Robert Brusca

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<p></p>
<p><img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100430e.jpg" style="border: 0px solid ; width: 353px; height: 265px; float: left;" align="left"></p>
<p>European unemployment continues to rise in March and the
figure reported for 2010 in-Q1 in Spain reached 20%; We report monthly
data in the table above. Only Germany shows any hint of a turn to lower
rates of unemployment. Of course we know that the unemployment rate
lags the cycle, but we are now pretty well into this cycle and the
ongoing unemployment difficulties are beyond what has been cyclical
normalcy.</p>
<p>The chart at the top juxtaposes the EMU trend to the US trend
for employment. Two things stand out. One is that the US series is more
volatile than the European series with generally higher highs and lower
lows. The other is that the low in this recent recession was much worse
in the US than it was for Europe where the social safety net is much
cushier. Still the turn after the fall has been much sharper in the US
where Yr/Yr job losses are now occurring at a slower pace than they are
in Europe.</p>
<p>One price that Europe pays for more government intervention in
its economy is less economic vitality. The US economy is mending faster
from what was admittedly a harder fall. But the US appears to be on the
road to repair as jobs and GDP are showing sharper turnarounds even if
they are still struggling</p>
<p>In Europe unemployment is very slow to repair and unemployment
rates are generally still rising. Spain&#8217;s 20% rate of unemployment in
2010 Q1 is a huge burden to that economy. Also it socks a wicked punch
to the rate for all of EMU that will give even the
inflation-angst-ridden ECB pause on how it views inflation risks.</p>
<p>One of the biggest problems for the ECB is making policy in a
one currency zone that has multiple fiscal policies. The regional
unemployment rates in Europe have a different meaning than the regional
and state-level reports in the United States where the country,
currency and fiscal situation all are under one umbrella (except for
state and local budgets, of course).</p>
<p>The recent problems in Greece and credit down grades meted out
to Spain and to Portugal simply underline the sort minefield though
which the ECB must pick its way. Even the tough-minded Germans did a
sharp about face yesterday when the situation in Greece turned sharply
for the worse. True, Germany&#8217;s stance is complicated by its being in
the middle of elections. But such is the risk in such a community. With
such a disparate flock of counties; there are always going to be
elections somewhere in Europe. The game of musical chairs played in
economics and by financial markets does not agree to let the music keep
going just because one key country has an election. Contrarily, chances
are that such an event brings more attention to bear on a tough call
that is in the middle of deciding.</p>
<p>Having separate fiscal policies has just revealed what its
risks are. Germans are hot that Greeks &#8216;lied&#8217; bout their fiscal
position and did it for the second time. But I really don&#8217;t see any
reason for surprise. These countries want to have separate fiscal
polices and separate political relations. Still they do want to become
a single economic zone but not a country called &#8216;Europe.&#8217; Their
tendency to call themselves European breaks down into a laughable faced
of falsity when things go wrong. Then they return to being German, or
Dutch, or Greek, or whatever.</p>
<p>As to their relations, nations have always lied to one
another. It is known as diplomacy. Diplomats are among the best trained
in their respective countries and they are taught to meet you face to
face and to mis-represent their country&#8217;s views from time to time for
their own advantage speaking to you in your language and doing it with
eloquence. I don&#8217;t see why Germans are so upset that Greeks fudged
their fiscal position because to the Greeks it may have seemed &#8216;fair
game.&#8217; Clearly the Mass-Trick laws do not punish a county enough for
cheating yet its restrictions are burdensome enough to make nations
want to avoid them and cheat. Are the Mass-trick restrictions too
severe to be obeyed?</p>
<p>Europe must take a good hard look at itself and decide what
relations it wants to reserve for its member countries and which it
wants to assign to an amalgamated European zone ( it already has done
this is the treaty that was &#8216;approved across member countries. But it
may need to do some fine tuning on what the &#8216;state&#8217;s&#8217; rights and
responsibilities really are). We need to know in what sense EMU is
Europe and what sense is it not. And Europeans need to figure out when
they draw that line exactly what it means.</p>
<p>If they are going to continue to have the usual diplomatic
relations, and if they do not want those standards to percolate to
their economic relations, then they are in need of requiring an
independent AUDIT for each country just as there is such a requirement
for a bank. Because either you can believe the numbers or you can&#8217;t.
Europe needs to adopt one common set of budget accounting rules and to
stick to them, to monitor them (audit compliance to them) and to
enforce them. Then it may have a chance to succeed under its separate
country/budget model should it choose to stick with it.</p>
<p>Even if it does this it will find its economic results will
remain disparate because Europe is not uniform.</p>
</span>
<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="7" scope="col"><b>Unemployment rate and changes</b>
</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td style="font-weight: bold;" class="firstcol">&nbsp;
&nbsp;Rate</td>
<td style="font-weight: bold;" colspan="3">&nbsp;Level</td>
<td style="font-weight: bold;" colspan="3">Simple Changes</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>Feb-10</td>
<td>Jan-10</td>
<td>Dec-09</td>
<td>3-Mo</td>
<td>6-Mo</td>
<td>12-Mo</td>
</tr>
<tr>
<td class="firstcol">&nbsp;
&nbsp;EU-Urate</td>
<td>9.6</td>
<td>9.5</td>
<td>9.4</td>
<td>0.2</td>
<td>0.4</td>
<td>1.3</td>
</tr>
<tr>
<td class="firstcol">&nbsp;
&nbsp;EMU-Urate</td>
<td>10.0</td>
<td>9.9</td>
<td>9.9</td>
<td>0.1</td>
<td>0.4</td>
<td>1.2</td>
</tr>
<tr class="odd">
<td style="font-weight: bold;" class="firstcol">&nbsp;
&nbsp;Unemployment rate and changes</td>
<td style="font-weight: bold;" colspan="3">m/m%</td>
<td style="font-weight: bold;" colspan="3">Changes (ar)</td>
</tr>
<tr>
<td class="firstcol">&nbsp;
&nbsp;EU-U 000s</td>
<td>0.6%</td>
<td>0.9%</td>
<td>0.5%</td>
<td>2.0%</td>
<td>4.3%</td>
<td>15.8%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;
&nbsp;EMU-U 000s</td>
<td>0.4%</td>
<td>0.7%</td>
<td>0.3%</td>
<td>1.4%</td>
<td>3.4%</td>
<td>13.3%</td>
</tr>
<tr class="odd">
<td style="font-weight: bold;" class="firstcol">&nbsp;
&nbsp;U-Rates</td>
<td style="font-weight: bold;" colspan="3">&nbsp;Level</td>
<td style="font-weight: bold;" colspan="3">Simple Changes</td>
</tr>
<tr>
<td class="firstcol">&nbsp;
&nbsp;Germany</td>
<td>7.5</td>
<td>7.5</td>
<td>7.5</td>
<td>0</td>
<td>-0.1</td>
<td>0.2</td>
</tr>
<tr>
<td class="firstcol">&nbsp;
&nbsp;France</td>
<td>10.1</td>
<td>10</td>
<td>10</td>
<td>0.1</td>
<td>0.4</td>
<td>1.2</td>
</tr>
<tr>
<td class="firstcol">&nbsp;
&nbsp;Spain</td>
<td>19</td>
<td>18.9</td>
<td>18.9</td>
<td>0</td>
<td>0.3</td>
<td>2.3</td>
</tr>
<tr>
<td class="firstcol">&nbsp;
&nbsp;USA</td>
<td>9.7</td>
<td>9.7</td>
<td>10</td>
<td>-0.3</td>
<td>0</td>
<td>1.5</td>
</tr>
<tr>
<td class="firstcol">&nbsp;
&nbsp;Japan</td>
<td>4.9</td>
<td>4.9</td>
<td>5.2</td>
<td>-0.4</td>
<td>-0.5</td>
<td>0.5</td>
</tr>
</tbody>
</table>
</body></html>

European unemployment continues to rise in March and the figure reported for 2010 in-Q1 in Spain reached 20%; We report monthly data in the table above. Only Germany shows any hint of a turn to lower rates of unemployment. Of course [...]

