Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060406a.jpg" width="353">
Initial claims for unemployment insurance dropped for the third consecutive period last week. The 5,000 person decline to 299,000 compared to Consensus expectations for 305,000 claims. It followed a 8,000 fall the prior week which was slightly less than initially estimated.
During the last ten years there has been a (negative) 75% correlation between the level of initial jobless insurance claims and the m/m change in payroll employment.
The four-week moving average of initial claims fell to 308,500 (-9.9% y/y).<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060406b.jpg" width="353">
Continuing claims for unemployment insurance fell a sharp 22,000 during the latest week following a revised decline of 1,000 the prior period, initially reported as an increase.
The insured rate of unemployment was stable at 1.9% for the seventh week.
The highest insured unemployment rates during the week ending March 18 were in Alaska (5.1%), Michigan (4.5%), Wisconsin (3.5%), Puerto Rico (3.4%), Pennsylvania (3.3%), Rhode Island (3.3%), New Jersey (3.1%), Vermont (3.1%), Massachusetts (3.0%), Connecticut (2.8%), and Oregon (2.8%).
Look Who&#39;s Working Now from the Federal Reserve Bank of St. Louis is available <a href="http://research.stlouisfed.org/publications/net/20060401/cover.pdf"> here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/WEEKLY/@W5/@W507/@W507.HTM">Unemployment Insurance (000s)</a></th>
<th scope="col">04/01/06</th>
<th scope="col">03/25/06</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>299</td>
<td>304</td>
<td>-13.6%</td>
<td>332</td>
<td>343</td>
<td>402</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>--</td>
<td>2,440</td>
<td>-9.0%</td>
<td>2,663</td>
<td>2,924</td>
<td>3,532</td>
</tr>
</tbody>
</table>
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Initial claims for unemployment insurance dropped for the third consecutive period last week. The 5,000 person decline to 299,000 compared to Consensus expectations for 305,000 claims. It followed a 8,000 fall the prior week which was [...]

