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/060728e.jpg" width="353">
Japanese stocks rose and bonds fell after a plethora of economic data that traders deemed favorable today. June consumer prices showed an eighth straight month of year-on-year increase in the most popular measure, the total less fresh food, which was up 0.6%. Retail sales rose 0.4% from a year ago. The labor market, which we feature here, moderated somewhat, but perhaps analysts saw this as a pause in an otherwise increasingly robust picture.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060728f.jpg" width="353">
Employment fell 160,000 after advancing 270,000 in May. However, the June figure was up 0.3% from a year ago, a bit more growth than the 0.2% of May and April. The unemployment rate rose to 4.2% from May&#39;s 4.0%. The latter rate was the lowest in a little over eight years.
One of the Japanese news services, Mainichi, called our attention to the set of interesting data on job openings and placements from the Ministry of Health, Labor and Welfare. [The aggregate labor force survey is published by the Ministry of Internal Affairs and Communications.] In June, the number of people registered as needing work was 2.15 million, the smallest since late 1997; during the recent long period of economic stress in Japan, this number peaked at 2.805 million in January 2002. The other side of this coin is job openings, which totaled 2.327 million in June, compared with a cycle low of 1.174 million in May 1999. The number of openings was smaller than the number of applicants until just this past December.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060728g.jpg" width="353">
The ratio of these &quot;active&quot; openings to &quot;active&quot; applicants was 1.08 in June, suggesting that conditions are positive for employment to continue growing. Remarkably, this is the highest such value since July 1992, almost 14 years. At its worst, the relationship between applicants and openings saw at least 2 applicants for every opening; this prevailed from autumn 1998 throughout 1999. Presently, additional data on marginal changes in the labor market show how much conditions have changed: new job openings are far larger than the number of new job applicants. Their June ratio was 1.62, following May&#39;s 1.65. The last time this indicator of marginal changes in labor market conditions was this high was May of 1992. Its low was 0.80, also in May 1999.

<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/@J6/@J6.HTM">Japan: SA</a></th>
<th scope="col">June 2006</th>
<th scope="col">May 2006</th>
<th scope="col">Apr 2006</th>
<th scope="col">June 2005</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">Employment (millions)</td>
<td>63.75</td>
<td>63.91</td>
<td>63.64</td>
<td>63.55</td>
<td>63.57</td>
<td>63.29</td>
<td>63.15</td>
</tr>
<tr>
<td class="firstcol">Change (thous.) / Yr-to-Yr % Change*</td>
<td>-160</td>
<td>+270</td>
<td>-50</td>
<td>0.3%</td>
<td>0.4%</td>
<td>0.2%</td>
<td>-0.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">Unemployment Rate (%)</td>
<td>4.2%</td>
<td>4.0%</td>
<td>4.1%</td>
<td>4.2%</td>
<td>4.4%</td>
<td>4.7%</td>
<td>5.3%</td>
</tr>
<tr>
<td class="firstcol">Active Applications (thous.)</td>
<td>2,150</td>
<td>2,156</td>
<td>2,181</td>
<td>2,294</td>
<td>2,272</td>
<td>2,367</td>
<td>2,595</td>
</tr>
<tr class="odd">
<td class="firstcol">New Applications (thous.)</td>
<td>547</td>
<td>538</td>
<td>545</td>
<td>570</td>
<td>567</td>
<td>589</td>
<td>626</td>
</tr>
<tr>
<td class="firstcol">Active Openings (thous.)</td>
<td>2,327</td>
<td>2,309</td>
<td>2,266</td>
<td>2,191</td>
<td>2,167</td>
<td>1,958</td>
<td>1,672</td>
</tr>
<tr class="odd">
<td class="firstcol">New Openings (thous.)</td>
<td>884</td>
<td>889</td>
<td>839</td>
<td>863</td>
<td>831</td>
<td>761</td>
<td>673</td>
</tr>
<tr>
<td class="firstcol">Ratio: Active Openings to Applications</td>
<td>1.08</td>
<td>1.07</td>
<td>1.04</td>
<td>0.96</td>
<td>0.95</td>
<td>0.83</td>
<td>0.64</td>
</tr>
<tr class="odd">
<td class="firstcol">Ratio: New Openings to Applications</td>
<td>1.62</td>
<td>1.65</td>
<td>1.54</td>
<td>1.51</td>
<td>1.47</td>
<td>1.29</td>
<td>1.08</td>
</tr>
</tbody>
</table>
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Japanese stocks rose and bonds fell after a plethora of economic data that traders deemed favorable today. June consumer prices showed an eighth straight month of year-on-year increase in the most popular measure, the total less fresh [...]

