Tom Moeller

Small business optimism, according to the National Federation of Independent Business (NFIB), recovered last month to the highest level since April. The 3.3% m/m rise to 91.1 made up all of a 1.1% July decline which had pulled the [...]

U.S. Small Business Optimism Recovered

Robert Brusca

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080908a.jpg" align="left" border="0">
After a scintillating run of price increases, the UK&#8217;s PPI has
finally fallen in August and the all-important core rate has dropped
and decelerated. The accompanying chart shows the sharp break-off in
the rate of PPI core inflation to just under 2.8% over three months
even as its year/year rate lingers at 6.3%. Headline inflation is still
at an astonishing 9.7% year/year but the three-month pace has fallen to
3.3%. The Bank of England puts a 2% ceiling on headline consumer price
inflation and has no corresponding number for the PPI or for any core
measure. But with oil having dominated inflation trends, the core has
to be an important signal these days. The PPI tends to be more volatile
than the CPI so we cannot make any firm statements about the CPI since
it will include imported goods and services prices. But the trend shift
in inflation&#8217;s pace is severe. The forces bringing the PPI down should
translate to the CPI. The move lower has been long awaited since spot
oil prices had broken from their peaks some time ago. This sort of
dramatic decline could pave the way for rate cuts even with an
excessive CPI pace since the drop is indicative of an ongoing process
and a deflation that is sudden and severe. It unties the hands of
policymakers to some extent but contains no assurances of imminent rate
cuts.

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="8" scope="col">UK PPI
</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td colspan="3">%m/m</td>
<td colspan="4">%-SAAR</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>Aug-08</td>
<td>Jul-08</td>
<td>Jun-08</td>
<td>3-mo</td>
<td>6-mo</td>
<td>12-mo</td>
<td>12-moY-Ago</td>
</tr>
<tr>
<td class="firstcol">MFG</td>
<td>-0.4%</td>
<td>0.3%</td>
<td>0.9%</td>
<td>3.3%</td>
<td>10.3%</td>
<td>9.7%</td>
<td>2.4%</td>
</tr>
<tr>
<td class="firstcol">Core</td>
<td>-0.1%</td>
<td>0.3%</td>
<td>0.4%</td>
<td>2.8%</td>
<td>7.2%</td>
<td>6.3%</td>
<td>2.2%</td>
</tr>
<tr>
<td colspan="7" class="firstcol">Core: ex
food beverages, tobacco
&amp; Petroleum</td>
<td>&nbsp;</td>
</tr>
</tbody>
</table>
</body></html>

After a scintillating run of price increases, the UK’s PPI has finally fallen in August and the all-important core rate has dropped and decelerated. The accompanying chart shows the sharp break-off in the rate of PPI core inflation to [...]

A Sigh of Relief on Threadneedle Street

Louise Curley

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080908b.jpg" align="left" border="0">
In its Economy Watchers Survey
the Cabinet Office in Japan surveys some 2050 individuals whose
business activity is sensitive to developments that affect households,
corporations and employment. Among the economy watchers are managers
and clerks at super markets, restaurant employees, taxi drivers, beauty
parlor operators and barbers, managers and employees in manufacturing
and service industries, staffs of employment agencies and temporary
manpower companies.

The economy watchers reported a further deterioration in
August in their already depressed appraisal of current conditions for
the total economy. The diffusion index was 28.3 compared with 29.3 in
July and the fifth consecutive decline since March. There was, however,
a slight improvement in their pessimistic expectations for the future
as that diffusion index rose to 32.0 from 30.8 in July. Both indexes
are well below levels reached a year ago. The current condition index
is down 44.1% and the future condition index, 46.5%. Recent levels of
both indexes have not been seen since the recession of the early
nineties as shown in the first chart.

Until recently, the current and future conditions indexes for
employment tended to be higher than those for households and
corporations. Currently, however, the employment indexes have been
deteriorating faster than those for households and corporations and are
now below them as shown in the second and third charts.

<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080908c.jpg" border="0" width="312"><img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080908d.jpg" border="0" width="312">
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">JAPAN:
ECONOMY WATCHERS SURVEY&nbsp;&nbsp; (Diffusion Indexes)</th>
<th scope="col">Aug 08</th>
<th scope="col">Jul 08&nbsp;</th>
<th scope="col">Jun 08&nbsp;</th>
<th scope="col">Aug 07&nbsp;</th>
<th scope="col">Y/Y % chg&nbsp;</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Current Conditions</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td class="firstcol">&nbsp; Total</td>
<td>28.3</td>
<td>29.3</td>
<td>29.5</td>
<td>44.1</td>
<td>-35.8</td>
<td>44.9</td>
<td>51.4</td>
<td>50.3</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Households</td>
<td>28.3</td>
<td>30.6</td>
<td>29.3</td>
<td>43.7</td>
<td>-34.1</td>
<td>44.0</td>
<td>48.8</td>
<td>49.0</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Corporations</td>
<td>28.1</td>
<td>27.7</td>
<td>31.4</td>
<td>43.1</td>
<td>-34.8</td>
<td>45.1</td>
<td>51.8</td>
<td>50.5</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Employment</td>
<td>26.0</td>
<td>24.1</td>
<td>26.4</td>
<td>48.3</td>
<td>46.2</td>
<td>49.9</td>
<td>60.2</td>
<td>57.7</td>
</tr>
<tr class="odd">
<td class="firstcol">Future Conditions</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td class="firstcol">&nbsp; Total</td>
<td>32.0</td>
<td>30.8</td>
<td>32.1</td>
<td>46.5</td>
<td>-31.2</td>
<td>46.9</td>
<td>51.4</td>
<td>50.3</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Households</td>
<td>32.5</td>
<td>30.7</td>
<td>318</td>
<td>46.1</td>
<td>-29.5</td>
<td>46.6</td>
<td>52.5</td>
<td>50.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Corporations</td>
<td>31.8</td>
<td>32.1</td>
<td>32.8</td>
<td>46.3</td>
<td>-31.3</td>
<td>45.8</td>
<td>51.7</td>
<td>50.6</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Employment</td>
<td>29.3</td>
<td>28.0</td>
<td>31.8</td>
<td>49.7</td>
<td>-41.0</td>
<td>51.0</td>
<td>58.4</td>
<td>56.9</td>
</tr>
<tr>
<td class="firstcol"></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
</tbody>
</table>
</body></html>

In its Economy Watchers Survey the Cabinet Office in Japan surveys some 2050 individuals whose business activity is sensitive to developments that affect households, corporations and employment. Among the economy watchers are managers [...]

Japanese Economy Watchers Still in the Doldrums

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080908b.jpg" align="left" border="0">
In its Economy Watchers Survey
the Cabinet Office in Japan surveys some 2050 individuals whose
business activity is sensitive to developments that affect households,
corporations and employment. Among the economy watchers are managers
and clerks at super markets, restaurant employees, taxi drivers, beauty
parlor operators and barbers, managers and employees in manufacturing
and service industries, staffs of employment agencies and temporary
manpower companies.

The economy watchers reported a further deterioration in
August in their already depressed appraisal of current conditions for
the total economy. The diffusion index was 28.3 compared with 29.3 in
July and the fifth consecutive decline since March. There was, however,
a slight improvement in their pessimistic expectations for the future
as that diffusion index rose to 32.0 from 30.8 in July. Both indexes
are well below levels reached a year ago. The current condition index
is down 44.1% and the future condition index, 46.5%. Recent levels of
both indexes have not been seen since the recession of the early
nineties as shown in the first chart.

Until recently, the current and future conditions indexes for
employment tended to be higher than those for households and
corporations. Currently, however, the employment indexes have been
deteriorating faster than those for households and corporations and are
now below them as shown in the second and third charts.

