusca

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081029a.jpg" align="left" border="0" height="265" width="353">
Japan&#8217;s IP fell sharply by 3.5% in August, but it has made a
substantial rebound in September. Still the trends for IP all are
lower, as the sequential growth rates in the table below show. The
rebounds by sector in September are only about one-third of the drop
made in August.
Year-over-year, Japan&#8217;s IP is still rising at a 2.7% pace.
Consumer goods output is up by a strong 3.9% while investment goods
output is up by 0.5% at an annual rate. The investment goods side is
slowing down faster than the consumer goods side.
That trend is in place for the quarter as well. With the
September figures just in to complete the quarter, Q3 reveals that
overall IP is falling at a 5% pace in MFG. Investment goods output is
dropping at a sizeable 13.2% pace while the output of consumer goods is
still up at a 4.1% pace. Since consumers are showing weakness around
the world in terms of lower confidence and reduced spending and since
Japan is a strong exporter of consumer goods this sector is due to get
hit much harder.

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr><th colspan="9" scope="col">Japan Industrial Production Trends </th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td colspan="3">m/m %</td>
<td colspan="3">Saar %</td>
<td>Yr/Yr</td>
<td>Qtr-to-Date</td>
</tr>
<tr class="odd">
<td class="firstcol">seas adjusted</td>
<td>Sep-08</td>
<td>Aug-08</td>
<td>Jul-08</td>
<td>3-mo</td>
<td>6-mo</td>
<td>12-mo</td>
<td>Yr-Ago</td>
<td>% AR</td>
</tr>
<tr>
<td class="firstcol">Mining &amp; Mfg</td>
<td>1.2%</td>
<td>-3.5%</td>
<td>1.3%</td>
<td>-4.1%</td>
<td>-1.3%</td>
<td>-1.9%</td>
<td>2.7%</td>
<td>-4.8%</td>
</tr>
<tr>
<td class="firstcol">Total Industry</td>
<td>1.1%</td>
<td>-3.6%</td>
<td>1.5%</td>
<td>-4.1%</td>
<td>-1.3%</td>
<td>-2.1%</td>
<td>3.0%</td>
<td>-4.5%</td>
</tr>
<tr>
<td class="firstcol">MFG</td>
<td>1.1%</td>
<td>-3.5%</td>
<td>1.2%</td>
<td>-4.8%</td>
<td>-1.7%</td>
<td>-2.1%</td>
<td>2.8%</td>
<td>-5.0%</td>
</tr>
<tr>
<td class="firstcol">Textiles</td>
<td>-1.4%</td>
<td>-0.2%</td>
<td>-2.9%</td>
<td>-16.6%</td>
<td>-13.7%</td>
<td>-10.6%</td>
<td>-6.8%</td>
<td>-16.2%</td>
</tr>
<tr>
<td class="firstcol">T-port</td>
<td>4.4%</td>
<td>-9.8%</td>
<td>4.0%</td>
<td>-7.9%</td>
<td>-1.2%</td>
<td>-1.3%</td>
<td>10.4%</td>
<td>-7.4%</td>
</tr>
<tr class="odd">
<td colspan="9" class="firstcol">Product Group</td>
</tr>
<tr>
<td class="firstcol">Consumer Goods</td>
<td>0.9%</td>
<td>-3.3%</td>
<td>3.6%</td>
<td>4.5%</td>
<td>4.3%</td>
<td>0.6%</td>
<td>3.9%</td>
<td>4.1%</td>
</tr>
<tr>
<td class="firstcol">Intermediate Goods</td>
<td>0.5%</td>
<td>-2.3%</td>
<td>-0.2%</td>
<td>-7.8%</td>
<td>-3.6%</td>
<td>-1.8%</td>
<td>3.4%</td>
<td>-5.6%</td>
</tr>
<tr>
<td class="firstcol">Investment Goods</td>
<td>4.7%</td>
<td>-5.2%</td>
<td>-0.5%</td>
<td>-5.1%</td>
<td>-2.4%</td>
<td>-4.9%</td>
<td>0.5%</td>
<td>-13.2%</td>
</tr>
<tr>
<td class="firstcol">Mining</td>
<td>-4.4%</td>
<td>1.6%</td>
<td>4.2%</td>
<td>4.7%</td>
<td>2.5%</td>
<td>-1.4%</td>
<td>1.8%</td>
<td>12.4%</td>
</tr>
<tr>
<td class="firstcol">Electricity &amp; Gas</td>
<td>2.0%</td>
<td>-7.6%</td>
<td>6.3%</td>
<td>0.4%</td>
<td>-0.8%</td>
<td>-3.9%</td>
<td>8.8%</td>
<td>-1.8%</td>
</tr>
</tbody>
</table>
</body></html>

Japan’s IP fell sharply by 3.5% in August, but it has made a substantial rebound in September. Still the trends for IP all are lower, as the sequential growth rates in the table below show. The rebounds by sector in September are only [...]

