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/061214e.jpg" width="353">
Four Central European countries reported their October current account results during the day yesterday, December 13. Yesterday in this commentary, we noted that the improvement in Japan&#39;s surplus in the month resulted from lower petroleum imports, which were augmented by complementary advances in other current account components. Today, we see that for Poland, Bulgaria, Slovenia and Serbia, developments in those other current account items &#150; services, income and transfers &#150; helped during the summer to mitigate the impact on the current account of larger petroleum imports. But this counterbalance can&#39;t be counted on every month and sometimes such increases in merchandise trade deficits are enlarged.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061214f.jpg" width="353">
Poland is a good example: its current account deficit widened to $1.23 billion in October from just $82 million in September and $940 million a year ago. As seen in the graph, in most months, the trade portion is only about half the total current account balance. The deficit on income, particularly rising income payments abroad, make for a more complex current account situation.
In Bulgaria, the current account deficit has been steady the last three months at just over $500 million, even as imports of goods have fallen from their August peak of $2,139 million to $1,896 billion. Goods exports also fell and the net on services, generally a surplus in Bulgaria, declined to virtually zero. The moves are small, but they still indicate the intricacy of international trade and financial flows. <img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061214g.jpg" width="353">
Serbia&#39;s current account position receives considerable support from transfer payments. As seen in the graph, the deficit on goods and services is heavily offset by transfer receipts. As we point out here, though, the flows do not come in lockstep, so in October transfers went down at the same time as the goods and services balance.
Finally in Slovenia, the trade deficit is offset to some degree by a continuing small surplus in services, although income accounts generally show net outflows and transfers are erratic in both directions.

<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/EMERGECW/@EQ/@EQ9/@EQ91/@EQ91A/@EQ91A.HTM">Current Account Balances</a><a href="http://www.haverselect.com/dlx/EMERGECW/@EQ/@EQ9/@EQ91/@EQ91A/@EQ91A.HTM">:&nbsp;</a> SA, Mil.$</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&nbsp; </td>
<td>2004</td>
<td>2003</td>
</tr>
<tr>
<td class="firstcol">Poland</td>
<td>-1,234</td>
<td>-82</td>
<td>-1,192</td>
<td>-940</td>
<td>-427</td>
<td>-891</td>
<td>-386</td>
</tr>
<tr class="odd">
<td class="firstcol">Bulgaria</td>
<td>-527</td>
<td>-509</td>
<td>-539</td>
<td>-311</td>
<td>-255</td>
<td>-122</td>
<td>-87</td>
</tr>
<tr>
<td class="firstcol">Serbia (NSA)</td>
<td>-330</td>
<td>-132</td>
<td>-334</td>
<td>-344</td>
<td>-174</td>
<td>-244</td>
<td>-161</td>
</tr>
<tr class="odd">
<td class="firstcol">Slovenia</td>
<td>-58</td>
<td>-271</td>
<td>-92</td>
<td>-33</td>
<td>-56</td>
<td>-74</td>
<td>-18</td>
</tr>
</tbody>
</table>


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Four Central European countries reported their October current account results during the day yesterday, December 13. Yesterday in this commentary, we noted that the improvement in Japan's surplus in the month resulted from lower [...]

Current Accounts in Central Europe: Services, Income and Transfers Play Significant Role

Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061214c.jpg" width="353">
Initial unemployment insurance claims fell a sharp 20,000 last week to 304,000 following an unrevised 34,000 drop during the prior week. The decline was to the lowest level since mid-October and by far surpassed Consensus expectations for a slight decline to 320,000 claims.
During the last ten years there has been a (negative) 77% correlation between the level of initial claims and the m/m change in nonfarm payroll employment.
The four-week moving average of initial claims eased slightly to 327,750 (+2.6% y/y).
Continuing claims for unemployment insurance fell 33,000 after a downwardly revised 43,000 increase during the prior week.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061214d.jpg" width="353">
The insured rate of unemployment remained at 1.9% for the sixth consecutive week and equaled the average rate since February.
Beyond the Outsourcing Angst: Making America More Productive from the Federal Reserve Bank of Dallas can be found <a href="http://dallasfed.org/research/eclett/2006/el0602.html"> here</a>.
How Labor Market Policies Shape Immigrants&#146; Opportunities, also from the Federal Reserve Bank of Dallas, is available <a href="http://dallasfed.org/research/eclett/2006/el0607.html"> here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/WEEKLY/@W5/@W507/@W507.HTM">Unemployment Insurance (000s)</a></th>
<th scope="col">12/09/06</th>
<th scope="col">12/02/06</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>
<td class="firstcol">Initial Claims</td>
<td>304</td>
<td>324</td>
<td>-5.3%</td>
<td>332</td>
<td>343</td>
<td>403</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Continuing Claims</td>
<td>--</td>
<td>2,477</td>
<td>-4.5%</td>
<td>2,662</td>
<td>2,924</td>
<td>3,532</td>
</tr>
</tbody>
</table>


