Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081106a.jpg" width="353">
The job market remains weak.That&#39;s the message from the figures covering initial claims for jobless insurance. Last week, they held roughly steady at 481,000 with an upwardly revised reading of 485,000 during the prior week. Expectations had been for 476,000 claims. The latest figures were down slightly from the cycle&#39;s high, which was boosted after Hurricane Ike, but they were up by half from the year ago level. The four-week moving average of initial claims fell slightly to 477,000 (43.8% y/y).
The largest increases in initial claims for the week ending October 25 were in Pennsylvania (+5,579), California (+4,617), Illinois (+4,314), Ohio (+3,949), and North Carolina (+3,179), while the largest decreases were in Texas (-5,898), Tennessee (-2,078), Kansas (-1,067), Arkansas (-1,003), and Florida (-661).<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081106b.jpg" width="353">
Continuing claims for unemployment insurance during the week of October 25 rose a sharp 122,000 after the prior week&#39;s 6,000 decline. The four-week average of continuing claims rose to 3,754,000 it is this cycle&#39;s high and the highest (just barely) since 1983. Continuing claims provide some indication of workers&#39; ability to find employment and they lag the initial claims figures by one week.
The insured rate of unemployment was stable for the third week at 2.8%, this cycle&#39;s high and the highest since mid-2003. The peak rate in that recessionary period was 3.0% reached in late June 2003. The Commerce Department indicated that the highest insured unemployment rates in the week ending October 18 were in Oregon (3.6 percent), the Virgin Islands (3.6), Michigan (3.5), Nevada (3.5), California (3.4), Puerto Rico (3.4), South Carolina (3.3), Arkansas (3.2), New Jersey (3.2), and Pennsylvania (3.2).
Understanding inflation and the implications for monetary policy: a Phillips curve retrospective from the Federal Reserve Bank of New England is available <a href="http://www.bos.frb.org/economic/conf/conf53/index.htm">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/WEEKLY/@W5/@W507/@W507.HTM">Unemployment Insurance (000s)</a>&nbsp;</th>
<th scope="col">11/01/08</th>
<th scope="col">10/25/08</th>
<th scope="col">10/18/08</th>
<th scope="col">Y/Y</th>
<th scope="col">2007</th>
<th scope="col">2006&nbsp;</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Initial Claims</td>
<td>481</td>
<td>&nbsp;485</td>
<td>479</td>
<td>48.5%</td>
<td>322</td>
<td>313</td>
<td>331</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>--</td>
<td>3,843</td>
<td>3,721</td>
<td>48.4</td>
<td>2,552</td>
<td>2,459</td>
<td>2,662</td>
</tr>
</tbody>
</table>
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The job market remains weak.That's the message from the figures covering initial claims for jobless insurance. Last week, they held roughly steady at 481,000 with an upwardly revised reading of 485,000 during the prior week. [...]

U.S. Jobless Insurance Claims Remained Elevated

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081106a.jpg" align="left" border="0" height="265" width="353">
The job market remains weak.That's the message from the
figures covering initial claims for jobless insurance. Last week, they
held roughly steady at 481,000 with an upwardly revised reading of
485,000 during the prior week. Expectations had been for 476,000
claims. The latest figures were down slightly from the cycle's high,
which was boosted after Hurricane Ike, but they were up by half from
the year ago level. The four-week moving average of initial claims fell
slightly to 477,000 (43.8% y/y).
The largest increases in initial claims for the week ending
October 25 were in Pennsylvania (+5,579), California (+4,617), Illinois
(+4,314), Ohio (+3,949), and North Carolina (+3,179), while the largest
decreases were in Texas (-5,898), Tennessee (-2,078), Kansas (-1,067),
Arkansas (-1,003), and Florida (-661).<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081106b.jpg" align="right" border="0" height="265" width="353">
Continuing claims for unemployment insurance during the week
of October 25 rose a sharp 122,000 after the prior week's 6,000
decline. The four-week average of continuing claims rose to 3,754,000
it is this cycle's high and the highest (just barely) since 1983.
Continuing claims provide some indication of workers' ability to find
employment and they lag the initial claims figures by one week.
The insured rate of unemployment was stable for the third week
at 2.8%, this cycle's high and the highest since mid-2003. The peak
rate in that recessionary period was 3.0% reached in late June 2003.
The Commerce Department indicated that the highest insured unemployment
rates in the week ending October 18 were in Oregon (3.6 percent), the
Virgin Islands (3.6), Michigan (3.5), Nevada (3.5), California (3.4),
Puerto Rico (3.4), South Carolina (3.3), Arkansas (3.2), New Jersey
(3.2), and Pennsylvania (3.2).
Understanding inflation and the implications for
monetary policy: a Phillips curve retrospective from the
Federal Reserve Bank of New England is available <a href="http://www.bos.frb.org/economic/conf/conf53/index.htm">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/WEEKLY/@W5/@W507/@W507.HTM">Unemployment
Insurance (000s)</a>&nbsp;</th>
<th scope="col">11/01/08</th>
<th scope="col">10/25/08</th>
<th scope="col">10/18/08</th>
<th scope="col">Y/Y</th>
<th scope="col">2007</th>
<th scope="col">2006&nbsp;</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Initial Claims</td>
<td>481</td>
<td>&nbsp;485</td>
<td>479</td>
<td>48.5%</td>
<td>322</td>
<td>313</td>
<td>331</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>--</td>
<td>3,843</td>
<td>3,721</td>
<td>48.4</td>
<td>2,552</td>
<td>2,459</td>
<td>2,662</td>
</tr>
</tbody>
</table>
U.S. Productivity Growth Weakened
and Unit Labor Costs Surged 
by <a href="/comment/Moeller.html">Tom
Moeller</a> November 6, 2008


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080904i.jpg" align="left" border="0" height="265" width="353">
Labor productivity in the nonfarm business sector rose 1.1%
last quarter. That gain was down by two-thirds from the 2Q increase and
by half from 1Q. Nonetheless, the y/y gain of 2.0% remained nearly the
quickest since 2004. The latest increase about matched Consensus
expectations for 3Q.
Output growth fell to a negative 1.7% (+0.3% y/y) which was
its weakest since the 2001 recession. Productivity, however, still rose
as hours worked were reduced by an even greater degree. They declined
2.7% (-1.7% y/y).
Growth in compensation per hour nevertheless accelerated to
4.7% and that raised the y/y growth to 4.3%.
As a result of weaker productivity and quicker compensation,
unit labor cost growth jumped to 3.6%. That was off the recent highs
near 4.0% but the trend is one of acceleration.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081106e.jpg" align="right" border="0" height="265" width="353">
In the factory sector productivity declined at a 1.0% (+1.1%
y/y) rate and that was the second consecutive quarterly decline
following a 3.4% increase last year. Output declined 2.6% y/y and hours
worked were reduced by an even greater 3.7% y/y. Compensation growth
quickened to 5.1%, the fastest since 2006. As a result, unit labor cost
growth 6.1% last quarter and by 3.9% y/y, the fastest since late-2006.
The Current State
of the U.S. Economy and the Fed&#8217;s Response (With Reference to
Irrational Exuberance and Virgil&#8217;s Aeneid) from the Federal
Reserve Bank of Dallas is available <a href="http://dallasfed.org/news/speeches/fisher/2008/fs081104.cfm">here</a>.
Multinationals Make the Most of IT
from the Federal Reserve Bank of St. Louis is available <a href="http://research.stlouisfed.org/publications/net/20080601/cover.pdf">here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EC/@EC02/@EC02.HTM">Nonfarm
Business Sector</a> (SAAR, %)</th>
<th scope="col">3Q '08</th>
<th scope="col">2Q '08</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">Output per Hour</td>
<td>1.1</td>
<td>3.6</td>
<td>2.0</td>
<td>1.4</td>
<td>1.0</td>
<td>1.8</td>
</tr>
<tr>
<td class="firstcol">Compensation per Hour</td>
<td>4.7</td>
<td>3.5</td>
<td>4.3</td>
<td>4.1</td>
<td>3.8</td>
<td>4.0</td>
</tr>
<tr class="odd">
<td class="firstcol">Unit Labor Costs</td>
<td>3.6</td>
<td>-0.1</td>
<td>2.3</td>
<td>2.7</td>
<td>2.8</td>
<td>2.2</td>
</tr>
</tbody>
</table>
Germany's Flirtation with ReboundIs Smashed by a Stunning September Order Drop 
by <a href="/comment/Brusca.html">Robert
Brusca</a> November 6, 2008


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081106c.jpg" align="left" border="0">
German officials have officially ended their excursion trip
with optimism. During their journey through fantasy land, they did take
their turns in showing how wrong they can be. From the start of the US
slowing, they thought Europe had decoupled and that the euro could
continue to rise with little ill effect on the Zone. When the other
e-Zone countries were affected they said Germany was different. When
the banking crisis hit the US they said German banks were strong and
did not have these sorts of problems. Recently they had believed
Germany was going to be so much less affected by the growing recession
in Europe as policymakers announced that Germany was better prepared to
meet the crisis. And so it may be. And we shall find out because ready
or not here it comes. 
 