Euro Unemployment Bucks Image Of Recovering Region

Tom Moeller

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<p></p>
<p><img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100430a.jpg" style="width: 312px; height: 265px;"><img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100430b.jpg" style="width: 312px; height: 265px;"></p>
<p>A slower rate of inventory replenishment was warranted because
products weren't leaving the shelves quickly. As a result, real GDP
growth eased last quarter to 3.2% after the 5.6% jump during 4Q '09.
The latest roughly matched Consensus expectations for 3.4% growth.
Regardless, it was the third consecutive quarter of positive growth
after the recession when GDP fell 3.7% peak-to-trough, a postwar record.</p>
<p>The addition to growth from inventories fell to 1.6 percentage
points which was roughly half the 4Q add. Inventories also helped the
economy initially emerge from recession with a moderate 0.7
contribution to 3Q '09 GDP growth. Prior to these additions, inventory
liquidation had subtracted from GDP growth since 2005, a length of time
unprecedented in postwar history.</p>
<p>Growth in domestic final demand picked up last quarter to a
still-modest 2.2% after 1.4% 4Q growth. These rates compare to up to
9.0% in the early stages of earlier economic recoveries. Last quarter's
improvement was due to consumer spending growth of 3.6% after 1.6% 4Q
growth. Motor vehicle purchases fell for the second straight quarter
(+1.4% y/y) but spending on other consumer durables and clothing (2.1%
y/y) jumped. Spending on services also improved (1.1% y/y). Fixed
business investment growth remained moderate at 4.0% compared to
double-digit growth early in past recoveries. Equipment spending surged
13.4% (6.9% y/y) offset by a 14.0% decline (-17.0% y/y) in structures.
With an on again-off again pattern, residential investment fell 10.9%
after just two quarters of positive growth. Finally, government
spending fell at a 1.8% rate as budget cutbacks caused state &amp;
local spending to fall (-0.7% y/y) for the fifth time in the last six
quarters.</p>
<p>Deterioration in the foreign trade deficit subtracted 0.6
percentage points from last quarter's gain in GDP. It was the second
negative effect in the last three quarters. Growth in exports of 5.8%
(10.1% y/y) was much lower than during prior two quarters. In addition
import growth of 8.9% (6.9% y/y) was reduced from double-digit rates in
3Q &amp; 4Q '09.</p>
<p>Price inflation remained low at 0.9% as measured by the
chained GDP price index. The y/y gain of just 0.4% was the lowest since
the early-1950s. The personal consumption chain price index rose a
reduced 1.5% but year-to-year prices increased an improved 2.0%, the
quickest since 2008. The price index for fixed business investment fell
1.7% (-3.0% y/y), the fifth consecutive quarterly decline, but the
residential investment price index rose for the second consecutive
quarter (-1.0% y/y).</p>
</span>
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100430c.jpg" style="width: 312px; height: 265px;"><img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100430d.jpg" style="width: 312px; height: 265px;">
<table>
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E7/@E701/@E701.HTM"><b>Chained 2005$, % AR</b></a></th>
<th scope="col"><b>1Q '10</b></th>
<th scope="col"><b>4Q '09&nbsp; </b></th>
<th scope="col"><b>3Q '09</b></th>
<th scope="col"><b>1Q Y/Y</b></th>
<th scope="col"><b>2009</b></th>
<th scope="col"><b>2008</b></th>
<th scope="col"><b>2007</b></th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol"><b>GDP</b></td>
<td>3.2</td>
<td>5.6</td>
<td>2.2</td>
<td>2.5</td>
<td>-2.4</td>
<td>0.4</td>
<td>2.1</td>
</tr>
<tr>
<td class="firstcol"><b>&nbsp;&nbsp;
Inventory Effect</b></td>
<td>1.6</td>
<td>3.8</td>
<td>0.7</td>
<td>1.1</td>
<td>-0.7</td>
<td>-0.4</td>
<td>-0.4</td>
</tr>
<tr class="odd">
<td class="firstcol"><b>Final Sales</b></td>
<td>1.6</td>
<td>1.7</td>
<td>1.5</td>
<td>1.4</td>
<td>-1.7</td>
<td>0.8</td>
<td>2.5</td>
</tr>
<tr>
<td class="firstcol"><b>&nbsp;&nbsp;
Foreign Trade Effect</b></td>
<td>-0.6</td>
<td>0.3</td>
<td>-0.8</td>
<td>0.2</td>
<td>1.0</td>
<td>-1.2</td>
<td>0.8</td>
</tr>
<tr class="odd">
<td class="firstcol"><b>Domestic Final Demand</b></td>
<td>2.2</td>
<td>1.4</td>
<td>2.3</td>
<td>1.2</td>
<td>-2.7</td>
<td>-0.4</td>
<td>1.7</td>
</tr>
<tr>
<td class="firstcol"><b>&nbsp;&nbsp;
Personal Consumption</b></td>
<td>3.6</td>
<td>1.6</td>
<td>2.8</td>
<td>1.8</td>
<td>-0.6</td>
<td>-0.2</td>
<td>2.7</td>
</tr>
<tr class="odd">
<td class="firstcol"><b>&nbsp;&nbsp;
Business Fixed Investment</b></td>
<td>4.0</td>
<td>5.3</td>
<td>-5.9</td>
<td>-1.7</td>
<td>-17.8</td>
<td>1.6</td>
<td>6.2</td>
</tr>
<tr>
<td class="firstcol"><b>&nbsp;&nbsp;
Residential Investment</b></td>
<td>-10.9</td>
<td>3.7</td>
<td>18.9</td>
<td>4.2</td>
<td>-20.5</td>
<td>-22.9</td>
<td>-18.5</td>
</tr>
<tr class="odd">
<td class="firstcol"><b>&nbsp;&nbsp;
Government Spending</b></td>
<td>-1.8</td>
<td>-1.3</td>
<td>2.7</td>
<td>2.5</td>
<td>1.8</td>
<td>3.1</td>
<td>1.7</td>
</tr>
<tr>
<td class="firstcol"><b>Chained GDP Price Index</b></td>
<td>0.9</td>
<td>0.5</td>
<td>0.4</td>
<td>0.4</td>
<td>1.2</td>
<td>2.1</td>
<td>2.9</td>
</tr>
</tbody>
</table>
</body></html>

A slower rate of inventory replenishment was warranted because products weren't leaving the shelves quickly. As a result, real GDP growth eased last quarter to 3.2% after the 5.6% jump during 4Q '09. The latest roughly matched [...]