Japan Labor Data Ease in June, But Conditions Remain Positive

Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060728h.jpg" width="353">
Consumer sentiment late this month recovered from the decline early in July. For the full month the volatility left sentiment off just 0.2% from June at 84.7, according to the University of Michigan. Consensus expectations had been for a full month reading of 83.0.
During the last ten years there has been a 77% correlation between the level of consumer sentiment and the y/y change in real consumer spending.
The reading of current economic conditions eased just 1.4% following a 9.3% rise during June. The index of current personal finances fell 2.7% (-9.8% y/y) and perceived buying conditions for large household goods slipped 0.6% (-8.1% y/y).
Expectations for the economy rose 0.7% led by a 1.7% (-8.3% y/y) rise in expected personal finances. Expected 12 month business conditions fell 1.1% (-22.3% y/y) but 5 year expected conditions improved.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060728i.jpg" width="353">
Consumers&#39; opinion about gov&#39;t economic policy improved a sharp 10.8% m/m (-10.9% y/y), the first monthly increase since March while expected inflation during the next year fell sharply to 3.8%, its lowest since February. The five to ten year expected rate of inflation also fell to 3.2%, its lowest in over a year.
The University of Michigan survey is not seasonally adjusted.The mid-month survey is based on telephone interviews with 250 households nationwide on personal finances and business and buying conditions. The survey is expanded to a total of 500 interviews at month end.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EF/@EF14/@EF1402/@EF1402.HTM">University of Michigan</a></th>
<th scope="col">July</th>
<th scope="col">July (Prelim.)</th>
<th scope="col">June</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">Consumer Sentiment</td>
<td>84.7</td>
<td>83.0</td>
<td>84.9</td>
<td>-14.0%</td>
<td>88.6</td>
<td>95.2</td>
<td>87.6</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Current Conditions</td>
<td>103.5</td>
<td>100.8</td>
<td>105.0</td>
<td>-11.2%</td>
<td>105.9</td>
<td>105.6</td>
<td>97.2</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp; Expectations</td>
<td>72.5</td>
<td>71.6</td>
<td>72.0</td>
<td>-16.3%</td>
<td>77.4</td>
<td>88.5</td>
<td>81.4</td>
</tr>
</tbody>
</table>
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Consumer sentiment late this month recovered from the decline early in July. For the full month the volatility left sentiment off just 0.2% from June at 84.7, according to the University of Michigan. Consensus expectations had been [...]

U.S. Consumer Sentiment Improved in Late July

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060728c.jpg" width="353">
The employment cost index for private industry workers increased 0.8% during 2Q, about as expected, after an unrevised 0.6% 1Q increase.
The 2Q increase was the fastest in over a year.
Wages &amp; salaries grew at the quickest pace (0.9%) since late 2003 as factory sector wages grew 0.8% (NSA, 2.7% y/y). That was the best quarterly gain since 3Q04. Service-producing industries&#39; wage also grew a firm 0.8% (2.7% y/y) which was stable with 1Q.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060728d.jpg" width="353">
Benefit costs grew 0.7% after a depressed 1Q increase.
The 12-month gain in health insurance benefits picked up slightly to 5.2%.
To view the latest release with all the industry detail visit BLS <a href="http://www.bls.gov/news.release/eci.nr0.htm">site</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/@EB08/@EB08.HTM">ECI- Private Industry Workers</a></th>
<th scope="col">2Q &#39;06</th>
<th scope="col">1Q &#39;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">Compensation</td>
<td>0.8%</td>
<td>0.6%</td>
<td>2.8%</td>
<td>3.0%</td>
<td>3.7%</td>
<td>4.0%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Wages &amp; Salaries</td>
<td>0.9%</td>
<td>0.7%</td>
<td>2.9%</td>
<td>2.5%</td>
<td>2.7%</td>
<td>3.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Benefit Costs</td>
<td>0.7%</td>
<td>0.4%</td>
<td>2.7%</td>
<td>4.0%</td>
<td>6.6%</td>
<td>6.5%</td>
</tr>
</tbody>
</table>
</body>
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The employment cost index for private industry workers increased 0.8% during 2Q, about as expected, after an unrevised 0.6% 1Q increase. The 2Q increase was the fastest in over a year. Wages & salaries grew at the quickest pace (0.9%) [...]

