Tom Moeller

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071207a.jpg" align="left" border="0" height="265" width="353">
The 94,000 worker rise in nonfarm payrolls in November
reported today by the Bureau of Labor Statistics was a bit stronger
than early expectations for a 70,000 increase. However, it was much
weaker than forecasts which were ratcheted up after Wednesday's ADP
report of a strong gain in private nonfarm payrolls. And while the
increase was accompanied by a slight upward revision to the gain in
October jobs, the rise in September employment was more than halved to
44,000.
The unemployment rate held steady at 4.7%
last month. Household employment surged 696,000 (0.7% y/y) and more
than offset the prior month's 250,000 decline. The labor force also
surged 617,000 (0.9% y/y). The labor force participation rate jumped to
66.1%, its highest level since July but still down from 66.2% averaged
last year.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071207b.jpg" align="right" border="0" height="265" width="353">
The level of average hours worked has remained notably stable
recently. As a result, for the fourth quarter so far the level of
aggregate hours worked (employment times hours) is up just 0.9% (AR)
following a 3Q rise of 1.2%. During the last ten years there has been a
44% correlation between the gain in hours and the gain in real GDP.
That correlation is down from 56% over the last 20 years and from 74%
over the last 30 due to the faster growth in worker productivity.
Private service sector jobs increased 97,000 (1.7% y/y) last
month after an unrevised gain of 154,000 in October. Retail employment
grew 24,200 (0.4% y/y) and professional &amp; business service jobs
rose 30,000 (1.8% y/y). Jobs in the education sector ticked up 2,000
(2.6% y/y) while the health care sector added 25,300 workers (3.2%
y/y). Employment in the temporary help industry rose by 11,300 (-1.2%
y/y).
Job losses in the service sector were logged in the finance
industry. The 20,000 worker decline (-0.1% y/y) was the fifth decline
in the last six months. In addition, following the drop off in the
housing industry, real estate employment fell 10,800 (-0.2% y/y) for
the second decline in the last three months.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071207c.jpg" align="left" border="0" height="265" width="353">
Employment in the government sector also rose a modest 30,000
(1.1% y/y) after a 38,000 worker increase in October. Very weak hiring
by the Federal government (-0.3% y/y) has held back gains in the total.
Factory sector payrolls fell further by11,000, adding to a
decline that began early last year. These declines remain at odds with
the ISM reports of job growth in manufacturing. Construction employment
fell 24,00 last month.
Average hourly earnings increased 0.3%
while the prior month's gain was revised down sharply and now shows a decline
of 0.2%. Factory sector earnings bounced back 0.4% (2.7% y/y) from a
0.3% decline in October which was initially reported as an increase.
Private service-providing earnings rose 0.3% (3.9% y/y) following a
0.2% October decline that also was originally reported as an increase.
The minimum wage and the labor market
from the Federal Reserve Bank of Cleveland can be found <a href="http://www.clevelandfed.org/research/Commentary/2007/0501.pdf">
here</a>.
Fed GovernorRandall S. Kroszner's speech titled Loan
Modifications and Foreclosure Prevention is available <a href="http://www.federalreserve.gov/newsevents/testimony/kroszner20071206a.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/USECON/@EB/@EB01/@EB01.HTM">Employment</a>
: 000s </th>
<th scope="col">November</th>
<th scope="col">October</th>
<th scope="col">September</th>
<th scope="col">Y/Y</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Payroll Employment</td>
<td>94</td>
<td>170</td>
<td>44</td>
<td>1.2%</td>
<td>1.9%</td>
<td>1.7%</td>
<td>1.1%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Previous</td>
<td>--</td>
<td>166</td>
<td>96</td>
<td>--</td>
<td>--</td>
<td>--</td>
<td>--</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Manufacturing</td>
<td>-11</td>
<td>-15</td>
<td>-15</td>
<td>-1.3%</td>
<td>-0.2%</td>
<td>-0.6%</td>
<td>-1.3%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Construction</td>
<td>-24</td>
<td>-9</td>
<td>-25</td>
<td>-1.6%</td>
<td>4.8%</td>
<td>5.2%</td>
<td>3.6%</td>
</tr>
<tr class="odd">
<td class="firstcol">Average Weekly Hours</td>
<td>33.8</td>
<td>33.8</td>
<td>33.8</td>
<td>33.8 (Nov '06)</td>
<td>33.8</td>
<td>33.8</td>
<td>33.7</td>
</tr>
<tr>
<td class="firstcol">Average Hourly Earnings</td>
<td>0.3%</td>
<td>-0.2%</td>
<td>1.3%</td>
<td>3.8%</td>
<td>3.9%</td>
<td>2.8%</td>
<td>2.1%</td>
</tr>
<tr class="odd">
<td class="firstcol">Unemployment Rate</td>
<td>4.7%</td>
<td>4.7%</td>
<td>4.7%</td>
<td>4.5% (Nov '06)</td>
<td>4.6%</td>
<td>5.1%</td>
<td>5.5%</td>
</tr>
</tbody>
</table>
Michigan Consumer Sentiment DownHard 
by <a href="/comment/Moeller.html">Tom
Moeller</a> December 7, 2007


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071207d.jpg" align="left" border="0" height="265" width="353">
The University of Michigan's consumer sentiment index for
early this month slid 2.1% to 74.5 from an upwardly revised November
level. It was the third consecutive monthly decline and for the fourth
quarter sentiment looks to have dropped 10% from the 3Q average.
The current conditions index stabilized a bit and rose 0.7%
after a hefty 6.3% November decline. Conversely, the expectations index
continued the prior two month's rate of decline and fell 4.5% m/m to
63.2, the lowest reading since 2005.
Current buying conditions for large household goods improved
modestly m/m but remained down 13.0% from last December. The view of
current personal finances, however, slid 3.0% for the second sharp
monthly decline (-17.6% y/y).
Expectations for personal finances fell 3.5%, repeating a
November drop (-10.5% y/y) and expectations for business conditions
during the next year fell 11.0% (-38.1% y/y). Expectations for business
conditions during the next five years, however, remained stable with
the November level which was still depressed by nearly one quarter from
a year ago.
The rise in gasoline prices has raised expectations for
inflation during the next twelve months to 4.5% from 4.3% in November
and from 3.5% one year ago. For the next five to ten years expectations
were for a 3.6% rise in prices.
Opinions about government policy fell sharply. The 7.3% m/m
decline brought this opinion measure down 14.6% from one year ago.
The University of Michigan survey is not seasonally
adjusted.The reading is based on telephone interviews with about 500
households at month-end; the mid-month results are based on about 300
interviews. The summary indexes are in Haver's USECON database,
with details in the proprietary UMSCA database.
Consumer sentiment, the economy, and the news media
is a 2004 paper from the Federal Reserve Bank of San
Francisco and it can be found <a href="http://www.frbsf.org/publications/economics/papers/2004/wp04-09bk.pdf">
here</a>.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071207e.jpg" height="265" width="312"><img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071207f.jpg" height="265" width="312">


