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/060630d.jpg" width="353">
For Japan, as was the case yesterday with Germany, the last time we wrote about the labor market was three months ago. Back then, we were all excited about rising employment in Japan and falling unemployment, particularly for February. In the intervening months, however, Japanese labor conditions have hesitated somewhat, although employment has been basically stable with February&#39;s strong performance.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060630e.jpg" width="353">
In May, employment gained 270,000 after a cumulative loss of 280,000 in March and April. The total amount in May, 63.91 million workers, remains above the levels of all but two months in the last 4 1/2 years. The highest was 63.93 million in September 2005, followed by February&#39;s 63.92 million. Other months, as evident from the graph and the table below, have been noticeably weaker.
The news headlines today highlighted May&#39;s low unemployment rate, 4.0%, which, as seen in the second graph, is the lowest since early 1998. However, our own enthusiasm was tempered by a look at labor force data. Japan&#39;s Ministry of Internal Affairs and Communications doesn&#39;t publish the labor force series on a seasonally adjusted basis, but we can calculate it by adding employment and unemployment. Last time we assessed these data, we were pleased to describe growth in the labor force, which meant that the decline in unemployment was coming from the strength of employment. This time, though, as we describe above, employment has been flat for three months and the second graph shows that the labor force has also stopped growing. Thus, May&#39;s dip in unemployment is not a sign of further strength, but of hesitation by workers, who likely remain skittish about the prospects for continuing growth.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060630f.jpg" width="353">
At the same time, we don&#39;t want to downplay the employment performance. Two key sectors, manufacturing and construction are looking better. The third graph indicates that these have both stabilized after declines that began in about 1997. These industry data are not seasonally adjusted either, so they&#39;re a bit erratic. But manufacturing is notable for not experiencing the jobs decline that has characterized the spring months in several recent years; instead, gains from last summer have largely held, a situation we see as impressive with the competition Japan manufacturing faces from its neighbors. Construction job gains are a good sign that investment is picking up, a quite tangible expression of confidence.

<table border="0" cellspacing="0" width="100%">
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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">May</th>
<th scope="col">April</th>
<th scope="col">Y/Y</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Personal Income</td>
<td>0.4%</td>
<td>0.7%</td>
<td>5.4%</td>
<td>5.4%</td>
<td>5.9%</td>
<td>3.2%</td>
</tr>
<tr>
<td class="firstcol">Personal Consumption</td>
<td>0.4%</td>
<td>0.7%</td>
<td>6.7%</td>
<td>6.5%</td>
<td>6.5%</td>
<td>4.9%</td>
</tr>
<tr class="odd">
<td class="firstcol">Savings Rate</td>
<td>-1.7%</td>
<td>-1.6%</td>
<td>0.0% (May &#39;05)</td>
<td>-0.5%</td>
<td>1.7%</td>
<td>2.1%</td>
</tr>
<tr>
<td class="firstcol">PCE Chain Price Index</td>
<td>0.4%</td>
<td>0.5%</td>
<td>3.3%</td>
<td>2.8%</td>
<td>2.6%</td>
<td>1.9%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Less food &amp; energy</td>
<td>0.2%</td>
<td>0.2%</td>
<td>2.1%</td>
<td>2.0%</td>
<td>2.0%</td>
<td>1.3%</td>
</tr>
</tbody>
</table>
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For Japan, as was the case yesterday with Germany, the last time we wrote about the labor market was three months ago. Back then, we were all excited about rising employment in Japan and falling unemployment, particularly for [...]