Initial Claims for Jobless Insurance Below Expectations

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060406a.jpg" width="353">
Initial claims for unemployment insurance dropped for the third consecutive period last week. The 5,000 person decline to 299,000 compared to Consensus expectations for 305,000 claims. It followed a 8,000 fall the prior week which was slightly less than initially estimated.
During the last ten years there has been a (negative) 75% correlation between the level of initial jobless insurance claims and the m/m change in payroll employment.
The four-week moving average of initial claims fell to 308,500 (-9.9% y/y).<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060406b.jpg" width="353">
Continuing claims for unemployment insurance fell a sharp 22,000 during the latest week following a revised decline of 1,000 the prior period, initially reported as an increase.
The insured rate of unemployment was stable at 1.9% for the seventh week.
The highest insured unemployment rates during the week ending March 18 were in Alaska (5.1%), Michigan (4.5%), Wisconsin (3.5%), Puerto Rico (3.4%), Pennsylvania (3.3%), Rhode Island (3.3%), New Jersey (3.1%), Vermont (3.1%), Massachusetts (3.0%), Connecticut (2.8%), and Oregon (2.8%).
Look Who&#39;s Working Now from the Federal Reserve Bank of St. Louis is available <a href="http://research.stlouisfed.org/publications/net/20060401/cover.pdf"> here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/WEEKLY/@W5/@W507/@W507.HTM">Unemployment Insurance (000s)</a></th>
<th scope="col">04/01/06</th>
<th scope="col">03/25/06</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>299</td>
<td>304</td>
<td>-13.6%</td>
<td>332</td>
<td>343</td>
<td>402</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>--</td>
<td>2,440</td>
<td>-9.0%</td>
<td>2,663</td>
<td>2,924</td>
<td>3,532</td>
</tr>
</tbody>
</table>
Employment Grows in Israel; Wages Rise, but Lose Ground to Inflation 
by <a href="/comment/Stone.html">Carol Stone</a> April 6, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060406c.jpg" width="353">
The number of jobs in Israel increased 5,000 in January from December, seasonally adjusted, to 2.59 million, according to data reported today by Israel&#39;s Central Bureau of Statistics (CBS). The gain from a year ago was 79,000 jobs, or 2.9%. The CBS also publishes a subset of the jobs data that excludes foreign workers, mostly Palestinians. There were 82,000 of them in January, up from 70,000 a year ago. So the number of jobs covered by Israeli workers was 2.508 million, up just 1,000 from December and 2.7% from January 2005. Both the total number of jobs and those held by Israelis increased by 3.3% for 2005 as a whole.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060406d.jpg" width="353">
The average job paid NIS7,232 for the month of January, about US$1,565. For jobs held by Israelis only, the comparable figure was NIS7,614, about US$1,648. In shekels, both total and Israeli wages were up 1.6% from a year ago. Taking account of inflation, &quot;real&quot; wages have fallen 1.3% for all workers and 1.0% for Israeli workers since January 2005.
While real purchasing power per job in Israel has stagnated over the last few years, the number of jobs themselves has advanced nicely. As we point out frequently here, employment in Europe is nearly at a standstill, and in the US, prior to the release tomorrow of March data, recent trends show roughly 1.5% gains in nonfarm payrolls, only about half the pace in Israel. So midst all the Middle East tension, the Israeli economy is presently able to increase jobs and overall growth as well. In industry data through Q4 2005, accommodation, trade and business services were seeing the greatest percentage job gains.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">&nbsp;</th>
<th scope="col">Jan 2006</th>
<th scope="col">Dec 2005</th>
<th scope="col">Year Ago</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 Number of Jobs (thous.)</td>
<td>2,590</td>
<td>2,585</td>
<td>2,511</td>
<td>2,548</td>
<td>2,466</td>
<td>2,425</td>
</tr>
<tr>
<td class="firstcol">Yr/Yr % Change</td>
<td>2.9</td>
<td>3.0</td>
<td>--</td>
<td>3.3</td>
<td>2.2</td>
<td>-0.7</td>
</tr>
<tr class="odd">
<td class="firstcol">Jobs ex Foreign Workers (thous.)</td>
<td>2,508</td>
<td>2,507</td>
<td>2,441</td>
<td>2,472</td>
<td>2,393</td>
<td>2,342</td>
</tr>
<tr>
<td class="firstcol">Yr/Yr % Change</td>
<td>2.7</td>
<td>2.9</td>
<td>--</td>
<td>3.3</td>
<td>2.8</td>
<td>-0.1</td>
</tr>
<tr class="odd">
<td class="firstcol">Average Wages, All Jobs (NIS)</td>
<td>7,232</td>
<td>7,208</td>
<td>7,138</td>
<td>7,225</td>
<td>7,000</td>
<td>6,863</td>
</tr>
<tr>
<td class="firstcol">Yr/Yr % Change</td>
<td>1.6</td>
<td>-1.4</td>
<td>--</td>
<td>3.3</td>
<td>2.1</td>
<td>-2.3</td>
</tr>
<tr class="odd">
<td class="firstcol">Average Wages, ex Foreign Workers (NIS)</td>
<td>7,614</td>
<td>7,636</td>
<td>7,481</td>
<td>7,334</td>
<td>7,081</td>
<td>6,981</td>
</tr>
<tr>
<td class="firstcol">Yr/Yr % Change</td>
<td>1.6</td>
<td>-1.2</td>
<td>--</td>
<td>3.1</td>
<td>2.2</td>
<td>-2.5</td>
</tr>
</tbody>
</table>
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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/060405e.jpg" width="353">
Commercial real estate has increased significantly in importance as an investment medium in recent years. Securitization of commercial mortgage securities and direct interests in portfolios of properties join residential real estate as outlets for capital. But it is complicated to assess the returns on such investments. Each property is sizable and very different from every other property. So, unlike other objects to be priced, there are not simple rules-of-thumb or statistical properties that can be exploited to derive valuations.
Just in mid-February, the Massachusetts Institute of Technology&#39;s Center for Real Estate introduced a helpful tool in this process, the Transactions-Based Index. A client brought these new quarterly series to Haver&#39;s attention, and they were added to our basic USECON product about two weeks ago.
The Total Return Index shows that commercial real estate holdings earned 34.3% in 2005, following valuation gains of 16.0% in 2004 and 10.0% in 2003. Returns based on price change alone were 29.4% last year, 10.7% in 2004 and 4.2% in 2003.
These figures are weighted indexes for &quot;All Properties&quot;, including apartments, industrial buildings, offices and retail centers. Sub-indexes are available for each one of these segments. Retail properties were the strongest in 2005, with a 40.2% total return, while industrial buildings earned &quot;only&quot; 24.2%.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060405f.jpg" width="353">
The secret to these indexes is a proprietary database maintained by the National Council of Real Estate Investment Fiduciaries (NCREIF). This group is a trade association of pension funds managers; they collectively own some $200 billion worth of commercial properties numbering about 5,000. Data on pricing and income is taken from actual transactions involving these properties.
Further, since the properties are all distinct, the &quot;average&quot; value of transactions cannot by obtained by simply toting up individual prices and dividing by some appropriate number. The indexes are compiled by appeal to the same kind of weighted &quot;hedonic&quot;, quality-adjusting econometric techniques used by BEA and BLS for constructing many of the price indexes used by economists every day. The NCREIF database has been maintained for many years, allowing the MIT econometricians to construct 22 years of history for the &quot;All Property&quot; index and 12 years for the individual property types. A press release and more detailed description of the data are found <a href="http://web.mit.edu/cre/news/060216-tbi.html">here</a> on the website of the MIT Center for Real Estate. 

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">MIT Commercial Real Estate &quot;TBI&quot; Indexes</th>
<th scope="col">Q4 2005</th>
<th scope="col">Q3 2005</th>
<th scope="col">Q2 2005</th>
Year-End
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">2004</td>
<td>2003</td>
<td>2002</td>
</tr>
<tr>
<td class="firstcol">Total Return Index</td>
<td>668.0</td>
<td>638.9</td>
<td>601.1</td>
<td>497.1</td>
<td>428.5</td>
<td>389.5</td>
</tr>
<tr class="odd">
<td class="firstcol">Yr/Yr % Change</td>
<td>34.3</td>
<td>31.8</td>
<td>26.0</td>
<td>16.0</td>
<td>10.0</td>
<td>11.5</td>
</tr>
<tr>
<td class="firstcol">TBI Price Index</td>
<td>194.3</td>
<td>187.3</td>
<td>177.7</td>
<td>150.2</td>
<td>135.7</td>
<td>130.2</td>
</tr>
<tr class="odd">
<td class="firstcol">Yr/Yr % Change</td>
<td>29.4</td>
<td>26.6</td>
<td>20.6</td>
<td>10.7</td>
<td>4.2</td>
<td>4.3</td>
</tr>
</tbody>
</table>
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Commercial real estate has increased significantly in importance as an investment medium in recent years. Securitization of commercial mortgage securities and direct interests in portfolios of properties join residential real estate [...]

