Carol Stone, CBE

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061213l.jpg" width="353">
Japan&#39;s current account surplus rose &yen;611.4 billion in October, according to data reported December 13 by the Ministry of Finance, reaching a record &yen;2,020.1 billion (seasonally adjusted).The previous record was &yen;2,015.1 billion in December 2005.
The month-to-month increase in the surplus included favorable moves in every segment of the current account.The goods balance increased to &yen;852.7 billion from &yen;437.2 billion, more than reversing September&#39;s shrinkage.Exports rose &yen;113.0 billion or 1.9% and imports fell &yen;302.5 billion or 5.4%.The merchandise trade data reported earlier indicate that just under half of the fall in imports was in &quot;mineral fuels&quot;, including petroleum and natural gas products.Among exports, the strongest items appear to be motor vehicles and metals, as suggested by year/year gains in not-seasonally-adjusted data.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061213k.jpg" width="353">
There is a deficit in services, but it shrank markedly in October, to &yen;122.8 billion from &yen;208.5 billion in September.It is erratic on a monthly basis, but the October reading compares favorably with an average for all of last year of &yen;219.4 billion and with &yen;308.3 billion in 2004.
The balance on income flows grew as well in October, as gains in assets held abroad are bringing in increased portfolio income. The monthly change in October portfolio income was small, just to &yen;1,071.0 billion from &yen;1,038.4 billion in September, but these are both up from &yen;852.4 billion in October a year ago and &yen;737.6 billion for all of 2005.Total income includes interest on bank loans, profits from direct investments, and wage income; the October total was &yen;1,374.9 billion.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061213j.jpg" width="353">
All together in Japan&#39;s current account performance for October, the balance of trade in goods showed the largest improvement, but the largest net surplus is in income.As world capital markets become more and more integrated and direct investment becomes more diversified around the world, swings in both goods and income balances are likely to be wider and more frequent.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/JAPAN/@J9/@J9.HTM">JAPAN</a><a href="http://www.haverselect.com/dlx/JAPAN/@J9/@J9.HTM">: SA, Bil.&yen;</a></th>
<th scope="col">Oct 2006</th>
<th scope="col">Sept 2006</th>
<th scope="col">Aug 2006</th>
<th scope="col">Year-Ago</th>
Monthly Averages
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">2005</td>
<td>2004</td>
<td>2003</td>
</tr>
<tr>
<td class="firstcol">Current Account Balance</td>
<td>2020.1</td>
<td>1408.7</td>
<td>1605.0</td>
<td>1739.6</td>
<td>1537.7</td>
<td>1557.4</td>
<td>1316.9</td>
</tr>
<tr class="odd">
<td class="firstcol">Goods Exports</td>
<td>6134.1</td>
<td>6021.1</td>
<td>6170.0</td>
<td>5510.8</td>
<td>5212.5</td>
<td>4841.6</td>
<td>4303.3</td>
</tr>
<tr>
<td class="firstcol">Goods Imports</td>
<td>-122.8</td>
<td>-208.5</td>
<td>-169.8</td>
<td>-54.1</td>
<td>-219.4</td>
<td>-308.3</td>
<td>-300.8</td>
</tr>
<tr class="odd">
<td class="firstcol">Balance on Services</td>
<td>1374.9</td>
<td>1266.0</td>
<td>105.73</td>
<td>1099.3</td>
<td>966.2</td>
<td>776.9</td>
<td>692.4</td>
</tr>
<tr>
<td class="firstcol">Balance on Income</td>
<td>1374.9</td>
<td>1266.0</td>
<td>1057.3</td>
<td>1099.3</td>
<td>966.2</td>
<td>776.9</td>
<td>692.4</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;Portfolio Income</td>
<td>1071.0</td>
<td>1038.4</td>
<td>838.2</td>
<td>852.4</td>
<td>737.6</td>
<td>622.8</td>
<td>569.9</td>
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</tbody>
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Japan's current account surplus rose ¥611.4 billion in October, according to data reported December 13 by the Ministry of Finance, reaching a record ¥2,020.1 billion (seasonally adjusted).The previous record was ¥2,015.1 billion in [...]

Japan Current Account Hits Record ¥2.02 Trillion in October; Trade, Services & Income All Contribute

Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061213g.jpg" width="353">
The Bureau of Labor Statistics reported in the Job Openings &amp; Labor Turnover Survey (JOLTS) that the October job openings rate was stable with the prior month at an elevated 3.0%. The job openings rate is the number of job openings on the last business day of the month as a percent of total employment plus job openings.
The actual number of job openings increased 1.3% m/m to 4.207 million (8.8% y/y) and three month growth surged.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061213h.jpg" width="353">
The hires rate improved m/m to 3.6%, the same as averaged during 2Q &amp; 3Q. The hires rate is the number of hires during the month divided by employment. 
The actual number of hires increased 1.9% (1.5% y/y) to 4.893 million but it was the first increase in the last three months.
The job separations rate was stable for the third month in October at 3.2%. Separations include quits, layoffs, discharges, and other separations as well as retirements. The total separations, or turnover, rate is the total number of separations during the month divided by employment. The level of job separations increased a very slight 0.1% (0.6% y/y) for only the first increase in the last five months.
The survey dates only to December 2000 but has since followed the movement in nonfarm payrolls.
A description of the Jolts survey and the latest release from the U.S. Department of Labor is available <a href="http://www.bls.gov/news.release/jolts.nr0.htm">here</a>.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EB/@EB14/@EB14.HTM">JOLTS</a> (Job Openings &amp; Labor Turnover Survey)</th>
<th scope="col">October</th>
<th scope="col">September</th>
<th scope="col">Oct &#39;05</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
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<td class="firstcol">Job Openings Rate: Total</td>
<td>3.0%</td>
<td>3.0%</td>
<td>2.8%</td>
<td>2.7%</td>
<td>2.4%</td>
<td>2.1%</td>
</tr>
<tr>
<td class="firstcol">Hires Rate: Total</td>
<td>3.6%</td>
<td>3.5%</td>
<td>3.6%</td>
<td>3.6%</td>
<td>3.5%</td>
<td>3.2%</td>
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The Bureau of Labor Statistics reported in the Job Openings & Labor Turnover Survey (JOLTS) that the October job openings rate was stable with the prior month at an elevated 3.0%. The job openings rate is the number of job openings on [...]