Gain in the Employment Cost Index Accelerated

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060728b.jpg" width="353">
U.S. real GDP growth last quarter slowed to 2.5% (AR) from 3.7% during the prior four quarters and the figure fell short of Consensus expectations for a 3.0% advance.
Much of the disappointment stemmed from a meager 2.7% advance in business investment. It reflected a 1.0% (+6.9% y/y) decline in spending on equipment &amp; software as well as a 21.6% (-1.0% y/y) drop in spending on transportation equipment.
Growth in real personal consumption expenditures also slowed to 2.5% from 3.4% during the prior four quarters. Durables spending growth fell 0.5% (3.3% y/y) due to a 3.1% (-4.6% y/y) drop in motor vehicles &amp; parts.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060728a.jpg" width="353">
Residential investment fell for the third straight quarter. The 6.3% decline (-0.2% y/y) knocked 0.4 percentage points out of 2Q growth in real GDP.
Final sales to domestic purchasers overall grew just 1.6% (3.0% y/y) following four quarters of 3.7% growth. Earlier growth rates were revised down but the effect on GDP was limited by upward revisions to inventories.
Last quarter, inventories added 0.4 percentage points to GDP growth.In addition, improvement in net exports added 0.3 percentage points to growth as exports grew 3.3% (7.4% y/y) and imports inched up 0.2% (6.1% y/y).
The GDP chain price index grew 3.3%, the same as during 1Q. Less final sales of computers, the chain price index grew 3.5% (3.5% y/y).

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E7/@E701/@E701.HTM">Chained 2000$, % AR</a></th>
<th scope="col">2Q &#39;06</th>
<th scope="col">1Q &#39;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">GDP</td>
<td>2.5%</td>
<td>5.6%</td>
<td>3.5%</td>
<td>3.2%</td>
<td>3.9%</td>
<td>2.5%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Inventory Effect</td>
<td>0.4%</td>
<td>-0.0%</td>
<td>0.6%</td>
<td>-0.3%</td>
<td>0.4%</td>
<td>0.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">Final Sales</td>
<td>2.1%</td>
<td>5.6%</td>
<td>2.9%</td>
<td>3.5%</td>
<td>3.5%</td>
<td>2.5%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Foreign Trade Effect</td>
<td>&nbsp;0.3%</td>
<td>-0.0%</td>
<td>-0.1%</td>
<td>-0.1%</td>
<td>-0.5%</td>
<td>-0.3%</td>
</tr>
<tr class="odd">
<td class="firstcol">Domestic Final Demand</td>
<td>1.6%</td>
<td>5.4%</td>
<td>3.0%</td>
<td>3.6%</td>
<td>4.0%</td>
<td>2.8%</td>
</tr>
<tr>
<td class="firstcol">Chained GDP Price Index</td>
<td>3.3%</td>
<td>3.3%</td>
<td>3.3%</td>
<td>3.0%</td>
<td>2.8%</td>
<td>2.1%</td>
</tr>
</tbody>
</table>


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U.S. real GDP growth last quarter slowed to 2.5% (AR) from 3.7% during the prior four quarters and the figure fell short of Consensus expectations for a 3.0% advance. Much of the disappointment stemmed from a meager 2.7% advance in [...]

US GDP Growth Slowed

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060728b.jpg" width="353">
U.S. real GDP growth last quarter slowed to 2.5% (AR) from 3.7% during the prior four quarters and the figure fell short of Consensus expectations for a 3.0% advance.
Much of the disappointment stemmed from a meager 2.7% advance in business investment. It reflected a 1.0% (+6.9% y/y) decline in spending on equipment &amp; software as well as a 21.6% (-1.0% y/y) drop in spending on transportation equipment.
Growth in real personal consumption expenditures also slowed to 2.5% from 3.4% during the prior four quarters. Durables spending growth fell 0.5% (3.3% y/y) due to a 3.1% (-4.6% y/y) drop in motor vehicles &amp; parts.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060728a.jpg" width="353">
Residential investment fell for the third straight quarter. The 6.3% decline (-0.2% y/y) knocked 0.4 percentage points out of 2Q growth in real GDP.
Final sales to domestic purchasers overall grew just 1.6% (3.0% y/y) following four quarters of 3.7% growth. Earlier growth rates were revised down but the effect on GDP was limited by upward revisions to inventories.
Last quarter, inventories added 0.4 percentage points to GDP growth.In addition, improvement in net exports added 0.3 percentage points to growth as exports grew 3.3% (7.4% y/y) and imports inched up 0.2% (6.1% y/y).
The GDP chain price index grew 3.3%, the same as during 1Q. Less final sales of computers, the chain price index grew 3.5% (3.5% y/y).