The pop in orders in August may have errantly encouraged the
belief that Germany was wearing some sort of special recession-proof
vest. But now Super-Germany has met its Kryptonite. The Sept plunge in
orders of -8% is the largest drop since German unification and has
swept optimism aside. Germany is now, after all, just another European
country with an economy under pressure, not a special case 
 

Moreover a perusal of the trends makes is crystal clear that
this downturn has been building for some time. Optimism in retrospect
looks a bit like whistling past the graveyard. August&#8217;s orders gain was
a rogue rise of 3.5% sandwiched in between drops of 1.7% in July and
now 8% in September. The sequential growth rates get progressively more
negative from -9% over 12 months to -12% over six months to -23% over
three months. Similarly the foreign and domestic orders show the same
progressions. 
 

Germany is getting pulled down more by weakness from the
outside. So, in some sense, it is true that Germany has been faring
better. But in good times German export orders boomed beyond the reach
of domestic orders as well. Germany is simply a lower growth more
stable economy than the world in which it trades. Yet weakness abroad
will weigh on Germany just as a global boom will boost it. Because
Germany is plugged into that trading system, it shares the good and bad
times with the world it exports to. There is nothing unusual about that
or about the effect of that on Germany in this cycle. 
 

The German industrial sales figures underline the issues.
German sales are showing the same sort of progressive declines. For a
while Germany was growing better than its trading partners because it
deals a lot in capital goods. One year ago German capital goods growth
rates rose 8% Yr/Yr while overall German sales rose by just 5.8%. But
in September German capital goods orders are being crushed. They are
falling by 5.2% in Sept alone. Their three-month pace of contraction is
-14.4% rivaling the 15.5% drop in the usually volatile sales of
consumer durable goods. 
 

Germany has been caught in the same web of weakness that all
of Europe is in. Today&#8217;s industrial orders report combines with the
week&#8217;s earlier reports from the MFG and Services sector purchasers data
from Markit to show that weakness is spreading in Germany as well as
across the e-Zone. 
 

Germany is in the soup along with the rest of Europe although
it may be submerging at a slightly slower rate. There can be little
doubt that Germany, like the rest of Europe is submerging. Down
periscope. 
 


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="9" scope="col">German
Orders and Sales By Sector and Origin </th>
</tr>
</thead>
<tbody>
<tr class="grey4">
<td class="firstcol">Real and SA</td>
<td colspan="3">% M/M</td>
<td colspan="5">% Saar</td>
</tr>
<tr class="grey3">
<td class="firstcol">&nbsp;</td>
<td>Sep-08</td>
<td>Aug-08</td>
<td>Jul-08</td>
<td>3-Mo</td>
<td>6-Mo</td>
<td>12-Mo</td>
<td>Yr Ago</td>
<td>QTR-2-Date</td>
</tr>
<tr class="grey2">
<td class="firstcol">Total Orders</td>
<td>-8.0%</td>
<td>3.5%</td>
<td>-1.7%</td>
<td>-23.0%</td>
<td>-12.2%</td>
<td>-9.0%</td>
<td>6.4%</td>
<td>-14.7%</td>
</tr>
<tr class="grey2">
<td class="firstcol">Foreign</td>
<td>-11.4%</td>
<td>4.3%</td>
<td>-1.2%</td>
<td>-30.7%</td>
<td>-16.7%</td>
<td>-13.6%</td>
<td>12.1%</td>
<td>-17.8%</td>
</tr>
<tr class="grey2">
<td class="firstcol">Domestic</td>
<td>-4.3%</td>
<td>2.8%</td>
<td>-2.1%</td>
<td>-14.2%</td>
<td>-7.4%</td>
<td>-3.9%</td>
<td>0.8%</td>
<td>-11.4%</td>
</tr>
<tr class="grey1">
<td colspan="9" class="firstcol">Real
Sector Sales</td>
</tr>
<tr class="grey2">
<td class="firstcol">MFG/Mining</td>
<td>-4.0%</td>
<td>4.5%</td>
<td>-2.4%</td>
<td>-8.2%</td>
<td>-4.2%</td>
<td>-1.9%</td>
<td>5.8%</td>
<td>-5.0%</td>
</tr>
<tr class="grey2">
<td class="firstcol">Consumer</td>
<td>-0.6%</td>
<td>2.0%</td>
<td>-0.4%</td>
<td>4.0%</td>
<td>2.0%</td>
<td>-2.6%</td>
<td>1.3%</td>
<td>-0.9%</td>
</tr>
<tr class="grey2">
<td class="firstcol">Consumer Durables</td>
<td>-6.3%</td>
<td>6.8%</td>
<td>-4.2%</td>
<td>-15.5%</td>
<td>-8.1%</td>
<td>-5.8%</td>
<td>2.4%</td>
<td>-7.7%</td>
</tr>
<tr class="grey2">
<td class="firstcol">Consumer Non-Durable</td>
<td>0.6%</td>
<td>1.2%</td>
<td>0.3%</td>
<td>8.5%</td>
<td>4.2%</td>
<td>-1.9%</td>
<td>1.0%</td>
<td>0.6%</td>
</tr>
<tr class="grey2">
<td class="firstcol">Capital Goods</td>
<td>-5.2%</td>
<td>5.7%</td>
<td>-4.0%</td>
<td>-14.4%</td>
<td>-7.5%</td>
<td>-1.2%</td>
<td>8.0%</td>
<td>-9.2%</td>
</tr>
<tr class="grey2">
<td class="firstcol">Intermediate Goods</td>
<td>-4.3%</td>
<td>4.2%</td>
<td>-1.7%</td>
<td>-7.5%</td>
<td>-3.8%</td>
<td>-2.6%</td>
<td>6.0%</td>
<td>-2.5%</td>
</tr>
<tr class="grey2">
<td class="firstcol">All MFG-Sales</td>
<td>-3.9%</td>
<td>4.4%</td>
<td>-2.2%</td>
<td>-7.4%</td>
<td>-3.8%</td>
<td>-1.9%</td>
<td>5.3%</td>
<td>-4.5%</td>
</tr>
</tbody>
</table>
</body></html>

Robert Brusca

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081105f.jpg" align="left" border="0" height="265" width="353">
The chart serves as yet another reminder as to why it has been
loopy for observers to have insisted that Europe and the US had become
disconnected economically &#8211; the so-called de-coupling argument. The MFG
sectors across countries are always closely connected because they
trade goods and compete in the same markets for the same business. The
services sectors have a lower incidence of tradable services &#8211; much
lower than for goods. Still, the overall EMU and US economies have been
on such similar cycles that their two service sector indices, with very
few exceptions, have been on the same page. 
 

The EMU in country level measures are mostly on their
respective lowest readings since May of 2000. The US measure is in its
bottom 13% of its range &#8211;also very weak. Germany&#8217;s measure is &#8216;only&#8217; in
the bottom 28% of its range. 
 

The drop in the EMU index in October is its largest m/m drop
since May 2000 when the comparisons start. 
 

We can also see that consumer confidence is very low in most
of these same places. Since the service sector provides the bulk of the
jobs, this is an expected result. 
 