JOLTS: Job Openings & Hires Firm

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061213f.jpg" width="353">
The total number of mortgage applications rose 11.4% last week after an 8.1% rise during the prior period, according to the Mortgage Bankers Association.
Purchase applications continued firm and posted an 8.7% jump after the 4.9% rise during the prior week. The increases lifted purchase applications in December 9.7% above the November average which rose 6.4% from the October level.
During the last ten years there has been a 58% correlation between the y/y change in purchase applications and the change in new plus existing single family home sales.
Applications to refinance logged another double digit increase and jumped 15.8% on the heels of the prior week&#39;s 13.7% spike.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061213e.jpg" width="353">
The effective interest rate on a conventional 30-year mortgage increased slightly w/w to 6.22% but the average of 6.19% so far in December is down versus 6.36% during November. The peak for 30 year financing was 7.08% late in June. Rates for 15-year financing also increased to 6.00% and averaged 6.13% last month. Interest rates on 15 and 30 year mortgages are closely correlated (&gt;90%) with the rate on 10 year Treasury securities.
During the last ten years there has been a (negative) 79% correlation between the level of applications for purchase and the effective interest rate on a 30-year mortgage.
The Mortgage Bankers Association surveys between 20 to 35 of the top lenders in the U.S. housing industry to derive its refinance, purchase and market indexes. The weekly survey covers roughly 50% of all U.S. residential mortgage applications processed each week by mortgage banks, commercial banks and thrifts. Visit the Mortgage Bankers Association site <a href="http://www.mbaa.org">here</a>.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYW/@S5/@S5.HTM">MBA Mortgage Applications (3/16/90=100)</a></th>
<th scope="col">12/08/06</th>
<th scope="col">12/01/06</th>
<th scope="col">Y/Y</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total Market Index</td>
<td>721.2</td>
<td>647.6</td>
<td>16.5%</td>
<td>708.6</td>
<td>735.1</td>
<td>1,067.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Purchase</td>
<td>463.8</td>
<td>426.6</td>
<td>-3.0%</td>
<td>470.9</td>
<td>454.5</td>
<td>395.1</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Refinancing</td>
<td>2,304.4</td>
<td>1,989.7</td>
<td>59.8%</td>
<td>2,092.3</td>
<td>2,366.8</td>
<td>4,981.8</td>
</tr>
</tbody>
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The total number of mortgage applications rose 11.4% last week after an 8.1% rise during the prior period, according to the Mortgage Bankers Association. Purchase applications continued firm and posted an 8.7% jump after the 4.9% rise [...]

Mortgage Applications Rose Further

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061213c.jpg" width="353">
Total business inventories rose an expected 0.4% in October, a bit above a downwardly revised 0.3% September increase. Over the last three months the 0.4% average increase was the slowest since March.
During the last ten years there has been a 57% correlation between the y/y change in business inventories and the change in factory sector industrial production. Using quarterly figures, there has been an 84% correlation between the change in real private nonfarm inventories and production.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061213d.jpg" width="353">
Business sales fell 0.2% (+3.6% y/y) after a 2.3% September decline. Manufacturers&#39; sales recovered all of 0.1% after the 4.2% September drop. Retail sales fell 0.1% (+4.6% y/y) and wholesale sales fell 0.5% (+5.9% y/y) after a 1.5% September drop. As a result the inventory to sales ratio rose to 1.31. 
Retail inventories were unchanged but excluding autos they rose 0.3% after an upwardly revised 0.2% September gain. General merchandise inventories surged 1.2% (2.9% y/y) and have been accumulating strongly since May. Accumulation of clothing store inventories also was firm at 0.8% (7.2% y/y). Furniture inventories rose a moderate 0.3% (5.2% y/y).

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@ED/@ED06/@ED0601/@ED0601.HTM">Business Inventories</a></th>
<th scope="col">October</th>
<th scope="col">September</th>
<th scope="col">Y/Y</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
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</thead>
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<td class="firstcol">Total</td>
<td>0.4%</td>
<td>0.3%</td>
<td>7.3%</td>
<td>4.4%</td>
<td>7.6%</td>
<td>-1.0%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Retail</td>
<td>0.0%</td>
<td>-0.3%</td>
<td>5.4%</td>
<td>2.7%</td>
<td>6.7%</td>
<td>3.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp; Retail excl. Autos</td>
<td>0.3%</td>
<td>0.2%</td>
<td>4.8%</td>
<td>4.5%</td>
<td>7.1%</td>
<td>1.9%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Wholesale</td>
<td>0.8%</td>
<td>0.7%</td>
<td>10.1%</td>
<td>7.1%</td>
<td>9.8%</td>
<td>1.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Manufacturing</td>
<td>0.4%</td>
<td>0.6%</td>
<td>7.1%</td>
<td>4.0%</td>
<td>6.9%</td>
<td>-7.4%</td>
</tr>
</tbody>
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Total business inventories rose an expected 0.4% in October, a bit above a downwardly revised 0.3% September increase. Over the last three months the 0.4% average increase was the slowest since March. During the last ten years there [...]

U.S. Inventory Accumulation Continued Easier

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061213a.jpg" width="353">
US retail sales last month recovered all of the weakness during the prior three months. Sales rose 1.0% following a 0.1% decline in October and a 0.6% shortfall in September which both were revised slightly shallower. The November increase easily beat Consensus expectations for a 0.2% rise.
Sales by motor vehicle &amp; parts dealers rose 0.9% (6.4% y/y) after an upwardly revised 1.0% October gain. New unit vehicle sales, however, fell 0.7% to 16.04M for the third decline in the last four months. Excluding autos, retail sales surged 1.1% after a slightly revised 0.3% October dip.
Sales of some discretionary items recovered. Sales at furniture, home furnishings &amp; appliance stores surged 2.1% (6.7% y/y) after an unrevised 0.4% October drop. Also up were building material sales which jumped 1.8% (4.2% y/y). Sales of nonstore retailers (internet &amp; catalogue) made up for weakness during the prior three months with a 1.3% (10.1% y/y) jump. <img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061213b.jpg" width="353">
Restaurant and bar sales rose 0.7% (7.9% y/y) after firm gains during the prior four months.
Still lagging, however, were apparel store sales which fell marginally (+6.7% y/y) after a 0.6% decline during October and, with a 0.4% (3.8% y/y) increase, sales at general merchandise stores recovered an unrevised 0.3% October decline.
Sales at gasoline service stations recovered 2.3% after three months of decline though gasoline prices slipped another 0.7% last month to $2.23 per gallon.
Nonauto retail sales less gasoline in November jumped 0.9% (6.4% y/y), triple the 0.3% increases during each of the prior three months. During the last three months these sales rose at a 6.5% annual rate, the best since March.