MIT Center for Real Estate Compiles Price and Total Return Indexes for Commercial Real Estate Transactions: [...]

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060405b.jpg" width="353">
The total number of mortgage applications rose for the second consecutive period. The 7.2% increase last week limited the average decline during March to 1.0% after a 6.3% drop during February.
Purchase applications jumped 8.4% at month end and the average level during March ticked up 0.2% after a 10.2% decline during February.
During the last ten years there has been a 54% correlation between the y/y change in purchase applications and the change in new plus existing single family home sales.
Applications to refinance also recovered with a 5.3% increase last week though the average March level fell 2.4% m/m after a 2.0% February drop.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060405a.jpg" width="353">
The effective interest rate on a conventional 30-year mortgage rose sharply. The sixteen basis point increase w/w lifted the effective rate to 6.72% and the rate on 15-year financing likewise surged to 6.43%, its highest since June 2002. Interest rates on 15 and 30 year mortgages are closely correlated (&gt;90%) with the rate on 10 year Treasury securities and during the last ten years there has been a (negative) 82% correlation between purchase applications and the effective 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 accounts for more than 40% of all applications processed each week by mortgage lenders. Visit the Mortgage Bankers Association site <a href="http://www.mbaa.org">here</a>.
A New Perspective on Policy, yesterday&#39;s speech by Dallas Federal Reserve Bank President &amp; CEO Richard W. Fisher, is available <a href="http://www.dallasfed.org/news/speeches/fisher/2006/fs060404.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/SURVEYW/@S5/@S5.HTM">MBA Mortgage Applications (3/16/90=100)</a></th>
<th scope="col">03/31/06</th>
<th scope="col">03/24/06</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>612.8</td>
<td>571.7</td>
<td>-4.9%</td>
<td>708.6</td>
<td>735.1</td>
<td>1,067.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Purchase</td>
<td>438.2</td>
<td>404.1</td>
<td>-1.7%</td>
<td>470.9</td>
<td>454.5</td>
<td>395.1</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Refinancing</td>
<td>1,640.8</td>
<td>1,558.4</td>
<td>-8.8%</td>
<td>2,092.3</td>
<td>2,366.8</td>
<td>4,981.8</td>
</tr>
</tbody>
</table>
</body>
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The total number of mortgage applications rose for the second consecutive period. The 7.2% increase last week limited the average decline during March to 1.0% after a 6.3% drop during February. Purchase applications jumped 8.4% at [...]

Mortgage Applications Manage Late-March Recovery

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060405c.jpg" width="353">
The March Business Activity Index for the non-manufacturing sector inched up to 60.5 from 60.1 during February, reported the Institute for Supply Management (ISM). These levels are much improved versus the low January reading of 56.8 and the latest beat Consensus expectations for a decline to 59.0.
Since the series&#39; inception in 1997 there has been a 53% correlation between the level of the Business Activity Index and the q/q change in real GDP for services plus construction.
The new orders index improved to the highest level this year, though at 59.5 remained below the 2005 average. The employment index backpedaled to 54.6 and so far this year is down slightly from the 2005 average of 55.9. Since the series&#39; inception in 1997 there has been a 60% correlation between the level of the ISM non-manufacturing employment index and the m/m change in payroll employment in the service producing plus the construction industries. <img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060405d.jpg" width="353">
Pricing power fell again and has fallen continually since the series peak last September. Since inception eight years ago, there has been a 70% correlation between the price index and the y/y change in the GDP Services chain price index.
ISM surveys more than 370 purchasing managers in more than 62 industries including construction, law firms, hospitals, government and retailers. The non-manufacturing survey dates only to July 1997, therefore its seasonal adjustment should be viewed tentatively.
Business Activity Index for the non-manufacturing sector reflects a question separate from the subgroups mentioned above. In contrast, the NAPM manufacturing sector composite index is a weighted average five components.
&quot;This is Bangalore Calling: Hang Up or Speed Dial? What Technology-Enabled International Trade in Services Means for the U.S. Economy and Workforce from the Federal Reserve Bank of Cleveland can be found <a href="http://www.clevelandfed.org/Research/Com2005/0115.pdf"> here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EF/@EF03/@EF03.HTM">ISM Nonmanufacturing Survey</a></th>
<th scope="col">Mar</th>
<th scope="col">Feb</th>
<th scope="col">Mar &#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">Business Activity Index</td>
<td>60.5</td>
<td>60.1</td>
<td>61.8</td>
<td>60.1</td>
<td>62.5</td>
<td>58.3</td>
</tr>
<tr>
<td class="firstcol">Prices Index</td>
<td>60.5</td>
<td>64.8</td>
<td>65.9</td>
<td>67.9</td>
<td>68.8</td>
<td>56.6</td>
</tr>
</tbody>
</table>


</html>

The March Business Activity Index for the non-manufacturing sector inched up to 60.5 from 60.1 during February, reported the Institute for Supply Management (ISM). These levels are much improved versus the low January reading of 56.8 [...]

