Carol Stone, CBE

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061130j.jpg" width="353">
The Canadian economy slowed in Q3, according to the national accounts array published today by Statistics Canada. GDP grew only 1.7% at an annual rate from Q2, slower than Q2&#39;s 2.0% and also less than the 2.0% widely expected by Canadian economists. It was the weakest performance since Q2 2003, when there was a decline of 1.3%. <img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061130i.jpg" width="353">
The slowdown was not a result of weaker consumer spending; this actually strengthened to 4.2% growth from 3.8% in Q2 and was 4.1% ahead of a year ago, compared with year-on-year growth of 2.5% for total GDP. And private nonresidential fixed investment, often the generator of business cycles, also picked up, growing at a 7.0% pace compared with 5.4% in Q2.Further, net exports, while deteriorating, did so less than in Q2, as that deficit inched outward by only C$0.8 billion, following a sharp widening in Q2 of C$12.2 billion.
So the slowing in this one quarter was due primarily to a marked deceleration in government consumption and to further declines in housing investment. The swing in the government accounts related to the quinquennial census that was taken in mid-May. This created a bulge in government spending from Q4 2005 through Q2 2006. A quick look at the second graph shows the periodic slowdowns following these 5-year censuses, previously taken in 1996 and 2001. <img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061130h.jpg" width="353">
Residential construction deepened its decline that set in during Q2 after the huge seasonally adjusted advance during last winter, which as we in the US know, was quite mild. Residential investment in Canada jumped 14.2% (annualized) in Q1 and has almost exactly offset that in Q2 and Q3, so the latest figure is very close to the C$68.8 billion in the second half of last year.
These sources of weakness appear to be temporary adjustments to outsized gains earlier. But before dismissing them as mere jiggles in numbers, it gives us pause that the other compilation of Canada&#39;s GDP, the industrial product breakdown calculated monthly, showed an outright contraction in September of 0.3%. So the economy ended the quarter on a down note, not a very promising position.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/CANSIM/@C2/@C2.HTM">CANADA</a><a href="http://www.haverselect.com/dlx/CANSIM/@C2/@C2.HTM">:</a> SAAR, Bil.Chn97C$</th>
<th scope="col">Q3 2006</th>
<th scope="col">Q2 2006</th>
<th scope="col">Q1 2006</th>
<th scope="col">Year- Ago</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
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<td class="firstcol">Total GDP</td>
<td>1192.2</td>
<td>1187.1</td>
<td>1181.1</td>
<td>1162.8</td>
<td>1157.7</td>
<td>1124.7</td>
<td>1088.8</td>
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<tr>
<td class="firstcol">&nbsp;% Chg, AR</td>
<td>1.7</td>
<td>2.0</td>
<td>3.8</td>
<td>2.5</td>
<td>2.9</td>
<td>3.3</td>
<td>1.8</td>
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<td class="firstcol">Personal Consumption</td>
<td>4.2</td>
<td>3.8</td>
<td>4.8</td>
<td>4.1</td>
<td>3.9</td>
<td>3.3</td>
<td>3.0</td>
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<td class="firstcol">Gov&#39;t Consumption</td>
<td>0.7</td>
<td>4.9</td>
<td>3.3</td>
<td>3.3</td>
<td>2.7</td>
<td>3.0</td>
<td>3.5</td>
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<td class="firstcol">Business Investment</td>
<td>1.2</td>
<td>1.6</td>
<td>10.3</td>
<td>5.0</td>
<td>7.1</td>
<td>8.6</td>
<td>6.6</td>
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<td class="firstcol">Net Exports (Bil.Chn.97C$)</td>
<td>-23.3</td>
<td>-22.5</td>
<td>-10.3</td>
<td>--</td>
<td>-2.0</td>
<td>+19.8</td>
<td>+30.6</td>
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The Canadian economy slowed in Q3, according to the national accounts array published today by Statistics Canada. GDP grew only 1.7% at an annual rate from Q2, slower than Q2's 2.0% and also less than the 2.0% widely expected by [...]

Canada GDP Slows in Q3: Temporary Easing -- or Not?

Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061130m.jpg" width="353">
The Chicago Purchasing Manager&#39;s Assn. reported that its November business barometer fell to 49.9. It was the first month the diffusion index of factory sector activity fell below the break even line of 50 since 2003.
During the last ten years there has been a 69% correlation between the index and the three month change in US factory sector industrial production.
All of the component series weakened m/m with the employment index falling to 49.4 versus an average 54.2 last year and new orders fell to 52.0 versus a 2005 average of 64.4.
The prices paid index dropped to 60.2, its lowest level since since May of last year.During the last ten years there has been an 89% correlation between the level of the prices diffusion index and the three month change in the core PPI for intermediate good.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S2/@S203/@S203.htm">Chicago PMI</a></th>
<th scope="col">November</th>
<th scope="col">October</th>
<th scope="col">Nov. &#39;05 </th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
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<td class="firstcol">Chicago PMI Business Barometer Index</td>
<td>49.9</td>
<td>53.5</td>
<td>60.8</td>
<td>60.4</td>
<td>62.8</td>
<td>54.7</td>
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The Chicago Purchasing Manager's Assn. reported that its November business barometer fell to 49.9. It was the first month the diffusion index of factory sector activity fell below the break even line of 50 since 2003. During the last [...]

Chicago Purchasing Managers Survey Down in November

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061130k.jpg" width="353">
According to the Office of Federal Housing Enterprise Oversight (OFHEO) home prices in the U.S. rose last quarter but the 0.9% gain was the slowest since 1998 and the y/y increase of 7.7% was the worst since 2003.
Price declines were scattered throughout the country. Job cutbacks in the auto industry helped lower prices in Michigan for the second consecutive quarter and in New York a 0.3% decline dropped the y/y rate of home price appreciation to 6.5%, the worst since 1999. Prices also fell q/q in Massachusetts (for the second quarter, +1.1% y/y), Rhode Island (+4.6% y/y) and New Hampshire (+3.7% y/y).<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061130l.jpg" width="353">
Home price appreciation in the District of Columbia continued reasonably firm last quarter at 1.0% but the still healthy y/y gain of 11.3% was down from last year&#39;s peak of 25.2%. Home prices in Idaho also turned in a strong showing with a 3.0% (17.5% y/y) increase. Notable for strength also were prices in Florida which rose 1.2% (15.1% y/y) though that is down from a 25.9% gain during all of last year.
The House Price Indices in this report are weighted indexes based on repeat sales or refinancings using data provided by Fannie Mae or Freddie Mac .
The latest report from the Office of Federal Housing Enterprise Oversight (OFHEO) can be found <a href="http://www.ofheo.gov/media/pdf/3q06hpi.pdf">here</a>.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/REGIONAL/@R11/@R1101/@R1101.HTM">House Price Index (OFHEO)</a></th>
<th scope="col">3Q &#39;06</th>
<th scope="col">2Q &#39;06</th>
<th scope="col">Y/Y</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
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<td class="firstcol">United States</td>
<td>0.9%</td>
<td>1.3%</td>
<td>7.7%</td>
<td>13.2%</td>
<td>10.7%</td>
<td>6.9%</td>
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<td class="firstcol">&nbsp; California</td>
<td>0.6%</td>
<td>1.5%</td>
<td>10.2%</td>
<td>23.4%</td>
<td>22.3%</td>
<td>12.3%</td>
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<td class="firstcol">&nbsp; New Jersey</td>
<td>0.8%</td>
<td>1.8%</td>
<td>9.2%</td>
<td>16.3%</td>
<td>14.9%</td>
<td>10.6%</td>
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<td class="firstcol">&nbsp; New York</td>
<td>-0.3%</td>
<td>1.0%</td>
<td>6.5%</td>
<td>13.8%</td>
<td>13.3%</td>
<td>10.4%</td>
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<td class="firstcol">&nbsp; Michigan</td>
<td>-0.5%</td>
<td>-0.7%</td>
<td>-0.6%</td>
<td>4.3%</td>
<td>4.3%</td>
<td>3.4%</td>
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According to the Office of Federal Housing Enterprise Oversight (OFHEO) home prices in the U.S. rose last quarter but the 0.9% gain was the slowest since 1998 and the y/y increase of 7.7% was the worst since 2003. Price declines were [...]

