Tom Moeller

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<div align="left"><img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080131i.jpg" width="353">
The Conference Board indicated that its index of help-wanted advertising did rise slightly last month but only to 22 from 21 in November. The figures are at the record lows for the series which dates back to the 1950s.
The Conference Board surveys help-wanted advertising volume in 51 major newspapers across the country every month.
During the last ten years there has been a 57% correlation between the level of help-wanted advertising and the three month change in non-farm payrolls.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080131j.jpg" width="353">
The proportion of labor markets with rising want-ads improved to 59% from a low of 12% in August.</div>
The regions of the country where the index of help-wanted advertising improved m/m were the West South Central, the West North Central, the East North Central, and the Middle Atlantic. States in each of the other regions of the country showed flat or declining ad volume.
The latest help wanted report from the Conference Board is available <a href="http://www.conference-board.org/economics/helpwanted.cfm">here</a>.<div align="left"> </div>

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/CBDB/@C3/@C3.HTM">Conference Board</a></th>
<th scope="col">December</th>
<th scope="col">November</th>
<th scope="col">December 2006</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">National Help Wanted Index</td>
<td>22</td>
<td>21</td>
<td>33</td>
<td>26</td>
<td>33</td>
<td>39</td>
</tr>
</tbody>
</table>
</body>
</html>

The Conference Board indicated that its index of help-wanted advertising did rise slightly last month but only to 22 from 21 in November. The figures are at the record lows for the series which dates back to the 1950s. The Conference [...]

U.S. Help-Wanted Advertising Remained Low

Robert Brusca

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080131h.jpg" align="left" border="0" height="265" width="353">
At 103.2, the EU confidence index fell by two points following
a nearly one point drop in December. The sentiment index now resides at
the border of the 70th percentile of its range since 1990. In absolute
terms services and the industrial sector give the most lift to the
region. But once alternatively ranked within their own ranges (since
1990) the sectors are repositioned. The industrial sector becomes the
strongest residing in the 85th percentile of its range with
construction, a battered sector, still doing &#8216;relatively&#8217; well in the
84th percentile of its range. While the service sector has a high raw
score, that is simply the nature of trend-dominated services. When
placed within its range, its relative contribution is much diminished.
At a percentile reading of 44.7% services in EU is the relative weakest
sector, followed by consumer confidence (58th percentile) and retailing
(66th percentile). So far only services are performing at a level that
is short of their usual mid-point. And the service sector is losing
momentum fast. 

On a country level sentiment is near its range mid-point in
Italy (54.4 percentile) and Spain (46.5 percentile). Germany (58.4
percentile) and France are doing better than that but still are fading.
France, especially, is staying in its range&#8217;s 75th percentile. The UK,
an EU member, is also still strong in the 70th percentile of its range
for economic sentiment. 

But make no mistake about it, the trends are poor. The
weakness extends back to about June. EMU sentiment has dropped (m/m) in
each of the past eight months. French and UK sentiment has dropped in
five of eight of those months. Spain&#8217;s sentiment fell in six of eight
months; Italy and Germany in seven of eight. 

Over this period the EMU index has shed 9.9 points, Italy has
lost 10.4 points and the UK has dropped 9.4 points. German sentiment
dropped 8.5 points, Spain&#8217;s sentiment fell by 7.4 points and France&#8217;s
eroded by just 4.9 points. 

From their cycle peaks, however, not just the past eight
months, Italy (-12.9) and Spain (-12.6) have made the largest drops
followed by the UK (-11.0). Germany (-8.5) and France have declined the
least with France&#8217;s cycle peak to current skid of 5.7 points being the
smallest among the largest EMU economies. Still, its momentum points
lower. 

In various ways we can construct measures of country and
sector weakness. It is clear that weakness is widespread across
countries and regions in the e-Zone. It is not yet clear how far this
trend to weakness will play out. But one very disturbing fact is the
lack of participation in the recovery and outright weakness of the
consumer and in retailing. Expansion cannot last without bringing the
consumer along.