ISM Nonmanufacturing Index Sustained Improvement

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060405c.jpg" width="353">
The March Business Activity Index for the non-manufacturing sector inched up to 60.5 from 60.1 during February, reported the Institute for Supply Management (ISM). These levels are much improved versus the low January reading of 56.8 and the latest beat Consensus expectations for a decline to 59.0.
Since the series&#39; inception in 1997 there has been a 53% correlation between the level of the Business Activity Index and the q/q change in real GDP for services plus construction.
The new orders index improved to the highest level this year, though at 59.5 remained below the 2005 average. The employment index backpedaled to 54.6 and so far this year is down slightly from the 2005 average of 55.9. Since the series&#39; inception in 1997 there has been a 60% correlation between the level of the ISM non-manufacturing employment index and the m/m change in payroll employment in the service producing plus the construction industries. <img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060405d.jpg" width="353">
Pricing power fell again and has fallen continually since the series peak last September. Since inception eight years ago, there has been a 70% correlation between the price index and the y/y change in the GDP Services chain price index.
ISM surveys more than 370 purchasing managers in more than 62 industries including construction, law firms, hospitals, government and retailers. The non-manufacturing survey dates only to July 1997, therefore its seasonal adjustment should be viewed tentatively.
Business Activity Index for the non-manufacturing sector reflects a question separate from the subgroups mentioned above. In contrast, the NAPM manufacturing sector composite index is a weighted average five components.
&quot;This is Bangalore Calling: Hang Up or Speed Dial? What Technology-Enabled International Trade in Services Means for the U.S. Economy and Workforce from the Federal Reserve Bank of Cleveland can be found <a href="http://www.clevelandfed.org/Research/Com2005/0115.pdf"> here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EF/@EF03/@EF03.HTM">ISM Nonmanufacturing Survey</a></th>
<th scope="col">Mar</th>
<th scope="col">Feb</th>
<th scope="col">Mar &#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">Business Activity Index</td>
<td>60.5</td>
<td>60.1</td>
<td>61.8</td>
<td>60.1</td>
<td>62.5</td>
<td>58.3</td>
</tr>
<tr>
<td class="firstcol">Prices Index</td>
<td>60.5</td>
<td>64.8</td>
<td>65.9</td>
<td>67.9</td>
<td>68.8</td>
<td>56.6</td>
</tr>
</tbody>
</table>
Mortgage Applications Manage Late-March Recovery 
by <a href="/comment/Moeller.html">Tom Moeller</a> April 5, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060405b.jpg" width="353">
The total number of mortgage applications rose for the second consecutive period. The 7.2% increase last week limited the average decline during March to 1.0% after a 6.3% drop during February.
Purchase applications jumped 8.4% at month end and the average level during March ticked up 0.2% after a 10.2% decline during February.
During the last ten years there has been a 54% correlation between the y/y change in purchase applications and the change in new plus existing single family home sales.
Applications to refinance also recovered with a 5.3% increase last week though the average March level fell 2.4% m/m after a 2.0% February drop.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060405a.jpg" width="353">
The effective interest rate on a conventional 30-year mortgage rose sharply. The sixteen basis point increase w/w lifted the effective rate to 6.72% and the rate on 15-year financing likewise surged to 6.43%, its highest since June 2002. Interest rates on 15 and 30 year mortgages are closely correlated (&gt;90%) with the rate on 10 year Treasury securities and during the last ten years there has been a (negative) 82% correlation between purchase applications and the effective 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 accounts for more than 40% of all applications processed each week by mortgage lenders. Visit the Mortgage Bankers Association site <a href="http://www.mbaa.org">here</a>.
A New Perspective on Policy, yesterday&#39;s speech by Dallas Federal Reserve Bank President &amp; CEO Richard W. Fisher, is available <a href="http://www.dallasfed.org/news/speeches/fisher/2006/fs060404.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/SURVEYW/@S5/@S5.HTM">MBA Mortgage Applications (3/16/90=100)</a></th>
<th scope="col">03/31/06</th>
<th scope="col">03/24/06</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>612.8</td>
<td>571.7</td>
<td>-4.9%</td>
<td>708.6</td>
<td>735.1</td>
<td>1,067.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Purchase</td>
<td>438.2</td>
<td>404.1</td>
<td>-1.7%</td>
<td>470.9</td>
<td>454.5</td>
<td>395.1</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Refinancing</td>
<td>1,640.8</td>
<td>1,558.4</td>
<td>-8.8%</td>
<td>2,092.3</td>
<td>2,366.8</td>
<td>4,981.8</td>
</tr>
</tbody>
</table>
MIT Center for Real Estate Compiles Price and Total Return Indexes for Commercial Real Estate Transactions: Properties Earn 34% in 2005 
by <a href="/comment/Stone.html">Carol Stone</a> April 5, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060405e.jpg" width="353">
Commercial real estate has increased significantly in importance as an investment medium in recent years. Securitization of commercial mortgage securities and direct interests in portfolios of properties join residential real estate as outlets for capital. But it is complicated to assess the returns on such investments. Each property is sizable and very different from every other property. So, unlike other objects to be priced, there are not simple rules-of-thumb or statistical properties that can be exploited to derive valuations.
Just in mid-February, the Massachusetts Institute of Technology&#39;s Center for Real Estate introduced a helpful tool in this process, the Transactions-Based Index. A client brought these new quarterly series to Haver&#39;s attention, and they were added to our basic USECON product about two weeks ago.
The Total Return Index shows that commercial real estate holdings earned 34.3% in 2005, following valuation gains of 16.0% in 2004 and 10.0% in 2003. Returns based on price change alone were 29.4% last year, 10.7% in 2004 and 4.2% in 2003.
These figures are weighted indexes for &quot;All Properties&quot;, including apartments, industrial buildings, offices and retail centers. Sub-indexes are available for each one of these segments. Retail properties were the strongest in 2005, with a 40.2% total return, while industrial buildings earned &quot;only&quot; 24.2%.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060405f.jpg" width="353">
The secret to these indexes is a proprietary database maintained by the National Council of Real Estate Investment Fiduciaries (NCREIF). This group is a trade association of pension funds managers; they collectively own some $200 billion worth of commercial properties numbering about 5,000. Data on pricing and income is taken from actual transactions involving these properties.
Further, since the properties are all distinct, the &quot;average&quot; value of transactions cannot by obtained by simply toting up individual prices and dividing by some appropriate number. The indexes are compiled by appeal to the same kind of weighted &quot;hedonic&quot;, quality-adjusting econometric techniques used by BEA and BLS for constructing many of the price indexes used by economists every day. The NCREIF database has been maintained for many years, allowing the MIT econometricians to construct 22 years of history for the &quot;All Property&quot; index and 12 years for the individual property types. A press release and more detailed description of the data are found <a href="http://web.mit.edu/cre/news/060216-tbi.html">here</a> on the website of the MIT Center for Real Estate. 