<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080908c.jpg" border="0" width="312"><img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080908d.jpg" border="0" width="312">
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">JAPAN:
ECONOMY WATCHERS SURVEY&nbsp;&nbsp; (Diffusion Indexes)</th>
<th scope="col">Aug 08</th>
<th scope="col">Jul 08&nbsp;</th>
<th scope="col">Jun 08&nbsp;</th>
<th scope="col">Aug 07&nbsp;</th>
<th scope="col">Y/Y % chg&nbsp;</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Current Conditions</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td class="firstcol">&nbsp; Total</td>
<td>28.3</td>
<td>29.3</td>
<td>29.5</td>
<td>44.1</td>
<td>-35.8</td>
<td>44.9</td>
<td>51.4</td>
<td>50.3</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Households</td>
<td>28.3</td>
<td>30.6</td>
<td>29.3</td>
<td>43.7</td>
<td>-34.1</td>
<td>44.0</td>
<td>48.8</td>
<td>49.0</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Corporations</td>
<td>28.1</td>
<td>27.7</td>
<td>31.4</td>
<td>43.1</td>
<td>-34.8</td>
<td>45.1</td>
<td>51.8</td>
<td>50.5</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Employment</td>
<td>26.0</td>
<td>24.1</td>
<td>26.4</td>
<td>48.3</td>
<td>46.2</td>
<td>49.9</td>
<td>60.2</td>
<td>57.7</td>
</tr>
<tr class="odd">
<td class="firstcol">Future Conditions</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td class="firstcol">&nbsp; Total</td>
<td>32.0</td>
<td>30.8</td>
<td>32.1</td>
<td>46.5</td>
<td>-31.2</td>
<td>46.9</td>
<td>51.4</td>
<td>50.3</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Households</td>
<td>32.5</td>
<td>30.7</td>
<td>318</td>
<td>46.1</td>
<td>-29.5</td>
<td>46.6</td>
<td>52.5</td>
<td>50.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Corporations</td>
<td>31.8</td>
<td>32.1</td>
<td>32.8</td>
<td>46.3</td>
<td>-31.3</td>
<td>45.8</td>
<td>51.7</td>
<td>50.6</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Employment</td>
<td>29.3</td>
<td>28.0</td>
<td>31.8</td>
<td>49.7</td>
<td>-41.0</td>
<td>51.0</td>
<td>58.4</td>
<td>56.9</td>
</tr>
<tr>
<td class="firstcol"></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
</tbody>
</table>
A Sigh of Relief on Threadneedle
Street 
by <a href="/comment/Brusca.html">Robert
Brusca</a> September 8, 2008


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080908a.jpg" align="left" border="0">
After a scintillating run of price increases, the UK&#8217;s PPI has
finally fallen in August and the all-important core rate has dropped
and decelerated. The accompanying chart shows the sharp break-off in
the rate of PPI core inflation to just under 2.8% over three months
even as its year/year rate lingers at 6.3%. Headline inflation is still
at an astonishing 9.7% year/year but the three-month pace has fallen to
3.3%. The Bank of England puts a 2% ceiling on headline consumer price
inflation and has no corresponding number for the PPI or for any core
measure. But with oil having dominated inflation trends, the core has
to be an important signal these days. The PPI tends to be more volatile
than the CPI so we cannot make any firm statements about the CPI since
it will include imported goods and services prices. But the trend shift
in inflation&#8217;s pace is severe. The forces bringing the PPI down should
translate to the CPI. The move lower has been long awaited since spot
oil prices had broken from their peaks some time ago. This sort of
dramatic decline could pave the way for rate cuts even with an
excessive CPI pace since the drop is indicative of an ongoing process
and a deflation that is sudden and severe. It unties the hands of
policymakers to some extent but contains no assurances of imminent rate
cuts.

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="8" scope="col">UK PPI
</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td colspan="3">%m/m</td>
<td colspan="4">%-SAAR</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>Aug-08</td>
<td>Jul-08</td>
<td>Jun-08</td>
<td>3-mo</td>
<td>6-mo</td>
<td>12-mo</td>
<td>12-moY-Ago</td>
</tr>
<tr>
<td class="firstcol">MFG</td>
<td>-0.4%</td>
<td>0.3%</td>
<td>0.9%</td>
<td>3.3%</td>
<td>10.3%</td>
<td>9.7%</td>
<td>2.4%</td>
</tr>
<tr>
<td class="firstcol">Core</td>
<td>-0.1%</td>
<td>0.3%</td>
<td>0.4%</td>
<td>2.8%</td>
<td>7.2%</td>
<td>6.3%</td>
<td>2.2%</td>
</tr>
<tr>
<td colspan="7" class="firstcol">Core: ex
food beverages, tobacco
&amp; Petroleum</td>
<td>&nbsp;</td>
</tr>
</tbody>
</table>
</body></html>

Japanese EconomyWatchers Still in the Doldrums

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080905f.jpg" align="left" border="0" height="265" width="353">
OECD Trends. The OECD
trend-adjusted LEIs show clear ongoing declines. The OECD declines are
getting progressively weaker for the entire area as well as for the
OECD seven and for the OECD four. In the US, however, the OECD LEI is
still declining but is dropping at a decelerating pace. The US LEI grew
at the strongest pace one year ago and now its Yr/Yr pace is only in
line with other OECD measures while its 3-month and 6-month pace is
stronger than the other comparable OECD measures.
The OECD says. The OECD
characterizes the G7 reading as consistent with a still-weakening
climate. The OECD reports that the growth cycle outlook is for a
slowdown in the OECD area, G7 area and Japan, while for the Euro area a
strong slowdown is anticipated. "OECD composite leading indicators for
July 2008 indicate a continued weakening outlook for all the major
seven economies," the OECD said in its monthly release. "The latest
data for major non-OECD member economies tentatively point to expansion
in China, Brazil and Russia and a downturn in India," it said.
Selected Countries. Italy's
composite indicator fell the sharpest of all the G7 countries, off 1.9
points on the month. The German and Canadian indicators dropped 1.5
points. Japan's indicator fell 0.5 point and the United States saw a
0.2 point fall.
Comparison with past US turning
point. The US indicator is weak but did not get as weak as
it did in or before the last economic downturn. It is now rising from
its current cycle low. In Japan the index reach a spike low as weak as
it was in the last recession but it did not stay impacted for as long
as it did last time. The Japanese index is now rising.
The index for the Euro-Zone economies is much weaker than
it was at the time of the last US recession and it is still dropping at
an increasing speed.

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr><th colspan="5" scope="col"> OECD Trend-Restored Leading Indicators</th>
 </tr>
<tr>
<th colspan="5" scope="col">Growth progression-SAAR</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>3Mos</td>
<td>6Mos</td>
<td>12mos</td>
<td>Yr-Ago</td>
</tr>
<tr>
<td class="firstcol">OECD</td>
<td>-4.6%</td>
<td>-3.6%</td>
<td>-3.3%</td>
<td>1.9%</td>
</tr>
<tr>
<td class="firstcol">OECD 7</td>
<td>-3.8%</td>
<td>-3.4%</td>
<td>-3.9%</td>
<td>1.3%</td>
</tr>
<tr>
<td class="firstcol">OECD Europe</td>
<td>-9.0%</td>
<td>-6.8%</td>
<td>-4.5%</td>
<td>1.1%</td>
</tr>
<tr>
<td class="firstcol">OECD Japan</td>
<td>0.9%</td>
<td>-0.4%</td>
<td>-0.9%</td>
<td>-1.2%</td>
</tr>
<tr>
<td class="firstcol">OECD US</td>
<td>-0.5%</td>
<td>-1.8%</td>
<td>-3.8%</td>
<td>2.5%</td>
</tr>
<tr class="odd">
<td colspan="5" class="firstcol">Six month readings at
6-month intervals:</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>Recent six</td>
<td>6Mo Ago</td>
<td>12Mo Ago</td>
<td>18MO Ago</td>
</tr>
<tr>
<td class="firstcol">OECD</td>
<td>-3.6%</td>
<td>-2.9%</td>
<td>1.7%</td>
<td>2.2%</td>
</tr>
<tr>
<td class="firstcol">OECD 7</td>
<td>-3.4%</td>
<td>-4.3%</td>
<td>1.4%</td>
<td>1.2%</td>
</tr>
<tr>
<td class="firstcol">OECD Europe</td>
<td>-6.8%</td>
<td>-2.2%</td>
<td>0.6%</td>
<td>1.5%</td>
</tr>
<tr>
<td class="firstcol">OECD Japan</td>
<td>-0.4%</td>
<td>-1.5%</td>
<td>-3.7%</td>
<td>1.4%</td>
</tr>
<tr>
<td class="firstcol">OECD US</td>
<td>-1.8%</td>
<td>-5.7%</td>
<td>3.5%</td>
<td>1.5%</td>
</tr>
<tr>
<td colspan="5" class="firstcol">Slowdowns indicated by BOLD RED.</td>
</tr>
</tbody>
</table>
</body></html>

OECD Trends. The OECD trend-adjusted LEIs show clear ongoing declines. The OECD declines are getting progressively weaker for the entire area as well as for the OECD seven and for the OECD four. In the US, however, the OECD LEI is [...]