U.S. GDP Growth Moderates As Lift From Inventories Fades

U.S. GDP Growth Moderates As LiftFrom Inventories Fades

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<p></p>
<p><img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100429g.jpg" style="border: 0px solid ; width: 353px; height: 265px; float: left;" align="left"></p>
<p>Money growth rates in Europe are starting to edge higher, but
ever so slowly. At a 2.2% annual rate pace over three months compared
to a 1.5% pace Yr/Yr is not much of an acceleration. Credit growth is
however weaker over three months than over 12-months. In the US money
growth is decelerating. In Japan it&#8217;s decelerating. In the UK, where
inflation has started to flash some less than comfortable numbers,
there is an issue. Money growth is in a major acceleration in the UK
for M4 which is up at nearly a 40% annual rate pace over three months.</p>
<p>While the growth rates are different, the main themes remain
in tact when we look at the growth rates of real money balances - money
growth deflated by inflation.</p>
<p>Basically money is not much of a stimulant anywhere except in
the UK.</p>
<p>Still we have great concerns among some economists that the
fiscal spending and coming monetary excesses (paradoxically, fiscal
issues already are taking what must be regarded as a deflationary toll
in Europe) will result in a bout of inflation. For the most part,
market pricing does not see that risk. Some of the hardest-money
economists still are very worried. Some worry that the economy will
recover and banks will begin to loan and this excess of reserves at the
Fed will be unleashed into something that can become a torrent of
inflation.</p>
<p>Then, others among us worry about getting hit by meteors from
outer space.</p>
<p>While a cyclical pick up in lending is something we do expect
in every business cycle, right now bankers are hunkered down. It is
very hard to see how they are going to turn the lending spigot from a
slow drip to full throttle in some quick fashion. Bank lending
committees are notoriously slow in shifting their policy stance. The US
economy and the European economies have a huge amount of slack.
Conservative hard-money economists also point out that a lot of
capacity was destroyed in the economic downturn. They warn that capital
may appear to be less utilized than it really is. While that is a good
point it is largely academic. The amount of slack in the economy is so
great it&#8217;s like warning that the other rim of the Grand Canyon might be
five feet closer than we thought so be careful about what might want to
&#8216;fit inside of it.&#8217;</p>
<p>There will come a time to worry about these things. But
unemployment in Europe is high. In the US 8.5 million people net were
taken off the job rolls. In addition, many first-time job seekers were
not able to find work. There is a great deal of slack. Money supply
growth is slow. Europe&#8217;s fiscal situation has deteriorated making it a
drag on the outlook despite some recent upbeat reports on growth. The
question of the role of the deterioration in confidence in the e-Zone
will play out over months not over hours. The US has its own fiscal
challenge which will make public policy more contractionary ahead. Why
all the worry about excess stimulus and inflation?</p>
<p>For the time being, despite high oil prices and some pressures
on commodity prices, we have to signal the &#8216;all clear&#8217; on the inflation
front. Not enough growth remains as the near term clear and present
danger. Inflation always lurks but it is, for the moment, unarmed and
not very dangerous. Inflation is more lost in the woods and confused
than it is dangerously lurking in some dark alley-way to mug an
unsuspecting policymaker.</p>
</span>

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr><th colspan="8" scope="col"> <b>Look at Global and Euro Liquidity Trends</b></th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">&nbsp;
&nbsp;Saar-all</td>
<td colspan="3">Euro Measures (E13):
Money &amp; Credit</td>
<td colspan="3">G-10 Major Markets:
Money</td>
<td>Memo</td>
</tr>
<tr>
<td class="firstcol">&nbsp;</td>
<td>&#8364;-Supply M2</td>
<td>Credit:Resid</td>
<td>Loans</td>
<td>$US M2</td>
<td>&#163;UK M4</td>
<td>&#165;Jpn M2+Cds</td>
<td>OIL:WTI</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;
&nbsp; 3-MO</td>
<td>2.2%</td>
<td>-0.6%</td>
<td>0.8%</td>
<td>-1.5%</td>
<td>39.5%</td>
<td>1.8%</td>
<td>38.3%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;
&nbsp; 6-MO</td>
<td>0.9%</td>
<td>-0.7%</td>
<td>0.1%</td>
<td>1.4%</td>
<td>19.5%</td>
<td>2.1%</td>
<td>35.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;
&nbsp; 12-MO</td>
<td>1.6%</td>
<td>-0.1%</td>
<td>-0.5%</td>
<td>1.5%</td>
<td>10.6%</td>
<td>2.6%</td>
<td>70.1%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;
&nbsp; 2Yr</td>
<td>4.5%</td>
<td>2.5%</td>
<td>1.5%</td>
<td>5.3%</td>
<td>13.7%</td>
<td>2.4%</td>
<td>-12.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;
&nbsp; 3Yr</td>
<td>6.4%</td>
<td>5.9%</td>
<td>4.6%</td>
<td>5.9%</td>
<td>13.0%</td>
<td>2.4%</td>
<td>10.1%</td>
</tr>
<tr>
<td colspan="8" class="firstcol">Real Balances: deflated
by Own CPI. Oil deflated by US CPI</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;
&nbsp; 3-MO</td>
<td>0.3%</td>
<td>-2.5%</td>
<td>-1.1%</td>
<td>-2.4%</td>
<td>32.8%</td>
<td>0.6%</td>
<td>37.0%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;
&nbsp; 6-MO</td>
<td>-1.4%</td>
<td>-2.9%</td>
<td>-2.1%</td>
<td>-0.3%</td>
<td>14.7%</td>
<td>1.9%</td>
<td>33.6%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;
&nbsp; 12-MO</td>
<td>0.2%</td>
<td>-1.6%</td>
<td>-1.9%</td>
<td>-0.9%</td>
<td>7.0%</td>
<td>3.7%</td>
<td>66.1%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;
&nbsp; 2Yr</td>
<td>3.4%</td>
<td>1.5%</td>
<td>0.5%</td>
<td>4.2%</td>
<td>10.2%</td>
<td>3.1%</td>
<td>-13.1%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;
&nbsp; 3Yr</td>
<td>4.5%</td>
<td>4.0%</td>
<td>2.6%</td>
<td>3.9%</td>
<td>9.8%</td>
<td>2.4%</td>
<td>8.0%</td>
</tr>
<tr>
<td colspan="8" class="firstcol">Japan's March CPI is
estimated to complete this table; The February value is used</td>
</tr>
</tbody>
</table>
</body></html>

Money growth rates in Europe are starting to edge higher, but ever so slowly. At a 2.2% annual rate pace over three months compared to a 1.5% pace Yr/Yr is not much of an acceleration. Credit growth is however weaker over three months [...]

Globally Money Growth Is Just Not Getting Into Gear. So Where’s The Real Risk?

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<span id="articletext">
<p></p>
<p><img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100429d.jpg" style="border: 0px solid ; width: 353px; height: 265px; float: left;" align="left"></p>
<p>The job market is on the mend. The Bureau of Labor Statistics
reported that initial claims for jobless insurance fell 11,000 to
448,000 after the prior week's revised 21,000 drop. The latest level
equaled the March average and roughly matched Consensus expectations
for a decline to 445,000 claims. Last week's figure was down from the
recession peak of 651,000 reached in March of 2009. The four-week
moving average of initial claims nudged up to 462,500.</p>
<p>A 18,000 decline in continuing claims for unemployment
insurance during the latest week added to a revised 23,000 drop during
the prior week. They were down by one-third from the June '09 peak. The
overall decline is a function of the improved job market but also
reflects the exhaustion of 26 weeks of unemployment benefits.
Continuing claims provide an indication of workers' ability to find
employment. The four-week average of continuing claims also fell to a
cycle low of 4.639 mil. This series dates back to 1966.</p>
<p>Extended benefits for unemployment insurance increased to
202,215. However, they were down by three-quarters from a peak of
597,688 reached in November.</p>
<p>The insured unemployment rate held steady at 3.6%. The rate
reached a high of 4.9% during May. During the last ten years, there has
been a 96% correlation between the level of the insured unemployment
rate and the overall rate of unemployment published by the Bureau of
Labor Statistics.</p>
<p>The highest insured unemployment rates in the week ending
April 10 were in Alaska (6.6 percent), Puerto Rico (6.4), Oregon (5.9),
Wisconsin (5.6), Pennsylvania (5.4), Nevada (5.2), California (5.0),
Idaho (5.0), Montana (5.0), Michigan (4.9), and North Carolina (4.9).
The lowest insured unemployment rates were in Virginia (1.8), Texas
(2.2), Georgia (2.9), Florida (3.1), Maryland (3.2), Wyoming (3.2),
Ohio (3.5), New York (3.7) and Maine (3.9). These data are not
seasonally adjusted but the overall insured unemployment rate is.</p>
<p>The unemployment insurance claims data is available in Haver's
<b>WEEKLY</b> database and the state data is in the <b>REGIONW</b>
database.</p>
<p><b>Employment Survey Delivers JOLTS</b> from the
Federal Reserve Bank of Atlanta can be found <a href="http://www.frbatlanta.org/documents/pubs/econsouth/q110econsouth.pdf#page=8">here</a>.</p>
</span><img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100429e.jpg" style="width: 312px; height: 265px;"><img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100429f.jpg" style="width: 312px; height: 265px;">
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><b><a ;="" href="http://www.haverselect.com/dlx/WEEKLY/@W5/@W507/@W507.HTM" style="color: black;">Unemployment Insurance (000s)</a></b></th>
<th scope="col"><b>04/24/10</b></th>
<th scope="col"><b>04/17/10</b></th>
<th scope="col"><b>04/10/10</b></th>
<th scope="col"><b>Y/Y</b></th>
<th scope="col"><b>2009</b></th>
<th scope="col"><b>2008</b></th>
<th scope="col"><b>2007</b></th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Initial Claims</td>
<td>448</td>
<td>459</td>
<td>480</td>
<td>-28.1%</td>
<td>572</td>
<td>419</td>
<td>321</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>--</td>
<td>4,645</td>
<td>4,663</td>
<td>-25.2%</td>
<td>5,809</td>
<td>3,340</td>
<td>2,549</td>
</tr>
<tr class="odd">
<td class="firstcol">Insured Unemployment Rate (%)</td>
<td>--</td>
<td>3.6</td>
<td>3.6</td>
<td>4.6(4/2009)</td>
<td>4.4</td>
<td>2.5</td>
<td>1.9</td>
</tr>
</tbody>
</table>
</body></html>