Japan Employment Hesitates, But Remains High; Unemployment Rate at 8-Year Low

Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060630c.jpg" width="353">
Consumer sentiment during all of June improved 7.3% from the prior month to 84.9 according to the University of Michigan. The increase recovered most of a 9.5% slump during May, built on the rise that was reported earlier and exceeded Consensus expectations for a reading of 82.5.
During the last ten years there has been a 77% correlation between the level of consumer sentiment and the y/y change in real consumer spending.
The reading of current economic conditions rose 9.3% as the index of current personal finances rose 10.8% (-7.4% y/y). Buying conditions for large household goods were judged to be 8.2% better (-7.6% y/y) than during May.
Expectations for the economy rose for just the second month this year. The 5.6% June gain reflected an 8.6% rise in business conditions expected during the next year. But long term (5 year) expectations for business conditions fell for the fourth month in the last five (-23.3% y/y). Consumers&#39; opinion about gov&#39;t economic policy fell 3.9% m/m (-20.4% y/y).
Expected inflation during the next year slipped modestly to 4.4% and the five to ten year expected rate of inflation also fell to 3.5%.
The University of Michigan survey is not seasonally adjusted.The mid-month survey is based on telephone interviews with 250 households nationwide on personal finances and business and buying conditions. The survey is expanded to a total of 500 interviews at month end.

<table border="0" cellspacing="0" width="100%">
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EF/@EF14/@EF1402/@EF1402.HTM">University of Michigan</a></th>
<th scope="col">June (Final)</th>
<th scope="col">June (Prelim.)</th>
<th scope="col">May</th>
<th scope="col">Y/Y</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Consumer Sentiment</td>
<td>84.9</td>
<td>82.4</td>
<td>79.1</td>
<td>-11.6%</td>
<td>88.6</td>
<td>95.2</td>
<td>87.6</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Current Conditions</td>
<td>105.0</td>
<td>103.1</td>
<td>96.1</td>
<td>-7.2%</td>
<td>105.9</td>
<td>105.6</td>
<td>97.2</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp; Expectations</td>
<td>72.0</td>
<td>69.2</td>
<td>68.2</td>
<td>-15.3%</td>
<td>77.4</td>
<td>88.5</td>
<td>81.4</td>
</tr>
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</table>
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Consumer sentiment during all of June improved 7.3% from the prior month to 84.9 according to the University of Michigan. The increase recovered most of a 9.5% slump during May, built on the rise that was reported earlier and exceeded [...]

U.S. Consumers' Spirits Rose Further as Inflation Expectations Fell

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060630a.jpg" width="353">
Personal income rose 0.4% last month following an upwardly revised 0.5% gain during April. The May increase doubled Consensus expectations for a 0.2% rise.
The PCE chain price index rose an expected 0.4% and reflected a 4.6% (30.5% y/y) jump in gasoline &amp; oil prices. Less food &amp; energy the 0.2% (2.1% y/y) rise in the chain price index also was expected. Prices for clothing &amp; shoes fell 0.1% (-0.6% y/y) and furniture &amp; household equipment prices continued their long standing decline (-5.0% y/y).
A strong 1.2% (7.4% y/y) gain in personal interest income and a 0.9% (11.1% y/y) increase in dividend income paced last month&#39;s rise in income.
Wage &amp; salary disbursements were unchanged (4.8% y/y) after a downwardly revised 0.8% spike during April. Private sector wages were unchanged (5.1% y/y) as factory sector wages fell 0.1% (+2.4% y/y). Service producing industries wages also fell 0.1% (+5.4% y/y) after a 1.1% April jump.
Government transfer payments for health insurance &amp; disability surged 1.0% (12.1% y/y) reflecting Medicare drug coverage.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060630b.jpg" width="353">
Disposable personal income rose 0.3% (4.7% y/y) after an upwardly revised 0.6% April jump. Personal taxes rose 0.5% (10.6% y/y).
Adjusted for price inflation, disposable personal income fell slightly (+1.4% y/y) marking the third m/m decline this year. A 0.1% decline in real disposable income per capita (+0.5% y/y) left the measure down 0.4% year to date.
Personal consumption matched Consensus expectations for a 0.4% rise but adjusted for price inflation spending rose just 0.1% (3.3% y/y). Real spending on durables dropped 0.6% (+4.7% y/y) reflecting lower sales of motor vehicle &amp; parts (-1.9% y/y) while real spending on furniture &amp; household equipment rose 0.3% (12.7% y/y).
The personal savings rate was again negative.
The Trend Growth Rate of Employment: Past, Present and Future from the Federal Reserve Bank of Kansas City is available <a href="http://www.kansascityfed.org/PUBLICAT/ECONREV/PDF/1q06clar.pdf">here</a>.