OECD LEIs Continue to Sag as Japan Bucks Trend

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080905e.jpg" align="left" border="0" height="265" width="353">
German statistics have been weakening and the weakness in
orders reported yesterday was a shock to some. Today the process of
being shocked continues with stark and unexpected weakness in German
industrial output. Output is off for the second time in two months and
by a severe 1.8% m/m. Yr/Yr the drop is -0.6%. MFG IP is off by 2% in
the month. Sequential growth rates generally show that the weakness is
still cumulating (construction and consumer spending are exceptions of
sorts). In the new quarter to date (Q3) output is falling at a 13.3%
annual rate, led by weakness in capital goods. While the drop in
consumer goods output is the most severe on a Yr/Yr basis, the
deceleration is the greatest for capital goods where output seems to
stay so high for so long. This it turns out was mirage like Wiley
Coyote standing on thin air waving to the Road Runner before gravity
took hold. German capital goods output too seemed to defy the gravity
and domestic weakness and the overly strong euro. But now that
resilience is a thing of the past.
German authorities have tried to argue that the weakness is
partly due to the start of the school year. But they hasten to add the
trends are going to be lower. There should be fewer denials of
encroaching weakness in Germany since the bottom fell out of orders and
IP and that has happened just over the past two days.
Things change. And they did not elect either Obama or McCain.
Still the ECB has decided to tighten up its collateral
acceptance parameters, and that action will impair liquidity in the
Zone and at a time when economic weakness seems to be taking greater
hold. In the US two speeches, one by Reserve Bank president Yellen, the
other by Reserve Bank president Fisher, talked in less than glowing
terms about the US economy. Fisher worries more about inflation
prospects while Yellen reports that the next move by the Fed is more
likely to be up than down but she reiterated Fed fallibility. Central
bankers clearly are not plugged into the news that reveals accelerating
weakness. Even the Bush Administration today took the opportunity to
say that a new stimulus program was not needed.
While the economic data are worsening central banks seem to be
taking the opportunity to let weaker growth drag inflation lower,
rather than to move to offset the weakness. This is done by ignoring
the weakening (Trichet), denying it (Germany, at least so far) or by
making inflation the greater threat (Richard Fisher, and others).

<table border="0" cellspacing="0" width="100%">
<colgroup><col></colgroup>
<thead><tr><th colspan="8" scope="col"> Total German IP</th>

</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Saar exept m/m</td>
<td>Jul-08</td>
<td>Jun-08</td>
<td>May-08</td>
<td>3-mo</td>
<td>6-mo</td>
<td>12-mo</td>
<td>Quarter-to-Date</td>
</tr>
<tr>
<td class="firstcol">IP total</td>
<td>-1.8%</td>
<td>0.1%</td>
<td>-1.8%</td>
<td>-13.3%</td>
<td>-8.0%</td>
<td>-0.6%</td>
<td>-13.3%</td>
</tr>
<tr>
<td class="firstcol">Consumer</td>
<td>-1.7%</td>
<td>0.4%</td>
<td>-0.3%</td>
<td>-6.2%</td>
<td>-8.6%</td>
<td>-2.1%</td>
<td>-8.8%</td>
</tr>
<tr>
<td class="firstcol">Capital</td>
<td>-3.7%</td>
<td>1.7%</td>
<td>-3.7%</td>
<td>-21.0%</td>
<td>-11.7%</td>
<td>-0.1%</td>
<td>-21.2%</td>
</tr>
<tr>
<td class="firstcol">Intermediate</td>
<td>-0.6%</td>
<td>-0.5%</td>
<td>-1.0%</td>
<td>-8.2%</td>
<td>-3.4%</td>
<td>0.4%</td>
<td>-7.5%</td>
</tr>
<tr class="odd">
<td class="firstcol">Memo</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol">Construction</td>
<td>-2.0%</td>
<td>-2.4%</td>
<td>2.4%</td>
<td>-8.2%</td>
<td>-23.1%</td>
<td>-2.8%</td>
<td>-15.8%</td>
</tr>
<tr>
<td class="firstcol">MFG IP</td>
<td>-2.0%</td>
<td>0.5%</td>
<td>-1.9%</td>
<td>-13.1%</td>
<td>-7.8%</td>
<td>-0.2%</td>
<td>-13.3%</td>
</tr>
<tr>
<td class="firstcol">MFG Orders</td>
<td>-1.7%</td>
<td>-2.6%</td>
<td>-1.3%</td>
<td>-20.0%</td>
<td>-15.2%</td>
<td>-4.1%</td>
<td>-20.7%</td>
</tr>
</tbody>
</table>
</body></html>

German statistics have been weakening and the weakness in orders reported yesterday was a shock to some. Today the process of being shocked continues with stark and unexpected weakness in German industrial output. Output is off for [...]