<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/@EF14/@EF1402/@EF1402.HTM">University
of Michigan</a></th>
<th scope="col">Dec (Prelim</th>
<th scope="col">Nov </th>
<th scope="col">Nov&nbsp; y/y</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Consumer Sentiment</td>
<td>74.5</td>
<td>76.1</td>
<td>-18.8% </td>
<td>87.3</td>
<td>88.5</td>
<td>95.2</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Current
Conditions</td>
<td>92.1</td>
<td>91.5</td>
<td>-14.8%</td>
<td>105.1</td>
<td>105.9</td>
<td>105.6</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;
Expectations</td>
<td>63.2</td>
<td>66.2</td>
<td>-22.2%</td>
<td>75.9</td>
<td>77.4</td>
<td>88.5</td>
</tr>
</tbody>
</table>
</body></html>

The 94,000 worker rise in nonfarm payrolls in November reported today by the Bureau of Labor Statistics was a bit stronger than early expectations for a 70,000 increase. However, it was much weaker than forecasts which were ratcheted [...]

U.S. Payrolls Increase Light, Unemployment Steady

Robert Brusca

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071206h.jpg" align="left" border="0" height="265" width="353">
German orders jumped in October rising by 4% after an upward
revised drop of 1.6% in Sept. The gain saw the domestic orders
component rise by 2.7% as foreign orders rose by 5%. Foreign orders are
now rising at a 33% pace over three months and clearly accelerating
while domestic orders post a slightly stronger three month growth rate
of 2.9%. Sales of consumer and intermediate goods remain weak while
capital goods sales surged in October. 
 

Order detail shows that bulk orders account for the surge in
October. Bulk orders were behind the 8.1% surge in investment goods
orders that saw domestic investment goods orders rise by 6.4% and
foreign orders rise by 9.4%. Basic goods orders fell by 0.4% in October
and consumer goods order volumes fell by 0.8%. Orders from outside the
Euro Area increased by 4.2% while Ex-German Euro Area orders rose by a
sharp 6%. 
 

For the quarter underway orders are not tremendously strong
with overall orders rising at an annual rate that exceeds 20%. 
 

On balance German institutes are still cutting their forecasts
for 2008. The chart (above) shows that even with this new surge, orders
are in lower trajectory than they were in their hey-day. It is unclear
what this surge means for the outlook. It may be a fluke of orders
clumping since most other measures continue to show slowing. I do not
think it is a revival. 


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="8" 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="4">% Saar</td>
</tr>
<tr class="grey3">
<td class="firstcol">&nbsp;</td>
<td>Oct-07</td>
<td>Sep-07</td>
<td>Aug-07</td>
<td>3-MO</td>
<td>6-Mo</td>
<td>12-Mo</td>
<td>Yr Ago</td>
</tr>
<tr class="odd">
<td class="firstcol">Total Orders</td>
<td>4.0%</td>
<td>-1.6%</td>
<td>1.9%</td>
<td>17.9%</td>
<td style="color: red;">8.6%</td>
<td>10.3%</td>
<td>7.1%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Foreign</td>
<td>5.0%</td>
<td>-0.8%</td>
<td>3.2%</td>
<td>33.6%</td>
<td>15.6%</td>
<td>15.5%</td>
<td>6.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Domestic</td>
<td>2.7%</td>
<td>-2.4%</td>
<td>0.4%</td>
<td>2.9%</td>
<td style="color: red;">1.4%</td>
<td style="color: red;">5.1%</td>
<td>7.4%</td>
</tr>
<tr class="grey3">
<td class="firstcol" colspan="8">Sector
Sales</td>
</tr>
<tr class="odd">
<td class="firstcol">MFG/Mining</td>
<td>1.2%</td>
<td style="color: red;">-0.3%</td>
<td>1.3%</td>
<td>9.2%</td>
<td style="color: red;">4.5%</td>
<td>6.6%</td>
<td>6.4%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Consumer</td>
<td>0.2%</td>
<td style="color: red;">-0.3%</td>
<td>1.7%</td>
<td>6.8%</td>
<td>3.3%</td>
<td style="color: red;">1.9%</td>
<td>2.9%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Consumer Durables</td>
<td>-1.7%</td>
<td style="color: red;">-4.0%</td>
<td>4.2%</td>
<td style="color: red;">-6.8%</td>
<td style="color: red;">-3.4%</td>
<td style="color: red;">-0.9%</td>
<td>7.8%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Consumer Nondurables</td>
<td>0.6%</td>
<td style="color: red;">0.5%</td>
<td>1.2%</td>
<td>9.5%</td>
<td>4.7%</td>
<td>2.5%</td>
<td>2.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">Capital Goods</td>
<td>3.4%</td>
<td style="color: red;">-0.2%</td>
<td>1.1%</td>
<td>18.2%</td>
<td style="color: red;">8.7%</td>
<td>9.9%</td>
<td>7.2%</td>
</tr>
<tr>
<td class="firstcol">Intermediate Goods</td>
<td style="color: red;">-0.7%</td>
<td style="color: red;">-0.2%</td>
<td>1.3%</td>
<td>1.3%</td>
<td style="color: red;">0.7%</td>
<td style="color: red;">5.6%</td>
<td>7.5%</td>
</tr>
<tr class="odd">
<td class="firstcol">All Manufacturing Sales</td>
<td>1.2%</td>
<td style="color: red;">-0.2%</td>
<td>1.3%</td>
<td>9.7%</td>
<td style="color: red;">4.7%</td>
<td>6.4%</td>
<td>5.8%</td>
</tr>
</tbody>
</table>
</body></html>

German orders jumped in October rising by 4% after an upward revised drop of 1.6% in Sept. The gain saw the domestic orders component rise by 2.7% as foreign orders rose by 5%. Foreign orders are now rising at a 33% pace over three [...]

German Orders JUMP!