The job market is on the mend. The Bureau of Labor Statistics reported that initial claims for jobless insurance fell 11,000 to 448,000 after the prior week's revised 21,000 drop. The latest level equaled the March average and roughly [...]

U.S. Unemployment Insurance Claims Fall To Last Month's Low

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<span id="articletext">
<p></p>
<p><img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100322a.jpg" align="left" border="0" height="265" width="363"></p>
<p>Weather constraints on U.S. economic growth abated last month,
according to the Chicago Fed National Activity Index (CFNAI) from the
Federal Reserve Bank of Chicago. Their index rose to -0.07 and
recovered all of its February decline. The increase added to earlier
gains from the series' low of -4.14 reached in January '09. During the
last ten years the has been a 76% correlation between the index level
and the q/q change in real GDP.</p>
<p><b>The three-month moving average of the index, which
smoothes out some of the series' volatility, also improved to -0.18.</b></p>
<p>An index level at or below -0.70 typically has indicated
negative U.S. economic growth. A zero value of the CFNAI indicates that
the economy is expanding at its historical trend rate of growth of
roughly 3.0%. The complete CFNAI report is available <a href="http://www.chicagofed.org/digital_assets/publications/cfnai/2010/cfnai_april2010.pdf">here</a>.</p>
<p>The Chicago Fed indicated that rebounds in the employment and
in the production components contributed to the total index
improvement. Overall, 50 of the 85 individual indicators made positive
contributions to the index while 34 made negative contributions. The
CFNAI is a weighted average of 85 indicators of economic activity. The
indicators reflect activity in the following categories: production
&amp; income, the labor market, personal consumption &amp;
housing, manufacturing &amp; trade sales, and inventories &amp;
orders.</p>
<p>In a separate survey, the Chicago Fed indicated that its
Midwest manufacturing index improved during February to its highest
level since December 2008. Indicators for the auto, steel, machinery
and resource sectors each rose. The Chicago Federal Reserve figures are
available in Haver's <b>SURVEYS </b>database.</p>
</span>
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100429b.jpg" style="width: 312px; height: 265px;"><img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100429c.jpg" style="width: 312px; height: 265px;">
<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/SURVEYS/@S5/@S503/@S503.HTM"><b>Chicago Fed</b></a></th>
<th scope="col"><b>March</b></th>
<th scope="col"><b>February</b></th>
<th scope="col"><b>January</b></th>
<th scope="col"><b>March '09</b></th>
<th scope="col"><b>2009</b></th>
<th scope="col"><b>2008</b></th>
<th scope="col"><b>2007</b></th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">CFNAI</td>
<td>-0.07</td>
<td>-0.44</td>
<td>-0.05</td>
<td>-3.37</td>
<td>-1.62</td>
<td>-1.79</td>
<td>-0.35</td>
</tr>
<tr>
<td class="firstcol">&nbsp; 3-Month Moving
Average</td>
<td>-0.18</td>
<td>-0.31</td>
<td>-0.11</td>
<td>-3.33</td>
<td>--</td>
<td>--</td>
<td>--</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Personal Consumption &amp; Housing&nbsp;</td>
<td>-0.42</td>
<td>-0.41</td>
<td>-0.45</td>
<td>-0.56</td>
<td>-0.49</td>
<td>-0.32</td>
<td>-0.09</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Employment, Unemployment &amp; Hours</td>
<td>0.12</td>
<td>-0.13</td>
<td>0.05</td>
<td>-1.45</td>
<td>-0.76</td>
<td>-0.67</td>
<td>-0.15</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Production &amp; Income</td>
<td>0.18</td>
<td>0.04</td>
<td>0.44</td>
<td>-0.99</td>
<td>-0.24</td>
<td>-0.56</td>
<td>-0.05</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Sales, Inventories &amp; Orders</td>
<td>0.06</td>
<td>0.06</td>
<td>-0.06</td>
<td>-0.38</td>
<td>-0.14</td>
<td>-0.25</td>
<td>-0.06</td>
</tr>
</tbody>
</table>
</body></html>

Weather constraints on U.S. economic growth abated last month, according to the Chicago Fed National Activity Index (CFNAI) from the Federal Reserve Bank of Chicago. Their index rose to -0.07 and recovered all of its February decline. [...]