German Sector Trends are Clear and Weak

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080905a.jpg" width="353">
Last month, nonfarm payrolls fell 84,000, according to the Bureau of Labor Statistics. The latest decline was slightly greater than expectations for a 75,000 drop but it was accompanied by downward revisions to prior months&#39; data. Payrolls have declined in each month of this year and it amounts to 605,000 jobs lost.
During the last three months payrolls fell at a 0.7% annual rate. That compared to a rate of decline in excess of 2.0% by the end of the last recession.
The unemployment rate jumped to 6.1% last month versus expectations for just a slight increase to 5.7%. That was the highest level since September of 2003.
Household sector employment fell 342,000 (-0.2% y/y) after a 72,000 worker decline during July. It was the sixth monthly decline this year. The level of the unemployed rose 592,000 (31.4% y/y) after a 285,000 increase in July.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080905c.jpg" width="353">
The labor force rose another 250,000 (1.3% y/y) last month and the labor force participation rate held at 66.1% for the third straight month. It was 66.0% during all of last year and 66.2% in 2006. The participation rate amongst adult men was 75.8%, about the same as averaged last year, and amongst adult women it was 61.1% versus 60.6% averaged during 2007.
The average duration of unemployment increased to 17.4 weeks and that was still up from 16.9 weeks averaged during the last two years. The number of those unemployed for more than 27 weeks rose by nearly one half versus one year ago.
From the establishment survey, hiring in the private service sector industries was notably weak. Jobs fell 44,000 but the 18,000 July decline was less than the 76,000 decline reported initially. Prior months&#39; job losses also were revised shallower. Nevertheless, August was the seventh decline in the last eight months and the three-month rate of decline during that period was 0.3%.
A decline of 53,000 (-0.7% y/y) jobs was reported for the professional &amp; business service industries. That was led by a 61,600 (-3.6% y/y) drop in hiring in the management &amp; technical support services area. Temporary help services job also were quite weak as they fell 36,900 (-9.1% y/y). Retail sector jobs fell 19,900 and they&#39;re down at a 1.2% rate during the last three months. That rate of decline, however, remained less than the 3.0% rate of this past April. Motor vehicle &amp; parts dealers employment led that drop with a 14,100 August decline and they&#39;re down at a 7.3% rate over the last three months. Jobs in the information sector fell 3,000 last month and at a 2.2% rate during the last three. Financial sector jobs fell 3,000 and at a 0.9% rate over the last three months.
These declines have been offset by 11.3% three-month growth in the number of jobs in education and by 2.7% growth health care jobs. The number of finance sector jobs fell 3,000 last month and they&#39;re down at a 0.9% rate during the last three. Real estate sector jobs slipped 1,400 and they have been falling at a moderate 0.6% annual rate during the last three months which is an improvement from the 3% to 4% rates of job loss late last year and early this year.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080905b.jpg" width="353">
Factory sector jobs fell 61,000 which was the largest monthly decline since mid-2003. Payrolls were down at a 4.1% rate over the last three months though that was slower than the 10% rate of decline by the end of the 2001 recession. The motor vehicle &amp; parts sector shed 39,000 (-12.9% y/y) jobs while jobs in the furniture industry fell 6,800 (-8.4% y/y).
Construction sector employment slipped just 8,000 last month after a little-revised 20,000 drop during July. They fell at a 4.2% annual rate during the last three months versus a 7.8% rate of decline as of June.
Government sector jobs continued to rise and they posted a 17,000 August increase. They&#39;ve increased at a 0.6% rate during the last three months. Federal government hiring rose at a 1.0% rate during the last three months while state as well as local government hiring rose at a 1.3% and a 0.2% rate, respectively. These rates of growth are down from their recent peaks.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080905d.jpg" width="353">
The one month diffusion index, which measures the breadth of job gain or loss (50 is the break-even level), improved to a near-break even 48.9%. The three-month index improved just slightly to 40.1% from the cycle low of 38.3% reached last month. The three-month figure for the factory sector was even weaker at 25.6%. That&#39;s up slightly from July but near the lowest since 2003.
Average hourly earnings increased 0.4%, the same as during as during an upwardly revised July. The three-month growth rate rose to 4.3%, its highest since early last year. Factory sector earnings fell 0.2% during August and rose at a 2.3% rate during the last three months, which was near the weakest since late last year. Private service sector earnings rose 0.4% and at an elevated 4.1% rate during the last three months.
China and India: Two Paths to Economic Power from the Federal Reserve Bank of Dallas can be found <a href="http://dallasfed.org/research/eclett/2008/el0808.html">here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EB/@EB01/@EB01.HTM">Employment: 000s</a></th>
<th scope="col">August</th>
<th scope="col">July</th>
<th scope="col">June</th>
<th scope="col">Y/Y</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Payroll Employment</td>
<td>-84</td>
<td>-60</td>
<td>-100</td>
<td>-0.2%</td>
<td>1.1%</td>
<td>1.8%</td>
<td>1.7%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Previous</td>
<td>--</td>
<td>-51</td>
<td>-51</td>
<td>--</td>
<td>1.3%</td>
<td>1.9%</td>
<td>1.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Manufacturing</td>
<td>-61</td>
<td>-38</td>
<td>-44</td>
<td>-3.0%</td>
<td>-1.9%</td>
<td>-0.5%</td>
<td>-0.6%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Construction</td>
<td>-8</td>
<td>-20</td>
<td>-50</td>
<td>-5.7%</td>
<td>-1.0%</td>
<td>4.9%</td>
<td>5.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">Average Weekly Hours</td>
<td>33.7</td>
<td>33.7</td>
<td>33.7</td>
<td>33.8 (August &#39;07)</td>
<td>33.8</td>
<td>33.9</td>
<td>33.8</td>
</tr>
<tr>
<td class="firstcol">Average Hourly Earnings</td>
<td>0.4%</td>
<td>0.4%</td>
<td>0.3%</td>
<td>3.6%</td>
<td>4.0%</td>
<td>3.9%</td>
<td>2.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">Unemployment Rate</td>
<td>6.1%</td>
<td>5.7%</td>
<td>5.5%</td>
<td>4.7% (August &#39;07)</td>
<td>4.6%</td>
<td>4.6%</td>
<td>5.1%</td>
</tr>
</tbody>
</table>
</body>
</html>

Last month, nonfarm payrolls fell 84,000, according to the Bureau of Labor Statistics. The latest decline was slightly greater than expectations for a 75,000 drop but it was accompanied by downward revisions to prior months' data. [...]

U.S. Payrolls Down Again, Jobless Rate Up Further

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080905a.jpg" align="left" border="0" height="265" width="353">
Last month, nonfarm payrolls fell 84,000,
according to the Bureau of Labor Statistics. The latest decline was
slightly greater than expectations for a 75,000 drop but it was
accompanied by downward revisions to prior months' data. Payrolls have
declined in each month of this year and it amounts to 605,000 jobs lost.
During the last three months payrolls fell at a 0.7% annual
rate. That compared to a rate of decline in excess of 2.0% by the end
of the last recession.
The unemployment rate jumped to 6.1% last
month versus expectations for just a slight increase to 5.7%. That was
the highest level since September of 2003.
Household sector employment fell 342,000 (-0.2% y/y) after a
72,000 worker decline during July. It was the sixth monthly decline
this year. The level of the unemployed rose 592,000 (31.4% y/y) after a
285,000 increase in July.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080905c.jpg" align="right" border="0" height="265" width="353">
The labor force rose another 250,000 (1.3% y/y) last month and
the labor force participation rate held at 66.1% for the third straight
month. It was 66.0% during all of last year and 66.2% in 2006. The
participation rate amongst adult men was 75.8%, about the same as
averaged last year, and amongst adult women it was 61.1% versus 60.6%
averaged during 2007.
The average duration of unemployment increased to 17.4 weeks
and that was still up from 16.9 weeks averaged during the last two
years. The number of those unemployed for more than 27 weeks rose by
nearly one half versus one year ago.
From the establishment survey, hiring in the private service
sector industries was notably weak. Jobs fell 44,000 but the 18,000
July decline was less than the 76,000 decline reported initially. Prior
months' job losses also were revised shallower. Nevertheless, August
was the seventh decline in the last eight months and the three-month
rate of decline during that period was 0.3%.
A decline of 53,000 (-0.7% y/y) jobs was reported for the
professional &amp; business service industries. That was led by a
61,600 (-3.6% y/y) drop in hiring in the management &amp; technical
support services area. Temporary help services job also were quite weak
as they fell 36,900 (-9.1% y/y). Retail sector jobs fell 19,900 and
they're down at a 1.2% rate during the last three months. That rate of
decline, however, remained less than the 3.0% rate of this past April.
Motor vehicle &amp; parts dealers employment led that drop with a
14,100 August decline and they're down at a 7.3% rate over the last
three months. Jobs in the information sector fell 3,000 last month and
at a 2.2% rate during the last three. Financial sector jobs fell 3,000
and at a 0.9% rate over the last three months.
These declines have been offset by 11.3% three-month growth in
the number of jobs in education and by 2.7% growth health care jobs.
The number of finance sector jobs fell 3,000 last month and they're
down at a 0.9% rate during the last three. Real estate sector jobs
slipped 1,400 and they have been falling at a moderate 0.6% annual rate
during the last three months which is an improvement from the 3% to 4%
rates of job loss late last year and early this year.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080905b.jpg" align="left" border="0" height="265" width="353">
Factory sector jobs fell 61,000 which was the largest monthly
decline since mid-2003. Payrolls were down at a 4.1% rate over the last
three months though that was slower than the 10% rate of decline by the
end of the 2001 recession. The motor vehicle &amp; parts sector
shed 39,000 (-12.9% y/y) jobs while jobs in the furniture industry fell
6,800 (-8.4% y/y).
Construction sector employment slipped just 8,000 last month
after a little-revised 20,000 drop during July. They fell at a 4.2%
annual rate during the last three months versus a 7.8% rate of decline
as of June.
Government sector jobs continued to rise and they posted a
17,000 August increase. They've increased at a 0.6% rate during the
last three months. Federal government hiring rose at a 1.0% rate during
the last three months while state as well as local government hiring
rose at a 1.3% and a 0.2% rate, respectively. These rates of growth are
down from their recent peaks.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080905d.jpg" align="right" border="0" height="265" width="353">
The one month diffusion index, which
measures the breadth of job gain or loss (50 is the break-even level),
improved to a near-break even 48.9%. The three-month index improved
just slightly to 40.1% from the cycle low of 38.3% reached last month.
The three-month figure for the factory sector was even weaker at 25.6%.
That's up slightly from July but near the lowest since 2003.
Average hourly earnings increased 0.4%, the
same as during as during an upwardly revised July. The three-month
growth rate rose to 4.3%, its highest since early last year. Factory
sector earnings fell 0.2% during August and rose at a 2.3% rate during
the last three months, which was near the weakest since late last year.
Private service sector earnings rose 0.4% and at an elevated 4.1% rate
during the last three months.
China and India:
Two Paths to Economic Power from the Federal Reserve Bank of
Dallas can be found <a href="http://dallasfed.org/research/eclett/2008/el0808.html">here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EB/@EB01/@EB01.HTM">Employment:
000s</a></th>
<th scope="col">August</th>
<th scope="col">July</th>
<th scope="col">June</th>
<th scope="col">Y/Y</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Payroll Employment</td>
<td>-84</td>
<td>-60</td>
<td>-100</td>
<td>-0.2%</td>
<td>1.1%</td>
<td>1.8%</td>
<td>1.7%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Previous</td>
<td>--</td>
<td>-51</td>
<td>-51</td>
<td>--</td>
<td>1.3%</td>
<td>1.9%</td>
<td>1.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Manufacturing</td>
<td>-61</td>
<td>-38</td>
<td>-44</td>
<td>-3.0%</td>
<td>-1.9%</td>
<td>-0.5%</td>
<td>-0.6%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Construction</td>
<td>-8</td>
<td>-20</td>
<td>-50</td>
<td>-5.7%</td>
<td>-1.0%</td>
<td>4.9%</td>
<td>5.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">Average Weekly Hours</td>
<td>33.7</td>
<td>33.7</td>
<td>33.7</td>
<td>33.8 (August '07)</td>
<td>33.8</td>
<td>33.9</td>
<td>33.8</td>
</tr>
<tr>
<td class="firstcol">Average Hourly Earnings</td>
<td>0.4%</td>
<td>0.4%</td>
<td>0.3%</td>
<td>3.6%</td>
<td>4.0%</td>
<td>3.9%</td>
<td>2.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">Unemployment Rate</td>
<td>6.1%</td>
<td>5.7%</td>
<td>5.5%</td>
<td>4.7% (August '07)</td>
<td>4.6%</td>
<td>4.6%</td>
<td>5.1%</td>
</tr>
</tbody>
</table>
German Sector Trends are Clear and
Weak 
by <a href="/comment/Brusca.html">Robert
Brusca</a> September 5, 2008