<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="even">
<td class="firstcol">EU</td>
<td>Jan 
08</td>
<td>Dec 
07</td>
<td>Nov 
07</td>
<td>Oct 
07</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="grey2">
<td class="firstcol">Overall</td>
<td>103.2</td>
<td>105.8</td>
<td>106.6</td>
<td>108.8</td>
<td>69.9</td>
<td>81</td>
<td>116</td>
<td>73</td>
<td>43</td>
<td>100</td>
<td>1.00</td>
</tr>
<tr class="odd">
<td class="firstcol">Industrial</td>
<td>2</td>
<td>2</td>
<td>3</td>
<td>2</td>
<td>85.3</td>
<td>28</td>
<td>7</td>
<td>-27</td>
<td>34</td>
<td>-7</td>
<td>0.88</td>
</tr>
<tr class="odd">
<td class="firstcol">Consumer Confidence</td>
<td>-10</td>
<td>-7</td>
<td>-7</td>
<td>-5</td>
<td>58.6</td>
<td>97</td>
<td>2</td>
<td>-27</td>
<td>29</td>
<td>-10</td>
<td>0.83</td>
</tr>
<tr class="odd">
<td class="firstcol">Retail</td>
<td>-3</td>
<td>2</td>
<td>4</td>
<td>2</td>
<td>66.7</td>
<td>49</td>
<td>6</td>
<td>-21</td>
<td>27</td>
<td>-6</td>
<td>0.46</td>
</tr>
<tr class="odd">
<td class="firstcol">Construction</td>
<td>-4</td>
<td>-3</td>
<td>-1</td>
<td>0</td>
<td>84.4</td>
<td>27</td>
<td>3</td>
<td>-42</td>
<td>45</td>
<td>-17</td>
<td>0.43</td>
</tr>
<tr class="odd">
<td class="firstcol">Services</td>
<td>11</td>
<td>15</td>
<td>14</td>
<td>19</td>
<td>44.7</td>
<td>91</td>
<td>32</td>
<td>-6</td>
<td>38</td>
<td>17</td>
<td>0.81</td>
</tr>
<tr>
<td class="firstcol">&nbsp;</td>
<td>&nbsp;</td>
<td>% m/m</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td colspan="2">Based on&nbsp;Level</td>
<td colspan="4">Level</td>
<td>&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">EMU</td>
<td style="color: red;">-1.6%</td>
<td style="color: red;">-0.7%</td>
<td style="color: red;">-1.2%</td>
<td style="color: red;">-0.8%</td>
<td>65.1</td>
<td>91</td>
<td>117</td>
<td>73</td>
<td>44</td>
<td>100</td>
<td>0.94</td>
</tr>
<tr class="odd">
<td class="firstcol">Germany</td>
<td style="color: red;">-1.9%</td>
<td style="color: red;">-0.3%</td>
<td style="color: red;">0.2%</td>
<td style="color: red;">-0.7%</td>
<td>58.4</td>
<td>83</td>
<td>121</td>
<td>79</td>
<td>42</td>
<td>99</td>
<td>0.65</td>
</tr>
<tr class="odd">
<td class="firstcol">France</td>
<td style="color: red;">-0.8%</td>
<td style="color: red;">-1.6%</td>
<td style="color: red;">-0.5%</td>
<td>0.5%</td>
<td>75.4</td>
<td>54</td>
<td>119</td>
<td>72</td>
<td>47</td>
<td>100</td>
<td>0.79</td>
</tr>
<tr class="odd">
<td class="firstcol">Italy</td>
<td style="color: red;">-1.3%</td>
<td>2.3%</td>
<td style="color: red;">-4.2%</td>
<td style="color: red;">-0.2%</td>
<td>54.4</td>
<td>112</td>
<td>121</td>
<td>71</td>
<td>50</td>
<td>100</td>
<td>0.78</td>
</tr>
<tr class="odd">
<td class="firstcol">Spain</td>
<td style="color: red;">-1.6%</td>
<td style="color: red;">-1.4%</td>
<td style="color: red;">-0.1%</td>
<td style="color: red;">-2.7%</td>
<td>46.5</td>
<td>182</td>
<td>118</td>
<td>67</td>
<td>51</td>
<td>100</td>
<td>0.65</td>
</tr>
<tr class="odd">
<td class="firstcol">Memo: UK</td>
<td style="color: red;">-2.2%</td>
<td style="color: red;">-1.0%</td>
<td style="color: red;">-4.5%</td>
<td style="color: red;">-2.0%</td>
<td>70.5</td>
<td>91</td>
<td>118</td>
<td>69</td>
<td>50</td>
<td>100</td>
<td>0.42</td>
</tr>
<tr class="odd">
<td colspan="5" class="firstcol">Since 1990
except Services (Oct
1996)
208</td>
<td colspan="2">-Count</td>
<td colspan="2">Services:</td>
<td>126</td>
<td colspan="2">-Count</td>
</tr>
<tr class="odd">
<td colspan="12" class="firstcol">Sentiment
is an index, sector
readings are net balance diffusion measures</td>
</tr>
</tbody>
</table>
</body></html>

At 103.2, the EU confidence index fell by two points following a nearly one point drop in December. The sentiment index now resides at the border of the 70th percentile of its range since 1990. In absolute terms services and the [...]

EU and Country Level Confidence is Still Sinking

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080131e.jpg" align="left" border="0" height="265" width="353">
German retail sales in December did nothing to make large
piles of presents appear under the old tanenbaum. Retail sales ex
autos, German clothing sales and vehicle sales (that lag for now) each
shows a dwindling trend. In the fourth quarter, nominal ex auto sales
are lower at a 7.4% annual rate; in real terms that becomes a -11.4%
annual rate.

The German unemployment rate continues to drop but German
unemployment still hovers above 8%. Despite ongoing e-Zone improvements
the consumer remains a lagging sector and now creeping evidence shows a
slowing across the e-Zone itself. Consumer confidence and retailing
continue to be the lagging sectors that optimists look to become
sources of growth as the Germany economy shifts into its next gear. The
problem is that various consumer measures suggest that no such pick-up
lies ahead for the consumer sentiment or for consumer spending.
Strength in the euro, while a source of contentment to the ECB - and
many Germans as well - is also a source of angst for what it means to
German export prospects.