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">MIT Commercial Real Estate &quot;TBI&quot; Indexes</th>
<th scope="col">Q4 2005</th>
<th scope="col">Q3 2005</th>
<th scope="col">Q2 2005</th>
Year-End
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">2004</td>
<td>2003</td>
<td>2002</td>
</tr>
<tr>
<td class="firstcol">Total Return Index</td>
<td>668.0</td>
<td>638.9</td>
<td>601.1</td>
<td>497.1</td>
<td>428.5</td>
<td>389.5</td>
</tr>
<tr class="odd">
<td class="firstcol">Yr/Yr % Change</td>
<td>34.3</td>
<td>31.8</td>
<td>26.0</td>
<td>16.0</td>
<td>10.0</td>
<td>11.5</td>
</tr>
<tr>
<td class="firstcol">TBI Price Index</td>
<td>194.3</td>
<td>187.3</td>
<td>177.7</td>
<td>150.2</td>
<td>135.7</td>
<td>130.2</td>
</tr>
<tr class="odd">
<td class="firstcol">Yr/Yr % Change</td>
<td>29.4</td>
<td>26.6</td>
<td>20.6</td>
<td>10.7</td>
<td>4.2</td>
<td>4.3</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/060404f.jpg" width="353">
The accumulation of foreign reserves by the developing countries in the Far East appears to be decelerating. Reserves are still increasing, but much more slowly than the pace of early 2004 when the year-to-year increases in reserves were of the order of 30-50%. Taiwan and South Korea are the latest countries to report. Total foreign reserves in Taiwan were unchanged in March from February and only 2.4% above March 2005, down from year-to-year increases of 35% in early 2004. Total reserves in South Korea were up less than one percent from February and less than 6% from March 2005, compared to year-to-year increases of over 30% in early 2004. The year-to-year increases in reserves in Taiwan and South Korea are shown in the first chart.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060404g.jpg" width="353">
China is much slower to report its reserve holdings. The latest data are for December, but even here a deceleration can be detected. In December the year-over-year increase in reserves was down to 33.7% from 51.1% in August. 2005. The deceleration has been going on longer in India where the year-to-year increase in reserves was 11.5% in February, 2006, down from 52.5% in April, 2004. The year-to-year increases in the reserves of China and India are shown in the second chart.
The International Monetary Fund has recently published information on the composition of total reserves and those held by the industrial countries and developing countries. Data are available in US Dollars, Euros, Pounds Sterling, Japanese Yen, Swiss Francs and a miscellaneous category &quot;other currencies&quot;. (These data are found in the IFS data base.) The data, however, show only the composition of allocated reserves, which, in the case of the developing countries, is only slightly more than half the total. Nevertheless, the changing composition of these allocated reserves gives some indication of the broader shifts that may be taking place in total reserves. Over the period from the first quarter of 1999 when the data began to the fourth quarter of 2005, the proportion of euro claims in the allocated reserves of the developing countries rose from 19% to 29% while the proportion of US$ claims declined from 70% to 60%. (See the third and fourth charts.)<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060404i.jpg" width="353"><img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060404h.jpg" width="353">