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080905e.jpg" align="left" border="0" height="265" width="353">
German statistics have been weakening and the weakness in
orders reported yesterday was a shock to some. Today the process of
being shocked continues with stark and unexpected weakness in German
industrial output. Output is off for the second time in two months and
by a severe 1.8% m/m. Yr/Yr the drop is -0.6%. MFG IP is off by 2% in
the month. Sequential growth rates generally show that the weakness is
still cumulating (construction and consumer spending are exceptions of
sorts). In the new quarter to date (Q3) output is falling at a 13.3%
annual rate, led by weakness in capital goods. While the drop in
consumer goods output is the most severe on a Yr/Yr basis, the
deceleration is the greatest for capital goods where output seems to
stay so high for so long. This it turns out was mirage like Wiley
Coyote standing on thin air waving to the Road Runner before gravity
took hold. German capital goods output too seemed to defy the gravity
and domestic weakness and the overly strong euro. But now that
resilience is a thing of the past.
German authorities have tried to argue that the weakness is
partly due to the start of the school year. But they hasten to add the
trends are going to be lower. There should be fewer denials of
encroaching weakness in Germany since the bottom fell out of orders and
IP and that has happened just over the past two days.
Things change. And they did not elect either Obama or McCain.
Still the ECB has decided to tighten up its collateral
acceptance parameters, and that action will impair liquidity in the
Zone and at a time when economic weakness seems to be taking greater
hold. In the US two speeches, one by Reserve Bank president Yellen, the
other by Reserve Bank president Fisher, talked in less than glowing
terms about the US economy. Fisher worries more about inflation
prospects while Yellen reports that the next move by the Fed is more
likely to be up than down but she reiterated Fed fallibility. Central
bankers clearly are not plugged into the news that reveals accelerating
weakness. Even the Bush Administration today took the opportunity to
say that a new stimulus program was not needed.
While the economic data are worsening central banks seem to be
taking the opportunity to let weaker growth drag inflation lower,
rather than to move to offset the weakness. This is done by ignoring
the weakening (Trichet), denying it (Germany, at least so far) or by
making inflation the greater threat (Richard Fisher, and others).

<table border="0" cellspacing="0" width="100%">
<colgroup><col></colgroup>
<thead><tr>
</tr>
</thead><thead><tr>
<th colspan="8" scope="col"> Total
German IP</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Saar exept m/m</td>
<td>Jul-08</td>
<td>Jun-08</td>
<td>May-08</td>
<td>3-mo</td>
<td>6-mo</td>
<td>12-mo</td>
<td>Quarter-to -Date</td>
</tr>
<tr>
<td class="firstcol">IP total</td>
<td>-1.8%</td>
<td>0.1%</td>
<td>-1.8%</td>
<td>-13.3%</td>
<td>-8.0%</td>
<td>-0.6%</td>
<td>-13.3%</td>
</tr>
<tr>
<td class="firstcol">Consumer</td>
<td>-1.7%</td>
<td>0.4%</td>
<td>-0.3%</td>
<td>-6.2%</td>
<td>-8.6%</td>
<td>-2.1%</td>
<td>-8.8%</td>
</tr>
<tr>
<td class="firstcol">Capital</td>
<td>-3.7%</td>
<td>1.7%</td>
<td>-3.7%</td>
<td>-21.0%</td>
<td>-11.7%</td>
<td>-0.1%</td>
<td>-21.2%</td>
</tr>
<tr>
<td class="firstcol">Intermediate</td>
<td>-0.6%</td>
<td>-0.5%</td>
<td>-1.0%</td>
<td>-8.2%</td>
<td>-3.4%</td>
<td>0.4%</td>
<td>-7.5%</td>
</tr>
<tr class="odd">
<td class="firstcol">Memo</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol">Construction</td>
<td>-2.0%</td>
<td>-2.4%</td>
<td>2.4%</td>
<td>-8.2%</td>
<td>-23.1%</td>
<td>-2.8%</td>
<td>-15.8%</td>
</tr>
<tr>
<td class="firstcol">MFG IP</td>
<td>-2.0%</td>
<td>0.5%</td>
<td>-1.9%</td>
<td>-13.1%</td>
<td>-7.8%</td>
<td>-0.2%</td>
<td>-13.3%</td>
</tr>
<tr>
<td class="firstcol">MFG Orders</td>
<td>-1.7%</td>
<td>-2.6%</td>
<td>-1.3%</td>
<td>-20.0%</td>
<td>-15.2%</td>
<td>-4.1%</td>
<td>-20.7%</td>
</tr>
</tbody>
</table> 
OECD LEIs Continue to Sag as Japan
Bucks Trend 
by <a href="/comment/Brusca.html">Robert
Brusca</a> September 5, 2008