Japan’s Industrial Output Recoups Some of Loss

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081029b.jpg" align="left" border="0" height="265" width="353">
During September, new orders for durable goods ticked up 0.8%
after falling 5.5% during August, a decline revised from the -4.5%
figure reported initially. Though the September rise in orders beat
Consensus expectations for a 1.0% decline, there where few, if any,
areas of strength. The gain mostly reflected a 21.8% (-16.6% y/y) jump
in new orders for aircraft &amp; parts that offset most of a
decline during August. (Nondefense aircraft orders rose 29.7% (-34.1%
y/y).
Highlighting the weakness in durable goods orders last month
was a 1.1% decline in new orders less the transportation sector
altogether. That followed a 4.1% drop during August, initially reported
at down 3.0%. The September decline about matched Consensus
expectations but during the last three months, orders less the
transportation sector fell at a 19.0% annual rate.
The rise in aircraft orders did lift overall orders for
nondefense capital goods by 0.8%, but that followed a little-revised
7.7% plunge during August. Without aircraft, nondefense capital goods
orders fell 1.4% after 2.2% drop during August. These declines lowered
the three-month growth rate to -12.4%, the worst since early last year.
During the last ten years there has been an 80% correlation between the
y/y gain in nondefense capital goods orders and the rise 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%.
The industry detail highlights the recent weakness in factory
orders. Orders for machinery ticked up just 0.5% after a 6.4% drop
during August. That left the three-month growth rate at -9.5%.Primary
metals orders fell sharply for the second consecutive month with a 4.5%
(+1.6% y/y) drop which followed a downwardly revised 12.5% August
plunge. New orders for electrical equipment increased 1.5% (1.1% y/y)
after a 3.5% August decline. On a three-month basis these orders were
down at a 35.0% annual rate.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081029c.jpg" align="right" border="0" height="265" width="353">
New orders for computers &amp; electronic products
continued on their weaker trend-line with a 1.4% drop last month. On a
three-month basis these orders fell at a 15.0% annual rate after their
2.1% decline during all of last year. Orders for just computers
&amp; related products fell 2.8% and on a three-month basis they
were off at a 47.9% annual rate. New orders for communications
equipment also have been quite weak and they fell 14.6% last month.
Three-month growth was -36.6% (AR) after last year's 7.5% decline.
Reflecting past weakness in new orders was a 0.2% rise in
overall shipments of durable goods which made up little of a 4.2%
August fall. During the last three months growth was a negative 7.6%
(AR) after last year's negligible 0.1% uptick. For comparison,
industrial production of durable goods during the last three months
fell at a 13.5%. During the last ten years there has been a 62%
correlation between the three-month change in shipments of durable
goods and the change in durables industrial production. Less
transportation, shipments of durable goods fell 0.4% following a 2.9%
August drop. Three-month growth fell to -4.8% (AR).
Inventories of durable goods rose just 0.4% (8.1% y/y), the
weakest monthly increase since last October. Three-month growth eased
slightly to a still strong 8.8%. Less transportation, inventories rose
a weaker 0.5% and the three-month growth rate eased slightly to 9.4%
(AR) after the 1.4% rise during 2007.
Addressing the Credit Crisis is a speech
given earlier this month by Dallas Fed President Richard W. Fisher and
it can be found <a href="http://dallasfed.org/news/speeches/fisher/2008/fs081012.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/USECON/@ED/@ED01/@ED0101/@ED0101.HTM">NAICS
Classification</a> (%)</th>
<th scope="col">September</th>
<th scope="col">August</th>
<th scope="col">Y/Y</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">Durable Goods Orders</td>
<td>0.8</td>
<td>-5.5</td>
<td>-3.6</td>
<td>1.4</td>
<td>6.2</td>
<td>10.2</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Excluding Transportation</td>
<td>-1.1</td>
<td>-4.1</td>
<td>-0.6</td>
<td>-0.3</td>
<td>9.1</td>
<td>9.1</td>
</tr>
<tr class="odd">
<td class="firstcol">Nondefense Capital Goods</td>
<td>0.8</td>
<td>-7.7</td>
<td>-7.2</td>
<td>3.5</td>
<td>9.4</td>
<td>17.3</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Excluding Aircraft</td>
<td>-1.4</td>
<td>-2.2</td>
<td>0.5</td>
<td>-2.7</td>
<td>10.7</td>
<td>11.6</td>
</tr>
</tbody>
</table>
U.S. Mortgage Applications
Recovered Last Week; Off Two-Thirds From Peak 
by <a href="/comment/Moeller.html">Tom
Moeller</a> October 29, 2008