Chicago Fed Index Improves Modestly

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<span id="articletext">
<p></p>
<p><img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100322a.jpg" align="left" border="0" height="265" width="363"></p>
<p>Weather constraints on U.S. economic growth abated last month,
according to the Chicago Fed National Activity Index (CFNAI) from the
Federal Reserve Bank of Chicago. Their index rose to -0.07 and
recovered all of its February decline. The increase added to earlier
gains from the series' low of -4.14 reached in January '09. During the
last ten years the has been a 76% correlation between the index level
and the q/q change in real GDP.</p>
<p><b>The three-month moving average of the index, which
smoothes out some of the series' volatility, also improved to -0.18.</b></p>
<p>An index level at or below -0.70 typically has indicated
negative U.S. economic growth. A zero value of the CFNAI indicates that
the economy is expanding at its historical trend rate of growth of
roughly 3.0%. The complete CFNAI report is available <a 
 href="http://www.chicagofed.org/digital_assets/publications/cfnai/2010/cfnai_april2010.pdf">here</a>.</p>
<p>The Chicago Fed indicated that rebounds in the employment and
in the production components contributed to the total index
improvement. Overall, 50 of the 85 individual indicators made positive
contributions to the index while 34 made negative contributions. The
CFNAI is a weighted average of 85 indicators of economic activity. The
indicators reflect activity in the following categories: production
&amp; income, the labor market, personal consumption &amp;
housing, manufacturing &amp; trade sales, and inventories &amp;
orders.</p>
<p>In a separate survey, the Chicago Fed indicated that its
Midwest manufacturing index improved during February to its highest
level since December 2008. Indicators for the auto, steel, machinery
and resource sectors each rose. The Chicago Federal Reserve figures are
available in Haver's <b>SURVEYS </b>database.</p>
</span>
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100429b.jpg" style="width: 312px; height: 265px;"><img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100429c.jpg" style="width: 312px; height: 265px;">
<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/SURVEYS/@S5/@S503/@S503.HTM"><b>Chicago
Fed</b></a></th>
    <th scope="col"><b>March</b></th>
    <th scope="col"><b>February</b></th>
    <th scope="col"><b>January</b></th>
    <th scope="col"><b>March '09</b></th>
    <th scope="col"><b>2009</b></th>
    <th scope="col"><b>2008</b></th>
    <th scope="col"><b>2007</b></th>
  </tr>
  </thead>
  <tbody>
    <tr class="odd">
      <td class="firstcol">CFNAI</td>
      <td>-0.07</td>
      <td>-0.44</td>
      <td>-0.05</td>
      <td>-3.37</td>
      <td>-1.62</td>
      <td>-1.79</td>
      <td>-0.35</td>
    </tr>
    <tr>
      <td class="firstcol">&nbsp; 3-Month Moving
Average</td>
      <td>-0.18</td>
      <td>-0.31</td>
      <td>-0.11</td>
      <td>-3.33</td>
      <td>--</td>
      <td>--</td>
      <td>--</td>
    </tr>
    <tr class="odd">
      <td class="firstcol">&nbsp;&nbsp;&nbsp;
Personal Consumption &amp; Housing&nbsp;</td>
      <td>-0.42</td>
      <td>-0.41</td>
      <td>-0.45</td>
      <td>-0.56</td>
      <td>-0.49</td>
      <td>-0.32</td>
      <td>-0.09</td>
    </tr>
    <tr>
      <td class="firstcol">&nbsp;&nbsp;&nbsp;
Employment, Unemployment &amp; Hours</td>
      <td>0.12</td>
      <td>-0.13</td>
      <td>0.05</td>
      <td>-1.45</td>
      <td>-0.76</td>
      <td>-0.67</td>
      <td>-0.15</td>
    </tr>
    <tr class="odd">
      <td class="firstcol">&nbsp;&nbsp;&nbsp;
Production &amp; Income</td>
      <td>0.18</td>
      <td>0.04</td>
      <td>0.44</td>
      <td>-0.99</td>
      <td>-0.24</td>
      <td>-0.56</td>
      <td>-0.05</td>
    </tr>
    <tr>
      <td class="firstcol">&nbsp;&nbsp;&nbsp;
Sales, Inventories &amp; Orders</td>
      <td>0.06</td>
      <td>0.06</td>
      <td>-0.06</td>
      <td>-0.38</td>
      <td>-0.14</td>
      <td>-0.25</td>
      <td>-0.06</td>
    </tr>
  </tbody>
</table>
<span id="articletitle">U.S. Unemployment Insurance Claims
Fall To Last Month's Low</span><br>
<span id="byline">by <a href="/comment/Moeller.html">Tom
Moeller</a> April 29, 2010</span>
<span id="articletext">
<p></p>
<p><img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100429d.jpg" style="border: 0px solid ; width: 353px; height: 265px; float: left;" align="left"></p>
<p>The job market is on the mend. The Bureau of Labor Statistics
reported that initial claims for jobless insurance fell 11,000 to
448,000 after the prior week's revised 21,000 drop. The latest level
equaled the March average and roughly matched Consensus expectations
for a decline to 445,000 claims. Last week's figure was down from the
recession peak of 651,000 reached in March of 2009. The four-week
moving average of initial claims nudged up to 462,500.</p>
<p>A 18,000 decline in continuing claims for unemployment
insurance during the latest week added to a revised 23,000 drop during
the prior week. They were down by one-third from the June '09 peak. The
overall decline is a function of the improved job market but also
reflects the exhaustion of 26 weeks of unemployment benefits.
Continuing claims provide an indication of workers' ability to find
employment. The four-week average of continuing claims also fell to a
cycle low of 4.639 mil. This series dates back to 1966.</p>
<p>Extended benefits for unemployment insurance increased to
202,215. However, they were down by three-quarters from a peak of
597,688 reached in November.</p>
<p>The insured unemployment rate held steady at 3.6%. The rate
reached a high of 4.9% during May. During the last ten years, there has
been a 96% correlation between the level of the insured unemployment
rate and the overall rate of unemployment published by the Bureau of
Labor Statistics.</p>
<p>The highest insured unemployment rates in the week ending
April 10 were in Alaska (6.6 percent), Puerto Rico (6.4), Oregon (5.9),
Wisconsin (5.6), Pennsylvania (5.4), Nevada (5.2), California (5.0),
Idaho (5.0), Montana (5.0), Michigan (4.9), and North Carolina (4.9).
The lowest insured unemployment rates were in Virginia (1.8), Texas
(2.2), Georgia (2.9), Florida (3.1), Maryland (3.2), Wyoming (3.2),
Ohio (3.5), New York (3.7) and Maine (3.9). These data are not
seasonally adjusted but the overall insured unemployment rate is.</p>
<p>The unemployment insurance claims data is available in Haver's
<b>WEEKLY</b> database and the state data is in the <b>REGIONW</b>
database.</p>
<p><b>Employment Survey Delivers JOLTS</b> from the
Federal Reserve Bank of Atlanta can be found <a 
 href="http://www.frbatlanta.org/documents/pubs/econsouth/q110econsouth.pdf#page=8">here</a>.</p>
</span>
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100429e.jpg" style="width: 312px; height: 265px;"><img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100429f.jpg" style="width: 312px; height: 265px;">
<table border="0" cellspacing="0" width="100%">
  <colgroup><col><col><col><col><col><col><col></colgroup>
  <thead><tr>
    <th scope="col" class="firstcol"><b><a 
 ;=""
 href="http://www.haverselect.com/dlx/WEEKLY/@W5/@W507/@W507.HTM"
 style="color: black;">Unemployment Insurance (000s)</a></b></th>
    <th scope="col"><b>04/24/10</b></th>
    <th scope="col"><b>04/17/10</b></th>
    <th scope="col"><b>04/10/10</b></th>
    <th scope="col"><b>Y/Y</b></th>
    <th scope="col"><b>2009</b></th>
    <th scope="col"><b>2008</b></th>
    <th scope="col"><b>2007</b></th>
  </tr>
  </thead>
  <tbody>
    <tr class="odd">
      <td class="firstcol">Initial Claims</td>
      <td>448</td>
      <td>459</td>
      <td>480</td>
      <td>-28.1%</td>
      <td>572</td>
      <td>419</td>
      <td>321</td>
    </tr>
    <tr>
      <td class="firstcol">Continuing Claims</td>
      <td>--</td>
      <td>4,645</td>
      <td>4,663</td>
      <td>-25.2%</td>
      <td>5,809</td>
      <td>3,340</td>
      <td>2,549</td>
    </tr>
    <tr class="odd">
      <td class="firstcol">Insured Unemployment Rate (%)</td>
      <td>--</td>
      <td>3.6</td>
      <td>3.6</td>
      <td>4.6(4/2009)</td>
      <td>4.4</td>
      <td>2.5</td>
      <td>1.9</td>
    </tr>
  </tbody>
</table>
<span id="articletitle">Globally Money Growth Is Just Not
Getting Into Gear. So Where&#8217;s The Real Risk?</span><br>
<span id="byline">by <a href="/comment/Brusca.html">Robert
Brusca</a> April 29, 2010</span>
<span id="articletext">
<p></p>
<p><img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100429g.jpg" style="border: 0px solid ; width: 353px; height: 265px; float: left;" align="left"></p>
<p>Money growth rates in Europe are starting to edge higher, but
ever so slowly. At a 2.2% annual rate pace over three months compared
to a 1.5% pace Yr/Yr is not much of an acceleration. Credit growth is
however weaker over three months than over 12-months. In the US money
growth is decelerating. In Japan it&#8217;s decelerating. In the UK, where
inflation has started to flash some less than comfortable numbers,
there is an issue. Money growth is in a major acceleration in the UK
for M4 which is up at nearly a 40% annual rate pace over three months.</p>
<p>While the growth rates are different, the main themes remain
in tact when we look at the growth rates of real money balances - money
growth deflated by inflation.</p>
<p>Basically money is not much of a stimulant anywhere except in
the UK.</p>
<p>Still we have great concerns among some economists that the
fiscal spending and coming monetary excesses (paradoxically, fiscal
issues already are taking what must be regarded as a deflationary toll
in Europe) will result in a bout of inflation. For the most part,
market pricing does not see that risk. Some of the hardest-money
economists still are very worried. Some worry that the economy will
recover and banks will begin to loan and this excess of reserves at the
Fed will be unleashed into something that can become a torrent of
inflation.</p>
<p>Then, others among us worry about getting hit by meteors from
outer space.</p>
<p>While a cyclical pick up in lending is something we do expect
in every business cycle, right now bankers are hunkered down. It is
very hard to see how they are going to turn the lending spigot from a
slow drip to full throttle in some quick fashion. Bank lending
committees are notoriously slow in shifting their policy stance. The US
economy and the European economies have a huge amount of slack.
Conservative hard-money economists also point out that a lot of
capacity was destroyed in the economic downturn. They warn that capital
may appear to be less utilized than it really is. While that is a good
point it is largely academic. The amount of slack in the economy is so
great it&#8217;s like warning that the other rim of the Grand Canyon might be
five feet closer than we thought so be careful about what might want to
&#8216;fit inside of it.&#8217;</p>
<p>There will come a time to worry about these things. But
unemployment in Europe is high. In the US 8.5 million people net were
taken off the job rolls. In addition, many first-time job seekers were
not able to find work. There is a great deal of slack. Money supply
growth is slow. Europe&#8217;s fiscal situation has deteriorated making it a
drag on the outlook despite some recent upbeat reports on growth. The
question of the role of the deterioration in confidence in the e-Zone
will play out over months not over hours. The US has its own fiscal
challenge which will make public policy more contractionary ahead. Why
all the worry about excess stimulus and inflation?</p>
<p>For the time being, despite high oil prices and some pressures
on commodity prices, we have to signal the &#8216;all clear&#8217; on the inflation
front. Not enough growth remains as the near term clear and present
danger. Inflation always lurks but it is, for the moment, unarmed and
not very dangerous. Inflation is more lost in the woods and confused
than it is dangerously lurking in some dark alley-way to mug an
unsuspecting policymaker.</p>
</span>