<table border="0" cellspacing="0" width="100%">
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<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">May</th>
<th scope="col">April</th>
<th scope="col">Y/Y</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Personal Income</td>
<td>0.4%</td>
<td>0.7%</td>
<td>5.4%</td>
<td>5.4%</td>
<td>5.9%</td>
<td>3.2%</td>
</tr>
<tr>
<td class="firstcol">Personal Consumption</td>
<td>0.4%</td>
<td>0.7%</td>
<td>6.7%</td>
<td>6.5%</td>
<td>6.5%</td>
<td>4.9%</td>
</tr>
<tr class="odd">
<td class="firstcol">Savings Rate</td>
<td>-1.7%</td>
<td>-1.6%</td>
<td>0.0% (May &#39;05)</td>
<td>-0.5%</td>
<td>1.7%</td>
<td>2.1%</td>
</tr>
<tr>
<td class="firstcol">PCE Chain Price Index</td>
<td>0.4%</td>
<td>0.5%</td>
<td>3.3%</td>
<td>2.8%</td>
<td>2.6%</td>
<td>1.9%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Less food &amp; energy</td>
<td>0.2%</td>
<td>0.2%</td>
<td>2.1%</td>
<td>2.0%</td>
<td>2.0%</td>
<td>1.3%</td>
</tr>
</tbody>
</table>


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Personal income rose 0.4% last month following an upwardly revised 0.5% gain during April. The May increase doubled Consensus expectations for a 0.2% rise. The PCE chain price index rose an expected 0.4% and reflected a 4.6% (30.5% [...]