Home Price Appreciation Slowest in Three Years

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<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061130g.jpg" width="353">
The Chicago Federal Reserve Bank&#39;s Midwest manufacturing index fell 0.4% last month and it was the third consecutive monthly decline. The three month growth rate in the index dropped to -6.5% (AR), its worst since 2003.
During the last ten years there has been a 89% correlation between the y/y change in Chicago&#39;s Midwest Mfg. index and the change in US factory sector industrial production. The October Chicago Fed Midwest Manufacturing Index can be found <a href="http://www.chicagofed.org/economic_research_and_data/files/cfmmi_october2006.pdf">here</a>.
The auto sector index registered its fifth decline in the last six months while the steel index fell for the third consecutive month. The machinery index, however, reflected the firm capital goods sector and rose moderately (6.7% y/y).
Industrial Ecology: Environmental and Economic Boon from the Federal Reserve Bank of Boston can be found <a href="http://www.bos.frb.org/commdev/c&amp;b/2006/fall/industrialecology.pdf"> here</a>.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S5/@S5.htm">Federal Reserve Surveys</a></th>
<th scope="col">October</th>
<th scope="col">September</th>
<th scope="col">Oct. &#39;05 </th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
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<td class="firstcol">Chicago Fed Midwest Mfg. Index (2002 = 100)</td>
<td>106.1</td>
<td>106.5</td>
<td>103.6</td>
<td>102.1</td>
<td>100.4</td>
<td>97.1</td>
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The Chicago Federal Reserve Bank's Midwest manufacturing index fell 0.4% last month and it was the third consecutive monthly decline. The three month growth rate in the index dropped to -6.5% (AR), its worst since 2003. During the [...]

Chicago Fed Survey of Factory Activity Down

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061130f.jpg" width="353">
The Conference Board reported that its Index of Help-Wanted Advertising in October ticked up to 30 in October from a downwardly revised reading of 29 in September.
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/061130e.jpg" width="353">
The proportion of labor markets with rising want-ad volume surged to 57%, the highest level in nearly one year.
The Conference Board surveys help-wanted advertising volume in 51 major newspapers across the country every month.
The latest help wanted report from the Conference Board is available <a href="http://www.conference-board.org/economics/helpwanted.cfm">here</a>.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/CBDB/@C3/@C3.HTM">Conference Board</a></th>
<th scope="col">October</th>
<th scope="col">September</th>
<th scope="col">October &#39;05</th>
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<td class="firstcol">National Help Wanted Index</td>
<td>30</td>
<td>29</td>
<td>37</td>
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The Conference Board reported that its Index of Help-Wanted Advertising in October ticked up to 30 in October from a downwardly revised reading of 29 in September. During the last ten years there has been a 57% correlation between the [...]

Help-Wanted Advertising Low

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061130c.jpg" width="353">
Initial claims for unemployment insurance jumped 34,000 last week to 357,000 from an upwardly revised level during the prior period. Consensus expectations had been for a decline to 317,000.
No specific factors were sighted by the Labor Department for the increase but volatility related to large seasonal factors often occurs around the Thanksgiving holiday. The seasonally unadjusted number of initial claims fell 45,203 last week.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061130d.jpg" width="353">
During the last ten years there has been a (negative) 77% correlation between the level of initial claims and the m/m change in nonfarm payroll employment.
The four-week moving average of initial claims rose to 325,000 (3.0% y/y), its highest level since June.
Continuing claims for unemployment insurance also jumped by 45,000 after a downwardly revised 5,000 worker decline the prior week.
The insured rate of unemployment remained at 1.9%, the average rate since February.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/WEEKLY/@W5/@W507/@W507.HTM">Unemployment Insurance (000s)</a></th>
<th scope="col">11/25/06</th>
<th scope="col">11/18/06</th>
<th scope="col">Y/Y</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
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<td class="firstcol">Initial Claims</td>
<td>357</td>
<td>323</td>
<td>12.6%</td>
<td>332</td>
<td>343</td>
<td>403</td>
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<td class="firstcol">&nbsp;Continuing Claims</td>
<td>--</td>
<td>2,480</td>
<td>-8.5%</td>
<td>2,662</td>
<td>2,924</td>
<td>3,532</td>
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Initial claims for unemployment insurance jumped 34,000 last week to 357,000 from an upwardly revised level during the prior period. Consensus expectations had been for a decline to 317,000. No specific factors were sighted by the [...]