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E7/@E701/@E701.HTM">Chained 2000$, % AR</a></th>
<th scope="col">2Q &#39;06</th>
<th scope="col">1Q &#39;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">GDP</td>
<td>2.5%</td>
<td>5.6%</td>
<td>3.5%</td>
<td>3.2%</td>
<td>3.9%</td>
<td>2.5%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Inventory Effect</td>
<td>0.4%</td>
<td>-0.0%</td>
<td>0.6%</td>
<td>-0.3%</td>
<td>0.4%</td>
<td>0.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">Final Sales</td>
<td>2.1%</td>
<td>5.6%</td>
<td>2.9%</td>
<td>3.5%</td>
<td>3.5%</td>
<td>2.5%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Foreign Trade Effect</td>
<td>&nbsp;0.3%</td>
<td>-0.0%</td>
<td>-0.1%</td>
<td>-0.1%</td>
<td>-0.5%</td>
<td>-0.3%</td>
</tr>
<tr class="odd">
<td class="firstcol">Domestic Final Demand</td>
<td>1.6%</td>
<td>5.4%</td>
<td>3.0%</td>
<td>3.6%</td>
<td>4.0%</td>
<td>2.8%</td>
</tr>
<tr>
<td class="firstcol">Chained GDP Price Index</td>
<td>3.3%</td>
<td>3.3%</td>
<td>3.3%</td>
<td>3.0%</td>
<td>2.8%</td>
<td>2.1%</td>
</tr>
</tbody>
</table>
Gain in the Employment Cost Index Accelerated 
by <a href="/comment/Moeller.html">Tom Moeller</a> July 28, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060728c.jpg" width="353">
The employment cost index for private industry workers increased 0.8% during 2Q, about as expected, after an unrevised 0.6% 1Q increase.
The 2Q increase was the fastest in over a year.
Wages &amp; salaries grew at the quickest pace (0.9%) since late 2003 as factory sector wages grew 0.8% (NSA, 2.7% y/y). That was the best quarterly gain since 3Q04. Service-producing industries&#39; wage also grew a firm 0.8% (2.7% y/y) which was stable with 1Q.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060728d.jpg" width="353">
Benefit costs grew 0.7% after a depressed 1Q increase.
The 12-month gain in health insurance benefits picked up slightly to 5.2%.
To view the latest release with all the industry detail visit BLS <a href="http://www.bls.gov/news.release/eci.nr0.htm">site</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/@EB08/@EB08.HTM">ECI- Private Industry Workers</a></th>
<th scope="col">2Q &#39;06</th>
<th scope="col">1Q &#39;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">Compensation</td>
<td>0.8%</td>
<td>0.6%</td>
<td>2.8%</td>
<td>3.0%</td>
<td>3.7%</td>
<td>4.0%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Wages &amp; Salaries</td>
<td>0.9%</td>
<td>0.7%</td>
<td>2.9%</td>
<td>2.5%</td>
<td>2.7%</td>
<td>3.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Benefit Costs</td>
<td>0.7%</td>
<td>0.4%</td>
<td>2.7%</td>
<td>4.0%</td>
<td>6.6%</td>
<td>6.5%</td>
</tr>
</tbody>
</table>
U.S. Consumer Sentiment Improved in Late July 
by <a href="/comment/Moeller.html">Tom Moeller</a> July 28, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060728h.jpg" width="353">
Consumer sentiment late this month recovered from the decline early in July. For the full month the volatility left sentiment off just 0.2% from June at 84.7, according to the University of Michigan. Consensus expectations had been for a full month reading of 83.0.
During the last ten years there has been a 77% correlation between the level of consumer sentiment and the y/y change in real consumer spending.
The reading of current economic conditions eased just 1.4% following a 9.3% rise during June. The index of current personal finances fell 2.7% (-9.8% y/y) and perceived buying conditions for large household goods slipped 0.6% (-8.1% y/y).
Expectations for the economy rose 0.7% led by a 1.7% (-8.3% y/y) rise in expected personal finances. Expected 12 month business conditions fell 1.1% (-22.3% y/y) but 5 year expected conditions improved.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060728i.jpg" width="353">