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<th scope="col" class="firstcol">&nbsp;</th>
<th scope="col">November</th>
<th scope="col">October</th>
<th scope="col">Y/Y</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
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<td class="firstcol"><a href="http://www.haverselect.com/dlx/usecon/@ED/@ED04/@ED0401/@ED0401.HTM">Retail Sales &amp; Food Services</a></td>
<td>1.0%</td>
<td>-0.1%</td>
<td>5.6%</td>
<td>7.2%</td>
<td>6.2%</td>
<td>4.2%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Excluding Autos</td>
<td>1.1%</td>
<td>-0.3%</td>
<td>5.3%</td>
<td>8.2%</td>
<td>7.2%</td>
<td>4.7%</td>
</tr>
</tbody>
</table>


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US retail sales last month recovered all of the weakness during the prior three months. Sales rose 1.0% following a 0.1% decline in October and a 0.6% shortfall in September which both were revised slightly shallower. The November [...]

U.S. Retail Sales Recovered

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061213a.jpg" width="353">
US retail sales last month recovered all of the weakness during the prior three months. Sales rose 1.0% following a 0.1% decline in October and a 0.6% shortfall in September which both were revised slightly shallower. The November increase easily beat Consensus expectations for a 0.2% rise.
Sales by motor vehicle &amp; parts dealers rose 0.9% (6.4% y/y) after an upwardly revised 1.0% October gain. New unit vehicle sales, however, fell 0.7% to 16.04M for the third decline in the last four months. Excluding autos, retail sales surged 1.1% after a slightly revised 0.3% October dip.
Sales of some discretionary items recovered. Sales at furniture, home furnishings &amp; appliance stores surged 2.1% (6.7% y/y) after an unrevised 0.4% October drop. Also up were building material sales which jumped 1.8% (4.2% y/y). Sales of nonstore retailers (internet &amp; catalogue) made up for weakness during the prior three months with a 1.3% (10.1% y/y) jump. <img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061213b.jpg" width="353">
Restaurant and bar sales rose 0.7% (7.9% y/y) after firm gains during the prior four months.
Still lagging, however, were apparel store sales which fell marginally (+6.7% y/y) after a 0.6% decline during October and, with a 0.4% (3.8% y/y) increase, sales at general merchandise stores recovered an unrevised 0.3% October decline.
Sales at gasoline service stations recovered 2.3% after three months of decline though gasoline prices slipped another 0.7% last month to $2.23 per gallon.
Nonauto retail sales less gasoline in November jumped 0.9% (6.4% y/y), triple the 0.3% increases during each of the prior three months. During the last three months these sales rose at a 6.5% annual rate, the best since March.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
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<th scope="col" class="firstcol">&nbsp;</th>
<th scope="col">November</th>
<th scope="col">October</th>
<th scope="col">Y/Y</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol"><a href="http://www.haverselect.com/dlx/usecon/@ED/@ED04/@ED0401/@ED0401.HTM">Retail Sales &amp; Food Services</a></td>
<td>1.0%</td>
<td>-0.1%</td>
<td>5.6%</td>
<td>7.2%</td>
<td>6.2%</td>
<td>4.2%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Excluding Autos</td>
<td>1.1%</td>
<td>-0.3%</td>
<td>5.3%</td>
<td>8.2%</td>
<td>7.2%</td>
<td>4.7%</td>
</tr>
</tbody>
</table>
U.S. Inventory Accumulation Continued Easier 
by <a href="/comment/Moeller.html">Tom Moeller</a> December 13, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061213c.jpg" width="353">
Total business inventories rose an expected 0.4% in October, a bit above a downwardly revised 0.3% September increase. Over the last three months the 0.4% average increase was the slowest since March.
During the last ten years there has been a 57% correlation between the y/y change in business inventories and the change in factory sector industrial production. Using quarterly figures, there has been an 84% correlation between the change in real private nonfarm inventories and production.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061213d.jpg" width="353">
Business sales fell 0.2% (+3.6% y/y) after a 2.3% September decline. Manufacturers&#39; sales recovered all of 0.1% after the 4.2% September drop. Retail sales fell 0.1% (+4.6% y/y) and wholesale sales fell 0.5% (+5.9% y/y) after a 1.5% September drop. As a result the inventory to sales ratio rose to 1.31. 
Retail inventories were unchanged but excluding autos they rose 0.3% after an upwardly revised 0.2% September gain. General merchandise inventories surged 1.2% (2.9% y/y) and have been accumulating strongly since May. Accumulation of clothing store inventories also was firm at 0.8% (7.2% y/y). Furniture inventories rose a moderate 0.3% (5.2% 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/USECON/@ED/@ED06/@ED0601/@ED0601.HTM">Business Inventories</a></th>
<th scope="col">October</th>
<th scope="col">September</th>
<th scope="col">Y/Y</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>0.4%</td>
<td>0.3%</td>
<td>7.3%</td>
<td>4.4%</td>
<td>7.6%</td>
<td>-1.0%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Retail</td>
<td>0.0%</td>
<td>-0.3%</td>
<td>5.4%</td>
<td>2.7%</td>
<td>6.7%</td>
<td>3.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp; Retail excl. Autos</td>
<td>0.3%</td>
<td>0.2%</td>
<td>4.8%</td>
<td>4.5%</td>
<td>7.1%</td>
<td>1.9%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Wholesale</td>
<td>0.8%</td>
<td>0.7%</td>
<td>10.1%</td>
<td>7.1%</td>
<td>9.8%</td>
<td>1.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Manufacturing</td>
<td>0.4%</td>
<td>0.6%</td>
<td>7.1%</td>
<td>4.0%</td>
<td>6.9%</td>
<td>-7.4%</td>
</tr>
</tbody>
</table>
Mortgage Applications Rose Further 
by <a href="/comment/Moeller.html">Tom Moeller</a> December 13, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061213f.jpg" width="353">
The total number of mortgage applications rose 11.4% last week after an 8.1% rise during the prior period, according to the Mortgage Bankers Association.
Purchase applications continued firm and posted an 8.7% jump after the 4.9% rise during the prior week. The increases lifted purchase applications in December 9.7% above the November average which rose 6.4% from the October level.
During the last ten years there has been a 58% correlation between the y/y change in purchase applications and the change in new plus existing single family home sales.
Applications to refinance logged another double digit increase and jumped 15.8% on the heels of the prior week&#39;s 13.7% spike.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061213e.jpg" width="353">
The effective interest rate on a conventional 30-year mortgage increased slightly w/w to 6.22% but the average of 6.19% so far in December is down versus 6.36% during November. The peak for 30 year financing was 7.08% late in June. Rates for 15-year financing also increased to 6.00% and averaged 6.13% last month. Interest rates on 15 and 30 year mortgages are closely correlated (&gt;90%) with the rate on 10 year Treasury securities.