Initial Claims for Jobless Insurance Jumped

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061130b.jpg" width="353">
Personal income for October rose a bit less than expectations with a 0.4% increase after an unrevised 0.5% September gain.
The disappointment in last month&#39;s income gain, however, was confined to a 3.9% (-8.7% y/y) decline in rental income and a slim 0.1% (2.4% y/y) increase in proprietors&#39; income.
Wage &amp; salary disbursements jumped 0.6% (5.9% y/y) after an upwardly revised like gain during September. Wages in the private service-producing industries surged 0.7% (6.4% y/y) and factory sector wages grew 0.6% (2.8% y/y) following an upwardly revised 0.1% September uptick. Revisions to the figures for April through September lowered the level of wages &amp; salaries.
Disposable personal income increased 0.3% (4.9% y/y) after an unrevised 0.5% September increase. Personal taxes jumped 1.2% (12.1% y/y).<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061130a.jpg" width="353">
Adjusted for recently lower prices, disposable personal income rose a firm 0.6% (3.4% y/y) last month after the 0.8% jump during September. Real disposable income per capita advanced 0.5% (2.5% y/y).
Personal consumption rose 0.2% after the downwardly revised 0.2% September decline. Expectations had been for a 0.1% increase. When adjusted for the 0.2% decline in prices, real consumer spending rose 0.4%. A 2.8% m/m decline in unit vehicle sales last month held back the gain in PCE along with a 9.8% m/m decline (-16.8% y/y) in spending on gasoline &amp; oil.
The PCE chain price index fell 0.2%, helped by last month&#39;s 12.1% decline in retail gasoline prices. Gasoline prices in November are down another 0.7% m/m. The 0.2% rise in prices less food &amp; energy prices was a bit firmer than expectations for a 0.1% uptick. In addition, the three month change in core prices crept higher to 2.7% (AR).
Interest income rose 0.4% (7.6% y/y) while dividend income jumped another 1.1% (11.6% y/y).
The personal savings rate was a slightly less negative -0.6% last month but so far in 2006 has averaged -0.9%. Should the Decline in the Personal Saving Rate Be a Cause for Concern? from the Federal Reserve Bank of Kansas City is available <a href="http://www.kansascityfed.org/PUBLICAT/ECONREV/PDF/2Q06garn.pdf">here</a>.
The Fed&#39;s latest Beige Book covering economic conditions around the country can be found <a href="http://www.federalreserve.gov/fomc/beigebook/2006/20061129/default.htm"> here</a>.

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<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">October</th>
<th scope="col">September</th>
<th scope="col">Y/Y</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
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<td class="firstcol">Personal Income</td>
<td>0.4%</td>
<td>0.5%</td>
<td>5.8%</td>
<td>5.2%</td>
<td>6.2%</td>
<td>3.2%</td>
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<tr>
<td class="firstcol">Personal Consumption</td>
<td>0.2%</td>
<td>-0.2%</td>
<td>5.0%</td>
<td>6.5%</td>
<td>6.6%</td>
<td>4.8%</td>
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<td class="firstcol">Savings Rate</td>
<td>-0.6%</td>
<td>-0.7%</td>
<td>-0.3% (Oct. &#39;05)</td>
<td>-0.4%</td>
<td>2.0%</td>
<td>2.1%</td>
</tr>
<tr>
<td class="firstcol">PCE Chain Price Index</td>
<td>-0.2%</td>
<td>-0.3%</td>
<td>1.5%</td>
<td>2.9%</td>
<td>2.6%</td>
<td>2.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Less food &amp; energy</td>
<td>0.2%</td>
<td>0.2%</td>
<td>2.4%</td>
<td>2.1%</td>
<td>2.0%</td>
<td>1.4%</td>
</tr>
</tbody>
</table>


</html>

Personal income for October rose a bit less than expectations with a 0.4% increase after an unrevised 0.5% September gain. The disappointment in last month's income gain, however, was confined to a 3.9% (-8.7% y/y) decline in rental [...]

U.S. Personal Income Gain Light, Core Prices Firmer

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: November 2006

Jump to:

Canada GDP Slows in Q3: Temporary Easing -- or Not?

Chicago Purchasing Managers Survey Down in November

Home Price Appreciation Slowest in Three Years

Chicago Fed Survey of Factory Activity Down

Help-Wanted Advertising Low

Initial Claims for Jobless Insurance Jumped

U.S. Personal Income Gain Light, Core Prices Firmer

U.S. Personal Income Gain Light, Core Prices Firmer