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080905f.jpg" align="left" border="0" height="265" width="353">
OECD Trends. The OECD
trend-adjusted LEIs show clear ongoing declines. The OECD declines are
getting progressively weaker for the entire area as well as for the
OECD seven and for the OECD four. In the US, however, the OECD LEI is
still declining but is dropping at a decelerating pace. The US LEI grew
at the strongest pace one year ago and now its Yr/Yr pace is only in
line with other OECD measures while its 3-month and 6-month pace is
stronger than the other comparable OECD measures.
The OECD says. The OECD
characterizes the G7 reading as consistent with a still-weakening
climate. The OECD reports that the growth cycle outlook is for a
slowdown in the OECD area, G7 area and Japan, while for the Euro area a
strong slowdown is anticipated. "OECD composite leading indicators for
July 2008 indicate a continued weakening outlook for all the major
seven economies," the OECD said in its monthly release. "The latest
data for major non-OECD member economies tentatively point to expansion
in China, Brazil and Russia and a downturn in India," it said.
Selected Countries. Italy's
composite indicator fell the sharpest of all the G7 countries, off 1.9
points on the month. The German and Canadian indicators dropped 1.5
points. Japan's indicator fell 0.5 point and the United States saw a
0.2 point fall.
Comparison with past US turning
point. The US indicator is weak but did not get as weak as
it did in or before the last economic downturn. It is now rising from
its current cycle low. In Japan the index reach a spike low as weak as
it was in the last recession but it did not stay impacted for as long
as it did last time. The Japanese index is now rising.
The index for the Euro-Zone economies is much weaker than
it was at the time of the last US recession and it is still dropping at
an increasing speed.

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup><thead><tr>
<th colspan="5" scope="col"> OECD
Trend-Restored Leading Indicators</th>
</tr>
<tr>
<th colspan="5" scope="col">Growth
progression-SAAR</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>3Mos</td>
<td>6Mos</td>
<td>12mos</td>
<td>Yr-Ago</td>
</tr>
<tr>
<td class="firstcol">OECD</td>
<td>-4.6%</td>
<td>-3.6%</td>
<td>-3.3%</td>
<td>1.9%</td>
</tr>
<tr>
<td class="firstcol">OECD 7</td>
<td>-3.8%</td>
<td>-3.4%</td>
<td>-3.9%</td>
<td>1.3%</td>
</tr>
<tr>
<td class="firstcol">OECD Europe</td>
<td>-9.0%</td>
<td>-6.8%</td>
<td>-4.5%</td>
<td>1.1%</td>
</tr>
<tr>
<td class="firstcol">OECD Japan</td>
<td>0.9%</td>
<td>-0.4%</td>
<td>-0.9%</td>
<td>-1.2%</td>
</tr>
<tr>
<td class="firstcol">OECD US</td>
<td>-0.5%</td>
<td>-1.8%</td>
<td>-3.8%</td>
<td>2.5%</td>
</tr>
<tr class="odd">
<td colspan="5" class="firstcol">Six
month readings at
6-month intervals:</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>Recent six</td>
<td>6Mo Ago</td>
<td>12Mo Ago</td>
<td>18MO Ago</td>
</tr>
<tr>
<td class="firstcol">OECD</td>
<td>-3.6%</td>
<td>-2.9%</td>
<td>1.7%</td>
<td>2.2%</td>
</tr>
<tr>
<td class="firstcol">OECD 7</td>
<td>-3.4%</td>
<td>-4.3%</td>
<td>1.4%</td>
<td>1.2%</td>
</tr>
<tr>
<td class="firstcol">OECD Europe</td>
<td>-6.8%</td>
<td>-2.2%</td>
<td>0.6%</td>
<td>1.5%</td>
</tr>
<tr>
<td class="firstcol">OECD Japan</td>
<td>-0.4%</td>
<td>-1.5%</td>
<td>-3.7%</td>
<td>1.4%</td>
</tr>
<tr>
<td class="firstcol">OECD US</td>
<td>-1.8%</td>
<td>-5.7%</td>
<td>3.5%</td>
<td>1.5%</td>
</tr>
<tr>
<td colspan="5" class="firstcol">Slowdowns
indicated by BOLD RED.</td>
</tr>
</tbody>
</table>
</body></html>

US and China big leaders in adoption of AI models

Robust US demand for advanced technology products

China's export growth rotating away from the US

More pronounced upward revisions in countries more exposed to AI investment

Stable job openings and hiring rates point to cautious hiring

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

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

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

Tighter US immigration enforcement adversely impacting labor force

Economic policy uncertainty, while still elevated, is declining

Gradual disinflation and easier monetary policies across advanced economies

Largest October layoffs since 2003, led by technology

Subdued global shipping costs not yet pointing to supply chain problems

PMIs show still-elevated but slowing US inflation

AI boosting US investment in data centers

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

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

US financial markets have gotten used to elevated policy uncertainty

FOMC now expects more rate cuts going forward than in June

China gaining ASEAN exports while US exports slump

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

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

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

Equity market exuberance outpacing macroeconomic data

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

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Tian Yong Woon

In our Letter this week, we explore Asia in two parts. The first reviews key developments from the past week, focusing on snap election outcomes in Japan (chart 1) and Thailand (chart 2), both of which delivered victories for incumbent parties and helped reduce near-term political uncertainty.

The second, and larger, section builds on last week’s discussion of Asia and AI, shifting the focus to AI’s potential impact on the region from an end-user perspective. On the upside, Asia stands to benefit meaningfully from the eventual large-scale adoption of AI-powered robotics, reflecting the region’s relatively high share of manufacturing value added (chart 3). That said, important considerations remain, including the cost viability of transitioning towards humanoid robotics given the sizeable upfront capital expenditure involved. Beyond manufacturing, AI adoption could also deliver gains in healthcare, particularly as many Asian economies grapple with ageing populations—implying a growing care burden alongside a shrinking domestic caregiver base (chart 4). However, regulatory, ethical, and implementation challenges persist. 

At the same time, the AI transition will likely displace certain jobs, making this a race not only of adoption but of adaptability, where education—while an imperfect proxy—offers some insight into which economies may be better positioned to adjust (chart 5). Finally, bureaucratic frictions also matter (chart 6), although even traditionally more bureaucratic economies have begun introducing fast-track frameworks to avoid falling behind in what could prove to be a pivotal transition reshaping the regional, and potentially global, economic landscape.

**Japan’s snap election**
Following a snap election held on Sunday, Japanese Prime Minister Takaichi’s Liberal Democratic Party (LDP) secured a historic landslide victory, winning a more than two-thirds majority in Japan’s 456-seat Lower House. The LDP’s coalition partner, the Japan Innovation Party, also expanded its presence to 36 seats. The outcome suggests that Takaichi’s political gamble to capitalise on strong opinion polling has paid off. While the election result has removed a key source of near-term political uncertainty for Japan, attention now turns to the policy agenda enabled by the government’s newly strengthened mandate. Among the first expected moves, Takaichi appears set to proceed with a temporary food tax pause, reducing the 8% consumption tax on food to 0% for two years. This proposal reinforces the perception that her policy stance is fiscally accommodative, even as critics raise concerns around fiscal discipline and long-term sustainability. As for the market reaction, Japanese equities rallied on stimulus expectations, bond yields rose on prospects of increased issuance to fund higher spending, while the yen recorded only muted net moves (chart 1)—prompting some speculation that some intervention may have taken place.

260210T1.jpg

**Thailand’s snap election**
Thailand also held snap elections last Sunday, which saw the incumbent deliver a strong showing at the polls. Unlike Japan’s election outcome, however, the scale of the increase in the incumbent Bhumjaithai (BJT) Party’s parliamentary footprint came as a surprise to many observers. That said, despite these sizable gains, the BJT Party fell short of an outright majority, securing 193 of the 500 seats in parliament, implying that a coalition government will likely still be required to pass legislation smoothly. Thai equities and the baht nevertheless rallied on the election results (chart 2). Attention now turns to whether—and how—Prime Minister Anutin will follow through on key campaign promises, including the revival of a popular shopping subsidy programme. While such measures would provide a near-term boost to consumption, they would also raise concerns around fiscal sustainability. Beyond the parliamentary vote, Thai voters also approved a proposal to replace the constitution. If pursued, this could pave the way for deeper structural reforms to Thailand’s economy.