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081029d.jpg" align="left" border="0">
The total number of mortgage applications rose 28.5% last week
and that recovered all of the prior period's decline, according to the
Mortgage Bankers Association. Nevertheless, the October average fell
20.0% from September and applications were two-thirds below their peak
reached this past January.
Last week, applications for a mortgage to purchase a home made
up most of the prior week's decline with an 8.5% rise. For October so
far, however, purchase applications reversed most of the prior month's
gain with a 13.3% decline. During the latest week purchase applications
were down 43% from their 2005 peak.
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. Figures covering sales of
existing single-family home will be available this Friday while
single-family home sales will be published early next week.
Applications to refinance a home mortgage recovered most of
the prior week's decline with a 28.5% increase but applications in
October overall remained 20% below September. During September,
applications to refinance had risen 61.9% from August as 15-year
mortgage rates fell briefly to 5.54%.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081029e.jpg" align="right" border="0">
The effective interest rate on a conventional 15-year mortgage
slipped last week to 6.30% following an average of 6.01% last month.
For a 30-year mortgage, rates slipped w/w to 6.48%. Interest rates on
15 and 30 year mortgages are closely correlated (&gt;90%) with the
rate on 10-year Treasury securities. For an adjustable rate 1-Year
mortgage the rate also slipped w/w to 6.95% after having averaged 6.70%
last month.
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.
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>.
The figures for weekly mortgage applications are available in
Haver's SURVEYW database.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYW/@S5/@S5.HTM">MBA
Mortgage Applications (3/16/90=100)</a></th>
<th scope="col">10/24/08</th>
<th scope="col">10/17/08</th>
<th scope="col">Y/Y</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">Total Market Index</td>
<td>476.7</td>
<td>408.1</td>
<td>-30.1%</td>
<td>652.6</td>
<td>584.2</td>
<td>708.6</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Purchase</td>
<td>303.1</td>
<td>279.3</td>
<td>-26.6%</td>
<td>424.9</td>
<td>406.9</td>
<td>470.9</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Refinancing</td>
<td>1,489.4</td>
<td>1,158.8</td>
<td>-33.8%</td>
<td>1,997.9</td>
<td>1,634.0</td>
<td>2,092.3</td>
</tr>
</tbody>
</table>
FOMC Cut Funds Rate to 1.00%; The
Lowest Since 2004 
by <a href="/comment/Moeller.html">Tom
Moeller</a> October 29, 2008


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081029f.jpg" align="left" border="0" height="265" width="353">
The Federal Open Market Committee today cut the Federal funds
rate, as expected, to 1.00% from 1.50%. The discount rate also was cut
to 1.25%. The latest Fed funds rate was its lowest since 2004.
The Fed indicated three specific reasons for lowering interest
rates today. 1) A slowdown in U.S. economic growth due to slower
consumer spending and weaker business investment spending 2) Financial
market turmoil and 3) an expectation for moderation in inflation due to
lower energy and other commodity prices as well as slower economic
growth.
Credit market conditions were expected by the Fed to improve
due to interest rate cuts around the world, "extraordinary liquidity
measures" and actions to strengthen financial systems.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081029g.jpg" align="right" border="0" height="265" width="353">
The decision was unanimous amongst FOMC voters.
For the complete text of the Fed's latest press release please
follow this <a href="http://www.federalreserve.gov/newsevents/press/monetary/20081029a.htm">link</a>.
How Economic News Moves Markets from the
Federal Reserve Bank of New York can be found <a href="http://www.newyorkfed.org/research/current_issues/ci14-6.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">&nbsp;</th>
<th scope="col">Current</th>
<th scope="col">Last</th>
<th scope="col">September</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Federal Funds Rate, % (Target)</td>
<td>1.00</td>
<td>1.50</td>
<td>2.00</td>
<td>5.05</td>
<td>4.96</td>
<td>3.19</td>
</tr>
<tr>
<td class="firstcol">Discount Rate, %</td>
<td>1.25</td>
<td>1.75</td>
<td>2.25</td>
<td>5.86</td>
<td>5.96</td>
<td>4.19</td>
</tr>
</tbody>
</table>
Japan&#8217;s Industrial Output Recoups
Some of Loss 
by <a href="/comment/Brusca.html">Robert
Brusca</a> October 29, 2008