During the last ten years there has been a (negative) 79% correlation between the level of applications for purchase and the effective interest rate on a 30-year mortgage.
The Mortgage Bankers Association surveys between 20 to 35 of the top lenders in the U.S. housing industry to derive its refinance, purchase and market indexes. The weekly survey covers roughly 50% of all U.S. residential mortgage applications processed each week by mortgage banks, commercial banks and thrifts. Visit the Mortgage Bankers Association site <a href="http://www.mbaa.org">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/SURVEYW/@S5/@S5.HTM">MBA Mortgage Applications (3/16/90=100)</a></th>
<th scope="col">12/08/06</th>
<th scope="col">12/01/06</th>
<th scope="col">Y/Y</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total Market Index</td>
<td>721.2</td>
<td>647.6</td>
<td>16.5%</td>
<td>708.6</td>
<td>735.1</td>
<td>1,067.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Purchase</td>
<td>463.8</td>
<td>426.6</td>
<td>-3.0%</td>
<td>470.9</td>
<td>454.5</td>
<td>395.1</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Refinancing</td>
<td>2,304.4</td>
<td>1,989.7</td>
<td>59.8%</td>
<td>2,092.3</td>
<td>2,366.8</td>
<td>4,981.8</td>
</tr>
</tbody>
</table>
JOLTS: Job Openings & Hires Firm 
by <a href="/comment/Moeller.html">Tom Moeller</a> December 13, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061213g.jpg" width="353">
The Bureau of Labor Statistics reported in the Job Openings &amp; Labor Turnover Survey (JOLTS) that the October job openings rate was stable with the prior month at an elevated 3.0%. The job openings rate is the number of job openings on the last business day of the month as a percent of total employment plus job openings.
The actual number of job openings increased 1.3% m/m to 4.207 million (8.8% y/y) and three month growth surged.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061213h.jpg" width="353">
The hires rate improved m/m to 3.6%, the same as averaged during 2Q &amp; 3Q. The hires rate is the number of hires during the month divided by employment. 
The actual number of hires increased 1.9% (1.5% y/y) to 4.893 million but it was the first increase in the last three months.
The job separations rate was stable for the third month in October at 3.2%. Separations include quits, layoffs, discharges, and other separations as well as retirements. The total separations, or turnover, rate is the total number of separations during the month divided by employment. The level of job separations increased a very slight 0.1% (0.6% y/y) for only the first increase in the last five months.
The survey dates only to December 2000 but has since followed the movement in nonfarm payrolls.
A description of the Jolts survey and the latest release from the U.S. Department of Labor is available <a href="http://www.bls.gov/news.release/jolts.nr0.htm">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/@EB/@EB14/@EB14.HTM">JOLTS</a> (Job Openings &amp; Labor Turnover Survey)</th>
<th scope="col">October</th>
<th scope="col">September</th>
<th scope="col">Oct &#39;05</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Job Openings Rate: Total</td>
<td>3.0%</td>
<td>3.0%</td>
<td>2.8%</td>
<td>2.7%</td>
<td>2.4%</td>
<td>2.1%</td>
</tr>
<tr>
<td class="firstcol">Hires Rate: Total</td>
<td>3.6%</td>
<td>3.5%</td>
<td>3.6%</td>
<td>3.6%</td>
<td>3.5%</td>
<td>3.2%</td>
</tr>
</tbody>
</table>
Japan Current Account Hits Record ¥2.02 Trillion in October; Trade, Services & Income All Contribute 
by <a href="/comment/Stone.html">Carol Stone</a> December 13, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061213l.jpg" width="353">
Japan&#39;s current account surplus rose &yen;611.4 billion in October, according to data reported December 13 by the Ministry of Finance, reaching a record &yen;2,020.1 billion (seasonally adjusted).The previous record was &yen;2,015.1 billion in December 2005.
The month-to-month increase in the surplus included favorable moves in every segment of the current account.The goods balance increased to &yen;852.7 billion from &yen;437.2 billion, more than reversing September&#39;s shrinkage.Exports rose &yen;113.0 billion or 1.9% and imports fell &yen;302.5 billion or 5.4%.The merchandise trade data reported earlier indicate that just under half of the fall in imports was in &quot;mineral fuels&quot;, including petroleum and natural gas products.Among exports, the strongest items appear to be motor vehicles and metals, as suggested by year/year gains in not-seasonally-adjusted data.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061213k.jpg" width="353">
There is a deficit in services, but it shrank markedly in October, to &yen;122.8 billion from &yen;208.5 billion in September.It is erratic on a monthly basis, but the October reading compares favorably with an average for all of last year of &yen;219.4 billion and with &yen;308.3 billion in 2004.
The balance on income flows grew as well in October, as gains in assets held abroad are bringing in increased portfolio income. The monthly change in October portfolio income was small, just to &yen;1,071.0 billion from &yen;1,038.4 billion in September, but these are both up from &yen;852.4 billion in October a year ago and &yen;737.6 billion for all of 2005.Total income includes interest on bank loans, profits from direct investments, and wage income; the October total was &yen;1,374.9 billion.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061213j.jpg" width="353">
All together in Japan&#39;s current account performance for October, the balance of trade in goods showed the largest improvement, but the largest net surplus is in income.As world capital markets become more and more integrated and direct investment becomes more diversified around the world, swings in both goods and income balances are likely to be wider and more frequent.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/JAPAN/@J9/@J9.HTM">JAPAN</a><a href="http://www.haverselect.com/dlx/JAPAN/@J9/@J9.HTM">: SA, Bil.&yen;</a></th>
<th scope="col">Oct 2006</th>
<th scope="col">Sept 2006</th>
<th scope="col">Aug 2006</th>
<th scope="col">Year-Ago</th>
Monthly Averages
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">2005</td>
<td>2004</td>
<td>2003</td>
</tr>
<tr>
<td class="firstcol">Current Account Balance</td>
<td>2020.1</td>
<td>1408.7</td>
<td>1605.0</td>
<td>1739.6</td>
<td>1537.7</td>
<td>1557.4</td>
<td>1316.9</td>
</tr>
<tr class="odd">
<td class="firstcol">Goods Exports</td>
<td>6134.1</td>
<td>6021.1</td>
<td>6170.0</td>
<td>5510.8</td>
<td>5212.5</td>
<td>4841.6</td>
<td>4303.3</td>
</tr>
<tr>
<td class="firstcol">Goods Imports</td>
<td>-122.8</td>
<td>-208.5</td>
<td>-169.8</td>
<td>-54.1</td>
<td>-219.4</td>
<td>-308.3</td>
<td>-300.8</td>
</tr>
<tr class="odd">
<td class="firstcol">Balance on Services</td>
<td>1374.9</td>
<td>1266.0</td>
<td>105.73</td>
<td>1099.3</td>
<td>966.2</td>
<td>776.9</td>
<td>692.4</td>
</tr>
<tr>
<td class="firstcol">Balance on Income</td>
<td>1374.9</td>
<td>1266.0</td>
<td>1057.3</td>
<td>1099.3</td>
<td>966.2</td>
<td>776.9</td>
<td>692.4</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;Portfolio Income</td>
<td>1071.0</td>
<td>1038.4</td>
<td>838.2</td>
<td>852.4</td>
<td>737.6</td>
<td>622.8</td>
<td>569.9</td>
</tr>
</tbody>
</table>