With the release of the EU Commission indexes today the German
economy showed a drop to -1 in sentiment for the consumer sector in
January. Retailing, too, saw sentiment fall back from a -18 rating in
December to -22 in January. Germany&#8217;s industrial sector, the back bone
of the economy, stepped back to post a +1 reading from +2 in December.
The services and construction sectors (the latter still very weak) each
posted month-to-month improvements. But by and large German sectors
took a step back in January with Germany&#8217;s overall sentiment reading
falling by two full points. The consumer sector does not seem about to
get out of its rough patch at all.


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="9" scope="col"> German
Real and Nominal Retail Sales&nbsp;</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Nominal</td>
<td>Dec-07</td>
<td>Nov-07</td>
<td>Oct-07</td>
<td>3-Mo</td>
<td>6-Mo</td>
<td>12-Mo</td>
<td>Year Ago</td>
<td>SAAR (QTR)</td>
</tr>
<tr class="grey1">
<td class="firstcol">Retail Ex Auto</td>
<td>-0.4%</td>
<td>-1.1%</td>
<td>-1.4%</td>
<td>-11.0%</td>
<td>-4.0%</td>
<td>-4.9%</td>
<td>9.8%</td>
<td>-7.4%</td>
</tr>
<tr>
<td class="firstcol">Motor Vehicle and Parts</td>
<td>--</td>
<td>-1.2%</td>
<td>0.4%</td>
<td>--</td>
<td>--</td>
<td>--</td>
<td>38.2%</td>
<td>--</td>
</tr>
<tr class="grey1">
<td class="firstcol">Food Beverages &amp; Tobacco</td>
<td>-1.4%</td>
<td>-2.3%</td>
<td>0.1%</td>
<td>-13.5%</td>
<td>-5.3%</td>
<td>-3.3%</td>
<td>5.7%</td>
<td>-4.5%</td>
</tr>
<tr>
<td class="firstcol">Clothing Footwear</td>
<td>2.3%</td>
<td>-1.5%</td>
<td>-8.5%</td>
<td>-27.8%</td>
<td>-3.7%</td>
<td>-2.1%</td>
<td>10.9%</td>
<td>-18.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">Real</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 class="grey1">
<td class="firstcol">Retail Ex Auto</td>
<td>-0.1%</td>
<td>-1.9%</td>
<td>-1.8%</td>
<td>-14.3%</td>
<td>-6.9%</td>
<td>-6.8%</td>
<td>9.4%</td>
<td>-11.4%</td>
</tr>
</tbody>
</table>
</body></html>

German retail sales in December did nothing to make large piles of presents appear under the old tanenbaum. Retail sales ex autos, German clothing sales and vehicle sales (that lag for now) each shows a dwindling trend. In the fourth [...]

German Retail Sales Continue to Slow

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080131f.jpg" width="353">
Rising 0.8% last quarter, the employment cost index for private industry workers remained steady with the 3Q increase. The gain matched Consensus expectations. Moreover, the gain in total compensation in 4Q was roughly steady at 3.0% with the gains since 2005.
During the last twenty years there has been a 54% correlation between the growth in employee compensation and the rise in the PCE price index. That level of correlation goes neither up or down, when either series is led or lagged the other. This suggests a self reinforcing effect between the two series.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080131g.jpg" width="353">
Wage and salary growth held at the 0.8% rate of 3Q. Wages account for roughly 70% of the compensation index. Wages in the services industries rose 0.8% (3.3% y/y). Wages in the leisure &amp; hospitality sector have been relatively strong with a 4.2% rise and professional &amp; business services wages also have been strong with a 4.0% y/y gain. Wages in the goods producing industries rose 0.9% (2.5% y/y) have lagged.
The gain in benefit costs also held about steady with a 0.9% 4Q rise. For all of last year, the 2.4% growth rate was the lowest since 1997. The slowdown has been pronounced in most service industries, but perhaps most pronounced in the goods producing sector where a 1.4% y/y growth rate last year is down from 8.7% growth in 2004.
The slowdown in benefit cost inflation for the year is due in part to a more moderate rise in the cost of health benefits:up 4.8% last year versus 10%+ rates of gain in 2002 and 2003. 