U.S. Personal Income Firm, Prices Tame

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060630b.jpg" width="353">
Personal income rose 0.4% last month following an upwardly revised 0.5% gain during April. The May increase doubled Consensus expectations for a 0.2% rise.
The PCE chain price index rose an expected 0.4% and reflected a 4.6% (30.5% y/y) jump in gasoline &amp; oil prices. Less food &amp; energy the 0.2% (2.1% y/y) rise in the chain price index also was expected. Prices for clothing &amp; shoes fell 0.1% (-0.6% y/y) and furniture &amp; household equipment prices continued their long standing decline (-5.0% y/y).
A strong 1.2% (7.4% y/y) gain in personal interest income and a 0.9% (11.1% y/y) increase in dividend income paced last month&#39;s rise in income.
Wage &amp; salary disbursements were unchanged (4.8% y/y) after a downwardly revised 0.8% spike during April. Private sector wages were unchanged (5.1% y/y) as factory sector wages fell 0.1% (+2.4% y/y). Service producing industries wages also fell 0.1% (+5.4% y/y) after a 1.1% April jump.
Government transfer payments for health insurance &amp; disability surged 1.0% (12.1% y/y) reflecting Medicare drug coverage.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060630a.jpg" width="353">
Disposable personal income rose 0.3% (4.7% y/y) after an upwardly revised 0.6% April jump. Personal taxes rose 0.5% (10.6% y/y).
Adjusted for price inflation, disposable personal income fell slightly (+1.4% y/y) marking the third m/m decline this year. A 0.1% decline in real disposable income per capita (+0.5% y/y) left the measure down 0.4% year to date.
Personal consumption matched Consensus expectations for a 0.4% rise but adjusted for price inflation spending rose just 0.1% (3.3% y/y). Real spending on durables dropped 0.6% (+4.7% y/y) reflecting lower sales of motor vehicle &amp; parts (-1.9% y/y) while real spending on furniture &amp; household equipment rose 0.3% (12.7% y/y).
The personal savings rate was again negative.
The Trend Growth Rate of Employment: Past, Present and Future from the Federal Reserve Bank of Kansas City is available <a href="http://www.kansascityfed.org/PUBLICAT/ECONREV/PDF/1q06clar.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/USECON/@E7/@E711/@E71102/@E71102.HTM">Disposition of Personal Income</a></th>
<th scope="col">May</th>
<th scope="col">April</th>
<th scope="col">Y/Y</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Personal Income</td>
<td>0.4%</td>
<td>0.7%</td>
<td>5.4%</td>
<td>5.4%</td>
<td>5.9%</td>
<td>3.2%</td>
</tr>
<tr>
<td class="firstcol">Personal Consumption</td>
<td>0.4%</td>
<td>0.7%</td>
<td>6.7%</td>
<td>6.5%</td>
<td>6.5%</td>
<td>4.9%</td>
</tr>
<tr class="odd">
<td class="firstcol">Savings Rate</td>
<td>-1.7%</td>
<td>-1.6%</td>
<td>0.0% (May &#39;05)</td>
<td>-0.5%</td>
<td>1.7%</td>
<td>2.1%</td>
</tr>
<tr>
<td class="firstcol">PCE Chain Price Index</td>
<td>0.4%</td>
<td>0.5%</td>
<td>3.3%</td>
<td>2.8%</td>
<td>2.6%</td>
<td>1.9%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Less food &amp; energy</td>
<td>0.2%</td>
<td>0.2%</td>
<td>2.1%</td>
<td>2.0%</td>
<td>2.0%</td>
<td>1.3%</td>
</tr>
</tbody>
</table>
U.S. Consumers' Spirits Rose Further as Inflation Expectations Fell 
by <a href="/comment/Moeller.html">Tom Moeller</a> June 30, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060630c.jpg" width="353">
Consumer sentiment during all of June improved 7.3% from the prior month to 84.9 according to the University of Michigan. The increase recovered most of a 9.5% slump during May, built on the rise that was reported earlier and exceeded Consensus expectations for a reading of 82.5.
During the last ten years there has been a 77% correlation between the level of consumer sentiment and the y/y change in real consumer spending.
The reading of current economic conditions rose 9.3% as the index of current personal finances rose 10.8% (-7.4% y/y). Buying conditions for large household goods were judged to be 8.2% better (-7.6% y/y) than during May.
Expectations for the economy rose for just the second month this year. The 5.6% June gain reflected an 8.6% rise in business conditions expected during the next year. But long term (5 year) expectations for business conditions fell for the fourth month in the last five (-23.3% y/y). Consumers&#39; opinion about gov&#39;t economic policy fell 3.9% m/m (-20.4% y/y).
Expected inflation during the next year slipped modestly to 4.4% and the five to ten year expected rate of inflation also fell to 3.5%.
The University of Michigan survey is not seasonally adjusted.The mid-month survey is based on telephone interviews with 250 households nationwide on personal finances and business and buying conditions. The survey is expanded to a total of 500 interviews at month end.