Consumers&#39; opinion about gov&#39;t economic policy improved a sharp 10.8% m/m (-10.9% y/y), the first monthly increase since March while expected inflation during the next year fell sharply to 3.8%, its lowest since February. The five to ten year expected rate of inflation also fell to 3.2%, its lowest in over a year.
The University of Michigan survey is not seasonally adjusted.The mid-month survey is based on telephone interviews with 250 households nationwide on personal finances and business and buying conditions. The survey is expanded to a total of 500 interviews at month end.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EF/@EF14/@EF1402/@EF1402.HTM">University of Michigan</a></th>
<th scope="col">July</th>
<th scope="col">July (Prelim.)</th>
<th scope="col">June</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">Consumer Sentiment</td>
<td>84.7</td>
<td>83.0</td>
<td>84.9</td>
<td>-14.0%</td>
<td>88.6</td>
<td>95.2</td>
<td>87.6</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Current Conditions</td>
<td>103.5</td>
<td>100.8</td>
<td>105.0</td>
<td>-11.2%</td>
<td>105.9</td>
<td>105.6</td>
<td>97.2</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp; Expectations</td>
<td>72.5</td>
<td>71.6</td>
<td>72.0</td>
<td>-16.3%</td>
<td>77.4</td>
<td>88.5</td>
<td>81.4</td>
</tr>
</tbody>
</table>
Japan Labor Data Ease in June, But Conditions Remain Positive 
by <a href="/comment/Stone.html">Carol Stone</a> July 28, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060728e.jpg" width="353">
Japanese stocks rose and bonds fell after a plethora of economic data that traders deemed favorable today. June consumer prices showed an eighth straight month of year-on-year increase in the most popular measure, the total less fresh food, which was up 0.6%. Retail sales rose 0.4% from a year ago. The labor market, which we feature here, moderated somewhat, but perhaps analysts saw this as a pause in an otherwise increasingly robust picture.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060728f.jpg" width="353">
Employment fell 160,000 after advancing 270,000 in May. However, the June figure was up 0.3% from a year ago, a bit more growth than the 0.2% of May and April. The unemployment rate rose to 4.2% from May&#39;s 4.0%. The latter rate was the lowest in a little over eight years.
One of the Japanese news services, Mainichi, called our attention to the set of interesting data on job openings and placements from the Ministry of Health, Labor and Welfare. [The aggregate labor force survey is published by the Ministry of Internal Affairs and Communications.] In June, the number of people registered as needing work was 2.15 million, the smallest since late 1997; during the recent long period of economic stress in Japan, this number peaked at 2.805 million in January 2002. The other side of this coin is job openings, which totaled 2.327 million in June, compared with a cycle low of 1.174 million in May 1999. The number of openings was smaller than the number of applicants until just this past December.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060728g.jpg" width="353">
The ratio of these &quot;active&quot; openings to &quot;active&quot; applicants was 1.08 in June, suggesting that conditions are positive for employment to continue growing. Remarkably, this is the highest such value since July 1992, almost 14 years. At its worst, the relationship between applicants and openings saw at least 2 applicants for every opening; this prevailed from autumn 1998 throughout 1999. Presently, additional data on marginal changes in the labor market show how much conditions have changed: new job openings are far larger than the number of new job applicants. Their June ratio was 1.62, following May&#39;s 1.65. The last time this indicator of marginal changes in labor market conditions was this high was May of 1992. Its low was 0.80, also in May 1999.