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EB/@EB08/@EB08.HTM">ECI- Private Industry Workers</a></th>
<th scope="col">4Q &#39;07</th>
<th scope="col">3Q &#39;07</th>
<th scope="col">2Q &#39;07</th>
<th scope="col">4Q 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">Compensation</td>
<td>0.8%</td>
<td>0.8%</td>
<td>0.9%</td>
<td>3.0%</td>
<td>3.1%</td>
<td>2.9%</td>
<td>3.1%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Wages &amp; Salaries</td>
<td>0.8%</td>
<td>0.8%</td>
<td>0.8%</td>
<td>3.4%</td>
<td>3.4%</td>
<td>2.9%</td>
<td>2.5%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Benefit Costs</td>
<td>0.9%</td>
<td>0.8%</td>
<td>1.1%</td>
<td>2.4%</td>
<td>2.4%</td>
<td>2.9%</td>
<td>4.6%</td>
</tr>
</tbody>
</table>
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Rising 0.8% last quarter, the employment cost index for private industry workers remained steady with the 3Q increase. The gain matched Consensus expectations. Moreover, the gain in total compensation in 4Q was roughly steady at 3.0% [...]

U.S. Employment Cost Index Steady At 0.8% Quarterly Increase

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080131c.jpg" width="353">
Last week, initial claims for jobless insurance surged to a level which now exceeds the late 2007 highs. A 69,000 w/w jump to 375,000 followed declines during the prior several weeks. The latest level is the highest since October of 2005. The difficulties of seasonal adjusting the data during the holiday season clearly played a role in the earlier declines. A more modest rise in claims to 317,000 had been generally expected.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080131d.jpg" width="353">
The four-week moving average of initial claims, a measure which smoothes out most of the series&#39; w/w volatility, rose to 325,750 (+5.0% y/y).
A claims level below 400,000 typically has been associated with growth in nonfarm payrolls. During the last six years there has been a (negative) 78% correlation between the level of initial claims and the m/m change in nonfarm payroll employment.
Continuing claims for unemployment insurance rose 47,000 after a little revised 78,000 decline during the week prior. The figure provides some indication of workers&#39; ability to find employment but here again difficulties of seasonal adjustment this time of year are great.
The continuing claims numbers lag the initial claims figures by one week.
The insured rate of unemployment held steady w/w at 2.0%.
Credit Derivatives, Macro Risks, and Systemic Risks from the Federal Reserve Bank of Atlanta can be found <a href="http://www.frbatlanta.org/filelegacydocs/erq407_weithers.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/@W5/@W507/@W507.HTM">Unemployment Insurance (000s)</a>&nbsp;</th>
<th scope="col">01/26/08</th>
<th scope="col">01/19/07</th>
<th scope="col">Y/Y</th>
<th scope="col">2006&nbsp;</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Initial Claims</td>
<td>&nbsp;375&nbsp;</td>
<td>306</td>
<td>18.3%</td>
<td>313</td>
<td>331</td>
<td>343</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>--</td>
<td>2,716</td>
<td>8.1%</td>
<td>2,459</td>
<td>2,662</td>
<td>2,924</td>
</tr>
</tbody>
</table>
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Last week, initial claims for jobless insurance surged to a level which now exceeds the late 2007 highs. A 69,000 w/w jump to 375,000 followed declines during the prior several weeks. The latest level is the highest since October of [...]

U.S. Initial Claims for Unemployment Insurance Surged

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<div align="left"><img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080131a.jpg" width="353">
Personal income slightly beat Consensus expectations last month with a 0.5% rise. Three-month growth in income totaled 4.4% (AR), a growth rate that has been roughly steady.
Wage &amp; salary income rose 0.4% (4.8% y/y) after a 0.6% November rise. Three-month growth amounted to 4.1% which has been a roughly steady rate of growth. Factory sector wages, however, fell 0.3% (+0.9% y/y) after rising 0.3% during the prior month.Wage &amp; salary income in the private service-providing industries rose 0.5% (5.8% y/y). Wages in the government sector again increased 0.3% (4.8% y/y).
Lower interest rates caused the third straight 0.3% decline in interest income (+6.7% y/y). Dividend income held steady at 0.9% (12.4% y/y).<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080131b.jpg" width="353">
Personal current taxes rose 0.5% (7.1% y/y. That y/y growth rate is less than one half the rate of rise during 2005. That left disposable personal income to rise 0.5% (5.6% y/y). Adjusted for inflation, disposable personal income increased 0.2% (2.1% y/y). The three-month growth in remained negative at -0.5%.
Personal consumption expenditures rose a hair more than the Consensus expectation for a 0.1% uptick. The 0.2% rise, however, left spending real spending during December down slightly and the three-month growth rate fell to 1.3%, its lowest since July.
Spending on discretionary items slipped as real spending on autos (-0.4% y/y) fell for the third straight month. Growth in real spending on household furniture &amp; appliances also fell back to 0.1% (7.1 y/y) after a 1.5% pop in November. Spending on apparel, however, was quite weak and fell 2.0% (+1.8% y/y). Medical care spending rose 0.3% (2.8% y/y. The detailed spending figures are available in Haver&#39;s USNA database.
The PCE chain price index rose 0.2% after the 0.6 surge during November. The gain in the core PCE price index held steady for the third month at 0.2%. However, the three-month growth in core prices recently has been far from steady, rising to 2.7% from its low in May due to faster growth in services prices.
IMF Sees World Growth Slowing, With U.S. Marked Down from the International Monetary Fund can be found <a href="http://www.imf.org/external/pubs/ft/survey/so/2008/RES012908A.htm"> here</a>.</div>