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071206e.jpg" align="left" height="265" width="353">
The Mortgage Bankers' Association today reported that
foreclosures started on all mortgages rose to a still low 0.78% of
mortgages outstanding. Nevertheless, that was by far the highest
foreclosure rate on record.
Foreclosure rates on both prime and subprime mortgages rose
sharply. Rates for prime FRM rose to 0.22% of loans issued from 0.18%
in 2Q and an average of 0.14% last year. 28 million loans were serviced.
Foreclosures on prime ARMs similarly rose to 1.02% from 0.62%
and from 0.30% last year. 6 million of these loans were serviced.
Foreclosures on subprime mortgage debt, however, rose much
more sharply as employment growth slowed recently and interest rates
rose. In total, foreclosures on subprime mortgages rose to 3.12% of
outstanding loans. That amounted to 6 million loans. The rise was
evenly spread between fixed and variable rate loans.
Foreclosures on subprime fixed rate debt rose to 1.38% of
loans outstanding for a total of 3 million loans serviced.
On variable rate subprime debt, however, foreclosures soared
to a 4.72% rate, up from 3.84% in 2Q and up from 2.0% last year. Three
million loans were serviced.
The Rise and Fall of Subprime Mortgages from
the Federal Reserve Bank of Dallas can be found <a href="http://dallasfed.org/research/eclett/2007/el0711.pd">
here</a>.
These data series are available in Haver's MBAMTG
database.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071206f.jpg" height="265" width="312"><img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071206g.jpg" height="265" width="312">

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">Mortgages
in Foreclosure (%)</th>
<th scope="col">3Q '07</th>
<th scope="col">2Q '07</th>
<th scope="col">3Q '06</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">All Mortgages</td>
<td>0.78</td>
<td>0.65</td>
<td>0.46</td>
<td>1.84</td>
<td>1.64</td>
<td>1.73</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;
Conventional Prime</td>
<td>0.37</td>
<td>0.27</td>
<td>0.19</td>
<td>0.77</td>
<td>0.72</td>
<td>0.77</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp;&nbsp;
Fixed Rate</td>
<td>0.22</td>
<td>0.18</td>
<td>0.13</td>
<td>0.14</td>
<td>0.15</td>
<td>0.16</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp;&nbsp;
ARM</td>
<td>1.02</td>
<td>0.62</td>
<td>0.30</td>
<td>0.30</td>
<td>0.19</td>
<td>0.18</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Subprime</td>
<td>3.12</td>
<td>2.72</td>
<td>1.82</td>
<td>7.23</td>
<td>5.66</td>
<td>5.98</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp;&nbsp;
Fixed Rate</td>
<td>1.38</td>
<td>1.35</td>
<td>0.97</td>
<td>1.06</td>
<td>1.08</td>
<td>1.44</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp;&nbsp;
ARM</td>
<td>4.72</td>
<td>3.84</td>
<td>2.19</td>
<td>2.20</td>
<td>1.52</td>
<td>1.52</td>
</tr>
</tbody>
</table>
</body></html>

The Mortgage Bankers' Association today reported that foreclosures started on all mortgages rose to a still low 0.78% of mortgages outstanding. Nevertheless, that was by far the highest foreclosure rate on record. Foreclosure rates on [...]

U.S. Mortgage Foreclosures: Conventional Up, Subprime Soared

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</table>
 



<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071206c.jpg" width="353">
Credit market debt outstanding owed by all sectors of the economy grew 11.0% (AR, 9.3% y/y) during the third quarter. The increase was the strongest since 4Q 2005 and reflected broad based, strong gains in the financial sector..
Credit market debt owed by the financial sector zoomed at a 16.5% (11.2% y/y) annual rate which was the strongest rate of gain since early 2001. Gains at commercial banks (41.0% y/y), bank holding companies (23.2 y/y), savings institutions (-8.8% y/y) and credit unions (68.9% y/y) were well into double or triple digit rates of growth.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071206d.jpg" width="353">
Stable was consumer credit growth which held at an 8.2% (7.8% y/y) quarterly rate of growth. Households&#39; obligations on home mortgages grew 7.3% (8.0% y/y) which was half the growth rates seen a few years back. Conversely, credit card debt rose sharply (5.3% y/y) and the quarterly growth rate of 10.3% was the quickest since 2004. Bank loans also surged.
The net worth of the US household sector last quarter improved to a record $58.604 trillion as the dollar gain in household sector assets, which totaled 72.8 trillion, outweighed by four times the growth of liabilities which total $14.1 trillion.
Total assets of households and nonprofit organizations grew at a 4.9% rate (7.4 y/y). Households&#39; ownership of real estate assets was much reduced to a 2.1% growth rate (4.3% y/y), the slowest rate of gain since 1993. That, however, was offset by a 6.4% (9.5% y/y) gain in financial assets led by a one-quarter (7.2% y/y) rise in the value of credit market instruments and a rise in the value of mutual fund share holdings (21.8% y/y). The value of money market shares rose by one third as assets were shifted to a safe haven (24.5% y/y).

<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/FFUNDS/@F2/@F201/@F201.HTM">Flow of Funds</a> (Y/Y Chg.)</th>
<th scope="col">% of Total</th>
<th scope="col">3Q&#39;07</th>
<th scope="col">2Q&#39;07</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total Credit Market Debt Outstanding</td>
<td>--</td>
<td>9.3%</td>
<td>8.7%</td>
<td>9.5%</td>
<td>8.8%</td>
<td>9.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp; Federal Government</td>
<td>12%</td>
<td>4.3%</td>
<td>3.0%</td>
<td>3.9%</td>
<td>7.0%</td>
<td>9.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp; Households</td>
<td>27%</td>
<td>7.8%</td>
<td>8.2%</td>
<td>10.3%</td>
<td>10.7%</td>
<td>11.5%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp; Nonfinancial Corporate Business</td>
<td>14%</td>
<td>11.0%</td>
<td>9.8%</td>
<td>8.4%</td>
<td>5.1%</td>
<td>3.5%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Financial Sectors</td>
<td>32%</td>
<td>11.2%</td>
<td>8.9%</td>
<td>10.1%</td>
<td>8.5%</td>
<td>9.2%</td>
</tr>
<tr>
<td class="firstcol"></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td class="firstcol">Net Worth: Households &amp; Nonprofit Organizations (Trillions)</td>
<td>--</td>
<td>$58.604</td>
<td>$57.979</td>
<td>$56.117</td>
<td>$52.061</td>
<td>$48.164</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Tangible Assets: Households</td>
<td>--</td>
<td>$27.484</td>
<td>$27.325</td>
<td>$26.671</td>
<td>$25.019</td>
<td>$22.464</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp; Financial Assets: Households</td>
<td>--</td>
<td>$45.277</td>
<td>$44.579</td>
<td>$42.880</td>
<td>$39.203</td>
<td>$36.747</td>
</tr>
</tbody>
</table>
</body>
</html>

Credit market debt outstanding owed by all sectors of the economy grew 11.0% (AR, 9.3% y/y) during the third quarter. The increase was the strongest since 4Q 2005 and reflected broad based, strong gains in the financial sector.. [...]