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081029a.jpg" align="left" border="0" height="265" width="353">
Japan&#8217;s IP fell sharply by 3.5% in August, but it has made a
substantial rebound in September. Still the trends for IP all are
lower, as the sequential growth rates in the table below show. The
rebounds by sector in September are only about one-third of the drop
made in August.
Year-over-year, Japan&#8217;s IP is still rising at a 2.7% pace.
Consumer goods output is up by a strong 3.9% while investment goods
output is up by 0.5% at an annual rate. The investment goods side is
slowing down faster than the consumer goods side.
That trend is in place for the quarter as well. With the
September figures just in to complete the quarter, Q3 reveals that
overall IP is falling at a 5% pace in MFG. Investment goods output is
dropping at a sizeable 13.2% pace while the output of consumer goods is
still up at a 4.1% pace. Since consumers are showing weakness around
the world in terms of lower confidence and reduced spending and since
Japan is a strong exporter of consumer goods this sector is due to get
hit much harder.

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr> <th colspan="9" scope="col">Japan
Industrial Production Trends </th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td colspan="3">m/m %</td>
<td colspan="3">Saar %</td>
<td>Yr/Yr</td>
<td>Qtr-to-Date</td>
</tr>
<tr class="odd">
<td class="firstcol">seas adjusted</td>
<td>Sep-08</td>
<td>Aug-08</td>
<td>Jul-08</td>
<td>3-mo</td>
<td>6-mo</td>
<td>12-mo</td>
<td>Yr-Ago</td>
<td>% AR</td>
</tr>
<tr>
<td class="firstcol">Mining &amp; Mfg</td>
<td>1.2%</td>
<td>-3.5%</td>
<td>1.3%</td>
<td>-4.1%</td>
<td>-1.3%</td>
<td>-1.9%</td>
<td>2.7%</td>
<td>-4.8%</td>
</tr>
<tr>
<td class="firstcol">Total Industry</td>
<td>1.1%</td>
<td>-3.6%</td>
<td>1.5%</td>
<td>-4.1%</td>
<td>-1.3%</td>
<td>-2.1%</td>
<td>3.0%</td>
<td>-4.5%</td>
</tr>
<tr>
<td class="firstcol">MFG</td>
<td>1.1%</td>
<td>-3.5%</td>
<td>1.2%</td>
<td>-4.8%</td>
<td>-1.7%</td>
<td>-2.1%</td>
<td>2.8%</td>
<td>-5.0%</td>
</tr>
<tr>
<td class="firstcol">Textiles</td>
<td>-1.4%</td>
<td>-0.2%</td>
<td>-2.9%</td>
<td>-16.6%</td>
<td>-13.7%</td>
<td>-10.6%</td>
<td>-6.8%</td>
<td>-16.2%</td>
</tr>
<tr>
<td class="firstcol">T-port</td>
<td>4.4%</td>
<td>-9.8%</td>
<td>4.0%</td>
<td>-7.9%</td>
<td>-1.2%</td>
<td>-1.3%</td>
<td>10.4%</td>
<td>-7.4%</td>
</tr>
<tr class="odd">
<td colspan="9" class="firstcol">Product Group</td>
</tr>
<tr>
<td class="firstcol">Consumer Goods</td>
<td>0.9%</td>
<td>-3.3%</td>
<td>3.6%</td>
<td>4.5%</td>
<td>4.3%</td>
<td>0.6%</td>
<td>3.9%</td>
<td>4.1%</td>
</tr>
<tr>
<td class="firstcol">Intermediate Goods</td>
<td>0.5%</td>
<td>-2.3%</td>
<td>-0.2%</td>
<td>-7.8%</td>
<td>-3.6%</td>
<td>-1.8%</td>
<td>3.4%</td>
<td>-5.6%</td>
</tr>
<tr>
<td class="firstcol">Investment Goods</td>
<td>4.7%</td>
<td>-5.2%</td>
<td>-0.5%</td>
<td>-5.1%</td>
<td>-2.4%</td>
<td>-4.9%</td>
<td>0.5%</td>
<td>-13.2%</td>
</tr>
<tr>
<td class="firstcol">Mining</td>
<td>-4.4%</td>
<td>1.6%</td>
<td>4.2%</td>
<td>4.7%</td>
<td>2.5%</td>
<td>-1.4%</td>
<td>1.8%</td>
<td>12.4%</td>
</tr>
<tr>
<td class="firstcol">Electricity &amp; Gas</td>
<td>2.0%</td>
<td>-7.6%</td>
<td>6.3%</td>
<td>0.4%</td>
<td>-0.8%</td>
<td>-3.9%</td>
<td>8.8%</td>
<td>-1.8%</td>
</tr>
</tbody>
</table>
</body></html>