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Initial unemployment insurance claims fell a sharp 20,000 last week to 304,000 following an unrevised 34,000 drop during the prior week. The decline was to the lowest level since mid-October and by far surpassed Consensus expectations [...]

Initial Claims For Jobless Insurance at Two Month Low

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061214a.jpg" width="353">
Overall import prices increased 0.2% last month following two months of sharp decline and compared to Consensus expectations for no change. 
The increase occurred despite a 1.6% decline in the prices of petroleum imports after October&#39;s 10.1% plunge, which was deeper than initially reported. So far in December the price of Brent crude oil has risen roughly four dollars from the $59.36 per bbl. averaged in November.
Less petroleum import prices reversed the October decline with a 0.7% increase. During the last ten years there has been a 66% (negative) correlation between the nominal trade-weighted exchange value of the US dollar vs. major currencies and the y/y change in non oil import prices. The correlation is a lower 47% against a broader basket of currencies.
Prices for nonoil industrial supplies &amp; materials reversed all of the prior month&#39;s decline with a 2.9% (1.7% y/y) increase. Prices for nondurables less petroleum jumped 6.5% (-10.9% y/y) in November following several months of decline this year. Prices for durable industrial supplies &amp; materials (14.7% y/y) were strong early this year but m/m price gains have evaporated. These prices are unchanged since June.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061214b.jpg" width="353">
Capital goods prices were unchanged for the fourth straight month (0.2% y/y) and excluding a 0.1% (-3.6% y/y) increase in computers, capital goods prices also were unchanged (2.0% y/y) in November. Prices for nonauto consumer goods additionally were unchanged (1.1% y/y).
Export prices rose 0.4% after two months of decline as nonagricultural commodities prices ticked up 0.1% (3.4% y/y) and agricultural export prices surged 4.4% (10.4% y/y).
The Adjustment of Global External Imbalances: Does Partial Exchange Rate Pass-through to Trade Prices Matter? from the Federal Reserve Board is available <a href="http://www.federalreserve.gov/pubs/ifdp/2006/850/ifdp850.pdf"> here</a>.
The Internationalization of the Dollar and Trade Balance Adjustment from the Federal Reserve Bank of New York can be found <a href="http://www.newyorkfed.org/research/staff_reports/sr255.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/@E8/@E807/@E807.HTM">Import/Export Prices (NSA)</a></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 class="odd">
<td class="firstcol">Import - All Commodities</td>
<td>0.2%</td>
<td>-2.3%</td>
<td>1.2%</td>
<td>7.5%</td>
<td>5.6%</td>
<td>2.9%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Petroleum</td>
<td>-1.6%</td>
<td>-10.1%</td>
<td>1.5%</td>
<td>37.6%</td>
<td>30.5%</td>
<td>21.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Non-petroleum</td>
<td>0.7%</td>
<td>-0.5%</td>
<td>1.3%</td>
<td>2.7%</td>
<td>2.6%</td>
<td>1.1%</td>
</tr>
<tr>
<td class="firstcol">Export- All Commodities</td>
<td>0.4%</td>
<td>-0.3%</td>
<td>3.9%</td>
<td>3.2%</td>
<td>3.9%</td>
<td>1.6%</td>
</tr>
</tbody>
</table>
</body>
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Overall import prices increased 0.2% last month following two months of sharp decline and compared to Consensus expectations for no change. The increase occurred despite a 1.6% decline in the prices of petroleum imports after [...]