US Flow of Funds: Debt Growth Back Up Due To Financial Sector

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071206a.jpg" width="353">
Last week, initial claims for jobless insurance retraced most of the prior period&#39;s surge. The 15,000 worker decline to 338,000 followed a little revised increase of 24,000.
The four week moving average of initial claims, a measure which smoothes out most of the series&#39; w/w volatility, rose to 340,250 (4.0% y/y). That was the highest level since 2005.
A claims level below 400,000 typically has been associated with growth in nonfarm payrolls. During the last six years there has been a (negative) 78% correlation between the level of initial claims and the m/m change in nonfarm payroll employment.
By state, some of the largest increases in the four week average level of claims were in New Jersey, California, &amp; Indiana, each to or near to the highest level since 2003. Other states with large increases recently were Florida, Ohio and Pennsylvania.
These detailed claims figures by state are in Haver&#39;s Regional Weekly database.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071206b.jpg" width="353">
Continuing claims for unemployment insurance fell 59,000 after the 104,000 surge during the prior week. That gain was revised down only slightly from the initial report.
The continuing claims numbers lag the initial claims figures by one week.
The insured rate of unemployment held at 2.0% after the prior week&#39;s increase.
The &#39;Great Moderation&#39; in Output and Employment Volatility: An Update from the Federal Reserve Bank of Dallas is available <a href="http://dallasfed.org/research/eclett/2007/el0709.pdf"> here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/WEEKLY/@W5/@W507/@W507.HTM">Unemployment Insurance (000s)</a></th>
<th scope="col">12/01/07 </th>
<th scope="col">11/24/07 </th>
<th scope="col">Y/Y</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Initial Claims</td>
<td>&nbsp;338</td>
<td>353</td>
<td>4.6%</td>
<td>313</td>
<td>331</td>
<td>343</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>--</td>
<td>2,559</td>
<td>4.6%</td>
<td>2,459</td>
<td>2,662</td>
<td>2,924</td>
</tr>
</tbody>
</table>
</body>
</html>

Last week, initial claims for jobless insurance retraced most of the prior period's surge. The 15,000 worker decline to 338,000 followed a little revised increase of 24,000. The four week moving average of initial claims, a measure [...]

U.S. Initial Unemployment Insurance Claims Highest Since 2005

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071206e.jpg" align="left" border="0" height="265" width="353">
The Mortgage Bankers' Association today reported that
foreclosures started on all mortgages rose to a still low 0.78% of
mortgages outstanding. Nevertheless, that was by far the highest
foreclosure rate on record.
Foreclosure rates on both prime and subprime mortgages rose
sharply. Rates for prime FRM rose to 0.22% of loans issued from 0.18%
in 2Q and an average of 0.14% last year. 28 million loans were serviced.
Foreclosures on prime ARMs similarly rose to 1.02% from 0.62%
and from 0.30% last year. 6 million of these loans were serviced.
Foreclosures on subprime mortgage debt, however, rose much
more sharply as employment growth slowed recently and interest rates
rose. In total, foreclosures on subprime mortgages rose to 3.12% of
outstanding loans. That amounted to 6 million loans. The rise was
evenly spread between fixed and variable rate loans.
Foreclosures on subprime fixed rate debt rose to 1.38% of
loans outstanding for a total of 3 million loans serviced.
On variable rate subprime debt, however, foreclosures soared
to a 4.72% rate, up from 3.84% in 2Q and up from 2.0% last year. Three
million loans were serviced.
The Rise and Fall of Subprime Mortgages from
the Federal Reserve Bank of Dallas can be found <a href="http://dallasfed.org/research/eclett/2007/el0711.pd">
here</a>.
These data series are available in Haver's MBAMTG
database.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071206f.jpg" height="265" width="312"><img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071206g.jpg" height="265" width="312">

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">Mortgages
in Foreclosure (%) </th>
<th scope="col">3Q '07</th>
<th scope="col">2Q '07</th>
<th scope="col">3Q '06</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">All Mortgages</td>
<td>0.78</td>
<td>0.65</td>
<td>0.46</td>
<td>1.84</td>
<td>1.64</td>
<td>1.73</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;
Conventional Prime</td>
<td>0.37</td>
<td>0.27</td>
<td>0.19</td>
<td>0.77</td>
<td>0.72</td>
<td>0.77</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp;&nbsp;
Fixed Rate</td>
<td>0.22</td>
<td>0.18</td>
<td>0.13</td>
<td>0.14</td>
<td>0.15</td>
<td>0.16</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp;&nbsp;
ARM</td>
<td>1.02</td>
<td>0.62</td>
<td>0.30</td>
<td>0.30</td>
<td>0.19</td>
<td>0.18</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp; Subprime</td>
<td>3.12</td>
<td>2.72</td>
<td>1.82</td>
<td>7.23</td>
<td>5.66</td>
<td>5.98</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp;&nbsp;
Fixed Rate</td>
<td>1.38</td>
<td>1.35</td>
<td>0.97</td>
<td>1.06</td>
<td>1.08</td>
<td>1.44</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp;&nbsp;
ARM</td>
<td>4.72</td>
<td>3.84</td>
<td>2.19</td>
<td>2.20</td>
<td>1.52</td>
<td>1.52</td>
</tr>
</tbody>
</table>
US Flow of Funds: Debt Growth Back
Up Due To Financial Sector 
by <a href="/comment/Moeller.html">Tom
Moeller</a> December 6, 2007


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071206c.jpg" align="left" border="0" height="265" width="353">
Credit market debt outstanding owed by all sectors of the
economy grew 11.0% (AR, 9.3% y/y) during the third quarter. The
increase was the strongest since 4Q 2005 and reflected broad based,
strong gains in the financial sector..
Credit market debt owed by the financial sector zoomed at a
16.5% (11.2% y/y) annual rate which was the strongest rate of gain
since early 2001. Gains at commercial banks (41.0% y/y), bank holding
companies (23.2 y/y), savings institutions (-8.8% y/y) and credit
unions (68.9% y/y) were well into double or triple digit rates of
growth.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071206d.jpg" align="right" border="0" height="265" width="353">
Stable was consumer credit growth which held at an 8.2% (7.8%
y/y) quarterly rate of growth. Households' obligations on home
mortgages grew 7.3% (8.0% y/y) which was half the growth rates seen a
few years back. Conversely, credit card debt rose sharply (5.3% y/y)
and the quarterly growth rate of 10.3% was the quickest since 2004.
Bank loans also surged.
The net worth of the US household sector last quarter improved
to a record $58.604 trillion as the dollar gain in household sector
assets, which totaled 72.8 trillion, outweighed by four times the
growth of liabilities which total $14.1 trillion.
Total assets of households and nonprofit organizations grew at
a 4.9% rate (7.4 y/y). Households' ownership of real estate assets was
much reduced to a 2.1% growth rate (4.3% y/y), the slowest rate of gain
since 1993. That, however, was offset by a 6.4% (9.5% y/y) gain in
financial assets led by a one-quarter (7.2% y/y) rise in the value of
credit market instruments and a rise in the value of mutual fund share
holdings (21.8% y/y). The value of money market shares rose by one
third as assets were shifted to a safe haven (24.5% y/y).