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr><th colspan="8" scope="col"> <b>Look at Global and Euro Liquidity Trends</b></th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">&nbsp;
&nbsp;Saar-all</td>
<td colspan="3">Euro Measures (E13):
Money &amp; Credit</td>
<td colspan="3">G-10 Major Markets:
Money</td>
<td>Memo</td>
</tr>
<tr>
<td class="firstcol">&nbsp;</td>
<td>&#8364;-Supply M2</td>
<td>Credit:Resid</td>
<td>Loans</td>
<td>$US M2</td>
<td>&#163;UK M4</td>
<td>&#165;Jpn M2+Cds</td>
<td>OIL:WTI</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;
&nbsp; 3-MO</td>
<td>2.2%</td>
<td>-0.6%</td>
<td>0.8%</td>
<td>-1.5%</td>
<td>39.5%</td>
<td>1.8%</td>
<td>38.3%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;
&nbsp; 6-MO</td>
<td>0.9%</td>
<td>-0.7%</td>
<td>0.1%</td>
<td>1.4%</td>
<td>19.5%</td>
<td>2.1%</td>
<td>35.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;
&nbsp; 12-MO</td>
<td>1.6%</td>
<td>-0.1%</td>
<td>-0.5%</td>
<td>1.5%</td>
<td>10.6%</td>
<td>2.6%</td>
<td>70.1%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;
&nbsp; 2Yr</td>
<td>4.5%</td>
<td>2.5%</td>
<td>1.5%</td>
<td>5.3%</td>
<td>13.7%</td>
<td>2.4%</td>
<td>-12.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;
&nbsp; 3Yr</td>
<td>6.4%</td>
<td>5.9%</td>
<td>4.6%</td>
<td>5.9%</td>
<td>13.0%</td>
<td>2.4%</td>
<td>10.1%</td>
</tr>
<tr>
<td colspan="8" class="firstcol">Real Balances: deflated
by Own CPI. Oil deflated by US CPI</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;
&nbsp; 3-MO</td>
<td>0.3%</td>
<td>-2.5%</td>
<td>-1.1%</td>
<td>-2.4%</td>
<td>32.8%</td>
<td>0.6%</td>
<td>37.0%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;
&nbsp; 6-MO</td>
<td>-1.4%</td>
<td>-2.9%</td>
<td>-2.1%</td>
<td>-0.3%</td>
<td>14.7%</td>
<td>1.9%</td>
<td>33.6%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;
&nbsp; 12-MO</td>
<td>0.2%</td>
<td>-1.6%</td>
<td>-1.9%</td>
<td>-0.9%</td>
<td>7.0%</td>
<td>3.7%</td>
<td>66.1%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;
&nbsp; 2Yr</td>
<td>3.4%</td>
<td>1.5%</td>
<td>0.5%</td>
<td>4.2%</td>
<td>10.2%</td>
<td>3.1%</td>
<td>-13.1%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;
&nbsp; 3Yr</td>
<td>4.5%</td>
<td>4.0%</td>
<td>2.6%</td>
<td>3.9%</td>
<td>9.8%</td>
<td>2.4%</td>
<td>8.0%</td>
</tr>
<tr>
<td colspan="8" class="firstcol">Japan's March CPI is
estimated to complete this table; The February value is used</td>
</tr>
</tbody>
</table>
</body>
</html>


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<br>

<span id="articletext">
<p></p>
<p><img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100428d.jpg" style="border: 0px solid ; width: 353px; height: 265px; float: left;" align="left"></p>
<p>Japan&#8217;s retail sales have made another strong monthly gain. In
the just-completed quarter, nominal retail sales are rising at an 11.3%
annual rate over the previous quarter&#8217;s level. Gains are strong across
the major retail categories we follow in the table above.</p>
<p>We are looking at the strongest Yr/Yr gains in Japan&#8217;s retail
sales in well over a decade. The results are a breath of fresh air amid
the sorts of news we are dealing with in markets today. News of Japan&#8217;s
strengthening economy is being submerged by the Goldman Sachs inquiry
and testimonies, the Greek relapse, the downgrading of Portugal and by
Germany&#8217;s reluctance to approve the disbursement of funds for Greece.</p>
<p>As the European circus goes on, few eyes are cast to Asia.
Japan&#8217;s improvement is a welcome sign, however. This not just a better
economic report from Japan, but it is also evidence that the Japanese
consumer has finally emerged to spend. We are still waiting for the
same sort of thing to happen in Europe where the recovery remains
largely an industrial and export-led recovery without much consumer
participation.</p>
</span>
<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="9" scope="col"><b>Japan
Retail Sales Trends</b> </th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>Mar-10</td>
<td>Feb-10</td>
<td>Jan-10</td>
<td>3-mo</td>
<td>6-mo</td>
<td>12-mo</td>
<td>Yr-Ago</td>
<td>Q-to-Date</td>
</tr>
<tr>
<td class="firstcol">Total SA</td>
<td>0.8%</td>
<td>0.9%</td>
<td>2.0%</td>
<td>15.9%</td>
<td>5.7%</td>
<td>4.9%</td>
<td>-12.5%</td>
<td>11.3%</td>
</tr>
<tr style="font-weight: bold;" class="grey2">
<td colspan="9" class="firstcol">Not
seasonally adjusted</td>
</tr>
<tr>
<td class="firstcol">Total: Nominal</td>
<td>-0.1%</td>
<td>1.8%</td>
<td>2.4%</td>
<td>17.4%</td>
<td>7.9%</td>
<td>4.6%</td>
<td>-13.0%</td>
<td>14.3%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Motor
Vehicles</td>
<td>2.0%</td>
<td>-1.2%</td>
<td>2.5%</td>
<td>14.0%</td>
<td>22.0%</td>
<td>18.2%</td>
<td>-16.3%</td>
<td>9.2%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;
Food&amp; Beverage</td>
<td>0.5%</td>
<td>-2.0%</td>
<td>5.1%</td>
<td>15.1%</td>
<td>2.6%</td>
<td>0.6%</td>
<td>2.2%</td>
<td>12.1%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Fabric
apparel&amp; access</td>
<td>-0.7%</td>
<td>2.3%</td>
<td>3.1%</td>
<td>20.7%</td>
<td>10.3%</td>
<td>8.0%</td>
<td>-15.3%</td>
<td>24.3%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Rest of
Retail</td>
<td>-0.9%</td>
<td>5.0%</td>
<td>0.5%</td>
<td>19.2%</td>
<td>7.6%</td>
<td>3.5%</td>
<td>-20.2%</td>
<td>15.5%</td>
</tr>
</tbody>
</table>
</body></html>

Japan’s retail sales have made another strong monthly gain. In the just-completed quarter, nominal retail sales are rising at an 11.3% annual rate over the previous quarter’s level. Gains are strong across the major retail categories [...]