However we can also use this report as a double check on the
MFG report which earlier was reported to have fallen so sharply. These
two sectors are showing the same sharp onset of weakness. That tends to
imbue the signal with a greater veracity than if the result came from
just one survey. The weak signal therefore seems to be the result of a
real weakness in the economy rather than from some quirk of the
calendar or a peculiarity of one survey. 
 


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="8" scope="col"> NTC
Services Indices for EU/EMU</th>
</tr>
</thead>
<tbody>
<tr class="grey5">
<td class="firstcol">&nbsp;</td>
<td>OCT-08</td>
<td>SEP-08</td>
<td>AUG-08</td>
<td>3Mo</td>
<td>6Mo</td>
<td>12Mo</td>
<td>Percentile</td>
</tr>
<tr class="odd">
<td class="firstcol">Euro-13</td>
<td>45.76</td>
<td>48.44</td>
<td>48.46</td>
<td>47.55</td>
<td>48.45</td>
<td>50.37</td>
<td>0.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">Germany</td>
<td>48.31</td>
<td>50.25</td>
<td>51.39</td>
<td>49.98</td>
<td>51.49</td>
<td>51.78</td>
<td>28.3%</td>
</tr>
<tr class="odd">
<td class="firstcol">France</td>
<td>47.54</td>
<td>50.14</td>
<td>48.04</td>
<td>48.57</td>
<td>48.96</td>
<td>53.05</td>
<td>0.4%</td>
</tr>
<tr class="odd">
<td class="firstcol">Italy</td>
<td>45.68</td>
<td>49.42</td>
<td>48.47</td>
<td>47.86</td>
<td>47.63</td>
<td>48.32</td>
<td>0.6%</td>
</tr>
<tr class="odd">
<td class="firstcol">Spain</td>
<td>32.22</td>
<td>36.09</td>
<td>38.98</td>
<td>35.76</td>
<td>37.39</td>
<td>41.65</td>
<td>0.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">Ireland</td>
<td>36.05</td>
<td>40.80</td>
<td>39.82</td>
<td>38.89</td>
<td>40.65</td>
<td>45.31</td>
<td>0.0%</td>
</tr>
<tr class="grey5">
<td class="firstcol">EU only</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">UK (CIPs)</td>
<td>42.39</td>
<td>45.95</td>
<td>49.17</td>
<td>45.84</td>
<td>46.98</td>
<td>49.60</td>
<td>0.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">US NONFMG ISM</td>
<td>44.20</td>
<td>52.10</td>
<td>51.60</td>
<td>49.30</td>
<td>50.17</td>
<td>50.48</td>
<td>13.6%</td>
</tr>
<tr class="grey3">
<td colspan="8" class="firstcol">EU
Commission Indices for
EU and EMU</td>
</tr>
<tr class="grey5">
<td class="firstcol">EU Index</td>
<td>OCT-08</td>
<td>SEP-08</td>
<td>AUG-08</td>
<td>3Mo</td>
<td>6Mo</td>
<td>12Mo</td>
<td>Percentile</td>
</tr>
<tr class="odd">
<td class="firstcol">EU Services</td>
<td>-10</td>
<td>-4</td>
<td>-2</td>
<td>-20.67</td>
<td>-19.00</td>
<td>-14.92</td>
<td>0.0%</td>
</tr>
<tr class="grey5">
<td class="firstcol">EMU</td>
<td>OCT-08</td>
<td>SEP-08</td>
<td>AUG-08</td>
<td>3Mo</td>
<td>6Mo</td>
<td>12Mo</td>
<td>Percentile</td>
</tr>
<tr class="odd">
<td class="firstcol">Services</td>
<td>-6</td>
<td>0</td>
<td>1</td>
<td>-1.67</td>
<td>2.17</td>
<td>5.79</td>
<td>0.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">Cons Confidence</td>
<td>-24</td>
<td>-19</td>
<td>-19</td>
<td>-20.67</td>
<td>-19.00</td>
<td>-1.11</td>
<td>0.0%</td>
</tr>
<tr class="grey5">
<td colspan="8" class="firstcol">Consumer
confidence by
country</td>
</tr>
<tr class="odd">
<td class="firstcol">Germany-Consumer Confidence</td>
<td>-12</td>
<td>-9</td>
<td>-9</td>
<td>-10.00</td>
<td>-7.50</td>
<td>-3.83</td>
<td>34.4%</td>
</tr>
<tr class="odd">
<td class="firstcol">France-Consumer Confidence</td>
<td>-32</td>
<td>-24</td>
<td>-23</td>
<td>-26.33</td>
<td>-23.83</td>
<td>-18.58</td>
<td>0.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">Ital-Consumer Confidence</td>
<td>-23</td>
<td>-22</td>
<td>-24</td>
<td>-23.00</td>
<td>-22.83</td>
<td>-22.83</td>
<td>13.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">Spain-Consumer Confidence</td>
<td>-44</td>
<td>-39</td>
<td>-37</td>
<td>-40.00</td>
<td>-38.00</td>
<td>-29.08</td>
<td>0.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">UK-Consumer Confidence</td>
<td>-27</td>
<td>-23</td>
<td>-24</td>
<td>-24.67</td>
<td>-22.50</td>
<td>-15.25</td>
<td>0.0%</td>
</tr>
<tr class="grey3">
<td colspan="5" class="firstcol">percentile
is over range since May
2000</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
</tbody>
</table>
</body></html>

The chart serves as yet another reminder as to why it has been loopy for observers to have insisted that Europe and the US had become disconnected economically – the so-called de-coupling argument. The MFG sectors across countries are [...]

Services Sectors Tank in US and in Europe

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081105d.jpg" width="353">
The Composite Index for the nonmanufacturing sector from the Institute for Supply Management fell sharply in October. It declined to 44.4 from an unrevised 50.2 during September. The figure, which was weaker than Consensus expectations, was the lowest in the series&#39; relatively brief ten year history.It rivaled the low during the 2001 recession.
The nonmanufacturing business activity sub-index also fell sharply to 44.2 which was the lowest level since this past January. Each figure was the lowest since the last recession. Since the series&#39; inception in 1997 there has been a 48% correlation between the level of the business activity index for the nonmanufacturing sector and the Q/Q change in real GDP for the services and the construction sectors.
The employment index fell to 41.5, a new low for the series. Since the series&#39; inception in 1997 there has been a 56% correlation between the level of the ISM nonmanufacturing employment index and the m/m change in payroll employment in the service-producing plus the construction industries.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081105e.jpg" width="353">
The new orders sub-index fell sharply to a recession level of 44.0.
Pricing power also collapsed. The reading of 53.4 was its lowest level since 2003. Since inception ten years ago, there has been a 60% correlation between the price index and the q/q change in the GDP services chain price index.
Beginning with the January 2008 Nonmanufacturing <cite>Report On Business</cite>&reg;, the composite index is calculated as an indicator of the overall economic condition for the non-manufacturing sector. It is a composite index based on the diffusion indexes for four of the indicators (business activity, new orders, employment and supplier deliveries) with equal weights. The latest report from the ISM can be found <a href="http://www.ism.ws/ISMReport/NonMfgROB.cfm">here</a>.
ISM surveys more than 370 purchasing managers in more than 62 industries including law firms, hospitals, government and retailers. The nonmanufacturing survey dates back to July 1997.
Interpreting the Great Moderation: changes in the volatility of economic activity at the macro and micro levels from the Federal Reserve Bank of New York can be found <a href="http://www.newyorkfed.org/research/staff_reports/sr334.pdf">here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EF/@EF03/@EF03.HTM">ISM Nonmanufacturing Survey</a></th>
<th scope="col">October</th>
<th scope="col">September</th>
<th scope="col">October &#39;07</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Composite Index</td>
<td>44.4</td>
<td>50.2</td>
<td>53.3</td>
<td>53.5</td>
<td>55.7</td>
<td>58.0</td>
</tr>
<tr>
<td class="firstcol">Prices Index</td>
<td>53.4</td>
<td>70.0</td>
<td>66.1</td>
<td>63.8</td>
<td>65.3</td>
<td>68.0</td>
</tr>
</tbody>
</table>


</html>

The Composite Index for the nonmanufacturing sector from the Institute for Supply Management fell sharply in October. It declined to 44.4 from an unrevised 50.2 during September. The figure, which was weaker than Consensus [...]