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Louise Curley

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061212i.jpg" width="353">
The ZEW institute which polls institutional investors and analysts regarding their opinions on the current state of the German economy and the outlook six months ahead announced today that in December the balance of pessimists over optimists declined from 28.5% to 19.0%. Investors and analysts have been more pessimistic than the managers of firms in manufacturing, construction and wholesale and retail trade polled in the broader IFO survey. The latter began to show a more positive outlook in October and increased their optimism in November when optimists exceeded pessimists by 2.7%. The first chart shows the percent balances of opinions of investors and analysts in the ZEW survey and of the managers in the IFO survey regarding the six months outlook.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061212j.jpg" width="353">
Both investors and managers have shown increasing confidence in their current situations. However, it is among the investors and analysts that more optimists than pessimists prevail regarding the current situation. In November, the excess of optimists among managers was 23.4% and among investors and analysts, 53.0%. The excess of optimists among the latter increased to 63% in December. The second chart shows the percent balances of the investors and analysts in the ZEW survey and the managers in the IFO survey regarding current conditions.
The improvement in confidence shown by both the IFO and ZEW polls is another sign that, although some slowdown is expected in the first quarter of 2007, there is a growing consensus that the current German expansion is strong enough to weather the impact of a strong euro and a tighter fiscal policy. Several of the six institutes that regularly monitor the German economy, have increased their forecasts for 2007. The Kiel based IfW institute, for example, announce today that it has doubled its estimate of German growth in 2007 from 1.0% to 2.1%. 

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/GERMANY/@D8/@D8.HTM">ZEW INDICATOR&nbsp; (% balance)</a>&nbsp;</th>
<th scope="col">Dec&nbsp; 06</th>
<th scope="col">Nov 06</th>
<th scope="col">Dec 05</th>
<th scope="col">M/M dif</th>
<th scope="col">Y/Y dif</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">Current Conditions</td>
<td>63.5</td>
<td>53.0</td>
<td>-44.4</td>
<td>10.5</td>
<td>107.9</td>
<td>18.3</td>
<td>-61.8</td>
<td>-67.7</td>
</tr>
<tr>
<td class="firstcol">Conditions 6 Months Ahead</td>
<td>-19.0</td>
<td>-28.5</td>
<td>61.6</td>
<td>9.5</td>
<td>-80.6</td>
<td>22.3</td>
<td>34.8</td>
<td>44.6</td>
</tr>
<tr class="odd">
<td class="firstcol"></td>
<td>Nov&nbsp; 06</td>
<td>Oct 06</td>
<td>Nov 05</td>
<td>M/M dif</td>
<td>Y/Y dif</td>
<td>2006</td>
<td>2005</td>
<td>2004</td>
</tr>
<tr>
<td class="firstcol"> <a href="http://www.haverselect.com/dlx/GERMANY/@D8/@D8.HTM">IFO INDICATOR&nbsp; (% balance)&nbsp;</a> </td>
<td>--</td>
<td>--</td>
<td>--</td>
<td>--</td>
<td>--</td>
<td>--</td>
<td>--</td>
<td>--</td>
</tr>
<tr class="odd">
<td class="firstcol">Current Conditions</td>
<td>23.4</td>
<td>19.4</td>
<td>-9.7</td>
<td>4.0</td>
<td>33.1</td>
<td>n.a</td>
<td>-14.2</td>
<td>-17.4</td>
</tr>
<tr>
<td class="firstcol">Conditions 6 Months Ahead</td>
<td>2.7</td>
<td>0.7</td>
<td>-0.8</td>
<td>2.0</td>
<td>3.5</td>
<td>n.a</td>
<td>-5.0</td>
<td>-2.0</td>
</tr>
</tbody>
</table>
</body>
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The ZEW institute which polls institutional investors and analysts regarding their opinions on the current state of the German economy and the outlook six months ahead announced today that in December the balance of pessimists over [...]

German Investors and Analysts Less Pessimistic About the Outlook: IfW Institute Doubles its 2007 Growth Estimate

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061212l.jpg" width="353">
The U.S. federal government&#39;s budget deficit in November fell to $75.6B versus a deficit of $83.1B last November. That pulled the figure for the first two months of FY07 to $124.9B against $130.3B during last fiscal year&#39;s first two months. The Congressional Budget Office expects the FY 2007 deficit to total $286B, up slightly from last year&#39;s deficit of $247.7B.
As a percentage of GDP, the U.S. budget deficit fell last year to 1.9% from 2.6% in FY2005.
Net revenues grew 8.8% y/y during the first two months of FY07. Individual income tax receipts (44% of total receipts) grew 11.8% as withheld taxes rose 9.7% due to employment growth and non-withheld taxes (primarily on capital gains) surged 45.8%. Corporate income taxes (13% of total receipts) surged 21.5% as corporate profits grew. Estate &amp; gift taxes fell 1.1% while higher employment levels raised social insurance &amp; retirement receipts by 4.2%.
U.S. net outlays grew 4.7% during this fiscal year&#39;s first two months versus last year. Defense spending (19% of total outlays) grew 13.6% and Medicare expenditures (12% of outlays) surged 42.5%. Social security spending (21% of outlays) rose 6.0% but the recent bond market rally dropped the government&#39;s interest expense by 11.0% y/y.
Middle-Income Tax Rates: Trends and Prospects from the Federal Reserve Bank of Kansas City can be found <a href="http://www.kansascityfed.org/PUBLICAT/ECONREV/PDF/4q06davig.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/@E1/@E106/@E10602/@E106021.HTM">US Government Finance</a> &nbsp;</th>
<th scope="col">November</th>
<th scope="col">October</th>
<th scope="col">Y/Y</th>
<th scope="col">FY 2006</th>
<th scope="col">FY 2005</th>
<th scope="col">FY 2004</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Budget Balance</td>
<td>-$75.6B</td>
<td>-$49.3B</td>
<td>-$83.1B (11/05)</td>
<td>-$247.7</td>
<td>-$318.7B</td>
<td>-$412.7B</td>
</tr>
<tr>
<td class="firstcol">Net Revenues</td>
<td>$145.9B</td>
<td>$167.7B</td>
<td>5.1%</td>
<td>11.8%</td>
<td>14.5%</td>
<td>5.5%</td>
</tr>
<tr class="odd">
<td class="firstcol">Net Outlays</td>
<td>$221.5B</td>
<td>$217.0B</td>
<td>-0.2%</td>
<td>7.4%</td>
<td>7.8%</td>
<td>6.2%</td>
</tr>
</tbody>
</table>
</body>
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The U.S. federal government's budget deficit in November fell to $75.6B versus a deficit of $83.1B last November. That pulled the figure for the first two months of FY07 to $124.9B against $130.3B during last fiscal year's first two [...]