<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/@J6/@J6.HTM">Japan: SA</a></th>
<th scope="col">June 2006</th>
<th scope="col">May 2006</th>
<th scope="col">Apr 2006</th>
<th scope="col">June 2005</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">Employment (millions)</td>
<td>63.75</td>
<td>63.91</td>
<td>63.64</td>
<td>63.55</td>
<td>63.57</td>
<td>63.29</td>
<td>63.15</td>
</tr>
<tr>
<td class="firstcol">Change (thous.) / Yr-to-Yr % Change*</td>
<td>-160</td>
<td>+270</td>
<td>-50</td>
<td>0.3%</td>
<td>0.4%</td>
<td>0.2%</td>
<td>-0.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">Unemployment Rate (%)</td>
<td>4.2%</td>
<td>4.0%</td>
<td>4.1%</td>
<td>4.2%</td>
<td>4.4%</td>
<td>4.7%</td>
<td>5.3%</td>
</tr>
<tr>
<td class="firstcol">Active Applications (thous.)</td>
<td>2,150</td>
<td>2,156</td>
<td>2,181</td>
<td>2,294</td>
<td>2,272</td>
<td>2,367</td>
<td>2,595</td>
</tr>
<tr class="odd">
<td class="firstcol">New Applications (thous.)</td>
<td>547</td>
<td>538</td>
<td>545</td>
<td>570</td>
<td>567</td>
<td>589</td>
<td>626</td>
</tr>
<tr>
<td class="firstcol">Active Openings (thous.)</td>
<td>2,327</td>
<td>2,309</td>
<td>2,266</td>
<td>2,191</td>
<td>2,167</td>
<td>1,958</td>
<td>1,672</td>
</tr>
<tr class="odd">
<td class="firstcol">New Openings (thous.)</td>
<td>884</td>
<td>889</td>
<td>839</td>
<td>863</td>
<td>831</td>
<td>761</td>
<td>673</td>
</tr>
<tr>
<td class="firstcol">Ratio: Active Openings to Applications</td>
<td>1.08</td>
<td>1.07</td>
<td>1.04</td>
<td>0.96</td>
<td>0.95</td>
<td>0.83</td>
<td>0.64</td>
</tr>
<tr class="odd">
<td class="firstcol">Ratio: New Openings to Applications</td>
<td>1.62</td>
<td>1.65</td>
<td>1.54</td>
<td>1.51</td>
<td>1.47</td>
<td>1.29</td>
<td>1.08</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/060727g.jpg" width="353">
Unemployment is falling in Europe. With the notable exception of the UK, unemployment rates are moving lower in most European countries. In May, the rates in Germany and France were both at their lowest since late 2002. Today, the three Scandinavian countries reported their latest rates. Denmark&#39;s labor force survey set records. In the 18-1/2 years of the Danish data, June saw the smallest number unemployed, 123,100, and the lowest unemployment rate, 4.5%, which was first reached in May. The number unemployed is down 23.7% from a year ago, before seasonal adjustment. (The other monthly figures are seasonally adjusted by Denmarks Statistiks.)<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060727h.jpg" width="353">
In Norway, the government&#39;s public employment service tallies its number of &quot;registered&quot; unemployed. These data are not seasonally adjusted, so they show a monthly increase for July. But the year-to-year comparisons are impressively favorable: the number unemployed is down more than 20,000 to 67,800 and the unemployment rate reached 2.8% from 3.7% in July 2005; this is the lowest July figure since 2001.
Sweden&#39;s data are a bit muddled, but they still show improvement. Statistics Sweden switched to the EU Harmonized structure of labor force data in April 2005, so data prior to that are not totally comparable with current results. Indeed, the graph shows a change in the pattern of the monthly evolution beginning at that time. However, we can still make a valid year-on-year comparison for June, and we see that the rate then was 6.5%, down from 7.0% in June 2005; the number unemployed is off 10.2%.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060727i.jpg" width="353">
A similar story can be told for Finland, which published its June data on Tuesday. The current unemployment rate is 8.1%, the lowest rate for June since 1991.
In all these countries, these rates are falling because employment is rising. The release of data for employment lags or is compiled only quarterly, so comparisons aren&#39;t so clear, but what is clear is that through the latest available data, however counted, the number of jobs is increasing faster than the number of people seeking work. As we point out often to highlight the important distinction, unemployment can fall if jobs are tight and people give up seeking work altogether. But this is not the case now: jobs are up and joblessness is down.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/G10/@GZ/@GZ6/@GZ601/@GZ601.HTM">Thous.</a></th>
<th scope="col">July 2006</th>
<th scope="col">June 2006</th>
<th scope="col">May 2006</th>
<th scope="col">Apr 2006</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">Denmark LFS*, Seas Adj</td>
<td>--</td>
<td>123.1</td>
<td>124.9</td>
<td>133.0</td>
<td>161.2</td>
<td>153.4</td>
<td>172.9</td>
<td>167.1</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Rate (%)</td>
<td>--</td>
<td>4.5</td>
<td>4.5</td>
<td>4.8</td>
<td>5.8</td>
<td>5.6</td>
<td>6.3</td>
<td>6.0</td>
</tr>
<tr class="odd">
<td class="firstcol">Norway Reg.*, NSA</td>
<td>67.8</td>
<td>62.3</td>
<td>60.6</td>
<td>66.6</td>
<td>89.3</td>
<td>76.2</td>
<td>84.9</td>
<td>91.7</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Rate (%)</td>
<td>2.8</td>
<td>2.6</td>
<td>2.5</td>
<td>2.8</td>
<td>3.7</td>
<td>3.0</td>
<td>3.6</td>
<td>3.9</td>
</tr>
<tr class="odd">
<td class="firstcol">Sweden LFS*, NSA</td>
<td>--</td>
<td>297.6</td>
<td>216.8</td>
<td>247.5</td>
<td>331.4</td>
<td>263.1</td>
<td>246.1</td>
<td>217.0</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Rate (%)</td>
<td>--</td>
<td>6.5</td>
<td>4.8</td>
<td>5.1</td>
<td>7.0</td>
<td>5.7</td>
<td>5.5</td>
<td>4.9</td>
</tr>
</tbody>
</table>
</body>
</html>