U.S. Import Prices Up

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061214a.jpg" width="353">
Overall import prices increased 0.2% last month following two months of sharp decline and compared to Consensus expectations for no change. 
The increase occurred despite a 1.6% decline in the prices of petroleum imports after October&#39;s 10.1% plunge, which was deeper than initially reported. So far in December the price of Brent crude oil has risen roughly four dollars from the $59.36 per bbl. averaged in November.
Less petroleum import prices reversed the October decline with a 0.7% increase. During the last ten years there has been a 66% (negative) correlation between the nominal trade-weighted exchange value of the US dollar vs. major currencies and the y/y change in non oil import prices. The correlation is a lower 47% against a broader basket of currencies.
Prices for nonoil industrial supplies &amp; materials reversed all of the prior month&#39;s decline with a 2.9% (1.7% y/y) increase. Prices for nondurables less petroleum jumped 6.5% (-10.9% y/y) in November following several months of decline this year. Prices for durable industrial supplies &amp; materials (14.7% y/y) were strong early this year but m/m price gains have evaporated. These prices are unchanged since June.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061214b.jpg" width="353">
Capital goods prices were unchanged for the fourth straight month (0.2% y/y) and excluding a 0.1% (-3.6% y/y) increase in computers, capital goods prices also were unchanged (2.0% y/y) in November. Prices for nonauto consumer goods additionally were unchanged (1.1% y/y).
Export prices rose 0.4% after two months of decline as nonagricultural commodities prices ticked up 0.1% (3.4% y/y) and agricultural export prices surged 4.4% (10.4% y/y).
The Adjustment of Global External Imbalances: Does Partial Exchange Rate Pass-through to Trade Prices Matter? from the Federal Reserve Board is available <a href="http://www.federalreserve.gov/pubs/ifdp/2006/850/ifdp850.pdf"> here</a>.
The Internationalization of the Dollar and Trade Balance Adjustment from the Federal Reserve Bank of New York can be found <a href="http://www.newyorkfed.org/research/staff_reports/sr255.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/@E8/@E807/@E807.HTM">Import/Export Prices (NSA)</a></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 class="odd">
<td class="firstcol">Import - All Commodities</td>
<td>0.2%</td>
<td>-2.3%</td>
<td>1.2%</td>
<td>7.5%</td>
<td>5.6%</td>
<td>2.9%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Petroleum</td>
<td>-1.6%</td>
<td>-10.1%</td>
<td>1.5%</td>
<td>37.6%</td>
<td>30.5%</td>
<td>21.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Non-petroleum</td>
<td>0.7%</td>
<td>-0.5%</td>
<td>1.3%</td>
<td>2.7%</td>
<td>2.6%</td>
<td>1.1%</td>
</tr>
<tr>
<td class="firstcol">Export- All Commodities</td>
<td>0.4%</td>
<td>-0.3%</td>
<td>3.9%</td>
<td>3.2%</td>
<td>3.9%</td>
<td>1.6%</td>
</tr>
</tbody>
</table>
Initial Claims For Jobless Insurance at Two Month Low 
by <a href="/comment/Moeller.html">Tom Moeller</a> December 14, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061214c.jpg" width="353">
Initial unemployment insurance claims fell a sharp 20,000 last week to 304,000 following an unrevised 34,000 drop during the prior week. The decline was to the lowest level since mid-October and by far surpassed Consensus expectations for a slight decline to 320,000 claims.
During the last ten years there has been a (negative) 77% correlation between the level of initial claims and the m/m change in nonfarm payroll employment.
The four-week moving average of initial claims eased slightly to 327,750 (+2.6% y/y).
Continuing claims for unemployment insurance fell 33,000 after a downwardly revised 43,000 increase during the prior week.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061214d.jpg" width="353">
The insured rate of unemployment remained at 1.9% for the sixth consecutive week and equaled the average rate since February.
Beyond the Outsourcing Angst: Making America More Productive from the Federal Reserve Bank of Dallas can be found <a href="http://dallasfed.org/research/eclett/2006/el0602.html"> here</a>.
How Labor Market Policies Shape Immigrants&#146; Opportunities, also from the Federal Reserve Bank of Dallas, is available <a href="http://dallasfed.org/research/eclett/2006/el0607.html"> here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/WEEKLY/@W5/@W507/@W507.HTM">Unemployment Insurance (000s)</a></th>
<th scope="col">12/09/06</th>
<th scope="col">12/02/06</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>
<td class="firstcol">Initial Claims</td>
<td>304</td>
<td>324</td>
<td>-5.3%</td>
<td>332</td>
<td>343</td>
<td>403</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Continuing Claims</td>
<td>--</td>
<td>2,477</td>
<td>-4.5%</td>
<td>2,662</td>
<td>2,924</td>
<td>3,532</td>
</tr>
</tbody>
</table>
Current Accounts in Central Europe: Services, Income and Transfers Play Significant Role 
by <a href="/comment/Stone.html">Carol Stone</a> December 14, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061214e.jpg" width="353">
Four Central European countries reported their October current account results during the day yesterday, December 13. Yesterday in this commentary, we noted that the improvement in Japan&#39;s surplus in the month resulted from lower petroleum imports, which were augmented by complementary advances in other current account components. Today, we see that for Poland, Bulgaria, Slovenia and Serbia, developments in those other current account items &#150; services, income and transfers &#150; helped during the summer to mitigate the impact on the current account of larger petroleum imports. But this counterbalance can&#39;t be counted on every month and sometimes such increases in merchandise trade deficits are enlarged.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061214f.jpg" width="353">
Poland is a good example: its current account deficit widened to $1.23 billion in October from just $82 million in September and $940 million a year ago. As seen in the graph, in most months, the trade portion is only about half the total current account balance. The deficit on income, particularly rising income payments abroad, make for a more complex current account situation.
In Bulgaria, the current account deficit has been steady the last three months at just over $500 million, even as imports of goods have fallen from their August peak of $2,139 million to $1,896 billion. Goods exports also fell and the net on services, generally a surplus in Bulgaria, declined to virtually zero. The moves are small, but they still indicate the intricacy of international trade and financial flows. <img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061214g.jpg" width="353">
Serbia&#39;s current account position receives considerable support from transfer payments. As seen in the graph, the deficit on goods and services is heavily offset by transfer receipts. As we point out here, though, the flows do not come in lockstep, so in October transfers went down at the same time as the goods and services balance.
Finally in Slovenia, the trade deficit is offset to some degree by a continuing small surplus in services, although income accounts generally show net outflows and transfers are erratic in both directions.