<table border="0" cellspacing="0" width="100%">
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<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EF/@EF14/@EF1402/@EF1402.HTM">University of Michigan</a></th>
<th scope="col">June (Final)</th>
<th scope="col">June (Prelim.)</th>
<th scope="col">May</th>
<th scope="col">Y/Y</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Consumer Sentiment</td>
<td>84.9</td>
<td>82.4</td>
<td>79.1</td>
<td>-11.6%</td>
<td>88.6</td>
<td>95.2</td>
<td>87.6</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Current Conditions</td>
<td>105.0</td>
<td>103.1</td>
<td>96.1</td>
<td>-7.2%</td>
<td>105.9</td>
<td>105.6</td>
<td>97.2</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp; Expectations</td>
<td>72.0</td>
<td>69.2</td>
<td>68.2</td>
<td>-15.3%</td>
<td>77.4</td>
<td>88.5</td>
<td>81.4</td>
</tr>
</tbody>
</table>
Japan Employment Hesitates, But Remains High; Unemployment Rate at 8-Year Low 
by <a href="/comment/Stone.html">Carol Stone</a> June 30, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060630d.jpg" width="353">
For Japan, as was the case yesterday with Germany, the last time we wrote about the labor market was three months ago. Back then, we were all excited about rising employment in Japan and falling unemployment, particularly for February. In the intervening months, however, Japanese labor conditions have hesitated somewhat, although employment has been basically stable with February&#39;s strong performance.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060630e.jpg" width="353">
In May, employment gained 270,000 after a cumulative loss of 280,000 in March and April. The total amount in May, 63.91 million workers, remains above the levels of all but two months in the last 4 1/2 years. The highest was 63.93 million in September 2005, followed by February&#39;s 63.92 million. Other months, as evident from the graph and the table below, have been noticeably weaker.
The news headlines today highlighted May&#39;s low unemployment rate, 4.0%, which, as seen in the second graph, is the lowest since early 1998. However, our own enthusiasm was tempered by a look at labor force data. Japan&#39;s Ministry of Internal Affairs and Communications doesn&#39;t publish the labor force series on a seasonally adjusted basis, but we can calculate it by adding employment and unemployment. Last time we assessed these data, we were pleased to describe growth in the labor force, which meant that the decline in unemployment was coming from the strength of employment. This time, though, as we describe above, employment has been flat for three months and the second graph shows that the labor force has also stopped growing. Thus, May&#39;s dip in unemployment is not a sign of further strength, but of hesitation by workers, who likely remain skittish about the prospects for continuing growth.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060630f.jpg" width="353">
At the same time, we don&#39;t want to downplay the employment performance. Two key sectors, manufacturing and construction are looking better. The third graph indicates that these have both stabilized after declines that began in about 1997. These industry data are not seasonally adjusted either, so they&#39;re a bit erratic. But manufacturing is notable for not experiencing the jobs decline that has characterized the spring months in several recent years; instead, gains from last summer have largely held, a situation we see as impressive with the competition Japan manufacturing faces from its neighbors. Construction job gains are a good sign that investment is picking up, a quite tangible expression of confidence.

<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">May</th>
<th scope="col">April</th>
<th scope="col">Y/Y</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Personal Income</td>
<td>0.4%</td>
<td>0.7%</td>
<td>5.4%</td>
<td>5.4%</td>
<td>5.9%</td>
<td>3.2%</td>
</tr>
<tr>
<td class="firstcol">Personal Consumption</td>
<td>0.4%</td>
<td>0.7%</td>
<td>6.7%</td>
<td>6.5%</td>
<td>6.5%</td>
<td>4.9%</td>
</tr>
<tr class="odd">
<td class="firstcol">Savings Rate</td>
<td>-1.7%</td>
<td>-1.6%</td>
<td>0.0% (May &#39;05)</td>
<td>-0.5%</td>
<td>1.7%</td>
<td>2.1%</td>
</tr>
<tr>
<td class="firstcol">PCE Chain Price Index</td>
<td>0.4%</td>
<td>0.5%</td>
<td>3.3%</td>
<td>2.8%</td>
<td>2.6%</td>
<td>1.9%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Less food &amp; energy</td>
<td>0.2%</td>
<td>0.2%</td>
<td>2.1%</td>
<td>2.0%</td>
<td>2.0%</td>
<td>1.3%</td>
</tr>
</tbody>
</table>