<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/FFUNDS/@F2/@F201/@F201.HTM">Flow
of Funds</a> (Y/Y Chg.)</th>
<th scope="col">% of Total</th>
<th scope="col">3Q'07</th>
<th scope="col">2Q'07</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total Credit Market Debt
Outstanding</td>
<td>--</td>
<td>9.3%</td>
<td>8.7%</td>
<td>9.5%</td>
<td>8.8%</td>
<td>9.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Federal Government</td>
<td>12%</td>
<td>4.3%</td>
<td>3.0%</td>
<td>3.9%</td>
<td>7.0%</td>
<td>9.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Households</td>
<td>27%</td>
<td>7.8%</td>
<td>8.2%</td>
<td>10.3%</td>
<td>10.7%</td>
<td>11.5%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Nonfinancial Corporate Business</td>
<td>14%</td>
<td>11.0%</td>
<td>9.8%</td>
<td>8.4%</td>
<td>5.1%</td>
<td>3.5%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Financial Sectors</td>
<td>32%</td>
<td>11.2%</td>
<td>8.9%</td>
<td>10.1%</td>
<td>8.5%</td>
<td>9.2%</td>
</tr>
<tr>
<td class="firstcol"></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td class="firstcol">Net Worth: Households &amp;
Nonprofit Organizations (Trillions)</td>
<td>--</td>
<td>$58.604</td>
<td>$57.979</td>
<td>$56.117</td>
<td>$52.061</td>
<td>$48.164</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Tangible Assets:
Households</td>
<td>--</td>
<td>$27.484</td>
<td>$27.325</td>
<td>$26.671</td>
<td>$25.019</td>
<td>$22.464</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp; Financial
Assets: Households</td>
<td>--</td>
<td>$45.277</td>
<td>$44.579</td>
<td>$42.880</td>
<td>$39.203</td>
<td>$36.747</td>
</tr>
</tbody>
</table>
U.S. Initial Unemployment
Insurance Claims Highest Since 2005 
by <a href="/comment/Moeller.html">Tom
Moeller</a> December 6, 2007


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071206a.jpg" align="left" border="0" height="265" width="353">
Last week, initial claims for jobless insurance retraced most
of the prior period's surge. The 15,000 worker decline to 338,000
followed a little revised increase of 24,000.
The four week moving average of initial claims, a
measure which smoothes out most of the series' w/w volatility, rose to
340,250 (4.0% y/y). That was the highest level since 2005.
A claims level below 400,000 typically has been associated
with growth in nonfarm payrolls. During the last six years there has
been a (negative) 78% correlation between the level of initial claims
and the m/m change in nonfarm payroll employment.
By state, some of the largest increases in the four week
average level of claims were in New Jersey, California, &amp;
Indiana, each to or near to the highest level since 2003. Other states
with large increases recently were Florida, Ohio and Pennsylvania. <img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071206b.jpg" align="right" border="0" height="265" width="353">
These detailed claims figures by state are in Haver's Regional
Weekly database.
Continuing claims for unemployment insurance fell 59,000 after
the 104,000 surge during the prior week. That gain was revised down
only slightly from the initial report.
The continuing claims numbers lag the initial claims figures
by one week.
The insured rate of unemployment held at 2.0% after the prior
week's increase.
The 'Great Moderation' in Output and Employment
Volatility: An Update from the Federal Reserve Bank of
Dallas is available <a href="http://dallasfed.org/research/eclett/2007/el0709.pdf">
here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/WEEKLY/@W5/@W507/@W507.HTM">Unemployment
Insurance (000s)</a></th>
<th scope="col">12/01/07 </th>
<th scope="col">11/24/07 </th>
<th scope="col">Y/Y</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Initial Claims</td>
<td>&nbsp;338</td>
<td>353</td>
<td>4.6%</td>
<td>313</td>
<td>331</td>
<td>343</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>--</td>
<td>2,559</td>
<td>4.6%</td>
<td>2,459</td>
<td>2,662</td>
<td>2,924</td>
</tr>
</tbody>
</table>
German Orders JUMP! by <a href="/comment/Brusca.html">Robert
Brusca
</a> December 6, 2007


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071206h.jpg" align="left" border="0" height="265" width="353">
German orders jumped in October rising by 4% after an upward
revised drop of 1.6% in Sept. The gain saw the domestic orders
component rise by 2.7% as foreign orders rose by 5%. Foreign orders are
now rising at a 33% pace over three months and clearly accelerating
while domestic orders post a slightly stronger three month growth rate
of 2.9%. Sales of consumer and intermediate goods remain weak while
capital goods sales surged in October. 

Order detail shows that bulk orders account for the surge in
October. Bulk orders were behind the 8.1% surge in investment goods
orders that saw domestic investment goods orders rise by 6.4% and
foreign orders rise by 9.4%. Basic goods orders fell by 0.4% in October
and consumer goods order volumes fell by 0.8%. Orders from outside the
Euro Area increased by 4.2% while Ex-German Euro Area orders rose by a
sharp 6%. 

For the quarter underway orders are not tremendously strong
with overall orders rising at an annual rate that exceeds 20%. 

On balance German institutes are still cutting their forecasts
for 2008. The chart (above) shows that even with this new surge, orders
are in lower trajectory than they were in their hey-day. It is unclear
what this surge means for the outlook. It may be a fluke of orders
clumping since most other measures continue to show slowing. I do not
think it is a revival. 


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="8" 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="4">% Saar</td>
</tr>
<tr class="grey3">
<td class="firstcol">&nbsp;</td>
<td>Oct-07</td>
<td>Sep-07</td>
<td>Aug-07</td>
<td>3-MO</td>
<td>6-Mo</td>
<td>12-Mo</td>
<td>Yr Ago</td>
</tr>
<tr class="odd">
<td class="firstcol">Total Orders</td>
<td>4.0%</td>
<td>-1.6%</td>
<td>1.9%</td>
<td>17.9%</td>
<td style="color: red;">8.6%</td>
<td>10.3%</td>
<td>7.1%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Foreign</td>
<td>5.0%</td>
<td>-0.8%</td>
<td>3.2%</td>
<td>33.6%</td>
<td>15.6%</td>
<td>15.5%</td>
<td>6.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Domestic</td>
<td>2.7%</td>
<td>-2.4%</td>
<td>0.4%</td>
<td>2.9%</td>
<td style="color: red;">1.4%</td>
<td style="color: red;">5.1%</td>
<td>7.4%</td>
</tr>
<tr class="grey3">
<td class="firstcol" colspan="8">Sector
Sales</td>
</tr>
<tr class="odd">
<td class="firstcol">MFG/Mining</td>
<td>1.2%</td>
<td style="color: red;">-0.3%</td>
<td>1.3%</td>
<td>9.2%</td>
<td style="color: red;">4.5%</td>
<td>6.6%</td>
<td>6.4%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Consumer</td>
<td>0.2%</td>
<td style="color: red;">-0.3%</td>
<td>1.7%</td>
<td>6.8%</td>
<td>3.3%</td>
<td style="color: red;">1.9%</td>
<td>2.9%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Consumer Durables</td>
<td>-1.7%</td>
<td style="color: red;">-4.0%</td>
<td>4.2%</td>
<td style="color: red;">-6.8%</td>
<td style="color: red;">-3.4%</td>
<td style="color: red;">-0.9%</td>
<td>7.8%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Consumer Nondurables</td>
<td>0.6%</td>
<td style="color: red;">0.5%</td>
<td>1.2%</td>
<td>9.5%</td>
<td>4.7%</td>
<td>2.5%</td>
<td>2.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">Capital Goods</td>
<td>3.4%</td>
<td style="color: red;">-0.2%</td>
<td>1.1%</td>
<td>18.2%</td>
<td style="color: red;">8.7%</td>
<td>9.9%</td>
<td>7.2%</td>
</tr>
<tr>
<td class="firstcol">Intermediate Goods</td>
<td style="color: red;">-0.7%</td>
<td style="color: red;">-0.2%</td>
<td>1.3%</td>
<td>1.3%</td>
<td style="color: red;">0.7%</td>
<td style="color: red;">5.6%</td>
<td>7.5%</td>
</tr>
<tr class="odd">
<td class="firstcol">All Manufacturing Sales</td>
<td>1.2%</td>
<td style="color: red;">-0.2%</td>
<td>1.3%</td>
<td>9.7%</td>
<td style="color: red;">4.7%</td>
<td>6.4%</td>
<td>5.8%</td>
</tr>
</tbody>
</table>
</body></html>