<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/EMERGECW/@EQ/@EQ9/@EQ91/@EQ91A/@EQ91A.HTM">Current Account Balances</a><a href="http://www.haverselect.com/dlx/EMERGECW/@EQ/@EQ9/@EQ91/@EQ91A/@EQ91A.HTM">:&nbsp;</a> SA, Mil.$</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&nbsp; </td>
<td>2004</td>
<td>2003</td>
</tr>
<tr>
<td class="firstcol">Poland</td>
<td>-1,234</td>
<td>-82</td>
<td>-1,192</td>
<td>-940</td>
<td>-427</td>
<td>-891</td>
<td>-386</td>
</tr>
<tr class="odd">
<td class="firstcol">Bulgaria</td>
<td>-527</td>
<td>-509</td>
<td>-539</td>
<td>-311</td>
<td>-255</td>
<td>-122</td>
<td>-87</td>
</tr>
<tr>
<td class="firstcol">Serbia (NSA)</td>
<td>-330</td>
<td>-132</td>
<td>-334</td>
<td>-344</td>
<td>-174</td>
<td>-244</td>
<td>-161</td>
</tr>
<tr class="odd">
<td class="firstcol">Slovenia</td>
<td>-58</td>
<td>-271</td>
<td>-92</td>
<td>-33</td>
<td>-56</td>
<td>-74</td>
<td>-18</td>
</tr>
</tbody>
</table>


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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.

<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>
</body>
</html>

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

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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>.

<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>
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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>.

<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>
</body>
</html>

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).

<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>
</body>
</html>

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

US and China big leaders in adoption of AI models

Robust US demand for advanced technology products

China's export growth rotating away from the US

More pronounced upward revisions in countries more exposed to AI investment

Stable job openings and hiring rates point to cautious hiring

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

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

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

Tighter US immigration enforcement adversely impacting labor force

Economic policy uncertainty, while still elevated, is declining

Gradual disinflation and easier monetary policies across advanced economies

Largest October layoffs since 2003, led by technology

Subdued global shipping costs not yet pointing to supply chain problems

PMIs show still-elevated but slowing US inflation

AI boosting US investment in data centers

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

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

US financial markets have gotten used to elevated policy uncertainty

FOMC now expects more rate cuts going forward than in June

China gaining ASEAN exports while US exports slump

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

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

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

Equity market exuberance outpacing macroeconomic data

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

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Andrew Cates

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

260205Z1.jpg

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

260205Z2.jpg

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

260205Z3.jpg

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

260205Z4.jpg

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

260205Z5.jpg

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

260205Z6.jpg

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

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

Robert Brusca

260206E.jpg

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

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

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

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

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

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

260206.jpg

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

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

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

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

Germany

German IP Reveals Chaotic Trends

Winnie Tapasanun

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

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

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

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

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

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

U.S. JOLTS: Openings Drop to Lowest Level Since Sept. ’20; Hiring Rebounds in December