Unemployment is falling in Europe. With the notable exception of the UK, unemployment rates are moving lower in most European countries. In May, the rates in Germany and France were both at their lowest since late 2002. Today, the [...]

Low Unemployment in Nordic Countries

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060727f.jpg" width="353">
The Conference Board&#39;s Index of Help-Wanted Advertising remained at its forty five year low of 33 in June.
During the last ten years there has been a 57% correlation between the level of help-wanted advertising and the three month change in non-farm payrolls.
The proportion of labor markets with rising want-ad volume improved to 49% from the low 27% in May and an average 48% last year.
The Conference Board surveys help-wanted advertising volume in 51 major newspapers across the country every month.
The latest help wanted report from the Conference Board is available <a href="http://www.conference-board.org/economics/helpwanted.cfm">here</a>.
Should the Decline in the Personal Saving Rate Be a Cause for Concern? from the federal Reserve Bank of Kansas City is available <a href="http://www.kansascityfed.org/PUBLICAT/ECONREV/PDF/2Q06garn.pdf"> here</a>. 

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/CBDB/@C3/@C3.HTM">Conference Board</a></th>
<th scope="col">June</th>
<th scope="col">May</th>
<th scope="col">June &#39;05</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">National Help Wanted Index</td>
<td>33</td>
<td>33</td>
<td>39</td>
</tr>
</tbody>
</table>
</body>
</html>

The Conference Board's Index of Help-Wanted Advertising remained at its forty five year low of 33 in June. During the last ten years there has been a 57% correlation between the level of help-wanted advertising and the three month [...]

Help-Wanted Advertising Remained Low

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060727a.jpg" width="353">
A 7,000 worker decline last week in initial claims for unemployment insurance to 298,000 followed a little revised 129,000 slide during the prior period and pulled claims to the lowest level in six weeks. Consensus expectations had been for 310,000 claims.
During the last ten years there has been a (negative) 78% correlation between the level of initial claims and the m/m change in nonfarm payroll employment.
The four-week moving average of initial claims fell to 312,750 (-2.7% y/y).
Continuing claims for unemployment insurance fell 23,000 after a little revised 78,000 jump the prior week.
The insured rate of unemployment held steady at 1.9% where it has been since February.
The latest Beige Book from the Federal Reserve Board can be found <a href="http://www.federalreserve.gov/FOMC/BeigeBook/2006/20060726/default.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/WEEKLY/@W5/@W507/@W507.HTM">Unemployment Insurance (000s)</a></th>
<th scope="col">07/22/06</th>
<th scope="col">07/15/06</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>298</td>
<td>305</td>
<td>-4.8%</td>
<td>332</td>
<td>343</td>
<td>403</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Continuing Claims</td>
<td>--</td>
<td>2,475</td>
<td>-5.2%</td>
<td>2,663</td>
<td>2,923</td>
<td>3,530</td>
</tr>
</tbody>
</table>
</body>
</html>

A 7,000 worker decline last week in initial claims for unemployment insurance to 298,000 followed a little revised 129,000 slide during the prior period and pulled claims to the lowest level in six weeks. Consensus expectations had [...]