U.S. ISM Nonmanufacturing Index Fell Sharply: Recession Indicated

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081105c.jpg" width="353">
According to the Challenger, Grey &amp; Christmas survey, layoffs jumped last to their highest level since January of 2004. The rise to 112,884 was a near-doubling from last October and the three-month level layoffs at 98,905 was its highest since early 2006.
The rise in layoffs last month was led by 17,949 cuts in financial industries and 15,692 cuts in the automotive industry. There also were 6,946 layoffs in the consumer goods sector, 6,301 in the electronics industries and 5,930 layoffs in the telecommunication businesses
During the last ten years there has been a 76% (inverse) correlation between the three-month moving average of announced job cuts and the three-month change payroll employment.
Job cut announcements differ from layoffs. Many are achieved through attrition, early retirement or just never occur.
Challenger also reported that announced hiring plans fell 3.2% y/y.
The causes and consequences of economic restructuring: evidence from the early 21st century from the Federal Reserve Board can be found <a href="http://www.federalreserve.gov/pubs/feds/2008/200841/200841abs.html">here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S3/@S301/@S301.HTM">Challenger, Gray &amp; Christmas</a></th>
<th scope="col">October</th>
<th scope="col">September</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>
<td class="firstcol">Announced Job Cuts</td>
<td>112,884</td>
<td>95,094</td>
<td>78.9%</td>
<td>768,264</td>
<td>839,822</td>
<td>1,072,054</td>
</tr>
</tbody>
</table>
</body>
</html>

According to the Challenger, Grey & Christmas survey, layoffs jumped last to their highest level since January of 2004. The rise to 112,884 was a near-doubling from last October and the three-month level layoffs at 98,905 was its [...]

U.S. Challenger Layoffs Highest Since 2004

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081105a.jpg" width="353">
The payroll processor ADP indicated in its latest National Employment Report that October private nonfarm payrolls fell 157,000 after a revised 25,000 September decline. The latest was the third decline in as many months and it was the largest since November 2002. During the last three months payrolls have fallen 0.2%.
The U.S. Bureau of Labor Statistics will report on October payroll employment this Friday. Last month, the 25,000 worker decline in ADP&#39;s measure of private nonfarm payrolls was accompanied by a 168,000 (-0.7% y/y) worker decline in the BLS measure of private sector payrolls.
According to ADP and Macro Advisers, the correlation between the monthly percentage change in the ADP estimate and that in the BLS data is 0.90.
By the ADP measure, goods producing payrolls fell by 126,000 (-3.3% y/y). The largest decline was amongst medium sized payrolls which fell 65,000 (-3.6% y/y) followed by a 36,000 (-2.0% y/y) drop in small sized payrolls. Large payrolls fell 25,000 (-5.0% y/y).<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081105b.jpg" width="353"> 
Employment in the manufacturing sector fell 85,000 (-3.4% y/y) It has fallen in each month since late-2005.
Employment in the service producing industry added to the weakness in the goods producing sector and payrolls fell 31,000 (+0.9% y/y). It was their first decline since 2002. Medium sized payrolls fell 26,000 (+0.7% y/y) and large service producing payrolls dropped by 16,000 (-0.3% y/y). Small service producing payrolls rose by 11,000 (1.4% y/y).
ADP compiled the estimate from its database of individual companies&#39; payroll information. Macroeconomic Advisers, LLC, the St. Louis economic consulting firm, developed the methodology for transforming the raw data into an economic indicator.
The ADP National Employment Report data is maintained in Haver&#39;s USECON database; historical data go back to December 2000. The figures in this report cover only private sector jobs and exclude employment in the public sector, which rose an average 11,083 during the last twelve months. 
The full ADP National Employment Report can be found <a href="http://www.adpemploymentreport.com/pdf/final_report_october_08.pdf" title="blocked::http://www.adpemploymentreport.com/PDF/FINAL_Report_june_09.pdf">here</a>, and the ADP methodology is explained <a href="http://www.adpemploymentreport.com/PDF/ADPNERMethodology.pdf" title="blocked::http://www.adpemploymentreport.com/PDF/ADPNERMethodology.pdf">here</a>.<div> </div>

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EB/@EB25/@EB25.HTM">LAXEPA@USECON</a></th>
<th scope="col">October</th>
<th scope="col">September</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>
<td class="firstcol">Nonfarm Private Payroll Employment (m/m Chg.)</td>
<td>-157,000</td>
<td>-26,000</td>
<td>0.1%</td>
<td>1.1%</td>
<td>1.7%</td>
<td>1.8%</td>
</tr>
</tbody>
</table>


</html>

The payroll processor ADP indicated in its latest National Employment Report that October private nonfarm payrolls fell 157,000 after a revised 25,000 September decline. The latest was the third decline in as many months and it was [...]

ADP Report: Payroll Employment Off 157,000

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081105d.jpg" align="left" border="0" height="265" width="353">
The Composite Index for the nonmanufacturing sector from the
Institute for Supply Management fell sharply in October. It declined to
44.4 from an unrevised 50.2 during September. The figure, which was
weaker than Consensus expectations, was the lowest in the series'
relatively brief ten year history.It rivaled the low during the 2001
recession.
The nonmanufacturing business activity sub-index also fell
sharply to 44.2 which was the lowest level since this past January.
Each figure was the lowest since the last recession. Since the series'
inception in 1997 there has been a 48% correlation between the level of
the business activity index for the nonmanufacturing sector and the Q/Q
change in real GDP for the services and the construction sectors.
The employment index fell to 41.5, a new low for the series.
Since the series' inception in 1997 there has been a 56% correlation
between the level of the ISM nonmanufacturing employment index and the
m/m change in payroll employment in the service-producing plus the
construction industries.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081105e.jpg" align="right" border="0" height="265" width="353">
The new orders sub-index fell sharply to a recession level of
44.0.
Pricing power also collapsed. The reading of 53.4 was its
lowest level since 2003. Since inception ten years ago, there has been
a 60% correlation between the price index and the q/q change in the GDP
services chain price index.
Beginning with the January 2008 Nonmanufacturing <cite>Report
On Business</cite>®, the composite index is calculated as an
indicator of the overall economic condition for the non-manufacturing
sector. It is a composite index based on the diffusion indexes for four
of the indicators (business activity, new orders, employment and
supplier deliveries) with equal weights. The latest report from the ISM
can be found <a href="http://www.ism.ws/ISMReport/NonMfgROB.cfm">here</a>.
ISM surveys more than 370 purchasing managers in more than 62
industries including law firms, hospitals, government and retailers.
The nonmanufacturing survey dates back to July 1997.
Interpreting the Great Moderation: changes in the
volatility of economic activity at the macro and micro levels from
the Federal Reserve Bank of New York can be found <a href="http://www.newyorkfed.org/research/staff_reports/sr334.pdf">here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EF/@EF03/@EF03.HTM">ISM
Nonmanufacturing Survey</a></th>
<th scope="col">October</th>
<th scope="col">September</th>
<th scope="col">October '07</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Composite Index</td>
<td>44.4</td>
<td>50.2</td>
<td>53.3</td>
<td>53.5</td>
<td>55.7</td>
<td>58.0</td>
</tr>
<tr>
<td class="firstcol">Prices Index</td>
<td>53.4</td>
<td>70.0</td>
<td>66.1</td>
<td>63.8</td>
<td>65.3</td>
<td>68.0</td>
</tr>
</tbody>
</table>
ADP Report: Payroll Employment Off
157,000 
by <a href="/comment/Moeller.html">Tom
Moeller</a> November 5, 2008


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081105a.jpg" align="left" border="0" height="265" width="353">
The payroll processor ADP indicated in its latest National
Employment Report that October private nonfarm payrolls fell 157,000
after a revised 25,000 September decline. The latest was the third
decline in as many months and it was the largest since November 2002.
During the last three months payrolls have fallen 0.2%.
The U.S. Bureau of Labor Statistics will report on October
payroll employment this Friday. Last
month, the 25,000 worker decline in ADP's measure of private nonfarm
payrolls was accompanied by a 168,000 (-0.7% y/y) worker decline in the
BLS measure of private sector payrolls.