Sandy Batten

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Initial claims for unemployment insurance jumped 22,000 to 231,000 in the week ended January 31 following an unrevised 209,000 in the prior week. The four-week average rose to 212,250 from 206,250. The Action Economics Forecast Survey looked for 213,000 claims to have been filed. Winter Storm Fern and the accompanying very cold temperatures could have provided a temporary boost. Historically speaking, claims remain at low levels.

The total number of unemployment insurance beneficiaries—also known as “continuing claims”—increased by 25,000 to 1.844 million in the week ending January 24, from a downwardly revised 1.819 million in the prior week (previously 1.827 million). The insured unemployment rate remained at 1.2% in the week of January 24, unchanged from the previous eight weeks.

The insured unemployment rate varied greatly across individual states and territories. In the week ending January 17, the highest unemployment rates were in Rhode Island (2.83%), New Jersey (2.77%), Massachusetts (2.67%), Washington (2.54%), and Minnesota (2.45%). The lowest rates were in Florida (0.30%), North Carolina (0.42%), Louisiana (0.43%), Alabama (0.46%), and Arkansas (0.47). Rates in other notable states include Illinois (2.15%), California, (2.08%), New York (2.02%), Pennsylvania (1.91%), and Texas (1.09%). 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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- New claims jumped 22,000 to 231,000, the highest level since December 6.
- Continuing claims rose to 1.844 million from 1.819 million.

U.S. Initial Unemployment Claims Surged in Latest Week

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German real orders in December adjusted for inflation rose strongly again, gaining 7.8% month-to-month after rising 5.7% month-to-month in November. Foreign orders were up by 5.6% in December compared to 5.2% in November. Domestic orders surged by 10.7% in December after rising 6.4% in November and 10% in October.

**Real sales**
Real sales were mixed in December with overall sales falling 1.4% month-to-month mostly on weakness in capital goods sales.

**Broad categorical acceleration**
Many flows are accelerating this month. Sequential growth rates show acceleration. Total real orders accelerate from a year ago, to the current year, to six-months, and to three-months. Sales growth rates for consumer goods, consumer nondurables, and intermediate goods all show accelerations in gear. The exceptions are foreign orders that are not as strong over six months compared to their 12-month growth. And on the sales side, consumer durables sales and capital goods sales are weak.

**Quarter-to-quarter**
Quarterly annualized growth is complete for Q4 with this report. Foreign orders are the ‘weak flow’ expanding at a 13.6% annual rate – certainly not a weak growth rate. But domestic real orders are up at an astounding 101.9% annual rate. The net impact on the total real orders growth is to lift it to a pace of 44.1%. 

**Order ranking is very strong**
The table provides two rankings: one based on the level of variables and the other based on its year-on-year growth. The rankings this month for real orders overall, foreign, and domestic orders all reside in their top 80th to 90th percentiles- extremely strong based on level or growth. Sales do not follow suit. This gives us some reason to suspect that there is some lumpiness involved in the manufacturing data as distinct from strength. That will be something to watch. Overall mining and manufacturing sales growth is essentially at its historic median at a rank of 49.8. However, capital goods, intermediate goods and manufacturing sales all have rankings at or above their medians - as high as a 61-percentile standing for capital goods.

**Industrial confidence**
Industrial confidence for Germany, France, Italy and Spain (the EU’s big-four economies) show rankings based on these survey levels that are much lower at the 11th percentile for Germany, the 42nd and 36th percentiles, for France and Italy, respectively. Spain scores better with a 61.8 percentile standing on its industrial confidence measure. 

On balance, there is now an accelerating profile that is broad in sales trends and especially strong order trends. Perhaps Europe, under the pressure to stimulate its miliary capabilities, has a core of demand to help drive output ahead more consistently. This is something to watch in the coming months.

Economy in Brief

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