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/JAPAN/@J5/@J5.HTM">International Reserves:&nbsp; Developing Countries in the Far East</a> (Bil US$)</th>
<th scope="col">Mar 06</th>
<th scope="col">Feb 06</th>
<th scope="col">Jan 06</th>
<th scope="col">Dec 05</th>
<th scope="col">Y/Y % Current</th>
<th scope="col">Y/Y % Past Peak&nbsp;</th>
<th scope="col">2004&nbsp;</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">South Korea</td>
<td>217.3</td>
<td>215.9</td>
<td>216.9</td>
<td>210.3</td>
<td>5.8</td>
<td>32.4</td>
<td>April</td>
</tr>
<tr>
<td class="firstcol">Taiwan&nbsp;</td>
<td>257.0</td>
<td>257.0</td>
<td>257.3</td>
<td>253.3</td>
<td>2.4</td>
<td>35.2</td>
<td>February</td>
</tr>
<tr class="odd">
<td class="firstcol">China</td>
<td></td>
<td></td>
<td></td>
<td>821.5</td>
<td>33.7</td>
<td>51.1</td>
<td>August</td>
</tr>
<tr>
<td class="firstcol">India</td>
<td></td>
<td>135.9</td>
<td>134.7</td>
<td>131.9</td>
<td>11.5</td>
<td>52.5</td>
<td>April</td>
</tr>
</tbody>
</table>
</body>
</html>

The accumulation of foreign reserves by the developing countries in the Far East appears to be decelerating. Reserves are still increasing, but much more slowly than the pace of early 2004 when the year-to-year increases in reserves [...]

Accumulation of Foreign Reserves of Developing Countries in the Far East Slowing: Shift in Composition of Holdings [...]

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060404e.jpg" width="353">
Announced job cuts fell another 25.7% m/m during March on top of the 15.5% February decline, according to the Challenger, Grey &amp; Christmas survey. The decline was to the lowest level in nearly one year
During the last ten years there has been an 83% (inverse) correlation between the three month moving average level of announced job cuts and the three month change payroll employment.
Layoffs in the auto industry dropped sharply for the second month after the January surge but the three month average remained quite elevated. Cuts in financial (-21.7 y/y, electronics (-37.7% y/y) and government (-72.0% y/y) also fell sharply. Announced job cuts in the apparel and chemical industries, however, surged.
Job cut announcements differ from layoffs. Many are achieved through attrition, early retirement or just never occur.
Challenger also reported an increase in announced hiring plans (31.7% y/y) after three months of decline.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S3/@S301/@S301.HTM">Challenger, Gray &amp; Christmas</a></th>
<th scope="col">Mar</th>
<th scope="col">Feb</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">Announced Job Cuts</td>
<td>64,975</td>
<td>87,437</td>
<td>-24.8%</td>
<td>1,072,054</td>
<td>1,039,935</td>
<td>1,236,426</td>
</tr>
</tbody>
</table>
</body>
</html>

Announced job cuts fell another 25.7% m/m during March on top of the 15.5% February decline, according to the Challenger, Grey & Christmas survey. The decline was to the lowest level in nearly one year During the last ten years there [...]

Challenger Layoffs Skid Further

Even with expected tariff-induced increases in inflation, BCFF forecasters look for a more aggressive round of monetary easing

USD/EUR exchange rate uncoupling from interest rate differential

Widespread downgrading of 2025 GDP outlook

Trade and fiscal policy uncertainty has exploded with the new administration

Much lower US electricity costs gives it a competitive advantage

Wage growth slowing in the US and Euro area; elevated and sticky in the UK

Stagflation-lite: Blue Chip forecasts below-trend growth and elevated inflation

US policy gyrations boosting policy uncertainty worldwide

Expected tariff hikes have boosted inflation expectations

US and Japan ended 2024 on solid ground in contrast to Europe

US economy expected to outperform other major economies in 2025

Only modest evidence of AI-related surge in US productivity growth

Previous Trump tariffs fading. A boost from new tariffs ahead?

Heavy US manufacturing states underperforming while Sun Belt states outperforming

Rising long-term yields a global phenomenon

US financial market concerns shifting from growth to inflation

Economic activity is picking up in the US but remains lackluster abroad

Policy uncertainty has surged since the US national elections.

Recent turnaround in US economic surprises leading to increases in rate-cut expectations

The outlook has brightened in the US, while it has dimmed for other major economies

Headline US PCE inflation elevated by sticky services prices

US and global equity prices have recently diverged

US leading global upturn in economic surprises

Blue Chip forecasters look for further significant monetary easing apart from Japan

Recent rise in global supply chain pressures could augur a pickup in global inflation pressures

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The Industrial Materials Price Index from the Foundation for International Business and Economic Research (FIBER) rose 0.6% (-3.6% y/y) during the four weeks ended May 9, 2025. The improvement followed sharp declines in April.

Miscellaneous group prices increased 2.4% (5.9% y/y) over the last four weeks. Natural rubber price soared 13.9% (11.7% y/y). The price of tallow (used in the soap industry) rose 10.6% (41.3% y/y) in four weeks but the cost of framing lumber declined 5.6%, but rose 7.3% y/y.