According to ADP and Macro Advisers, the correlation between
the monthly percentage change in the ADP estimate and that in the BLS
data is 0.90.

By the ADP measure, goods producing payrolls fell by 126,000
(-3.3% y/y). The largest decline was amongst medium sized payrolls
which fell 65,000 (-3.6% y/y) followed by a 36,000 (-2.0% y/y) drop in
small sized payrolls. Large payrolls fell 25,000 (-5.0% y/y).<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081105b.jpg" align="right" border="0" height="265" width="353">

Employment in the manufacturing sector fell 85,000 (-3.4% y/y)
It has fallen in each month since late-2005.
Employment in the service producing industry added to the
weakness in the goods producing sector and payrolls fell 31,000 (+0.9%
y/y). It was their first decline since 2002. Medium sized payrolls fell
26,000 (+0.7% y/y) and large service producing payrolls dropped by
16,000 (-0.3% y/y). Small service producing payrolls rose by 11,000
(1.4% y/y).
ADP compiled the estimate from its database of individual
companies' payroll information. Macroeconomic Advisers, LLC, the St.
Louis economic consulting firm, developed the methodology for
transforming the raw data into an economic indicator.
The ADP National Employment Report data is maintained in
Haver's 
USECON database;
historical data go back to December 2000. The figures in this report
cover only private sector jobs and exclude employment in the public
sector, which rose an average 11,083 during the last twelve months
The full ADP National Employment Report can be found <a href="http://www.adpemploymentreport.com/pdf/final_report_october_08.pdf" title="blocked::http://www.adpemploymentreport.com/PDF/FINAL_Report_june_09.pdf">here</a>,
and the ADP methodology is explained <a href="http://www.adpemploymentreport.com/PDF/ADPNERMethodology.pdf" title="blocked::http://www.adpemploymentreport.com/PDF/ADPNERMethodology.pdf">here</a>.
<div> </div>

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EB/@EB25/@EB25.HTM">LAXEPA@USECON</a></th>
<th scope="col">October</th>
<th scope="col">September</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>
<td class="firstcol">Nonfarm Private Payroll
Employment (m/m Chg.)</td>
<td>-157,000</td>
<td>-26,000</td>
<td>0.1%</td>
<td>1.1%</td>
<td>1.7%</td>
<td>1.8%</td>
</tr>
</tbody>
</table>
U.S. Challenger Layoffs Highest
Since 2004 
by <a href="/comment/Moeller.html">Tom
Moeller</a> November 5, 2008


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081105c.jpg" align="left" border="0" height="265" width="353">
According to the Challenger, Grey &amp; Christmas survey,
layoffs jumped last to their highest level since January of 2004. The
rise to 112,884 was a near-doubling from last October and the
three-month level layoffs at 98,905 was its highest since early 2006.
The rise in layoffs last month was led by 17,949 cuts in
financial industries and 15,692 cuts in the automotive industry. There
also were 6,946 layoffs in the consumer goods sector, 6,301 in the
electronics industries and 5,930 layoffs in the telecommunication
businesses
During the last ten years there has been a 76% (inverse)
correlation between the three-month moving average of announced job
cuts and the three-month change payroll employment.
Job cut announcements differ from layoffs. Many are achieved
through attrition, early retirement or just never occur.
Challenger also reported that announced hiring plans fell 3.2%
y/y.
The causes and consequences of economic
restructuring: evidence from the early 21st century from the
Federal Reserve Board can be found <a href="http://www.federalreserve.gov/pubs/feds/2008/200841/200841abs.html">here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S3/@S301/@S301.HTM">Challenger,
Gray &amp; Christmas</a></th>
<th scope="col">October</th>
<th scope="col">September</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>
<td class="firstcol">Announced Job Cuts</td>
<td>112,884</td>
<td>95,094</td>
<td>78.9%</td>
<td>768,264</td>
<td>839,822</td>
<td>1,072,054</td>
</tr>
</tbody>
</table>
Services Sectors Tank in US and in
Europe 
by <a href="/comment/Brusca.html">Robert
Brusca</a> November 5, 2008


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081105f.jpg" align="left" border="0" height="265" width="353">
The chart serves as yet another reminder as to why it has been
loopy for observers to have insisted that Europe and the US had become
disconnected economically &#8211; the so-called de-coupling argument. The MFG
sectors across countries are always closely connected because they
trade goods and compete in the same markets for the same business. The
services sectors have a lower incidence of tradable services &#8211; much
lower than for goods. Still, the overall EMU and US economies have been
on such similar cycles that their two service sector indices, with very
few exceptions, have been on the same page. 
 

The EMU in country level measures are mostly on their
respective lowest readings since May of 2000. The US measure is in its
bottom 13% of its range &#8211;also very weak. Germany&#8217;s measure is &#8216;only&#8217; in
the bottom 28% of its range. 
 

The drop in the EMU index in October is its largest m/m drop
since May 2000 when the comparisons start. 
 

We can also see that consumer confidence is very low in most
of these same places. Since the service sector provides the bulk of the
jobs, this is an expected result. 
 

However we can also use this report as a double check on the
MFG report which earlier was reported to have fallen so sharply. These
two sectors are showing the same sharp onset of weakness. That tends to
imbue the signal with a greater veracity than if the result came from
just one survey. The weak signal therefore seems to be the result of a
real weakness in the economy rather than from some quirk of the
calendar or a peculiarity of one survey. 
 


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup><thead><tr>
<th colspan="8" scope="col"> NTC
Services Indices for EU/EMU</th>
</tr>
</thead>
<tbody>
<tr class="grey5">
<td class="firstcol">&nbsp;</td>
<td>OCT-08</td>
<td>SEP-08</td>
<td>AUG-08</td>
<td>3Mo</td>
<td>6Mo</td>
<td>12Mo</td>
<td>Percentile</td>
</tr>
<tr class="odd">
<td class="firstcol">Euro-13</td>
<td>45.76</td>
<td>48.44</td>
<td>48.46</td>
<td>47.55</td>
<td>48.45</td>
<td>50.37</td>
<td>0.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">Germany</td>
<td>48.31</td>
<td>50.25</td>
<td>51.39</td>
<td>49.98</td>
<td>51.49</td>
<td>51.78</td>
<td>28.3%</td>
</tr>
<tr class="odd">
<td class="firstcol">France</td>
<td>47.54</td>
<td>50.14</td>
<td>48.04</td>
<td>48.57</td>
<td>48.96</td>
<td>53.05</td>
<td>0.4%</td>
</tr>
<tr class="odd">
<td class="firstcol">Italy</td>
<td>45.68</td>
<td>49.42</td>
<td>48.47</td>
<td>47.86</td>
<td>47.63</td>
<td>48.32</td>
<td>0.6%</td>
</tr>
<tr class="odd">
<td class="firstcol">Spain</td>
<td>32.22</td>
<td>36.09</td>
<td>38.98</td>
<td>35.76</td>
<td>37.39</td>
<td>41.65</td>
<td>0.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">Ireland</td>
<td>36.05</td>
<td>40.80</td>
<td>39.82</td>
<td>38.89</td>
<td>40.65</td>
<td>45.31</td>
<td>0.0%</td>
</tr>
<tr class="grey5">
<td class="firstcol">EU only</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">UK (CIPs)</td>
<td>42.39</td>
<td>45.95</td>
<td>49.17</td>
<td>45.84</td>
<td>46.98</td>
<td>49.60</td>
<td>0.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">US NONFMG ISM</td>
<td>44.20</td>
<td>52.10</td>
<td>51.60</td>
<td>49.30</td>
<td>50.17</td>
<td>50.48</td>
<td>13.6%</td>
</tr>
<tr class="grey3">
<td colspan="8" class="firstcol">EU
Commission Indices for
EU and EMU</td>
</tr>
<tr class="grey5">
<td class="firstcol">EU Index</td>
<td>OCT-08</td>
<td>SEP-08</td>
<td>AUG-08</td>
<td>3Mo</td>
<td>6Mo</td>
<td>12Mo</td>
<td>Percentile</td>
</tr>
<tr class="odd">
<td class="firstcol">EU Services</td>
<td>-10</td>
<td>-4</td>
<td>-2</td>
<td>-20.67</td>
<td>-19.00</td>
<td>-14.92</td>
<td>0.0%</td>
</tr>
<tr class="grey5">
<td class="firstcol">EMU</td>
<td>OCT-08</td>
<td>SEP-08</td>
<td>AUG-08</td>
<td>3Mo</td>
<td>6Mo</td>
<td>12Mo</td>
<td>Percentile</td>
</tr>
<tr class="odd">
<td class="firstcol">Services</td>
<td>-6</td>
<td>0</td>
<td>1</td>
<td>-1.67</td>
<td>2.17</td>
<td>5.79</td>
<td>0.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">Cons Confidence</td>
<td>-24</td>
<td>-19</td>
<td>-19</td>
<td>-20.67</td>
<td>-19.00</td>
<td>-1.11</td>
<td>0.0%</td>
</tr>
<tr class="grey5">
<td colspan="8" class="firstcol">Consumer
confidence by
country</td>
</tr>
<tr class="odd">
<td class="firstcol">Germany-Consumer Confidence</td>
<td>-12</td>
<td>-9</td>
<td>-9</td>
<td>-10.00</td>
<td>-7.50</td>
<td>-3.83</td>
<td>34.4%</td>
</tr>
<tr class="odd">
<td class="firstcol">France-Consumer Confidence</td>
<td>-32</td>
<td>-24</td>
<td>-23</td>
<td>-26.33</td>
<td>-23.83</td>
<td>-18.58</td>
<td>0.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">Ital-Consumer Confidence</td>
<td>-23</td>
<td>-22</td>
<td>-24</td>
<td>-23.00</td>
<td>-22.83</td>
<td>-22.83</td>
<td>13.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">Spain-Consumer Confidence</td>
<td>-44</td>
<td>-39</td>
<td>-37</td>
<td>-40.00</td>
<td>-38.00</td>
<td>-29.08</td>
<td>0.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">UK-Consumer Confidence</td>
<td>-27</td>
<td>-23</td>
<td>-24</td>
<td>-24.67</td>
<td>-22.50</td>
<td>-15.25</td>
<td>0.0%</td>
</tr>
<tr class="grey3">
<td colspan="5" class="firstcol">percentile
is over range since May
2000</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
</tbody>
</table>
</body></html>