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071205k.jpg" align="left" border="0" height="265" width="353">
The UK services PMI from NTC is falling sharply. It dropped
sharply in October and again in November. Among the three key PMI
sectors, manufacturing, construction and services, the services index
has the weakest reading as it resides in the 32nd percentile of its
range. There are only three episodes since 1998 when the services
reading was weaker than it is now. Each time in the past when the
service sector index fell to where it stands today, it was simply on
its way to a much lower level. Be advised. 


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="7" scope="col"> MFG,
Construction and Services PMI CIPS/NTC</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td colspan="2">Monthly readings</td>
<td colspan="3">Change over:</td>
<td>percentile</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>Nov-07</td>
<td>Oct-07</td>
<td>3MO</td>
<td>6MO</td>
<td>12MO</td>
<td>of range</td>
</tr>
<tr>
<td class="firstcol">MFG</td>
<td>54.38</td>
<td>52.82</td>
<td>-1.61</td>
<td>-0.38</td>
<td>1.61</td>
<td>65.8</td>
</tr>
<tr>
<td class="firstcol">Construction</td>
<td>54.32</td>
<td>57.41</td>
<td>-10.50</td>
<td>-3.69</td>
<td>-0.46</td>
<td>36.1</td>
</tr>
<tr>
<td class="firstcol">Services</td>
<td>51.95</td>
<td>53.08</td>
<td>-5.60</td>
<td>-5.23</td>
<td>-7.83</td>
<td>32.9</td>
</tr>
<tr class="grey2">
<td colspan="7" class="firstcol">MFG range
since January 1992;
Construction Since April 1997 Services Since July 1996</td>
</tr>
</tbody>
</table>
</body></html>

The UK services PMI from NTC is falling sharply. It dropped sharply in October and again in November. Among the three key PMI sectors, manufacturing, construction and services, the services index has the weakest reading as it resides [...]

UK Service Sector Index Falls Sharply Again and May Be Signaling That More Losses Lie Ahead

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071205i.jpg" width="353">
Factory inventories ticked up 0.1% during October following a 0.6% surge in September. The three month in manufacturers&#39; inventories remained stable at 2.3% (AR) but that was much more moderate than in prior years.
Excluding the volatile transportation sector, inventories were unchanged also after a 0.6% September increase. Three month accumulation at a 2.1% also is down from 7.1% for all of last year. The slowdown continued in inventories of computers &amp; electronic products to a three month growth rate of 4.4% versus 10.4% last year and inventories of industrial machinery rose 1.9% following a 22.8% jump last year. Electrical equipment inventories have been falling since mid-year after 25.2% growth in 2006. <img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071205j.jpg" width="353">
Factory shipments surged 1.0% in October but weakness during prior months left three month growth at -2.3% (AR). Much of that weakness has been due to the automotive and aircraft industries. Excluding transportation altogether, October shipments rose 1.1% and the three month growth rate was somewhat reduced at 3.7% versus 5.0% growth last year.
Total factory orders continue to hold little promise for a pickup in factory sector activity. A 0.5% October gain followed a like rise in September but three month growth fell to -10.2% (AR). The 0.4% October decline in durable goods orders in the advance report was little revised.
Unfilled orders rose 1.0%, about the same as in prior months. Excluding, the transportation industries unfilled orders rose 0.8% and the three month growth rate was double digit with a 10.4% rise.

<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/@ED/@ED01/@ED0101/@ED01016/@ED01016.HTM">Factory Survey</a> (NAICS)</th>
<th scope="col">October</th>
<th scope="col">September</th>
<th scope="col">Y/Y</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Inventories</td>
<td>0.1%</td>
<td>0.6%</td>
<td>2.2%</td>
<td>6.4%</td>
<td>8.9%</td>
<td>7.7%</td>
</tr>
<tr>
<td class="firstcol">New Orders</td>
<td>0.5%</td>
<td>0.3%</td>
<td>5.0%</td>
<td>5.1%</td>
<td>11.6%</td>
<td>6.9%</td>
</tr>
<tr class="odd">
<td class="firstcol">Shipments</td>
<td>1.0%</td>
<td>0.1%</td>
<td>4.7%</td>
<td>4.3%</td>
<td>10.3%</td>
<td>6.9%</td>
</tr>
<tr>
<td class="firstcol">Unfilled Orders</td>
<td>1.0%</td>
<td>1.1%</td>
<td>17.9%</td>
<td>20.0%</td>
<td>15.0%</td>
<td>3.9%</td>
</tr>
</tbody>
</table>
</body>
</html>

Factory inventories ticked up 0.1% during October following a 0.6% surge in September. The three month in manufacturers' inventories remained stable at 2.3% (AR) but that was much more moderate than in prior years. Excluding the [...]

U.S. Factory Inventory Gain Moderate

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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Sandy Batten

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Total retail sales rose a much larger-than-expected 0.9% m/m (6.9%y/y) in May following a slightly downwardly revised 0.4% monthly gain in April (previously 0.5% m/m), according to data released by the U.S. Census Bureau. The Action Economics Forecast Survey looked for a 0.5% m/m gain. Excluding autos, other sales increased 0.8% m/m (7.5% y/y) after an unrevised 0.7% m/m increase in April. Expectations were for a 0.5% monthly rise.

Elevated retail gasoline prices continued to boost the value of gasoline sales in May. Gasoline sales increased 3.4% m/m (26.5% y/y) in May on top of a 2.8% m/m increase in April. However, both monthly increases were slower than the 14.2% monthly jump reported in March. Gasoline sales accounted for 31% of total sales in May. However, sales were solid even without gasoline sales. Total sales excluding gasoline rose 0.7% m/m in April, up from 0.2% m/m in April. Sales excluding both autos and gasoline increased 0.5% m/m in May, the same monthly gain as in April.