Japan’s Retail Sales Are On The Road To Recovery

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

Resilient US economy is pushing up longer-term inflation expectations and interest rates

Positive US economic data surprises leading to upward adjustment of interest rate expectations

Recent aggressive policy easing in China has given a massive boost to equity prices

FOMC expects much more easing now than in June

US is clear world leader in business capital spending on artificial intelligence

Blue Chip forecasters expect US to lead aggressive policy rate cuts over coming year—apart from Japan

Ratio of job openings to the number unemployed in the US now below pre-pandemic level

U.S. layoffs not showing as much cooling in labor markets as unemployment rate

While goods prices have moderated, service price inflation remains elevated and sticky

Since Jan 2023, BCEI US outlook has improved, worsened for Japan and the euro area

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Andrew Cates

**Global current account imbalances**
Several US economic commentators have argued that US trade imbalances are fundamentally driven by capital account dynamics rather than trade policies or unfair competition. In other words, the US runs a persistent current account deficit not because of trade flows, but because of an excess capital account surplus—meaning that the US absorbs foreign savings surpluses from economies such as China, Germany, and Japan. These countries save more than they invest domestically, and their surplus savings are recycled into US financial markets due their deep and flexible capital markets, and superior return prospects. This explains why fluctuations in Germany’s, Japan’s, and China’s current account surpluses in recent years have been mirrored by corresponding shifts in the US current account deficit (chart 1).

250206Z1.jpg

**The US dollar**
As noted, this continuous inflow of foreign capital has pushed up the value of the dollar (chart 2), making US exports less competitive while encouraging domestic consumption and imports, reinforcing the trade deficit. That means that policies aimed at reducing US trade deficits via tariffs could be ineffective because they fail to address these underlying global savings and investment imbalances.

250206Z2.jpg

**Potential growth rates**
As further noted, another key factor behind the global imbalances concerns the US economy’s superior growth prospects compared with elsewhere. As Chart 3 illustrates, the US has maintained slightly higher potential GDP growth over the past 10–15 years, in stark contrast to the declining potential growth rates in Germany and China (albeit from much higher levels). Meanwhile, Japan’s potential growth has remained relatively stable but at already subdued levels.

250206Z3.jpg

**Reserve currencies**
Another key driver of the dollar – and the US current account deficit – is arguably the continued dominance of the US dollar in central banks’ reserves. Chart 4 below illustrates the global share of allocated foreign exchange reserves across major currencies over time. It shows that the US dollar has maintained a dominant share of these reserves, consistently accounting for over 55-60% of the total. This means that policies aimed at reducing the allure of the US dollar – and its financial markets – may find more success in reducing US trade imbalances compared with bilateral tariff policies.

250206Z4.jpg

**Savings, investment and demographics**
Policies aimed at reducing savings surpluses in overseas economies could also be more effective than bilateral tariffs in addressing trade imbalances, but they are difficult to implement. Chart 5 highlights a (small) negative correlation between current account balances and dependency ratios, indicating that economies with higher dependency ratios (i.e., more children and elderly relative to the workforce) tend to have lower current account balances. This occurs because higher dependency ratios reduce national savings, as dependent populations consume more while contributing less to production and savings, leading to current account deficits. The US deficit appears broadly in line with other major economies, given its demographic structure and investment needs. However, Germany and Japan stand out as big outliers, running very large savings surpluses despite ageing populations. This is a function of several factors including their strong industrial base and a cultural aversion to debt accumulation, partly shaped by historical legacies. Policies that trigger a reduced aversion to debt and encourage greater domestic consumption and investment could help rebalance global savings and trade flows. In Germany, this could involve higher public spending, stronger wage growth, and tax incentives to boost household consumption, while in Japan, reforms to pension systems and labour markets could incentivize higher domestic investment.

250206Z5.jpg

**Global trade and supply chain pressures**
Predicting how these developments will unfold and their broader impact on the global economy remains highly uncertain. The latest daily data from the Baltic Dry Index indicates that global shipping costs have fallen sharply in recent weeks, likely due to weaker demand for bulk shipping and container freight. Additionally, uncertainty surrounding trade policy may have led businesses to delay investment in global supply chains, further dampening shipping demand. However, in the longer term, higher tariffs could introduce new supply chain pressures. If tariffs provoke retaliatory trade measures from China or other key partners, logistics networks could come under renewed strain, leading to heightened supply chain volatility. This could, in turn, drive up costs, disrupt trade flows, and re-ignite global inflation risks, and add further complexity to an already fragile global economy.

250206Z6.jpg

President Trump’s tariff policies have been a major driver of financial market volatility in recent days, sparking sharp swings in equities and currencies. While the administration has temporarily reversed its proposal for a 25% tariff on imported goods from Canada and Mexico, uncertainty surrounding US trade relationships, the risk of retaliatory measures from key trading partners, and broader concerns about global growth continue to unsettle investors. A fundamental irony is that the US trade deficit—the very issue that President Trump purportedly aims to correct—is not primarily driven by so-called “unfair” trade practices but rather by global savings and investment imbalances (chart 1). Nations such as China, Germany, and Japan have maintained high savings rates for several years, and their excess capital is continually recycled into US financial markets, where superior returns and deep liquidity have made the US an attractive investment destination. The persistent inflow of foreign capital strengthens the US dollar, reinforcing the trade deficit rather than narrowing it (charts 3 and 4). Indeed, the multi-year highs in the trade-weighted value of the dollar serve as clear evidence that capital has continued to flow into the US, sustaining deficits despite protectionist measures. Ultimately, Trump’s tariff-driven policies risk doing more harm than good, as they threaten to slow global growth, strain relationships with allies, and exacerbate inflationary pressures by raising input costs for US businesses and consumers. Rather than addressing the root causes of global imbalances (chart 5), such measures distort supply chains (chart 6), impair productivity growth, and fail to alter the fundamental drivers of trade deficits.

Charts of the Week: Tariff Trouble

250206F5.jpg

250206G5.jpg

The National Association of Realtors' Fixed Rate Mortgage Housing Affordability Index (HAI) increased 1.3% (0.2% y/y) in December to 100.7 after falling 2.9% to 99.4 in November and 2.4% to 102.4 in October. The level of home affordability has risen 12.0% from its low of 89.9 in October 2023. It remains 43.8% below the high of 179.2 in April 2020.

The rise in affordability in December reflected an unchanged (+6.1% y/y) median price of an existing single-family home of $409,300. This followed declines in four of the prior five months from the record $432,900 in June. In December, the average mortgage rate slipped to 6.80% from 6.89% in November. It remained below a 7.14% May high but up sharply from the December 2020 low of 2.73%. These lowered the principal & interest payment by 0.9% (+5.0% y/y) to $2,135 per month. That was well above the most recent low of $984 in February 2020. Monthly mortgage payments averaged 24.8% of income during December versus 25.1% in November. They remained up from a low of 14.0% in April 2020.

The rise in housing costs was accompanied by improvement in median family income. It increased 0.3% in December (5.1% y/y) to a record $103,148 after rising 0.4% in November and 0.3% in October.