260210T2.jpg

**AI’s (potential) impact on Asia**
We now turn to the longer, second part of this week’s letter, where we examine AI’s potential impact on Asia. In contrast to last week’s discussion, the focus here is on Asia’s role as an end-user of AI, rather than its position within the global AI supply chain. While AI broadly promises substantial productivity gains if deeply embedded across economies, one sector where Asia may benefit disproportionately is manufacturing. This reflects the relatively high share of manufacturing value added in GDP across many Asian economies compared with the global average (chart 3). In particular, Asia stands to reap significant productivity gains through the widespread adoption of AI-powered robotics. Cost, however, remains a key consideration: relative to the overall cost of human labour, AI-enabled robots have yet to become unequivocally competitive once high upfront capital outlays are taken into account. That said, recent advances in humanoid, AI-enabled robots have demonstrated increasingly broad and sophisticated capabilities in replicating human tasks, including delicate and precision operations. Over time, this could meaningfully alleviate a persistent structural challenge facing many advanced Asian economies—ageing populations and the associated labour constraints.

260210T3.jpg

Digging deeper into the ageing population challenge faced by many Asian economies, another area where AI and robotics could play a meaningful role is healthcare. Ageing societies face a twin burden: a rising number of elderly individuals requiring care alongside a shrinking pool of working-age caregivers, absent offsetting labour inflows. One proxy for this imbalance is the old-age dependency, which, as shown in chart 4, is already relatively high in several Asian economies, including China, Japan, and South Korea. That said, adoption remains at a very early stage. Significant barriers to widespread deployment persist, including regulatory and ethical considerations, high implementation costs, and questions around the consistency, reliability, and safety of AI-enabled systems in delivering healthcare-related tasks.

260210T4.jpg

**Asia’s challenges in AI adoption**
That said, the outlook is not entirely positive for Asia in the context of widespread AI adoption. As with previous waves of transformative technology, AI will inevitably render some jobs—at least in their current form—obsolete, even as it creates new roles and reshapes others. This implies that many Asian economies will need to navigate a significant structural adjustment in their labour markets, as certain types of work are displaced while demand for new skill sets emerges. How effectively Asia manages this transition will be critical in determining whether its economies move ahead of—or fall behind—the global shift towards AI. At present, and using education quality as a rough proxy, some Asian economies appear better positioned to manage this adjustment than others. As illustrated in chart 5, economies such as China, Singapore, Japan, and South Korea seem relatively well placed to absorb and adapt to the coming changes. That said, education quality is only an imperfect indicator. Other factors will also matter, including the capacity to rapidly retool and reskill the workforce, as well as the inclusiveness of the transition. Ensuring that lower-skilled and more vulnerable segments of society are not left behind will be an important determinant of the long-term economic and social outcomes of AI adoption across the region.

260210T5.jpg

Another potential hurdle relates to bureaucratic costs, which—when elevated—can act as a meaningful source of friction in the adoption of new AI-driven technologies. On this front, some Asian economies stand out for having comparatively low bureaucratic burdens, notably Singapore, Taiwan, and South Korea, while others, such as Vietnam, the Philippines, and China, tend to lag (chart 6). That said, as with many broad-based indicators, this picture masks important nuances. Several of these economies have introduced industry-specific—particularly AI-focused—fast-tracking initiatives aimed at accelerating development within targeted domestic sectors. Even so, in an increasingly competitive and intensifying global race to adopt AI and capture its economic upside, we may see a growing tendency toward an “adopt first, regulate later” approach in the years ahead. This is likely to persist unless and until major incidents or heightened concerns emerge that materially slow the pace of AI adoption.

260210T6.jpg

Asia

Economic Letter from Asia: Of Ballots and Bots

260209E.jpg

Japan's economy watchers index has flattened out and backed off slightly for the current and future outlooks depending on the time horizon that you seek. However, what's clear is that the index reached the low point around the middle of last year, has been rebounding and now the rebound has either run out of gas or slowed after the index has rebuilt itself considerably.  

It is certainly too early to get pessimistic on Japan's economy, with Prime Minister Sanae Takaichi having just won a significant - essentially a landslide - snap election that she called after recently having been elected. The LDP would appear to be back in the driver's seat, and she has her sights set on more fiscal stimulus and expanded military spending. She is apparently much more on the same wavelength as Donald Trump in the United States. Mr. Trump was an Abe supporter, and Ms. Takaichi is a disciple of Mr. Abe.

At the moment, Japan would seem to have a groundswell of support behind the government and that government is set to try to rekindle some growth which could potentially put the Bank of Japan in a more decisively defensive track as far as setting rates and potentially raising rates.

**Economy watchers index is trending**
In January, the economy watchers index backed off for the second month in a row. However, it still has a percentile standing in its 51-percentile, slightly above its median standing since early-2005. The headline and all the components have standings above their respective 50th percentiles on this timeline, with the exception of housing, services, and employment; three readings that are extremely important to consumers. Housing has a 26.1 percentile standing, services (the employment sector) have a 45.8 percentile standing, while employment has a 22.9 percentile standing. Despite the otherwise solid and strong set of readings, there are these three significant flies in the ointment. Corporate Japan is doing extremely well with corporations having a 66.8 percentile standing; manufacturers and nonmanufacturers, separately, each come in with readings in their mid-to-upper 60th percentiles.

**The future index**
The future readings from the economy watchers index show continued but slight increases over the last few months. Only two future readings weaken month-to-month: housing and employment—once again two key readings as far as consumers are concerned. However, in terms of current monthly diffusion readings, the assessment of households, retailing, housing, and employment all have current diffusion values below 50, indicating net declines rather than increases. The percentile standing is for the future index are, like those for the current index, generally upbeat - and generally stronger than for the current indexes - with the future headline posting a 66.4 percentile standing in January. However, like the current index, the standing for housing is at its 21.3 percentile and the standing for employment is at its 30th percentile, both well below the neutral level that would place the ranking at the 50th percentile. Corporations show high readings, higher for the future indexes than for the current index standings. There also are high readings and standings for eating and drinking places as well as services. It's good to see services come up with a strong rating since it creates hope for the future for employment because services are the core employment sector. It will be interesting to see how this value changes in the coming months as Takaichi’s new policies are implemented and take hold.

**Summing up**
On balance, the economy watchers index has been firm to strong. There is some slight give-back in the current index in terms of trend. But beyond the index, there's more immediate reason to be more positive because Japan has just executed a very decisive and pro-growth snap election that is going to put the new Prime Minister Takaichi and strong control of the economy at a time where she seeks to cement economic strength. These elections were just completed over the weekend, and we will see the results reflected in data in the weeks and months to come.

260209.jpg

Japan

Economy Watchers Indexes Show Firmness; Impact of Takaichi Election to Come in Months Ahead

260206E.jpg

With the December report, Germany’s production and some of the early European industrial production data reveal a good deal of chaos in terms of the embedded trends. On the month, German industrial production fell by 1.9%, with consumer goods output up by 0.5%, capital goods output falling by 5.3%, and intermediate goods output falling by 1.2%. Among the early reporters in the monetary union—France, Spain, and Portugal—only Spain showed an increase in manufacturing IP in December; however, Spanish industrial production is notoriously volatile.

**Broader IP trends in Germany and elsewhere in Europe**
As for other early industrial production reporters, both Sweden and Norway showed strong-to-solid gains in December and each of them showed two-months of gains in a row. Beyond that, sequential growth rates from 12-months to six-months to three-months show accelerating growth in German consumer goods output against decelerating growth for intermediate goods. Real manufacturing output and real sales show mixed results- no clear trends; however, real manufacturing orders in Germany are off the map strong. 

**German manufacturing/industrial Surveys**
German industrial surveys from the IFO for manufacturing shows persistent weakening as well as for IFO manufacturing expectations, and in the EU Commission industrial index in the last three months. More broadly, Germany shows some modest but ongoing step up all of these based on average levels from 12-months to six-months to three-months for IFO expectations and the EU Commission industrial readings with mixed results for other survey readings.