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E7/@E711/@E71102/@E71102.HTM">Disposition of Personal Income</a></th>
<th scope="col">December</th>
<th scope="col">November</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">Personal Income</td>
<td>0.5%</td>
<td>0.4%</td>
<td>5.8%</td>
<td>6.2%</td>
<td>6.6%</td>
<td>5.9%</td>
</tr>
<tr>
<td class="firstcol">Personal Consumption</td>
<td>0.2%</td>
<td>1.0%</td>
<td>5.7%</td>
<td>5.5%</td>
<td>5.9%</td>
<td>6.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">Saving Rate</td>
<td>0.2%</td>
<td>0.0%</td>
<td>0.3% (Dec. 06)</td>
<td>0.5%</td>
<td>0.4%</td>
<td>0.5%</td>
</tr>
<tr>
<td class="firstcol">PCE Chain Price Index</td>
<td>0.2%</td>
<td>0.6%</td>
<td>3.5%</td>
<td>2.5%</td>
<td>2.8%</td>
<td>2.9%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Less food &amp; energy</td>
<td>0.2%</td>
<td>0.2%</td>
<td>2.2%</td>
<td>2.1%</td>
<td>2.2%</td>
<td>2.2%</td>
</tr>
</tbody>
</table>
</body>
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Personal income slightly beat Consensus expectations last month with a 0.5% rise. Three-month growth in income totaled 4.4% (AR), a growth rate that has been roughly steady. Wage & salary income rose 0.4% (4.8% y/y) after a 0.6% [...]

U.S. Personal Income Firm, Spending Light

Personal income slightly beat Consensus expectations last month with a 0.5% rise. Three- month growth in income totaled 4.4% (AR), a growth rate that has been roughly steady. Wage & salary income rose 0.4% (4.8% y/y) after a 0.6% [...]

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080130g.jpg" align="left" border="0" height="265" width="353">
<div align="left">

According to the S&amp;P/Case-Shiller
Composite 10 home price index, U.S. home prices fell
another 2.2% m/m in November to the lowest level since April 2005. Home
prices have fallen in every month since June of 2006 and the total
decline over that period amounts to 9.4%. The November decline pulled
the y/y comparison to a negative 8.4%.

The index of 10 U.S. cities and their surrounding areas is not
adjusted for the quality or the size of the home. The home price index
from the Office of Federal Housing Enterprise Oversight (OFHEO) does
make these adjustments. This series indicates that through the third
quarter home prices still were rising, but at a reduced 1.8% y/y rate.
The composite index of homes in 20 metropolitan areas fell
2.1% (-7.7% y/y) last month.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080130f.jpg" align="right" border="0" height="265" width="353">
Home prices in San Diego California continued quite weak and
registered a 13.4% y/y decline and they have fallen 16.3% from the late
2005 peak. Prices in Miami Florida also are down sharply, by 15.1% y/y.
Home prices in Las Vegas Nevada registered a 13.2% y/y decline and in
Los Angeles prices fell 11.9% y/y.
Relatively moderate declines were registered in New York
(-4.8% y/y), Chicago (-3.39% y/y) and Denver (-3.1%).
An overview of the S&amp;P/Case-Shiller home price series
can be found <a href="http://www2.standardandpoors.com/portal/site/sp/en/us/page.topic/indices_csmahp/0,0,0,0,0,0,0,0,0,1,1,0,0,0,0,0.html">
here</a>.
The S&amp;P/Case-Shiller home price series can be found in
Haver's REGIONAL database.
Masters of Illusion from the Federal
Reserve Bank of Minneapolis explores why home prices soar in both high
and low inflation eras? It is available <a href="http://www.minneapolisfed.org/pubs/region/07-12/masters.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">S&amp;P/Case-Shiller
Home Price Index (NSA, Jan 00 = 100)</th>
<th scope="col">November</th>
<th scope="col">October</th>
<th scope="col">Y/Y</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Ten City
Composite Index</td>
<td>205.09</td>
<td>209.75</td>
<td>-8.4%</td>
<td>224.56</td>
<td>209.16</td>
<td>178.90</td>
</tr>
</tbody>
</table>
</div></body></html>

According to the S&P/Case-Shiller Composite 10 home price index, U.S. home prices fell another 2.2% m/m in November to the lowest level since April 2005. Home prices have fallen in every month since June of 2006 and the total decline [...]

Case-Shiller Home Price Index Lowest Since 2005

USD/EUR exchange rate uncoupling from interest rate differential

Widespread downgrading of 2025 GDP outlook

Trade and fiscal policy uncertainty has exploded with the new administration

Much lower US electricity costs gives it a competitive advantage

Wage growth slowing in the US and Euro area; elevated and sticky in the UK

Stagflation-lite: Blue Chip forecasts below-trend growth and elevated inflation

US policy gyrations boosting policy uncertainty worldwide

Expected tariff hikes have boosted inflation expectations

US and Japan ended 2024 on solid ground in contrast to Europe

US economy expected to outperform other major economies in 2025

Only modest evidence of AI-related surge in US productivity growth

Previous Trump tariffs fading. A boost from new tariffs ahead?