U.S. Budget Deficit Continued to Shrink

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

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

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

Tighter US immigration enforcement adversely impacting labor force

Economic policy uncertainty, while still elevated, is declining

Gradual disinflation and easier monetary policies across advanced economies

Largest October layoffs since 2003, led by technology

Subdued global shipping costs not yet pointing to supply chain problems

PMIs show still-elevated but slowing US inflation

AI boosting US investment in data centers

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

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

US financial markets have gotten used to elevated policy uncertainty

FOMC now expects more rate cuts going forward than in June

China gaining ASEAN exports while US exports slump

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

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

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

Equity market exuberance outpacing macroeconomic data

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

US production rebounded in Q2, but demand continued to slow

US leader, Germany trailer for real GDP growth over past 3 years

Negative US inflation surprises leading G10 down

Deflation continues in China

Incoming data surprising on downside in US; positive surprises elsewhere

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Andrew Cates

**Faster-than-Expected Monetary Easing**
Our first potential upside risk for 2026 is that monetary policy across most major advanced economies is loosened further and by more than markets and forecasters currently anticipate. Monetary policy cycles have a history of being underestimated in both length and magnitude—in large part because of the powerful feedback loops between interest rates, inflation, and economic behaviour. On the way up, higher policy rates feed into mortgage costs, debt-service burdens, rents, and the general cost of doing business, reinforcing wage pressures and inflation persistence. But these same channels work in reverse on the way down. As rates fall, debt servicing eases, housing and rental inflation softens, and cost pressures across the economy unwind more rapidly than expected—allowing inflation to decelerate faster and creating scope for further easing. A risk, therefore, is that if disinflation becomes self-reinforcing, central banks find themselves cutting rates more aggressively than currently priced, not because of economic distress, but because restrictive policy proves increasingly unnecessary.

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**Energy Supply Dynamics Prove More Supportive**
The second chart reinforces the message from the first: easing monetary policy may be accompanied—and amplified—by a more benign energy backdrop. Recent projections from the EIA point to a renewed build-up in OECD crude oil and liquids inventories over the year ahead, a dynamic that has historically been associated with downward pressure on oil prices. If inventories continue to rise as supply growth outpaces demand, spot prices for crude could undershoot current forecasts, keeping energy inflation subdued. That, in turn, would reinforce disinflationary forces already in play—lowering headline CPI, easing cost pressures for firms and households, and giving central banks greater confidence to loosen policy further. In that sense, softer oil prices would not just be a standalone positive shock, but part of a reinforcing feedback loop alongside rate cuts, supporting real incomes, financial conditions, and global growth into 2026.


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**AI-Driven Productivity Gains Materialise More Quickly** 
The third chart shows a clear pickup in US nonfinancial productivity growth, reviving the debate around whether AI-driven efficiency gains may arrive sooner than many forecasters expect. While the longer-term productivity potential of AI remains uncertain and uneven across sectors, there are reasons to think that at least some near-term gains could prove more tangible than currently assumed. Rather than transformative breakthroughs, early benefits are likely to come from incremental improvements—automation of routine processes, better scheduling and logistics, more efficient use of capital and labour, and modest reductions in overhead costs—areas where US firms are already well positioned to implement new technologies quickly. If these gains accumulate and diffuse more broadly, the implications would still be meaningful. Even a modest, sustained uplift in productivity would help contain unit labour costs, support real income growth, and raise the economy’s speed limit without generating renewed inflation pressure. In that scenario, productivity would not need to “revolutionise” the economy to matter: incremental efficiency gains could nonetheless provide a supportive backdrop for growth, earnings, and policy easing into 2026—representing a genuine upside risk to the outlook.


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**The US Economy Proves Resilient Again**
The next chart highlights a further upside risk to the 2026 outlook: the possibility that the US economy once again outperforms its peers. Unlike the typical pre-recession backdrop, there is little evidence of meaningful financial stress in the US private sector. After a prolonged period of balance-sheet repair, private-sector debt ratios have been trending lower in recent years, while the sector as a whole is running a healthy financial surplus. This stands in stark contrast to previous late-cycle episodes, which were characterised by rising leverage, widening deficits, and growing dependence on credit expansion. The absence of private-sector excesses reduces the economy’s vulnerability to higher rates and external shocks, and helps explain why growth has remained more durable than expected. If households and firms continue to prioritise balance-sheet strength rather than forced deleveraging, the usual mechanisms that tip the economy into recession may fail to materialise. In that environment, even modest easing in financial conditions could translate into renewed spending and investment, allowing the US to sustain above-trend growth into 2026—representing another upside risk to the global outlook.


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**India’s Growth Engine Accelerates Further** 
Chart 5 points to another potential upside risk for 2026 emanating from India’s economy. After a period of relative pessimism earlier in the year, consensus growth forecasts for 2026 have been revised modestly higher, even as inflation projections have continued to drift lower. This combination—firmer growth expectations alongside easing inflation pressures—creates scope for a more supportive policy backdrop than markets currently assume. With real interest rates no longer rising and financial conditions stabilising, India’s investment cycle, already underpinned by public infrastructure spending and improving corporate balance sheets, could prove more durable than forecast. If these trends persist, India may deliver growth that is both stronger and more internally driven than expected, providing a meaningful demand impulse to the broader global economy. Given India’s increasing weight in global growth, even small upside surprises would have outsized effects on trade, commodity demand, and regional activity—reinforcing the case that the global outlook for 2026 may be skewed to the upside.


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**The Global South Becomes a More Independent Source of Demand** 
The final chart points to a broader upside risk for the global economy in 2026: that economies across the so-called Global South generate more durable momentum than currently assumed. With a few notable exceptions—such as China and Thailand—many emerging economies continue to benefit from stronger growth in their working-age populations and/or faster real GDP per capita growth than their advanced-economy counterparts. These demographic and income dynamics are helping to underpin domestic consumption, support labour-force expansion, and attract capital inflows, as reflected in the pattern of net FDI across countries. In contrast, much of the advanced world faces binding demographic constraints and lower steady-state growth rates, limiting the scope for demand to re-accelerate organically. If growth in the Global South proves more resilient and internally driven—rather than overly dependent on exports to advanced economies—it could provide a more stable and geographically diversified source of global demand. In that scenario, global growth in 2026 would be less reliant on a narrow set of advanced economies, reinforcing the case that risks to the outlook may be skewed to the upside.