**IP trends in Europe**
For the early reporting EMU members France, Spain, and Portugal, who report industrial production trends, each show mixed monthly trends against ongoing decelerations for manufacturing output over the broader sequential periods (12-month, to 6-month, to 3-month). However, for other Europe, Sweden and Norway, manufacturing trends are steadily accelerating on this broader timeline.

**A feeling of ‘Deja- What?’**
These combinations of opposed trends mixed with a lack of trends leave us with this sense of confusion about what's going on in manufacturing. For Germany, the extreme strength in orders is reassuring since orders should be forward-looking rather than backward-looking or even contemporaneous. But orders can also be a fickle series and so we'll have to watch it to see if the trends for German orders hold up.

**Current quarter-What’s been happening now**
In addition, current quarter growth for Germany actually looks quite good with industrial production up 3.7% at an annual rate in the current quarter, led by output increases in manufacturing against a decline in the intermediate goods output. Real orders in the quarter are surging at a 44% growth rate, while real sales in manufacturing only had a 0.1% uptick at an annual rate. The industrial indicators for Germany in the quarter show weakness or flatness with the only exception being IFO manufacturing expectations that advanced by a small amount. The three EMU members who report industrial production data show positive growth in the just-completed quarter except for Portugal where industrial production is falling at a 2.9% rate in the fourth quarter. Sweden and Norway, European countries but not monetary union members, show a strong 22% annual rate gain in Sweden against the 3% annual rate decline in Norway.

260206.jpg

**Rankings**
**How growth rates stack up…**
Moving away from short-term trends, the rankings of growth rates of these various metrics using 12-month growth rates on data back to 2006, show below-median growth rates for German industrial production and all three of its major sectors. All of them have rankings below the 50% mark where the median resides. Germany’s manufacturing output growth rate is below its median as is the growth of real sales; and once again real manufacturing orders break out and show a stunning 90th percentile standing, extremely strong compared to other growth rates on this period.

**Indicator rankings are poor**
However, the survey based industrial indicators for Germany, ranked based on their index levels, are all extremely weak and much weaker than German sector or other German metrics. The strongest indicator reading is the 29th percentile standing for IFO manufacturing expectations while the current ZEW index, IFO manufacturing index, and the EU Commission industrial readings, all reside below their 15th percentile. The survey rankings suggest that industrial sentiment is in much worse shape than activity and growth.

**IP elsewhere in Europe**
However, the growth ranking of manufacturing industrial production for the reporting EMU members and other European members are all quite solid, with percentile standings ranging from the 66th up to the 93rd percentile.

**Summing up**
From these data, Germany emerges as the weak economy compared with historic norms based on industrial production growth and indicator readings. However, there's a glimpse of positivity from the growth of real orders, and at the same time, some concern about ongoing sentiment for manufacturing in Germany as distinct from actual performance.

Germany

German IP Reveals Chaotic Trends

Andrew Cates

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

260205Z1.jpg

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

260205Z2.jpg

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

260205Z3.jpg

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

260205Z4.jpg

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

260205Z5.jpg

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

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

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

Winnie Tapasanun

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**Total job openings** fell 5.6% m/m (-12.9% y/y) to 6.542 million in December after a downwardly revised 7.0% decline to 6.928 million in November (previously -4.1% m/m; 7.146 million), according to the Job Openings and Labor Turnover Survey. December marked the third consecutive m/m fall and the lowest level since September 2020. The job openings rate declined to 3.9% in December, the lowest since April 2020, from 4.2% in November, remaining below a record-high 7.4% in March 2022. This rate is calculated as the ratio of job openings to total nonfarm employment plus openings. Significantly, the drop in job openings also lowered the **ratio of job openings to unemployed individuals** to 0.872 in December—the lowest since March 2021—from 0.890 in November, down from 1.085 in December 2024 and a pre-pandemic 1.211 in February 2020. A reading of 0.872 implies there were about 0.87 open jobs per unemployed person—indicating fewer openings than unemployed workers. December was the fifth time in six months that this ratio remained below 1.0.

**Private sector job openings** fell 6.8% (-12.5% y/y) to 5.804 million in December after a 6.6% fall to 6.227 million in November, registering the third successive m/m decline and the lowest level since September 2020. The private sector job openings rate fell to 4.1% in December, the lowest since April 2020, from 4.4% in November. The December m/m decline in private sector openings reflected drops of 27.7% (-36.9% y/y) in financial activities, 20.2% (-25.5% y/y) in professional & business services, 14.4% (-5.1% y/y) in trade, transportation & utilities, and 5.2% (-12.4% y/y) in private educational & health services. To the upside, private sector openings in the following categories rose m/m in December: other services (21.1%; 11.0% y/y), mining & lodging (17.6%; 0.0% y/y), information (13.5%; -4.7% y/y), manufacturing (8.5%; 0.5% y/y), leisure & hospitality (7.5%; -17.2% y/y), and construction (2.8%; 42.4% y/y). Meanwhile, government job openings rose 5.3% (-15.6% y/y) in December, the first m/m rise in three months, after a 10.6% drop in November.

**Total hiring** rebounded 3.4% (-1.5% y/y) to 5.293 million in December, the first m/m increase since September, following a 4.6% decrease to 5.121 million in November. The hiring rate edged up to 3.3% in December from 3.2% in November, though it remained below pre-pandemic levels. **Private sector hiring** rose 3.1% (-0.4% y/y) to 4.978 million in December, the third m/m rise in four months, after a 4.0% decline to 4.826 million in November. The private sector hiring rate rose to 3.7% in December from 3.5% in November, the same as in October and September. The December m/m increase in private sector hiring was led by a 32.1% jump (42.3% y/y) in information, followed by gains of 24.0% (-4.6% y/y) in financial activities, 23.5% (0.0% y/y) in mining & lodging, 6.5% (-4.8% y/y) in private educational & health services, 4.2% (-4.9% y/y) in trade, transportation & utilities, 3.6% (6.1% y/y) in construction, 3.4% (7.9% y/y) in leisure & hospitality, and 1.8% (-4.3% y/y) in manufacturing. To the downside, private sector hiring in professional & business services (-5.2%; +0.5% y/y) and other services (-4.3%; -16.5% y/y) declined m/m in December. Meanwhile, government hiring rebounded 6.4% (-16.3% y/y) in December, the first m/m rise since September, following a 13.5% drop in November.

**Total separations** rose 2.1% (3.3% y/y) to 5.251 million in December after a 1.5% rise to 5.144 million in November, marking the third m/m increase in four months and the highest level since September. The total separations rate edged up to 3.3% after holding at 3.2% in November and October. Private sector separations rose 1.6% (4.2% y/y) to 4.932 million in December, the highest level since June, while government sector separations jumped 10.4% (-9.1% y/y) to 319,000 following two consecutive m/m declines. **Total quits** (voluntary separations initiated by the employee) increased 0.3% (3.5% y/y) to 3.204 million in December, the third m/m rise in four months and the highest level since June, after a 7.4% rebound in November. The quits rate (a measure of workers’ willingness or ability to leave jobs) held at 2.0% in December and November, slightly below 2.3% in February 2020. Private sector quits eased 0.2% (+4.5% y/y) following an 8.4% November rebound. **Layoffs and discharges** (involuntary separations initiated by the employer) increased 3.6% (5.6% y/y) to 1.762 million in December, up for the third time in four months, after an 8.1% drop in November. The layoffs & discharges rate remained at 1.1% in December and November, marginally below 1.3% in February 2020. Private sector layoffs grew 4.3% (7.8% y/y) following a 7.3% November decrease.

The Job Openings and Labor Turnover Survey (JOLTS) data are available in Haver’s **USECON** database.

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- Job openings down 5.6% (-12.9% y/y) to 6.542 mil., third straight m/m decline.
- Hiring up 3.4% (-1.5% y/y) to 5.293 mil., first m/m increase since September.
- Separations rise to a three-month high; quits reach a six-month high; layoffs rebound.

Economy in Brief

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