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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060629e.jpg" width="353">
We last wrote about German labor markets three months ago. Since then there have been marginal changes. Employment shows signs of slight growth, according to seasonally adjusted labor force data. Unemployment by the ILO definition is basically steady at a level more than a full percentage point below year-ago amounts, although the more popular measure in Germany, &quot;registered&quot; unemployment, has shown less improvement. At the same time, job vacancies have been rising markedly, indicating some hope for later employment gains.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060629f.jpg" width="353">
Total employment as measured in the labor force survey was 38.72 million in May, up 43,000 from April and 0.2% from May 2005. While this is a small increase, it still represents growth, a contrast to last year&#39;s experience when total employment contracted slightly from 2004.
Accompanying unemployment has decreased, although as we have explained before, in the face of stagnant employment, the lower unemployment is a result of people withdrawing from the labor force. This is seen in the second graph. A more realistic picture of labor conditions in Germany is perhaps given by the preferred local measure of joblessness, &quot;registered unemployment&quot;. This rate is down from a year ago, but has moved in fits and starts and remains above its average for 2004.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060629g.jpg" width="353">
An optimistic note among the labor market data released today is the number of job vacancies. These are climbing, and at 531,000 for June, they are approaching their all-time high of 557,000 set in December 2000. Further, the gains are widespread among occupational groups in the German economy. Over the last year, total vacancies have increased 128,000; of these, 28,000 are in metal-working and machining jobs, 12,000 in administrative service functions, and 11,000 in construction. Nearly every category showed some year-on-year increase. So labor demand is looking better. We hope that soon translates into more workers.

<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/GERMANY/@D5/@D5.HTM">Germany: SA, ex as noted</a></th>
<th scope="col">June 2006</th>
<th scope="col">May 2006</th>
<th scope="col">Apr 2006</th>
<th scope="col">Year Ago</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">LFS Employment (mil)</td>
<td>--</td>
<td>38.72</td>
<td>38.68</td>
<td>38.66</td>
<td>38.67</td>
<td>38.78</td>
<td>38.63</td>
</tr>
<tr>
<td class="firstcol">Change (thous)</td>
<td>--</td>
<td>+43</td>
<td>+18</td>
<td>+5</td>
<td>-12</td>
<td>16</td>
<td>-11</td>
</tr>
<tr class="odd">
<td class="firstcol">Yr/Yr % Chg NSA</td>
<td>--</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>+0.2</td>
<td>-0.4</td>
<td>+0.5</td>
<td>-0.3</td>
</tr>
<tr>
<td class="firstcol">Unemployment Rate &nbsp; (%, ILO Def.)</td>
<td>--</td>
<td>8.0</td>
<td>7.9</td>
<td>9.2</td>
<td>9.2</td>
<td>9.2</td>
<td>8.8</td>
</tr>
<tr class="odd">
<td class="firstcol">Registered Unemployment Rate (%)</td>
<td>10.9</td>
<td>11.0</td>
<td>11.3</td>
<td>11.9</td>
<td>11.6</td>
<td>10.6</td>
<td>10.5</td>
</tr>
<tr>
<td class="firstcol">Job Vacancies (thous)</td>
<td>531</td>
<td>506</td>
<td>485</td>
<td>403</td>
<td>394</td>
<td>225</td>
<td>258</td>
</tr>
</tbody>
</table>
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We last wrote about German labor markets three months ago. Since then there have been marginal changes. Employment shows signs of slight growth, according to seasonally adjusted labor force data. Unemployment by the ILO definition is [...]

Hesitant Improvement in German Labor Markets; Employment Still Flat, but Job Vacancies Are Increasing