The control group of sales (total sales excluding food services, autos, gasoline and building materials that the BEA uses to construct PCE in the national accounts) posted another solid increase in May, rising 0.7% m/m (6.3% y/y) following an unrevised 0.5% monthly increase in April. The strong performance at the end of Q1 followed by solid gains in April and May put the April-May level of control group sales up 8.6% at an annual rate from the Q1 average, pointing to another solid contribution by consumption to overall GDP growth in Q2. Consumer spending remains surprisingly resilient notwithstanding the recent hit to disposable income from the marked increase in energy prices.

Sales generally increased across major sectors in May. Auto sales rebounded, rising 1.2% m/m in May and more than reversing the 0.9% monthly decline in April. This was the third gain in auto sales in the past four months. Furniture sales rose 1.0% m/m but sales at electronics and appliance stores slipped 0.5% m/m. Building material sales gained 1.0% m/m on top of a 1.1% monthly increase in April. Clothing sales rose 0.3% m/m. Sales at general merchandise stores gained 0.4% m/m in May. Miscellaneous sales jumped 2.3% m/m in May, their first monthly gain in three months. Sales by nonstore retailers continued their strong performance, increasing 1.5% m/m in May on top of a 1.1% monthly rise in April. Over the first five months of this year, nonstore retail sales have risen 7.2%, not annualized. By contrast, food sales were unchanged in May from April while sales at restaurants edged down 0.1% m/m in May, their first monthly decline in four months.

Retail sales data can be found in Haver’s **USECON** database. The expectations figures are from the Action Economics Forecast Survey in **AS1REPNA**.

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- Total sales increased 0.9% m/m in May, nearly twice expectations.
- Auto sales rebounded, rising 1.2% m/m in May, more than reversing a 0.9% monthly decline in April. 
- Gasoline sales rose 3.4% m/m in May.
- Excluding auto and gasoline sales, remaining sales increased by a solid 0.5% m/m in May, the same monthly increase as in April.
- Sales of the retail control group that is used to construct PCE rose 0.7% m/m in May and are 8.6% annualized above the Q1 average.

U.S. Retail Sales Jumped More than Expected in May

Winnie Tapasanun

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Mortgage applications fell 3.8% w/w (+8.6% y/y) in the week ending June 12 following a 10.8% rebound in the week ending June 5, according to the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey. The latest reading was the fourth w/w fall in five weeks, lowering the index to 269.5. Applications for loans to purchase a house slid 3.4% (+3.0% y/y) in the June 12 week, down for the fourth time in five weeks, after a 7.3% rise in the previous week. Applications for loan refinancing dropped 4.5% (+17.0% y/y) in the June 12 week, the seventh w/w decline in eight weeks, following a 15.3% jump in the June 5 week.

The effective interest rate on a 30-year fixed-rate loan was unchanged at 6.78% in the week ending June 12; it was above a low of 6.24% in the February 27 week but below a peak of 8.12% in the week of October 20, 2023. The rate on 15-year fixed-rate mortgages edged up 2bps to 6.18% in the June 12 week, the highest in three weeks, from 6.16% in the previous week; it was up from a low of 5.60% in the week of September 20, 2024 but down from a high of 7.44% in the week of October 27, 2023. Meanwhile, the rate on 30-year jumbo loans declined 4bps to 6.78% in the June 12 week from 6.82% in the prior week; it was above a low of 6.25% in the February 27 week but below a high of 7.99% in the week of October 27, 2023. The rate on a 5-year ARM fell 7bps to 6.16% in the June 12 week, the first w/w decline in six weeks, from 6.23% in the previous week (the highest since the week of August 15, 2025); it was above a low of 5.38% in the February 20 week but below a high of 7.31% in the week of October 27, 2023.

The share of applications for refinancing an existing loan edged up to 40.3% of total applications in the week ending June 12—the fourth w/w increase in five weeks and the highest level since the May 15 week—after rising to 40.2% in the week ending June 5; it remained below a peak of 61.9% in the January 16 week but above a low of 34.6% in the week of May 23, 2025. The adjustable-rate mortgage (ARM) share of activity slipped to 8.5% in the June 12 week from 8.6% in the prior week; it was below a peak of 12.9% in the week of September 12, 2025 but above a low of 4.7% in the week of January 3, 2025.

The average size of a mortgage loan fell 1.5% w/w (+3.7% y/y) to $394,100 in the June 12 week, the lowest level since the April 3 week, after a 0.4% rebound to $399,900 in the June 5 week. The average size of a purchase loan dropped 1.9% (+4.0% y/y) to $456,600 in the June 12 week following a 2.8% recovery to $465,300 in the prior week. The average size of a loan to refinance a mortgage fell 0.4% (+7.0% y/y) to $301,400 in the June 12 week on top of a 2.3% decline to $302,500 in the previous week, marking the third consecutive w/w fall, the sixth decline in seven weeks, and the lowest level since the week of July 25, 2025.

The Mortgage Bankers Association Survey covers 75% of all U.S. retail residential mortgage applications and has been conducted weekly since 1990. Respondents include mortgage bankers, commercial banks and thrifts. The base period and value for all indexes is March 16, 1990=100. The figures for weekly mortgage applications and interest rates are available in Haver’s **SURVEYS** database.

- Purchase applications -3.4% w/w, down for fourth time in five weeks; refinance applications -4.5% w/w, seventh fall in eight weeks.
- Effective interest rate on 30-year fixed loans unchanged at 6.78%, up from a late-February low of 6.24%.
- Average loan size down for the second time in three weeks, lowest since the April 3 week.

U.S. Mortgage Applications Down 3.8% in the June 12 Week, Fourth Drop in Five Weeks

Michael J. Moran

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The headline index on import prices rose 1.9% in May, close to the blistering pace in April and the fourth consecutive high-side reading. This recent pressure has pulled the year-over-year change to 6.7%, a distinct shift from last year when import prices showed no change over the 12 months of 2025.

Prices of petroleum products have been the most important factor behind the recent surge, increasing 13.0% in May after an average of 17.8% in the prior two months. However, prices excluding petroleum products also have stirred this year, as they have increased more than 0.6% in each of the past five months. May posted the firmest increase in this string of brisk readings (1.3%). Prices of consumer goods had been increasing moderately in early 2026, but they jumped 0.5% in May. The changes in capital and consumer goods led to an increase of 0.8% in nonpetroleum prices in May and an average of 0.6% in the first five months of the year.