Heavy US manufacturing states underperforming while Sun Belt states outperforming

Rising long-term yields a global phenomenon

US financial market concerns shifting from growth to inflation

Economic activity is picking up in the US but remains lackluster abroad

Policy uncertainty has surged since the US national elections.

Recent turnaround in US economic surprises leading to increases in rate-cut expectations

The outlook has brightened in the US, while it has dimmed for other major economies

Headline US PCE inflation elevated by sticky services prices

US and global equity prices have recently diverged

US leading global upturn in economic surprises

Blue Chip forecasters look for further significant monetary easing apart from Japan

Recent rise in global supply chain pressures could augur a pickup in global inflation pressures

Underperforming German economy generating increased policy uncertainty relative to Europe and the US

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Real GDP eased 0.3% SAAR (+2.1% y/y) during the first quarter of 2025 after increasing 2.4% in Q4’24 and 3.1% in Q3’24. A 0.4% increase had been expected in the Action Economics Forecast Survey. It was the first decline since Q1 2022.

Foreign trade subtracted 4.83 percentage points from growth last quarter as imports surged 41.3% (13.4% y/y) ahead of tariffs, which began to come into effect in the first quarter. The rise followed a 1.9% decline in Q4’24. Exports rose 1.8% (3.0% y/y) after easing 0.2% in Q4. Inventories added 2.25 percentage points to growth after subtracting 0.84 percentage point from Q4 growth.

Real final sales to domestic purchasers grew 2.3% (2.9% y/y) in Q1 after rising 3.0% in Q4. Personal consumption expenditures rose 1.8% (3.1% y/y) following a 4.0% gain. Durable goods spending fell 3.4% (+5.3% y/y) after surging 12.4% in Q4. Motor vehicle purchases declined 11.1% (+5.5% y/y) after strengthening 19.7% in Q4. Spending on home furnishings & appliances gained 1.5% (6.1% y/y) following a 5.4% rise. Recreational goods & vehicle outlays rose 2.5% (7.0% y/y) last quarter after a 13.9% Q4 increase.

Nondurable goods outlays rose 2.7% (3.0% y/y) following 3.1% growth in Q4. Apparel spending increased 6.7% (2.5% y/y) following a 5.0% rise. Food & beverage buying gained 2.5% (2.3% y/y) after a 1.8% increase. Gasoline & fuel oil purchases increased 4.6% (3.4% y/y) after falling 2.0% in Q4.

Spending on services increased 2.4% last quarter (2.7% y/y) after a 3.0% gain. Outlays on housing & utilities increased 3.4% (1.8% y/y) after rising 1.1% in Q4. Health care expenditures rose 4.0% (4.8% y/y) following a 4.7% strengthening. Transportation outlays increased 5.3% (4.6% y/y) after a 3.7% rise while recreation spending rose 4.7% (2.8% y/y) following a 4.5% rise. Restaurant & hotel expenditures declined 2.1% (+0.5% y/y) following a 2.8% rise. Financial services expenditures rose 1.9% (2.0% y/y) after a 3.1% Q4 increase.

Business fixed investment increased 9.8% (3.6% y/y) following a 3.0% decline in Q4. Expenditures on structures rose 0.4% (-0.4% y/y) after a 2.9% increase. Expenditures on producers’ durable equipment jumped 22.5% (8.0% y/y) after falling 8.7%.  Outlays on information processing equipment soared 69.3% (18.9% y/y) following a 7.3% decline. Industrial equipment investment fell 1.4% (-0.3% y/y) after easing 0.9%. Intellectual property product spending rose 4.1% (1.8% y/y) following a 0.5% decline. 

Residential structures investment increased 1.3% (-0.1% y/y) in Q1 after a 5.5% Q4 rise.

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Government spending fell 1.5% (+2.4% y/y) after a 3.1% Q4 rise. Federal government expenditures declined 5.1% (+2.9% y/y) after rising 4.0% in Q4. National defense expenditures declined 8.0% (+4.0% y/y) after increasing 4.8% in Q4. State & local government spending rose 0.8% (2.1% y/y) following a 2.5% rise.

The GDP price index rose 3.7% (2.6% y/y) after increasing 2.3% in Q4. It was the largest increase since Q4’22. A 2.4% increase had been expected. The PCE chain price index increased 3.6% (2.5% y/y) following a 2.4% rise. The PCE price index excluding food and energy rose 3.5% (2.8% y/y) after increasing 2.6% in Q4. The business fixed investment price index rose 0.4% (1.8% y/y) after 1.5% rise. The residential price index strengthened 3.9% (3.2% y/y) after a 1.9% rise while the government price index increased 4.7% (2.8% y/y) following a 2.1% rise.

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

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- Decline in GDP is first in three years.
- Foreign trade subtracts substantially ahead of tariffs.
- Domestic final demand growth weakens.
- Price index strengthens with higher core PCE prices.