Prices in the Metals group edged 0.2% higher (-7.3% y/y) over the most recent four weeks. Variation in pricing was wide. Copper scrap prices rose 7.4% (-3.3% y/y) while lead costs rose 4.0% in four weeks (-11.1% y/y). The cost of aluminum increased 2.3% in four weeks, off 4.4% y/y. Working lower, the cost of steel scrap declined 8.1% (-11.6% y/) in four weeks while tin prices followed with a 4.9% decline (-2.9% y/y). Zinc prices eased 0.7% in four weeks and declined 10.3% y/y.

Crude Oil & Benzene group prices edged 0.1% higher (-19.4% y/y) in four weeks. The cost of West Texas Intermediate crude oil weakened 4.0% to $58.50 per barrel and was 25.6% lower y/y. The cost of the petrol-chemical benzene, used for making plastics & synthetic fibers, strengthened 8.5% (-41.8% y/y) in the last four weeks. Excluding crude oil, the industrial commodity price index rose 0.9% (-2.1% y/y) during the last four weeks.

Textile group prices edged 0.9% lower (-0.5% y/y) during the last four weeks. Burlap costs declined 14.3% (+7.4% y/y) but the cost of cotton rose 4.5% (-7.7% y/y) over four weeks.

The Foundation for International Business and Economic Research (FIBER) develops economic measurement techniques as applied to business cycles and inflation in the U.S. and other market economies. The commodity price data can be found in Haver's **DAILY**, **WEEKLY**, **USECON** and **CMDTY** databases.

250509D1.jpg

250509B1.jpg

- Metals prices are mixed.
- Crude oil prices fall sharply.
- Textile prices ease.

FIBER: Industrial Commodity Price Movement Diverges in Latest Four Weeks

250509L1.jpg

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Wholesale trade inventories increased 0.4% (2.2% y/y) during March after rising 0.5% in February, revised from 0.3% after a 0.8% January rise. The increase compared to expectations for a 0.5% rise in the Informa Global Markets Survey and compared to a 0.6% gain in the advance report issued two weeks ago.

Durable goods inventories rose 0.6% in March (1.5% y/y) after rising 0.5% in February. Machinery inventories, the largest sector, increased 0.6% (1.7% y/y) while inventories of motor vehicles & parts, the second largest grouping, rose 1.2% (0.8% y/y). Furniture inventories strengthened 2.7% (6.8% y/y) while electrical equipment inventories declined 1.0% (-3.1% y/y). Inventories of nondurable goods edged 0.1% higher (3.4% y/y). Drug inventories, which make up one-quarter of nondurable inventories, advanced 1.0% (4.6% y/y). Grocery inventories, the second largest category, rose 0.4% (8.3% y/y). Apparel inventories fell 0.8% (-6.5% y/y) and chemical inventories rose 2.1% both m/m and y/y. Petroleum inventories increased 0.7% (0.3% y/y).

Sales at the wholesale level rose 0.6% (6.1% y/y) in March after rising 2.0% in February and falling 0.9% in January. A 0.9% March rise had been expected in the Action Economics Forecast Survey.

Durable goods sales rose 1.0% (8.5% y/y) in March after strengthening 3.2% in February. Sales of electrical equipment & electronic goods, the largest sector, rose 2.5% (20.9% y/y), after a 2.3% rise. Professional and commercial equipment sales, which includes computers, rose 1.2% (11.9% y/y), while vehicle sales declined 1.0% (1.1% y/y). Sales of machinery improved 0.7% (4.2% y/y). Nondurable product sales rose 0.3% (3.9% y/y) in March after gaining 0.9% in February. Drug store sales, the largest category, increased 2.8% (13.4% y/y), while grocery store sales eased 0.2% (+4.3% y/y). Sales of apparel weakened 0.8% (+3.5% y/y) while paper sales declined 1.7% (0.5% y/y). Petroleum product sales fell 4.6% both m/m and y/y.

The inventory-to-sales (I/S) ratio at the wholesale level remained at 1.30 in March and has been moving lower for the last two years.

The wholesale I/S ratio for durable goods eased to 1.69 in March and also has been trending lower. The machinery ratio fell to 2.92 while motor vehicles rose to 1.78. The I/S ratio for nondurable goods slipped to 0.93 and remained down from 1.02 early in 2023. The drug industry ratio eased to 0.94. Apparel's I/S ratio held at 2.06, but remained below its 2.28 level one year earlier, and has been declining since early 2023. The petroleum industry I/S ratio rose to 0.33.

The wholesale trade figures are available in Haver's **USECON** database. The expectations figure for inventories is contained in the **MMSAMER** database. Expectations for sales are from the **AS1REPNA** database.

**Assessing Maximum Employment** from Federal Reserve Governor Adriana D. Kugler is available [here](https://www.federalreserve.gov/newsevents/speech/kugler20250509a.htm).

250509N1.jpg

250509O1.jpg

- Inventories trend higher y/y.
- Sales increase broadly.
- Inventory-to-sales ratio steadies.

U.S. Wholesale Inventories & Sales Increase in March

250508N2.jpg

250508O2.jpg

Nonfarm labor productivity fell 0.8% (SAAR) during Q1’25 after increasing 1.7% in Q4’24, revised from 1.5%. A 0.6% decline had been expected in the Action Economics Forecast Survey. It was the first productivity decline since Q2’22. The y/y increase during Q1 fell to 1.4% from 2.1% in Q4. It was below a 3.3% high in the first quarter of last year. Productivity fell as real value-added output dropped 0.3% last quarter (+2.2% y/y) after increasing 2.5% in Q4, and hours worked lengthened 0.6% (0.8% y/y) following a 0.8% gain.