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081104c.jpg" width="353">
The retail price for a gallon of regular gasoline fell by another twenty five cents last week. According to the U.S. Department of Energy survey, the price decline came on top of a twenty five cent drop during the prior week and the cost of $2.40 was the lowest since February of 2007. Prices have now fallen roughly $1.75 per gallon, or by forty percent, since their peak early this past July. The latest decline was accompanied by a drop in the average price for all grades of gasoline to $2.46 per gallon.
Yesterday, the spot market price for a gallon of regular gasoline fell another sixteen cents from last week&#39;s average to $1.41. In futures trading the November contract closed down further at $1.36 per gallon.
Weekly gasoline prices can be found in Haver&#39;s WEEKLY database. Daily prices are in the DAILY database.
The slowing of U.S. economic growth and the relatively high price for gas has reduced demand for gasoline by 4.0% y/y, according to the U.S. Department of Energy. This was the largest y/y drop since late 1995 (the latest four weeks versus the same four weeks last year). The demand for all petroleum products also has softened, falling 7.8% y/y.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081104d.jpg" width="353">
These DOE figures are available in Haver&#39;s OILWKLY database.
The price for a barrel of West Texas Intermediate crude oil fell further last week to an average $65.68 per barrel, down by more than one-half from the high in July of $145.66. In futures trading yesterday, the two-month price for crude oil was $64.59 per barrel.
Last week ,prices for natural gas at $6.43 per mmbtu were near their lowest level since October of last year. The average price this month was nearly one-half below the high for natural gas prices in early-July of $13.19/mmbtu.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/WEEKLY/@W4/@W4.HTM">Weekly Prices</a></th>
<th scope="col">11/03/08</th>
<th scope="col">10/27/08</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>
<td class="firstcol">Retail Regular Gasoline ($ per Gallon)</td>
<td>2.40</td>
<td>2.66</td>
<td>-20.3%</td>
<td>2.80</td>
<td>2.57</td>
<td>2.27</td>
</tr>
<tr>
<td class="firstcol">Light Sweet Crude Oil, WTI&nbsp; ($ per bbl.)</td>
<td>65.68</td>
<td>68.18</td>
<td>-30.4%</td>
<td>72.25</td>
<td>66.12</td>
<td>56.60</td>
</tr>
</tbody>
</table>
</body>
</html>

The retail price for a gallon of regular gasoline fell by another twenty five cents last week. According to the U.S. Department of Energy survey, the price decline came on top of a twenty five cent drop during the prior week and the [...]

U.S. Gasoline Prices Lowest Since March '07 As Demand Falls

Next year's inflation forecasts are on the rise and above target

Disrupted global supply chains placing upward pressure on US goods prices

Construction of data centers has overtaken transportation construction in US

Elevated energy prices putting intense upward pressure on input prices around the globe

US is big leader in global surge in private AI investment

Larger-than-usual income tax refunds this year are supporting consumer spending

Sharply rising share of AI-related jobs

Inflationary impact of surge in oil prices larger in Europe than in the US

Futures market thinks the price of oil will recede significantly over the next six months

Recent pickup in US defense orders could help support overall growth ahead

Cost of transporting crude oil has soared to series high

Market-based inflation expectations have not yet reflected recent surge in oil prices

Global equity markets are fearing a major economic disruption from soaring oil prices

Is recent drop in sentiment signaling softer growth ahead?

With the Iran conflict, geopolitical risk has soared to alarming levels

Soaring AI-related investment in US underpinning strong contribution of business spending to overall growth

AI-related outperformance of IP in Advanced Asia ex Japan

Resilient US economy pushing up Blue Chip 2026 outlook

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

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Winnie Tapasanun

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New single-family home sales unexpectedly fell 7.3% m/m (-6.8% y/y) to a seasonally adjusted annual rate of 580,000 units in May following an upwardly revised 5.7% decline to 626,000 in April (initially -6.2%, 622,000) and an upwardly revised 5.4% increase to 664,000 in March (previously +3.4%, 663,000), according to data from the U.S. Census Bureau. The Action Economics Forecast Survey had expected May sales of 640,000. May marked the lowest level since January, down 23.4% from a high of 757,000 in November 2025 but up 8.4% from a low of 535,000 in July 2022. The May decline coincided with a rise in the average 30-year fixed mortgage rate to 6.44%, the highest since August 2025, from 6.33% in April, according to Freddie Mac.

Regionally, May new home sales showed a mixed performance. Sales in the West plummeted 26.9% (-17.0% y/y) to 117,000 in May, a seven-month low, reversing a 19.4% rebound to 160,000 in April. Sales in the South fell 4.1% (-5.4% y/y) to 350,000, the lowest level since January, on top of an 11.4% April drop to 365,000. In contrast, sales in the Midwest recovered 16.2% (-3.7% y/y) to 79,000, the third m/m gain in four months, after a 20.0% April plunge to 68,000. Sales in the Northeast increased 3.0% (17.2% y/y) to 34,000, the highest level since December, following a flat reading in April and a 73.7% surge in March. Notably, the South remained the dominant region, accounting for 60.3% of total U.S. new home sales.

The median sales price of a new home rose 2.0% (0.0% y/y) to $424,900 in May, the highest since December, following a 6.0% rise to $416,500 in April and three consecutive m/m decreases. The median sales price was 6.9% above a low of $397,600 in November 2024 but 7.7% below its record high of $460,300 in October 2022. The average sales price of a new home climbed 7.8% (5.0% y/y) to $540,600, the first m/m increase in three months and the highest level since July 2022, following a 1.3% April decline to $501,400. The average price was 13.7% above a low of $475,600 in August 2024 and just 0.1% below a peak of $541,200 in July 2022. These sales price data are not seasonally adjusted.