Some observers might seek to look for the effects of tariffs on import prices, but these figures would not be especially helpful in this regard, as prices are recorded before the imposition of tariffs. However, if foreign producers wished to absorb the tariff burden to remain competitive in the US market, they could reduce invoiced prices to keep post-tariff prices steady. Indeed, nonpetroleum prices softened after April of last year following the announcement of President Trump’s Liberation Day tariffs. The subsequent easing of some of the draconian tariffs and the nullification of tariffs imposed under the International Emergency Economic Powers Act might be factors leading importers to return to original prices this year. Given that the pressure on import prices ex-petroleum has been concentrated in the capital goods area, there does not seem to be a rush to return to pre-tariff pricing.

On the export side, prices rose 1.3% in May, continuing the firm pace seen in the preceding four months. Petroleum prices have played a role in this pressure, as shown by an increase of 2.4% in the industrial supply category (petroleum prices alone are not available on the export side). Food prices also have jumped this year, increasing 0.8% in May after an average of 1.2% in the prior three months. Prices of capital goods were tame in the early months of the year, but they have firmed in the past two months (0.5% in April and 0.7% in May).

These import and export price series are not seasonally adjusted; they can be found in Haver’s **USECON** database. Detailed figures are available in the **USINT** database. The expectations figure from the Action Economics Forecast Survey is in the **AS1REPNA** database.

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- Petroleum products led import prices higher, but capital goods also had an influence.
- Petroleum was also a factor on the export side; some stirring in food and capital goods.

Import and Export Prices: Firm in May

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Weighed down by further rises in longer-term interest rates, housing construction continued to languish in May. Housing starts plunged 15.4% m/m (-8.7% y/y) in May on top of a downwardly revised 8.5% monthly decline in April (previously -2.8% m/m). The level of starts plummeted to 1.177 million, the lowest since May 2020 when the economy was locked down during the COVID pandemic. The Action Economics Forecast Survey expected a 2.4% m/m decline to a level of 1.432 million units. The April/May average for starts was 1.285 million, 9.4% below the Q1 average. Residential investment has been a persistent drag on real GDP growth recently, subtracting from overall growth in each of the previous five quarters. Today’s report points to another subtraction in Q2.

Single-family starts fell 1.9% m/m (-6.7% y/y) in May on top of a downwardly revised 11.6% monthly plunge in April (previously -9.0% m/m). Multi-family starts, which had generally been trending up over the past year or so, albeit with quite a bit of volatility, plummeted 40.2% m/m (-14.2% y/y) in May following a downwardly revised 2.4% m/m decline in April (previously +10.3% m/m).

Starts fell in three of the four major geographic regions. Starts rose 3.7% m/m in the Midwest with gains in both single-family and multi-family starts. By contrast, starts fell in each of the other three regions, plunging 26.8% m/m in the Northeast, the third monthly decline in the past four months, falling 17.0% m/m in the South, also the third monthly decline in the past four months, and declining 17.2% m/m in the West, the fourth monthly decline in the past five months.

The performance of building permits is typically less volatile than that of starts. Total permits edged down 0.7% m/m (-0.2% y/y) to 1.413 million units in May following a 4.4% monthly gain in April and an 11.5% m/m fall in March. Expectations were for a 0.3% monthly increase in May. Single-family permits edged up 0.6% m/m (-1.8% y/y) in May versus a 1.6% monthly decline in April and a 3.7% m/m drop in March. By contrast, multi-family permits fell 2.8% m/m (+2.5 y/y) in May but this was after a 15.8% monthly surge in April.

In contrast to the regional performance of starts, permits fell in the Midwest (-18.7% m/m) but rose in each of the other three major geographic regions. Permits increased 3.1% m/m in the Northeast in May on top of a 18.1% monthly jump in April. They edged up 1.6% m/m in the South and rose 5.5% m/m in the West, the first monthly gain in three months.

The housing starts and permits figures can be found in Haver’s **USECON** database. The expectations figure is contained in the **AS1REPNA** database.

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- Housing starts plunged 15.4% m/m in May to the lowest level since May 2020 with a significant downward revision to the previously reported April decline.
- Single family starts fell 1.9% m/m while multi-family starts plummeted 40.2% m/m to their lowest level since November 2024.
- Less volatile permits slid 0.7% m/m in May with a slight rise (+0.6% m/m) in single-family permits and a 2.8% monthly drop in multi-family permits.

U.S. Housing Starts Plunged in May

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The ZEW diffusion survey (an up-minus-down survey) showed mixed improvements in the economic situation and improvements for macroeconomic expectations in June. The report shows the economic situation improving in the United States and China, with the euro area taking a small step back (to -43.4 in June from -41.4 in May), while Germany also saw a step back in the economic situation (to -81.0 from -77.8). The ranking metrics show the German reading as lower only 13.8% of the time—the weakest showing among the four. The EMU ranking is at a 36.7 percentile, with the U.S. ranking close to that at a 42.5 percentile. China has a 76.2 percentile ranking over a shorter timeline.

Macro expectations show solid improvements reported in Germany, the U.S., and China. Macroeconomic rankings all are muted, with the U.S. at a 39.9 percentile standing as the strongest, followed by Germany at a 35.2 percentile standing and China at a 22.2 percentile standing.

Inflation expectations are still high across the board, ranging from a low percentile standing for the EMU, Germany, and China—from a euro area low of 78.6 to a high standing for this group at 85.7 for China. In contrast, the U.S. ranking is still high, but only at its 61.8 percentile. And all the inflation expectations readings fell in June as optimism on opening the Strait of Hormuz has been growing. 

Nonetheless, expectations for short-term rates have been rising. They rose solidly in the EMU and China, and strongly in the U.S., from 10.5 in May to 38.5 in June.

In contrast, long-term rate expectations rose across the board as well but by modest amounts. The rankings for short-term expectations are stronger for all three countries compared to the ranking on long-term rate expectations. I suppose we can understand that as expectations of anti-inflation medicine.

Stock markets are assessed as higher month-to-month in the EMU and in all three countries. China has a strong ranking for its stock market assessment at its 81st percentile. The U.S. standing is above its median at its 51.5 percentile; the euro area expectation is at its 34.2 percentile, with German stock market expectations still weak at its 23.6 percentile.

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The pending conflict-ending deal in the Middle East should be a catalyst for further improvement. While the U.S.-Iran deal is not yet announced in detail—or even signed—market reactions are clear-cut across the board; there is no sign that this deal is expected to wither so soon. But it still has issues and contentious elements, such as Iran’s nuclear ambitions and the fact that the Israel is not on board with what it regards as a too-early exit from hostilities. Israel wants regime change and warns of a more difficult future without one.

Economy in Brief

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U.S. Payrolls Increase Light, Unemployment Steady

German Orders JUMP!

U.S. Mortgage Foreclosures: Conventional Up, Subprime Soared

US Flow of Funds: Debt Growth Back Up Due To Financial Sector

U.S. Initial Unemployment Insurance Claims Highest Since 2005

U.S. Mortgage Foreclosures: Conventional Up, Subprime Soared

UK Service Sector Index Falls Sharply Again and May Be Signaling That More Losses Lie Ahead

U.S. Factory Inventory Gain Moderate