Compensation per hour increased 4.8% last quarter following a 3.7% Q4 rise. Despite the strength of these last two increases, y/y growth decelerated to 2.7% from a 6.8% high one year earlier. Nevertheless, the productivity decline raised unit labor costs by 5.7% (1.3% y/y) in Q1 versus expectations for a 5.2% increase. It followed a 2.0% gain during Q4 and was the strongest quarterly increase in a year.

Factory sector productivity surged 4.5% (1.5% y/y) during Q1’25 following three consecutive increases of roughly 0.5%. This strength was accompanied by a 6.2% rise (2.2% y/y) in hourly compensation which came after two consecutive increases of approximately 4.1%. The strength in productivity lowered the rise in unit labor costs to 1.6% from 3.8% in Q4. The y/y gain fell to 0.7% from 2.0% in Q4 and stood below the 6.2% y/y increase in Q1’24.

The productivity and labor cost data are available in Haver’s **USECON** database. The Action Economics expectations figures are in the **AS1REPNA** database.

250508P2.jpg

250508Q2.jpg

- Productivity declines with lower output.
- Compensation surge exacerbates labor market stress.
- Factory sector productivity surge lessens cost pressure.

U.S. Productivity Declines in Q1’25; Unit Labor Costs Surge

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The National Association of Realtors' Fixed Rate Mortgage Housing Affordability Index (HAI) rose 0.6% (3.2% y/y) in March to 103.2 after rising 0.9% to 102.6 in February and rising 0.8% in January to 101.7. The level of home affordability has risen 14.8% from its low of 89.9 in October 2023. It remains 42.4% below the high of 179.2 in April 2020.

The rise in affordability in March occurred as the median price of an existing single-family home rose 1.8% (2.9% y/y) to $408,000 which was offset by a decline in mortgage rates to 6.73% from 6.92% in February. The price compared to the record $432,900 in June 2024. The decline in mortgage rates compared to a recent low of 6.26% in September of last year and a 7.70% high during October of 2023. It remained well above a December 2020 low of 2.73%. These changes lowered the principal & interest payment by 0.2% (+1.1% y/y) to $2,113 per month. That was well above the most recent low of $984 in February 2020. Monthly mortgage payments averaged a lessened 24.2% of income during March. They remained up from a low of 14.0% of income in April 2020.

The rise in housing costs in March was accompanied by improvement in median family income. It increased 0.4% (4.4% y/y) to a record $104,705 after rising 0.4% in February and 0.7% in January.

Housing affordability improved m/m across the country in March. The index edged 0.1% higher (2.8% y/y) to 134.5 in the Midwest. It remains the most affordable region of the country. In the South, the index 0.9% (5.4% y/y) to 106.6 and the affordability index in the Northeast increased 2.1% (-2.6% y/y) to 95.7. In the West, where homes are the least affordable, the index rose 0.8% (3.3% y/y) to 71.8 in March.

The Housing Affordability Index (HAI) equals 100 when a median-income borrower qualifies for an 80% mortgage on a median-priced existing single-family home. The HAI had exceeded 100 in each month since July 1990 and reached its all-time high of 213.3 in January 2013; since then, it fell below 100 for the first time in June 2022.

Data on Housing Affordability can be found in Haver’s **REALTOR** database. Median home sales prices are also available in **USECON**. Higher frequency interest rate data are found in **SURVEYS**, **WEEKLY**, and **DAILY**.

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- Home prices rise but mortgage rates decline.
- Median income improves.
- Affordability increases across the country.

U.S. Housing Affordability Improves Slightly in March

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Initial claims for unemployment insurance were 228,000 seasonally adjusted in the week ended May 3, down from 241,000 in the previous week, which was unrevised. For the latest week, the Action Economics Forecast Survey had expected a smaller decline to 233,000.

In the week ended April 26, the total number of unemployment insurance beneficiaries – also known as “continuing claims” – was 1.879 million, down from 1.908 million in the April 19 week.

The insured unemployment rate, that is, the number of beneficiaries as a percentage of covered employment, returned to its longstanding rate of 1.2% in the April 26 week; this rate has held that amount since continuously since the week of January 6, 2024, except for the prior week’s 1.3%.

As we do highlight in every week’s discussion, economic conditions vary widely across individual states and territories. In the week ended April 19, the highest unemployment rates were in New Jersey and Rhode Island (both at 2.48%), California (2.26%), Washington (2.14%) and New York (1.85%). The lowest were in Florida (0.36%), South Dakota (0.37%), Alabama (0.41%), Virginia (0.45%) and Nebraska (0.47%). Rates in other notable states include Illinois (1.78%), Pennsylvania (1.53%) and Texas (1.14%). 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. The expectations figure is from the Action Economics Forecast Survey in the **AS1REPNA** database.

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- Continued claims for unemployment insurance decreased 29, 000 in the week ended April 26.
- Insured unemployment rate returns to longstanding 1.2%.
- Across the states, the insured unemployment rate ranges from 0.36% to 2.48%.

Economy in Brief

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