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_This marks our final Charts of the Week publication for 2025 The next edition will be released on Thursday 8 January._

Last week’s Charts of the Week focused on the darker tail risks hanging over the 2026 outlook: the possibility of monetary policy mis-calibration, that geopolitics and trade fragmentation further disrupt supply chains, and that elevated debt levels—particularly in the public sector—reassert themselves as a drag on growth. This week’s charts take a deliberately different tack. Taken together, they highlight a set of upside risks that are possibly underappreciated in current forecasts. For example, policy easing across advanced economies may extend further than expected as disinflation feeds on itself (chart 1); oil prices could surprise on the downside as inventories rebuild (chart 2); US productivity may deliver incremental but meaningful gains sooner than assumed (chart 3); the US economy itself could continue to benefit from an absence of private-sector financial stress (chart 4); India’s growth momentum might firm again as inflation pressures recede (chart 5); and, more broadly, parts of the Global South appear increasingly capable of generating their own demand impulse, supported by favourable demographics and income growth (chart 6). None of these forces is guaranteed, and each carries its own caveats—but together they suggest that, having spent much of the past year fixated on downside risks, the risks to global growth in 2026 may be more evenly balanced than is widely assumed.

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Charts of the Week: The Upside Risks

Kathleen Stephansen, CBE

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Initial claims for unemployment insurance dropped 13,000 to 224,000 during the week of December 13, from 237,000 during the week of December 6, revised from 236,000. The four-week moving average of initial claims was 217,500, an increase of 500 from the previous week, which was revised to 217,000 from 216,750.

Federal government employees initially filed 1091 (NSA) jobless insurance claims in the week ended December 6, after filing 643 claims in the week ended November 29.

Continuing claims for unemployment insurance rose 67,000 to 1,897,000 in the week ending December 6, following a sharp decline of 107,000 to 1,830,000 in the prior week, revised from 1,838,000. The four-week moving average was 1,902,000 in the week ending December 6, a decrease of 14,000 from 1,916,00 in the week ended November 29, revised from 1,918,000. The insured unemployment rate stood at 1.2% in the week of December 6, unchanged from the prior week.

Federal government employees’ continuing benefits rose to 14,077 (NSA) in the week of November 29 from 12,732 (NSA) in the week ended November 22.

The insured unemployment rate varied greatly across individual states and territories. In the week ending November 29, the highest unemployment rates were in Washington (2.48%), New Jersey (2.42%), California (2.26%), Minnesota (2.16%), and Massachusetts (2.10%). The lowest rates were in Florida (0.34%), South Dakota (0.40%), North Carolina (0.41%), Louisiana (0.44%), Alabama (0.46%), Virginia (0.47%), and Tennessee (0.49%). Rates in other notable states include New York (1.81%), Illinois and Pennsylvania (both 1.67%), and Texas (1.22%). These state data are not seasonally adjusted.

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



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- Initial claims dropped from the prior week.
- Continuing claims rebounded from the prior week sharp decline.
- The insured unemployment rate was unchanged.


U.S. Initial Claims for Unemployment Insurance Eased in Latest Week

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Mortgage applications dropped 3.8% w/w (+40.9% y/y) in the week of December 12 after a rise of 4.8% w/w (45.4% y/y) in the week of December 5, according to the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey. Applications for loans to purchase a house fell 2.8% w/w (+12.3% y/y) in the latest week after declining 2.4% w/w (+17.2% y/y) in the week of December 5. Applications for loan refinancing dropped 3.6% w/w (+86.0% y/y) in the week of December 12, following the 14.3% (87.8% y/y) jump in the week ended December 5.

The effective interest rate on a 30-year fixed-rate loan rose 6bps to 6.56% in the week ending December 12, from 6.50% in the week ending December 5. The rate on 15-year fixed-rate mortgages rose 4bps to 5.91% in the latest week from 5.87% in the December 5 week. The rate on 30-year jumbo edged down 2bps to 6.55% in the December 12 week from 6.57% in the prior week. The rate on a 5-year ARM eased 4bps to 5.76% in the latest week from 5.80% in the December 5 week.

The share of applications for refinancing an existing loan rose to 59.0% of total applications in the December12 week from 58.2% in the week ending December 5. The adjustable-rate mortgage (ARM) share of activity rose to 7.2% in the latest week from 7.0% in the December 5 week.

The average size of a mortgage loan rose 1.5% (6.4% y/y) to $400,000 in the December 12 week, following a decline of 0.7% (+7.1% y/y) to $394,200 in the December 5 week. The average size of a purchase loan edged up 0.6% (-0.3% y/y) to $424,200 in the latest week, after dropping 0.4% (+1.3% y/y) to $421,700 in the December 5 week. The average size of a loan to refinance a mortgage rose 2.4% (19.8% y/y) to $383,300 in the week ending December 12 after rising 0.2% (19.4% y/y) to $374,500 in the December 5 week.

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 fell 2.8% w/w; refinancing loan applications fell 3.6% w/w.
- Effective interest rate on 30-year fixed loans rose to 6.56%.
- Average loan size rose moderately.

U.S. Mortgage Applications Retreated in the Week of December 12

Robert Brusca

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U.K. inflation has moderated in November, posting a 0.1% drop on the HICP, a 0.1% gain in the CPI-H headline measure as well as a 0.1% gain in the CPI-H core (excluding energy, food, alcohol, and tobacco). The sequential trend in core inflation points lower and is eroding but continues to run over the 2% mark set as a target by the Bank of England for overall inflation (over 12 months). The headline is excessive as well but also eroding.

Sequentially the CPI-H gains 3.5% over 12 months, slows to a 2.8% annual rate over six months and then dips to 1.4% annual rate over three months. The CPI-H core rises by 3.6% over 12 months, ticks down to a 3.0% pace over six months, and then runs at a 2.4% annualized pace over three months.

The trend for the CPI core, and for the headline, both are quite good and would be completely consistent with the Bank of England cutting rates, a move that is widely expected – although the 12-month pace for each is excessive.

Not only is inflation showing signs of falling into the Bank of England's target zone, but the economy has been weak although the unemployment rate currently is only hovering around the 4% mark. Still, recent economic data have been weak, and the recent monthly GDP report posted a negative reading, further unsettling the outlook. The October monthly GDP change was estimated at -0.1% while the year-over-year increase in GDP in October produced a gain of just 1.1%. These metrics have put the U.K. economy on recession watch at a time when there has been a sharp revision in the budget process that will be much more constrictive. A sharp pullback in the manufacturing of motor vehicles is blamed for the sudden weakness in GDP in October. The three-month drop in GDP is the first such drop since December 2023.