US and China big leaders in adoption of AI models

Robust US demand for advanced technology products

China's export growth rotating away from the US

More pronounced upward revisions in countries more exposed to AI investment

Stable job openings and hiring rates point to cautious hiring

Global freight costs are on the rise while supply chain pressures are contained

Accelerating positive economic surprises in the G10 are boosting the global economy

Considerably more monetary ease expected from US and UK as Japan tightens

Tighter US immigration enforcement adversely impacting labor force

Economic policy uncertainty, while still elevated, is declining

Gradual disinflation and easier monetary policies across advanced economies

Largest October layoffs since 2003, led by technology

Subdued global shipping costs not yet pointing to supply chain problems

PMIs show still-elevated but slowing US inflation

AI boosting US investment in data centers

US productivity growth has been significantly faster than in other major economies

Consumers' short-term US inflation expectations still elevated while longer-term expectations of financial markets are steady

US financial markets have gotten used to elevated policy uncertainty

FOMC now expects more rate cuts going forward than in June

China gaining ASEAN exports while US exports slump

Job openings less than the number unemployed in July for first time since 2021

Reaccelerating goods price inflation along with sticky services inflation clouds the outlook

Falling oil prices aren't pulling down inflation expectations, pointing to a boost from increased tariffs

Equity market exuberance outpacing macroeconomic data

Apart from Japan, Blue Chip forecasters expect further sizable monetary easing

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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

Andrew Cates

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

260205Z1.jpg

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

260205Z2.jpg

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

260205Z3.jpg

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

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

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

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Financial markets have experienced renewed gyrations in recent weeks, as shifting geopolitical risks, questions around Federal Reserve independence, renewed talk of US dollar “debasement,” and ongoing enthusiasm surrounding artificial intelligence have combined to drive volatility across asset classes. These cross-currents have also contributed to a degree of rotation away from high-flying technology stocks, as investors reassess valuations and the timing of anticipated AI-driven gains. Against this backdrop, the charts in this week’s COTW highlight several important themes. Policy rate expectations now appear more balanced globally, marking a clear shift away from the one-sided easing bias of the past two years (chart 1), even as resilient US data—underscored by the unexpected jump in the January ISM index and a run of positive economic surprises—continues to complicate the outlook for monetary easing (chart 2). At the same time, US financial conditions remain relatively benign, with limited evidence of widespread credit stress or aggressive tightening in lending standards (chart 3). Meanwhile, the sharp rebound in semiconductor sales and the accelerating rollout of large-scale AI models underscore why investors remain so focused on the AI narrative, even as Europe lags behind due to weaker industrial momentum and a smaller footprint in advanced chip production (charts 4 and 5). Finally, while some scepticism about AI’s ultimate economic impact persists, the latest survey results suggest a moderation in concerns that markets are materially overestimating its gains (chart 6). Taken together, these developments paint a picture of a US economy that remains more resilient than many had anticipated, set against a financial landscape increasingly shaped by powerful—if sometimes competing—narratives around geopolitics, policy, and technological transformation.

Charts of the Week: Balanced Policy, Resilient Data and AI Narratives

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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U.S. Initial Claims for Unemployment Insurance Stable But High

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FOMC Cut Funds Rate to 1.00%; The Lowest Since 2004

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U.S. Durable Goods Orders Ticked Up