The number of unsold new homes on the market grew 2.3% (-1.4% y/y) to 496,000 in May, the third m/m rise in four months and the highest level since July 2025, after a 0.8% rebound to 485,000 in April. The latest figure was 17.0% above a low of 424,000 in May 2023. The seasonally adjusted months' supply of new homes for sale rose to 10.3 months in May from 9.3 months in April, remaining above a low of 6.9 months in May 2023 and matching a high last seen in July 2022.

The median number of months a new home stayed on the market increased to 3.7 months in May, the highest since July 2021, from 3.6 months in April. The latest reading was above its record low of 1.5 months in September and October 2022 but well below a peak of 5.1 months in March 2021. These figures date back to January 1975.

New home sales are recorded when the sales contract is signed. New home sales activity and prices are available in Haver's **USECON** database. The consensus expectation figure from Action Economics is available in the **AS1REPNA** database.

260624H59.jpg

260624I59.jpg

- Sales -7.3% m/m (-6.8% y/y) to 580,000 in May; down 23.4% from a November high.
- Sales m/m down in the West (-26.9%) and South (-4.1%); up in the Midwest (+16.2%) and Northeast (+3.0%).
- Sales y/y down in all regions except the Northeast (+17.2%).
- Median sales price +2.0% m/m to $424,900, a 5-month high; avg. price +7.8% m/m to $540,600, highest since July ’22.
- Months' supply up to 10.3 mths., highest since July ’22.

U.S. New Home Sales Unexpectedly Hit a Four-Month Low in May

Michael J. Moran

260624A.jpg

260624B.jpg

The US current account balance, which consists of international trade and income flows, deteriorated slightly in the first quarter, moving to a deficit of $226.8 billion versus a shortfall of $221.1 billion in the fourth quarter of last year (chart, upper left). Trade flows moved slightly in favor of the US, as the deficit narrowed by $11.6 billion to $165.8 billion, with trade in both goods and services contributing to the improvement. The latest reading on the trade deficit was among the best of the post-pandemic period (chart, upper right).

The improvement in trade was more than offset by softening in both primary income and secondary income. Primary income consists of net receipts of both investment income and employee compensation, with net flows defined as receipts of US residents from abroad less US payments to residents in foreign countries. Net investment income is by far the larger of the two components of primary income, and it accounted for nearly all the slippage in primary income, dropping $17.0 billion to -$7.8 billion. The shift pushed net investment income back into negative territory after a quarter in the plus column (chart, lower left). Employee compensation moved in favor of the US by 4.0%, but given the small size of employee compensation, the improvement represented an insignificant offset to the slippage in investment income.

Secondary income consists of transfer payments (payments made without receiving something of economic value in return); examples include personal remittances (foreign workers sending funds to families in their home countries), charitable donations, taxes, fines, and penalties. Payments made by US residents have always exceeded payments received, leaving a regular deficit in secondary income. This component of the current account slipped 1.3% in Q1, but it remained within the range of observations over the past year.

Annual revisions to the current account were notable, as both the trade balance and the balance on primary income were revised to show deeper deficits. The quarterly average trade deficit for 2025 now totals $233.0 billion versus a previous estimate of $227.9 billion. Primary income now shows a quarterly average deficit of $11.9 billion for 2025 versus a surplus of $3.2 billion.

The shift to a deficit position in primary income in 2025 is not shocking, as previously estimated positive readings on average in 2025 (and prior years) were surprising in light of the international investment position of the US. Foreign investors hold far larger amounts of US assets than US investors hold of foreign assets (chart, lower right). That is, the US has a deficit in investment holdings. However, despite the differential in asset holdings, US investors typically earned higher rates of return on their foreign investments than foreigners earned on their US investments. Although the gap in asset holdings has been large, the higher returns earned by US investors left net investment income positive. Revised data now suggest that the net international investment position of the US has slipped to such a degree that higher rates of return will no longer offset the differential in asset holdings. Positive quarterly readings on net investment income might be apparent at times (such as 2025-Q4), but net investment income (and primary income in total) will probably be negative in most coming quarters.

Balance of Payments data are in Haver’s **USINT** database, with summaries available in **USECON**. The expectations figure is in the **AS1REPNA** database.

260624C.jpg

260624D.jpg

- Improvement in the trade balance offset by weaker net investment income.
- Annual revision showed wider deficit in 2025.


Q1 Current Account: Modest Slippage in Early 2026

260623E.jpg

**PMIs in June mark some progress**
The PMI report from S&P shows modest firming in conditions in June, even with the Middle East situation unresolved.

**Monthly:** The median reading for the 8 reporting countries or regions rose to 50.8 in June from 50.1 in May. Manufacturing improved to 52.7 from 52.4, while the services reading rose to 50.3 from 49.6, leaving a month of mild contraction behind.

**Most show June improvement:** Most countries or regions improved in June; the exceptions were Germany, the United Kingdom, and India, which were weaker. India was dragged down by a weaker service sector reading in June; the U.K. and Germany showed weakening conditions across the board for the composite index, the manufacturing sector, and services. On the other side of the coin, France, Japan, Australia, and the U.S. all showed improvement in each of three sectors: the composite, manufacturing, and services, in June compared to May.

**Sequentially still mixed:** The broader sequential readings show ongoing weakness, but these are derived from hard data and lag the monthly observations in the table that include preliminary flash estimates. All the composite readings weakened based on three-month averages except for India. However, seven of eight reporting areas showed improvement in manufacturing over three months compared to six months; the exception was Australia. Over six months, conditions are mixed, with four composite readings weaker compared to 12 months and with four stronger. However, over six months, all eight manufacturing sectors improved compared to 12 months. The 12-month readings are consistently stronger than their readings of 12 months ago. The only composite that's weaker is the U.S., while the services sectors in the monetary union, Germany, France, and the U.S. are weaker than they were 12 months ago.

**Standings are weak:** The queue percentile standings evaluate the current diffusion index in June compared to where it has been since January 2022, a period of about 4½ years. The queue standings show weakness up and down the line, with the exception of the manufacturing sector; that has the standing above its historic median in the monetary union, Germany, France, the U.K., the U.S., and Japan. Only Australia and India show manufacturing sectors whose current monthly standings are below their medians of the last 4½ years. In addition, Japan has a strong composite reading at its 81st percentile. Overall, the services sectors are weak and below their 50% standing every place, and below that mark by a large margin, except for Japan, where the services sector has a 47th percentile standing, only a few ticks below its median.

260623.jpg

**Summing up: A glimmer of hope but still a lot of weakness**
Manufacturing is stronger sequentially over three months, six months, and 12 months for every reporter except for Australia over three months. The rest of the report is not very impressive. There is some rebound in June, but here we're talking about volatile monthly data. The services sectors still show sequential weakness over 12 months, six months, and three months in the European Monetary Union, Germany, France, and the U.S. The U.K. and Japan showed three-month and six-month weakness as well. That’s too much weakness in the key job creation sector to think that this report is a positive signal.

S&P PMIs in June Firm

260622E.jpg

Danish consumer confidence rose to -14 in June from -19.8 in May, a small pickup for a still-negative net reading. In June, the reading has a standing at its 7.9 percentile on data back to 1995. So, this confidence headline still has a lower 8% reading overall.

On the month, all seven component readings improved compared to May, although the environmental assessments were little changed across four components. As for the environment, the most changed reading is the improved favorability of the time to save, a metric that is not always a positive category.

As for the seven categories, the readings on the financial situation, general economy and the unemployment rate all improved month-to-month, while the inflation metrics both backed down sharply.

These changes show the financial situation and general economy gauges all at rankings in the lower 20th percentiles, with the outlook for the next 12 months having a standing in their lower 10th percentiles and lower for both the financial situation and the general economy.

Consumer prices, despite a strong monthly step-back, have a 90.2 percentile standing for prices over the past 12 months and a 94.3 percentile standing for the CPI over the next 12 months. Despite some let-up in concerns about unemployment, the unemployment gauge has an 85.1 percentile standing, still substantially elevated.