Meanwhile, the headline and the core inflation statistics are progressing. The table calculates breadth statistics on how widespread inflation acceleration has been and we see that it has not been prevalent (over 50%) in September or November, although breadth did touch the 58% mark in October. Sequentially, inflation acceleration has been tamed: over 12 months (when it is neutral), six months, and three months. Over 12 months, inflation accelerated in only 50% of the categories. And inflation according to the CPI headline and in the core over six months continues to show deceleration to accompany narrowing breadth - only 8.3%. That reading indicates that there was more inflation deceleration than acceleration by a wide margin over six months. At 50%, inflation acceleration and deceleration forces are balanced. Readings below 50% indicate relatively more deceleration, and that is now the more common condition. Inflation acceleration is extremely rare across categories over six months and three months.

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On balance, inflation by the headline and by the core measures is well disciplined and falling into line although still excessive over 12 months. The breadth statistics reinforce the view that inflation is broadly coming to heel at the same time the real economy data are showing a cooling in the economy- and perhaps an excessive slowing at that. The new budget should put the economy under additional downward pressure, further restraining inflation and causing growth to moderate. In this situation, a rate cut from the Bank of England is the odds-on bet. Perhaps the only question now is how large a cut? How much will the Bank think that circumstance have changed and that key trends have been altered in a significant way? Will policy react mostly to lower trend tempered by an excessive 12-month pace, or will it be willing to look farther forward and weight heavily the deteriorating economic trend as well?

United Kingdom

U.K. Inflation Moderates Open Door for BOE Rate Cut

Sandy Batten

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The Bureau of Labor Statistics released establishment survey data for both October and November today. With the government shutdown during the month of October, there was no household survey for that month. Today’s release contained only November data for households. Nonfarm payrolls (from the establishment survey) increased 64,000 in November but fell 105,000 in October. The 119,000 increase previously reported for September was revised down to a 108,000 rise. The Action Economics Forecast Survey had expected an 80,000 decrease in October and a 35,000 increase in November. The three-month average change in payrolls rebounded to 22,000 in November from -8,000 in October. However, this figure has trended down since early this year, pointing to a modest softening of labor-market conditions. 

This softening was reinforced by a 0.2%-point jump in the unemployment rate, measured in the household survey, to 4.6% in November from 4.4% in September. (As already noted, there was no household survey in October.) The unemployment rate, including employees working part-time for economic reasons plus all marginally attached workers, surged to 8.7% in November from 8.0% in September. For both series, these were the highest readings since September 2021.

Average hourly earnings (AHE), a key variable for the Federal Reserve, showed a further slowing in wage growth. AHE edged up 0.1% m/m in November after a 0.4% monthly jump in October. Importantly, the y/y rate slowed to 3.5%, the slowest since May 2021, from 3.7% in both September and October. The annual pace of the rise in service-producing wages slowed to 3.4% in November from 3.7% in both September and October while the annual growth of goods-producing wages was unchanged at 4.0%. Depending on your estimate of productivity growth, the current pace of total AHE growth is likely still a little too fast to be consistent with the Fed’s 2% inflation target. But clearly, it is moving in the desired direction.

In the **establishment survey**, much of the recent softening reflects declines in federal government employment. Federal government employment fell again in November (-6,000). This follows a sharp decline of 162,000 in October, as some federal employees who accepted a deferred resignation offer came off federal payrolls. Federal government employment is down by 271,000 since reaching a peak in January. (Note however that federal employees on furlough during the government shutdown were counted as employed in the establishment survey because they received pay, even if later than usual, for the pay period that included the 12th of the month. Employees on paid leave or receiving ongoing severance pay are counted as employed in the establishment survey.)

Private-sector employment rose 69,000 in November and 52,000 in October following an upwardly revised 104,000 increase in September (previously 97,000). Goods sector employment rebounded in November, rising 19,000 after a 9,000 fall in October. Construction jobs increased 28,000 in November, their largest monthly gain in more than a year, but slipped 1,000 in October. Manufacturing jobs continued to decline, falling 5,000 in November and 9,000 in October. They have now declined for seven consecutive months, not the result that the Trump Administration new tariff policy had intended.

Private-sector service-producing jobs gained 50,000 in November on top of a 61,000 increase in October and an 87,000 rise in September. A 46,000 increase in healthcare jobs on top of a 44,000 increase in October and an 18,000 gain in social assistance jobs in November after a 21,000 increase in October led the overall increases in the past two months. Other major sectors mostly experienced either job declines or minimal gains in October and November.

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The length of the workweek increased to 34.3 hours in November from 34.2 hours in August, September and October. The goods-producing workweek edged up to 39.8 hours in November from 39.6 hours in October while the private service-producing workweek was unchanged at 33.2 hours in November.

In the **household survey**, the unemployment rate jumped to 4.6% in November, the highest since September 2021 and up from a recent low of 3.4% in April 2023, from 4.4% in September (again, no data for October). The labor force increased 323,000 in November from September after a 470,000 monthly gain in September. The gain in employment slowed in November with the number of employed rising only 96,000 from September following a 251,000 monthly increase in September. The number of unemployed increased 228,000 in November from September following a 219,000 monthly increase in September. The labor force participation rate rose to 62.5% in November, its highest since April, from 62.4% in September. On a slightly brighter note, the average duration of unemployment slipped to 23.0 weeks in November from 24.1 weeks in September while the median duration of unemployment fell to 9.5 weeks, the lowest since May, from 10.0 weeks in September.

The employment/population ratio for all workers slipped to 59.6% in November from 59.7% in September. It remained below the recent peak reading of 61.1% in February 2020 just prior to the pandemic. For men, the rate slipped to 64.6% in November from 64.8% in September and 65.0% in August, and for women, the rate was unchanged at 54.8% in November.

The employment and earnings data are collected from surveys taken each month during the week containing the 12th day of the month. The labor market data are contained in Haver's **USECON** database. Detailed figures are in the **EMPL** and **LABOR** databases. The expectations figures are in the **AS1REPNA** database.

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- Total payrolls rose 64k in November but fell 105k in October
- The October decline was more than accounted for by a 157k decline in government employment
- The unemployment rate jumped to 4.6% in November from 4.4% in September.
- There were no household survey data collected for October.

Economy in Brief

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Japan Current Account Hits Record ¥2.02 Trillion in October; Trade, Services & Income All Contribute

JOLTS: Job Openings & Hires Firm

Mortgage Applications Rose Further

U.S. Inventory Accumulation Continued Easier

U.S. Retail Sales Recovered

U.S. Retail Sales Recovered

German Investors and Analysts Less Pessimistic About the Outlook: IfW Institute Doubles its 2007 Growth Estimate

U.S. Budget Deficit Continued to Shrink