Housing affordability improved across the country in December. The index rose 2.3% (-2.9% y/y) to 132.9 in the Midwest, which remains the most affordable region of the country to live. In the South, the index improved 1.4% (2.9% y/y) to 103.7 and the affordability index in the Northeast rose 0.3% (-6.6% y/y) to 91.6. In the West, where homes are the least affordable, the index improved 3.2% (0.3% y/y) to 71.1 in December.

The Housing Affordability Index (HAI) equals 100 when a median-income borrower qualifies for an 80% mortgage on a median-priced existing single-family home. The HAI had exceeded 100 in each month since July 1990 and reached its all-time high of 213.3 in January 2013; since then, it fell below 100 for the first time in June 2022 (98.8).

Data on Housing Affordability can be found in Haver’s **REALTOR** database. Median home sales prices are also available in USECON. Higher frequency interest rate data are found in **SURVEYS**, **WEEKLY**, and **DAILY**.

250206H5.jpg

250206I5.jpg

- Home prices are little changed & mortgage rates fall.
- Median income improves.
- Affordability improves throughout country.

U.S. Housing Affordability Edges Up in December

250206N2.jpg

250206O2.jpg

Nonfarm business productivity increased 1.2% (SAAR) during Q4’24 after a 2.3% rise in Q3, revised from 2.2%. The figure compared to expectations for a 1.8% rise in the Action Economics Survey. During all of last year (Q4/Q4), productivity rose 1.6% after rising 2.7% in 2023, up from a 1.4% decline in 2022. Nonfarm business output increased 2.3% (2.6% y/y) after an unrevised 3.6% gain, while hours-worked rose 1.0% (0.9% y/y) after increasing 1.3% in Q3.

Compensation growth picked up to 4.2% (4.3% y/y) last quarter from 2.9% in Q3, revised from 3.1%. As a result, unit labor costs surged 3.0% (2.7% y/y) following a 0.5% rise, revised from 0.8% in Q3 and falling 1.1% in Q2. The Action Economics survey expected unit labor costs to rise 3.3% last quarter.

In the manufacturing sector, productivity in Q4 rose 0.8% (0.2% y/y) after increasing 0.5% in Q3, revised from 0.9%, and gaining 0.2% in Q2. Compensation grew 4.1% (1.7% y/y) last quarter after a 2.3% rise, revised from 2.6%, and falling 5.6% in Q2.  Unit labor costs rose 3.3% (1.5% y/y) after increasing a little-changed 1.8% in Q3 and falling 5.7% in Q2.

The productivity and labor cost data are available in Haver’s **USECON** database. The Action Economics expectations figures are in the **AS1REPNA** database.

250206P2.jpg

250206Q2.jpg

- Annual increase remains below 2023 gain.
- Compensation growth accelerates.
- Quarterly Increase in unit labor costs is strongest since Q1’23.

U.S. Productivity Growth Slows in Q4’24

Carol Stone, CBE

250206A1.jpg

250206B1.jpg

Initial claims for unemployment insurance rose 11,000 in the week ended February 1 to 219,000, seasonally adjusted, from 208,000 the week before; that was revised slightly from 207,000 reported before. The Action Economics Forecast Survey had expected 214,000 in the latest week. The four-week moving average of initial claims was 216,750 through the latest week, up from 212,750 the week before.

The total number of unemployment insurance beneficiaries – also known as “continuing claims” – was 1.886 million in the week ended January 25, up from 1.85 million the prior week. The four-week moving average of this total was 1,872.25 million through the week ended January 25, slightly more than the 1,870.00 through the prior week.

The insured unemployment rate – that is, the total number of beneficiaries as a percent of covered employment – still held at 1.2%, where it has been almost continuously since early 2023.

Unemployment rates vary widely across states and territories. The Labor Department reports that in the week ended January 18, the highest rates were in New Jersey (2.88%), Rhode Island (2.82%), Minnesota (2.52%), Illinois (2.43%), and Massachusetts (2.36%). The lowest rates were in Florida (0.34%), Virginia (0.43%), Alabama (0.45%), Tennessee and North Carolina (both 0.58%), and New Hampshire (0.59%).  Rates in other notable states include California (2.2%), Pennsylvania (2.04%), New York and Connecticut (both 1.88%) and Texas and Missouri (both 1.08%). These state unemployment rates are not seasonally adjusted.

Data on weekly unemployment claims are from the Department of Labor itself, not the Bureau of Labor Statistics. They begin in 1967 and are contained in Haver’s **WEEKLY** database and summarized monthly in **USECON**. Data for individual states are in **REGIONW** back to December 1986. The expectations figure is from the Action Economics Forecast Survey in the **AS1REPNA** database.

250206C1.jpg

250206D1.jpg

- Total beneficiaries had increased the week before.
- Insured unemployment rate holds at long-standing 1.2%.

U.S. Initial Claims for Unemployment Insurance Increase Slightly in February 1 Week

250205N12.jpg

250205O12.jpg

The U.S. ISM Services PMI fell to 52.8 in January following an increase to 54.0 in December, according to today’s report by the Institute for Supply Management. The reading indicated service sector expansion for the seventh consecutive month. The Action Economics Forecast Survey expected 54.2 for January.

Haver Analytics constructs a composite index combining the services index and the manufacturing index released on Monday. This index declined to 52.6 in January from 53.4 in December. The latest figure remains above its June low of 49.1.

Amongst the services component series, the business activity index fell to 54.5 in January after rising to 58.0 in December. The index remains higher than its recent low of 50.2 in June. A lessened 19.6% (NSA) of respondents reported higher orders last month while an increased 18.3% reported an activity decline. The new orders index declined to 51.3 in January after rising to 54.4 in December, indicating expansion in new orders for the seventh straight month. An increased 19.5% of respondents (NSA) reported higher orders in January and an increased 23.2% reported a decline.

Improvement was recorded on the labor front. The employment index rose to 52.3 in January after moving up to 51.3 in December. The latest reading stands well above its low of 43.7 in December 2023. A lessened 13.6% of respondents (NSA) indicated higher employment in January while 14.1% reported a decline. The supplier deliveries index (NSA) rose to 53.0 in January from 52.5 in December, indicating slower supplier delivery speeds.

On the inflation front, the prices index fell to 60.4 in January after jumping to 64.4 in December, which was the highest level in nearly two years.  An increased 25.0% of respondents reported higher prices while a fairly steady 3.1% reported lower.

Additionally, the new export orders index increased to 52.0 in January (NSA) following a rise to 50.1 in December. The imports index eased to 49.8 in January from 50.7 in December. The inventory change index fell to 47.5 in January after rising to 49.4 in December. These series are not seasonally adjusted and not included in the ISM Services PMI total.

The ISM Services PMI is a composite index consisting of four equally weighted diffusion indexes: Business Activity, New Orders, Employment, and Supplier Deliveries. A reading above 50 indicates expansion in the services sector, while below 50 suggests contraction. Supplier Deliveries is the only ISM index that is inversed; a reading above 50 indicates slower deliveries. The ISM figures are available in Haver's **USECON** database, with additional detail in the **SURVEYS** database. The expectations figure from Action Economics is in the **AS1REPNA** database.

250205P12.jpg

250205Q12.jpg

- Total index remains below October high.
- Business Activity index falls to five-month low; new orders weaken but employment firms.
- Prices Index moves lower, reversing sharp December gain.


Economy in Brief: April 2010

Jump to:

Euro Unemployment Bucks Image Of Recovering Region

U.S. GDP Growth Moderates As Lift From Inventories Fades

U.S. GDP Growth Moderates As LiftFrom Inventories Fades

Globally Money Growth Is Just Not Getting Into Gear. So Where’s The Real Risk?

U.S. Unemployment Insurance Claims Fall To Last Month's Low

Chicago Fed Index Improves Modestly

Chicago Fed Index Improves Modestly

Japan’s Retail Sales Are On The Road To Recovery