The environmental readings are less negative, starting with the ‘favorability of the time to purchase,’ a bit weaker month-to-month but improved on balance over two months. The June reading is slightly better than its 12-month average but still has a ranking only in its 21st percentile. The favorability of the time to purchase over the next 12 months is a tick weaker month-to-month and about a point worse than its 12-month average. Its June ranking is in its lower 10th percentile of its historic queue. The favorability of the time to save has a stronger ranking, but this is a more equivocal category. It is improved month-to-month and only slightly stronger over two months The June reading is stronger than its 12-month average, with a ranking in its 47.6 percentile—improved compared to previous categories but still worse than its historic median since 1995 (the median occurs at a ranking of 50%). The ‘general financial situation of households now’ ticked lower in June from May but is stronger on balance over two months. The June reading is above its 12-month average and has a 59.2 percentile standing—above its median.

On balance, Denmark shows improving confidence, progressing slowly but on the right path. There is a sharp downward adjustment in inflation, especially over the next 12 months, despite global conditions. Still, the ranking of the confidence metrics are uniformly weak.

260622.jpg

Denmark

Danish Confidence Improves As Inflation Expectations Pull Back Sharply

Andrew Cates

**US Outperformance Holds; Europe and China Continue to Disappoint**
One of the most persistent features of the global macro landscape in 2026 has been the widening divergence between growth outcomes in the United States and those in Europe and China. Citigroup’s global growth surprise indices—which measure the gap between actual economic releases and consensus expectations—capture this divergence with unusual clarity. US data have continued to surprise on the upside, supported by resilient consumer spending, a stronger-than-expected labour market and the ongoing AI-driven capital spending boom. The picture elsewhere is less encouraging. Growth surprises have turned negative across the euro area, reflecting the cumulative toll of elevated energy costs, weak industrial activity and subdued business confidence. And China's growth surprise index has also fallen sharply in recent weeks, with weaker-than-expected retail sales and fixed asset investment data for May this week reinforcing concerns that domestic demand remains fragile and that policy support is yet to gain meaningful traction.

260618Z1.jpg

**The Oil Risk Premium in the UK Has Been Fading**
One of the more notable features of UK markets this year has been the close relationship between oil prices and two-year gilt yields. The link is not mechanical, but in an economy heavily exposed to imported energy, swings in oil prices can materially alter the inflation outlook and, by extension, expectations for Bank of England policy. That relationship was on display again this week. A softer-than-expected UK CPI reading for May—helped in part by easing energy price pressures—led investors to scale back expectations that inflation would remain persistently above target, pushing two-year gilt yields to their lowest level in six weeks. The question now is whether this marks the start of a more sustained easing in inflation pressures or merely a temporary reprieve. Much will depend on whether the recent decline in oil prices following the US-Iran ceasefire agreement proves durable.

260618Z2.jpg

**The AI Investment Boom Is Rewriting the Rule Book for the Chip Industry**
If the divergence in global growth surprises noted above tells a story of a world economy under strain, the semiconductor sales data tell a very different one — of a technology-driven investment cycle that is accelerating almost regardless of the broader macro environment. Global semiconductor sales have surged to record levels over the past twelve months, driven primarily by insatiable demand for the chips that underpin AI infrastructure: graphics processing units, high-bandwidth memory, and advanced logic chips. Data centre capital expenditure from the hyperscalers continues to exceed even the most optimistic forecasts from a year ago, and the investment pipeline shows no sign of moderating. The gains are concentrated in AI-adjacent products; legacy chips for consumer electronics and industrial applications remain relatively soft.

260618Z3.jpg

**Copper Holds Firm As Oil Retreats**
The commodity markets are telling two quite different stories this week, and the contrast is instructive. Oil has moved sharply lower on the US-Iran MoU news as investors trim the conflict risk premium that has been embedded in energy markets since March — a welcome development for inflation and central bank optionality alike. But the three commodities shown in this chart tell a different story. Copper, one of the most reliable proxies for global electricity infrastructure investment, remains near multi-year highs, reflecting the extraordinary volume of data centre construction, grid expansion and electrification spending flowing through the global economy. Aluminium — energy-intensive to produce and increasingly in demand for the structural components of both data centres and electric vehicles — has, until quite recently, held its ground. Lithium hydroxide, the battery-grade refining product that sits at the heart of the energy storage supply chain, has seen some cyclical softness but remains structurally underpinned by the scale of demand being projected for grid-scale storage and electric mobility over the next decade.

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**Is Energy Availability a Binding Constraint on Growth?**
This next chart is a scatter plot that maps electricity generation per capita against GDP growth per capita across a broad sample of countries over the past five years. The positive relationship is striking. Economies with higher electricity generation per capita, including the United States, have generally delivered stronger GDP growth, while those with more constrained electricity systems have tended to lag. The obvious objection is reverse causality: richer economies generate more electricity because they have more to power. That is partly true. But the broader evidence is difficult to dismiss. The US shale revolution delivered an abundance of cheap energy that supported a sustained period of industrial outperformance relative to many advanced economies. Mainstream commentary often attributed this advantage to factors such as labour market flexibility or technological innovation, but energy costs were arguably at least as important.

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**Corporate America Is Investing from a Position of Unusual Financial Strength**
The surge in US corporate investment—particularly in AI infrastructure, data centres and semiconductors—has inevitably drawn comparisons with the late-1990s dot-com boom. Yet the financial balance data suggest an important difference. During the dot-com era, US non-financial corporates moved into a financial deficit approaching 4% of GDP, relying heavily on external financing to fund investment. Today, despite another ambitious investment cycle, the sector remains in surplus, currently around 1.8% of GDP. Corporate America is investing aggressively, but it is still generating more cash than it is spending. The boom is being financed largely through profits rather than debt. Risks remain—not least the growing fiscal burden on the federal government—but the balance-sheet fragilities that turned previous investment booms into systemic crises appear far less pronounced. If a major constraint emerges in the years ahead, it may be energy and resources rather than leverage.

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The signing of a Memorandum of Understanding (MoU) between the United States and Iran earlier this week has offered financial markets their most significant moment of geopolitical relief since the Middle East conflict escalated in early March. Oil prices fell sharply on the news, short-dated bond yields moved lower across several major economies, and risk assets recovered ground. But relief, as investors have learnt repeatedly over the past three months, is arguably not the same as resolution. The MoU sets a framework for negotiations rather than a final settlement, and the history of US-Iran diplomacy is not one that encourages complacency. Meanwhile, the Federal Reserve — concluding its June meeting yesterday under new chair Kevin Warsh — held rates steady but delivered a distinctly hawkish dot plot that shifted the median year-end projection from a cut to a hike, a reminder that the easing cycle the market had been pricing is no longer the base case. Against this backdrop, this week's charts take stock of where the global economy presently stands — and what the underlying data, beneath the geopolitical noise, are telling us. The picture that emerges is one of divergence. The United States continues to outperform consensus growth expectations while Europe and China disappoint (chart 1). UK short-dated yields have tracked oil prices with unusual consistency this year, and today's softer-than-expected CPI print for May — arriving just as the MoU has knocked crude lower — potentially changes the policy calculus for the Bank of England (chart 2). Global semiconductor sales, meanwhile, are storming ahead regardless of the geopolitical noise, powered by AI infrastructure spending that shows no sign of fatigue (chart 3). A cross-section of commodity prices tells two stories simultaneously: the geopolitical risk premium is draining out of oil, but the metals and materials the AI economy actually needs — copper, uranium, critical minerals — are holding firm (chart 4). Meanwhile a cross-country scatter of electricity generation and GDP growth over the past five years raises a question that deserves more attention than it typically gets: is energy availability a constraint on growth, or merely a consequence of it? The evidence, we would argue, points firmly in one direction (chart 5). And finally, for all the comparisons being drawn between the current investment boom and the late 1990s, the financial balance of the US corporate sector tells a rather different story — one that matters for how any correction might unfold (chart 6).

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Economy in Brief

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U.S. Jobless Insurance Claims Remained Elevated

U.S. Jobless Insurance Claims Remained Elevated

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U.S. ISM Nonmanufacturing Index Fell Sharply: Recession Indicated

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U.S. ISM Nonmanufacturing Index Fell Sharply: Recession Indicated

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