U.S. GDP Unexpectedly Declines in Q1’25; Prices Strengthen

Michael J. Moran

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High-side readings on the price indexes for personal consumption expenditures in January and February caused some concern about emerging price pressure, especially with some policies of the Trump administration possibly adding to the upward force. However, March brought notable relief, with the headline price index falling slightly (-0.04%). A marked decline in energy prices was helpful (-2.7%), but core prices also were subdued, increasing less than 0.1%.  Year-over-year changes were still above the Fed’s target of 2%, but only barely so for the headline measure (2.3%). The core index backed away from the reading of 3.0% in February, but the latest reading of 2.7% was in line with observations in the past year, and still uncomfortably above target.

Consumers roused from a winter slumber in March, with nominal outlays increasing 0.7%. With inflation restrained, real outlays also posted a gain of 0.7%. Spending on durable gods stood out, with real outlays advancing 3.2%. Real outlays for both nondurable goods and services rose 0.4%, a solid pace. Signs of life were certainly welcome after an average decline of 0.1% in January and February. The March rebound left growth of 1.8% (annual rate) in the first quarter.

The brisk increase in spending in March was supported by a solid gain in personal income (0.5% in both nominal and real terms). Growth in wage income was firm at 0.5%, while proprietors’ income was robust with a gain of 1.8% (not annualized!). The farm sector led the advance in proprietors’ income, but the nonfarm sector also was strong (0.6%).

The personal income and consumption figures are available in Haver’s **USECON** database with detail in the **USNA** database. The Action Economics forecasts are in **AS1REPNA**.

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- Price pressure eases.
- Spending rebounds after two soft months.

Personal Income, Consumption, and Prices in March

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The Pending Home Sales Index, a forward-looking home sales measure based on contract signings, from the National Association of Realtors rose 6.1% to 76.5 (-0.6% y/y) during March after rising a little-revised 2.1% in February. These changes followed a 4.6% January decline.

The rise in March sales occurred as the rate on a 30-year mortgage eased to an average 6.65% from 6.84% in February. This rate was well above a low of 2.68% averaged in December 2020.

Pending home sales were up in most regions of the country. Sales in the Midwest rose 4.9% (1.4% y/y) last month after rising 1.8% in February. Sales in the South increased 9.8% (-0.4% y/y) following a 5.8% February rise. Sales in the West improved 4.8% (-2.0% y/y) after falling 3.0% in February. Sales in the Northeast were off 0.5% (-3.0% y/y) in March after falling 0.9% in February.

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

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

- Sales rise to highest level in four months.
- Strength is evident throughout most of country.

U.S. Pending Home Sales Surge in March

Sandy Batten

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The employment cost index (ECI) for civilian workers, arguably the most accurate measure of labor compensation in the United States, rose 0.9% q/q (3.6% y/y) in Q1, the same quarterly increase as in last year’s Q4, according to the Bureau of Labor Statistics. The quarterly gains have fluctuated between 0.8% and 1.0% for the past six quarters. The Action Economics Forecast Survey had expected a 0.9% q/q increase and a 3.5% y/y gain.

Wages and salaries for civilian workers rose 0.8% q/q (3.5% y/y) in Q1, down from 1.0% q/q in Q4. This tied the Q3 2024 quarterly rise as the smallest increase since Q2 2021. It was also the smallest y/y increase since Q2 2021. Benefits increased by an outsized 1.2% q/q (3.9% y/y) in Q1 versus 0.8% q/q in Q4. This is the largest quarterly gain since Q2 2022. In general, employment cost gains remain above the pace observed prior to the pandemic but are slowing gradually.

Private industry workers’ compensation rose 0.8% q/q (3.4% y/y) in Q1, down from 0.9% q/q (3.6% y/y) in Q4. Wages and salaries for private industry workers increased 0.8% q/q (3.4% y/y) in Q1 versus 0.8% q/q (3.7% y/y) in Q4. The quarterly gain in Q1 tied that in Q3 2024 as the smallest increase since Q4 2020. Benefits for private industry workers jumped 1.2% q/q (3.6% y/y). the largest quarterly gain since Q2 2022. The acceleration in benefits in Q1 was primarily in service-producing industries.

Compensation in private goods-producing industries increased 1.0% q/q (3.2% y/y) in Q1, the largest quarterly gain in five quarters, versus a 0.7% q/q increase in Q4. Compensation in construction jumped 1.3% q/q, its largest quarterly increase since Q2 2022, up from a 0.6% q/q gain in Q4. Manufacturing compensation growth slowed to 0.7% q/q, its slowest quarterly advance since Q4 2020, from 0.8% q/q in Q4. Compensation in private service-producing industries increased 0.8% q/q (3.5% y/y), down slightly from a 0.9% q/q gain in Q4. Compensation in education and health services jumped 1.3% q/q, its largest quarterly gain since Q3 2023. In contrast, compensation in other services edged up 0.1% q/q in Q1, its smallest quarterly advance since before the pandemic.