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060629h.jpg" width="353">
The Federal Open Market Committee raised the target interest rate for Federal funds 25 basis points to 5.25% at today&#39;s meeting. This seventeenth 25 basis point increase since June of 2004 was the result of a unanimous decision.
The discount rate also was raised 25 basis points to 6.25%.
The action was widely expected by analysts though market disappointment that rates weren&#39;t increased 50 basis points may be evident in yesterday&#39;s rise in gold prices.
The Fed&#39;s rationale for a 25 basis point increase was that &quot;Recent indicators suggest that economic growth is moderating from its quite strong pace earlier this year ...&quot; and that &quot;inflation expectations remain contained.&quot;<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060629i.jpg" width="353">
Ever vigilant for building inflationary pressure, the Fed statement succinctly stated that &quot;the Committee judges that some inflation risks remain.&quot;
For the complete text of the Fed&#39;s latest press release please follow this <a href="http://www.federalreserve.gov/boarddocs/press/monetary/2006/20060629/default.htm">link</a>.
Market anticipation of recent Fed action is reflected in the decline, since early May, in gold futures prices and the so called &quot;TIPS spread.&quot;
Reading the Minds of Investors: An Empirical Term Structure Model for Policy Analysis from the Federal Reserve Board is available <a href="http://www.federalreserve.gov/pubs/feds/2004/200464/200464pap.pdf">here</a>.
Reflections on the Yield Curve and Monetary Policy is Chairman Ben S. Bernanke&#39;s March speech and it can be found <a href="http://www.federalreserve.gov/boarddocs/speeches/2006/20060320/default.htm">here</a>.

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The Federal Open Market Committee raised the target interest rate for Federal funds 25 basis points to 5.25% at today's meeting. This seventeenth 25 basis point increase since June of 2004 was the result of a unanimous decision. The [...]

Fed Funds Rate Increased to 5.25%

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060629c.jpg" width="353">
The Index of Help-Wanted Advertising from the Conference Board fell to 33 in May from 35 the prior month and an average of 39 last year. The decline dropped the figure to its lowest level since July 1961.
During the last ten years there has been a 60% correlation between the level of help-wanted advertising and the three month change in non-farm payrolls.
The proportion of labor markets with rising want-ad volume dropped to 27% versus an average 48% last 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>.
Help-wanted advertising and job vacancies from the Federal Reserve Bank of San Francisco can be found <a href="http://www.frbsf.org/publications/economics/letter/2005/el2005-02.pdf"> here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col></colgroup>
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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">May</th>
<th scope="col">April</th>
<th scope="col">May &#39;05</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">National Help Wanted Index</td>
<td>33</td>
<td>35</td>
<td>38</td>
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The Index of Help-Wanted Advertising from the Conference Board fell to 33 in May from 35 the prior month and an average of 39 last year. The decline dropped the figure to its lowest level since July 1961. During the last ten years [...]

Help-Wanted Advertising Lowest Since 1961

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060629d.jpg" width="353">
Initial unemployment insurance claims ticked up another 4,000 to 313,000 last week. The gain followed a 12,000 increase the prior week which was little changed. Consensus expectations had been for 305,000 claims.
The four-week moving average of initial claims fell to 305,500 (-6.3% y/y), the lowest level since late February.
Continuing claims for unemployment insurance rose 54,000 following a 66,000 decline the previous week which was revised from an 18,000 increase reported initially.
The insured rate of unemployment rose to 1.9% from a downwardly revised 1.8% the previous week.
The Yield Curve and Predicting Recessions from the Federal Reserve Board can be found <a href="http://www.federalreserve.gov/pubs/feds/2006/200607/200607pap.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></th>
<th scope="col">06/24/06</th>
<th scope="col">06/17/06</th>
<th scope="col">Y/Y</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Initial Claims</td>
<td>313</td>
<td>309</td>
<td>-0.6%</td>
<td>332</td>
<td>343</td>
<td>403</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Continuing Claims</td>
<td>--</td>
<td>2,409</td>
<td>-7.5%</td>
<td>2,663</td>
<td>2,923</td>
<td>3,530</td>
</tr>
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Initial unemployment insurance claims ticked up another 4,000 to 313,000 last week. The gain followed a 12,000 increase the prior week which was little changed. Consensus expectations had been for 305,000 claims. The four-week moving [...]

Initial Unemployment Insurance Claims Again Up Slightly

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: June 2006

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