The employment cost index measures the change in the cost of labor, free from the influence of employment shifts across occupations and industries. It is provided by the Bureau of Labor Statistics and is available in Haver’s **USECON** database. Consensus estimates from the Action Economics Forecast Survey are in Haver’s **AS1REPNA** database.

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- Compensation grew 0.9 q/q in Q1, the same pace as in Q4.
- Wage growth slowed to 0.8% q/q while benefits surged 1.2% q/q, their largest quarterly increase since Q2 2022.

Employment Cost Growth Steady in Q1 2025

Kathleen Stephansen, CBE

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The ADP National Employment Report indicated that nonfarm private sector payrolls rose 62,000 (1.4% y/y) during April after increasing 147,000 (1.4% y/y) during March, revised from 155,000. A 124,000 April rise in ADP employment had been expected in the Action Economics Forecast Survey.

Growth in median annual pay for "job stayers" eased to 4.5% y/y during April, from 4.6% y/y in March and from 4.7% y/y in the prior two months. Manufacturing sector pay grew 4.6% y/y during April, down from 4.8% y/y in March. Construction sector pay was unchanged at 4.7% y/y. Natural resource & mining sector pay grew 4.4% y/y. Financial sector pay rose 5.1% y/y, while education & health services pay rose 4.7% y/y. Leisure & hospitality pay also increased 4.7% y/y. Professional & business service sector pay increased 4.3% y/y as did trade, transportation & utilities pay. Information pay rose 4.1% y/y. Median annual pay for “job changers” rose 6.9% y/y after 6.7% y/y in March.

Small business hiring (less than 50 employees) rose 11,000 (0.6% y/y) after rising 18,000 (0.6% y/y) in March, revised down from 52,000. Employment at medium-sized firms (50-499,000 employees) rose 40,000 (1.1% y/y) after rising 43,000 (1.1% y/y). Large business hiring (500+ employees) rose 12,000 (3.4% y/y) in April, after rising 61,000 (3.6% y/y) in March, revised from 59,000.

Goods-producing employment rose 26,000 (1.3% y/y) in April, after rising 16,000 (1.3% y/y) during March, revised from 24,000. Manufacturing jobs rose 4,000 (-0.2% y/y) after rising 17,000 (-0.3% y/y) in March. The number of construction sector jobs rose 16,000 (3.4% y/y) in April, following a 2,000 (3.6% y/y) March increase, revised from 6,000. Natural resources & mining jobs rose 6,000 (2.8% y/y) in April after falling 3,000 (+1.9% y/y) in March.

The number of service-producing jobs rose 34,000 (1.4% y/y) during April, following a rise of 131,000 (1.4% y/y) in March. Professional & business services employment fell 2,000 (0.6% y/y) after rising 46,000 (0.7% y/y) in the prior month, revised from 57,000. Employment in the financial industry rose 20,000 (2.1% y/y) in April, after rising 38,000 (2.0% y/y) in March. Leisure and hospitality employment increased 27,000 (3.0% y/y), following a 23,000 (2.9% y/y) March increase, revised from 17,000. The number of education & health care jobs fell 23,000 (1.6% y/y) in April, following a 15,000 (1.8% y/y) rise in March, revised from 12,000. Information sector employment fell 8,000 (-0.1% y/y) after a rise of 3,000 (0.2% y/y) in March. The number of jobs in trade, transportation & utilities rose 21,000 (0.4% y/y) in April, after falling 4,000 (+0.4% y/y) in March, revised from a 6,000 fall. Employment in “other” services rose fell 1,000 (+3.2% y/y) following a 10,000 (3.4% y/y) rise in March, revised from 11,000.

By region, employment in the Northeast increased 10,000 (1.9% y/y) in April, following an increase of 95,000 (2.0% y/y) in March, revised from 89,000. Employment in the Midwest rose 42,000 (1.5% y/y) after a gain of 84,000 (1.4% y/y) in March, revised from 81,000. In the South, employment rose 3,000 (1.3% y/y) during April, after rising 10,000 (1.4% y/y) in March, revised from 27,000. In the West, employment rose 9,000 (0.6% y/y) after declining 43,000 (+0.6% y/y), revised from a 41,000 decline in March.

The ADP National Employment Report and Pay Insights data can be found in Haver's **USECON** database. Historical figures date back to January 2010 for private employment. Pay data date back to October 2020. The expectation figure is available in Haver's **AS1REPNA** database.

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- Employment increase is modest in both services & factory sectors.
- Wage growth for “job stayers” moderates.
- Small and medium-sized business employment slows.

Economy in Brief: January 2008

Jump to:

U.S. Help-Wanted Advertising Remained Low

EU and Country Level Confidence is Still Sinking

German Retail Sales Continue to Slow

U.S. Employment Cost Index Steady At 0.8% Quarterly Increase

U.S. Initial Claims for Unemployment Insurance Surged

U.S. Personal Income Firm, Spending Light

U.S. Personal Income Firm, Spending Light

Case-Shiller Home Price Index Lowest Since 2005