Initial Jobless Insurance Claims Fell Further

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

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

Tighter US immigration enforcement adversely impacting labor force

Economic policy uncertainty, while still elevated, is declining

Gradual disinflation and easier monetary policies across advanced economies

Largest October layoffs since 2003, led by technology

Subdued global shipping costs not yet pointing to supply chain problems

PMIs show still-elevated but slowing US inflation

AI boosting US investment in data centers

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

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

US financial markets have gotten used to elevated policy uncertainty

FOMC now expects more rate cuts going forward than in June

China gaining ASEAN exports while US exports slump

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

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

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

Equity market exuberance outpacing macroeconomic data

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

US production rebounded in Q2, but demand continued to slow

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

Negative US inflation surprises leading G10 down

Deflation continues in China

Incoming data surprising on downside in US; positive surprises elsewhere

FOMC expects more inflation and less growth than in March

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The National Association of Realtors' Fixed Rate Mortgage Housing Affordability Index (HAI) improved 0.9% (3.6% y/y) to 106.2 in October after rising 4.7% in September, revised from 3.9%, following a 2.8% increase in August. The index level was the highest since February 2023. The level of home affordability was 18.1% higher than its low of 89.9 in October 2023, but 40.7% below the peak of 179.0 in April 2020.

The rise in October affordability occurred as the average mortgage rate fell to 6.33% from 6.43% in September. The fall in mortgage rates left them above their low of 6.26% in September of last year, though below a 7.70% high in October of 2023. They remained well above a December 2020 low of 2.73%. The median price of an existing single-family home rose 0.7% (2.2% y/y) to $420,600. That price compared to the record $438,600 in June 2025. In October, the principal plus interest payment eased 0.3% (+0.2% y/y) to $2,089 per month, down 9.6% from June’s record high of $2,311, but still well above the most recent low of $984 in February 2020. Monthly mortgage payments averaged a slightly lessened 23.5% of income during October, but remained well above a low of 14.0% of income in April 2020.

The change in housing costs in October was accompanied by a 0.5% rise (3.8% y/y) in median family income to $106,478 after falling 0.3% in September. Qualifying income declined 0.3% (+0.2% y/y) to $100,272, after falling for three straight months.

Housing affordability improved m/m in most of the country in October. The index in the Midwest, the country’s most affordable region, rose 1.5% (0.9% y/y) to 134.4. In the South, the index increased 0.7% (5.4% y/y) to 112.1, while the affordability index in the Northeast strengthened 1.1% (-1.4% y/y) to 93.7. Declining, however, was the affordability index in the West, where homes are the least affordable. The index eased 0.3% (+5.3% y/y) to 75.2 in October.

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. It reached an all-time high of 213.3 in January 2013.

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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251212I1.jpg

- Mortgage rates continue to decline.
- Median income strengthens.
- Affordability improves in most of country.

U.S. Housing Affordability Edges Higher in October

Andrew Cates

**The Blue Chip Consensus**
Before turning to the risks that could unsettle the global outlook in 2026, it’s worth noting the backdrop against which those risks are emerging. The first chart shows that forecasters have, if anything, become more optimistic in recent months, raising their 2026 GDP projections across many major economies. The upgrades are most visible in Asia’s tech-focused economies, where the semiconductor and AI upturn is lifting expectations, but the US has also benefited from stronger-than-expected momentum and fading concerns that tariffs would deliver a major growth hit. In short, the starting point for the global outlook has improved—making the downside scenarios explored in the next few charts all the more important to test.

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**Policy divergence**
The second chart highlights one of the central risks to the 2026 outlook: monetary-policy calibration. Even as growth expectations have firmed, forecasters remain convinced that the major central banks still have a little further to go in their easing cycles. For both the Fed and the Bank of England, respondents expect additional rate cuts in early 2026, albeit with growing uncertainty about the exact timing and pace. The broader message is that the heavy lifting on disinflation is now largely done, and what remains are finer calibration risks—where cutting too slowly risks choking momentum, while cutting too aggressively risks undoing progress on inflation. The ECB outlook is far more fragmented. A large share of forecasters sees the next step as a cut—though not necessarily soon—but a meaningful minority lean toward a possible hike. At the opposite pole is the Bank of Japan. Unlike its peers, the BoJ is still expected to tighten policy, reflecting Japan’s firmer growth foundation and a more durable inflation process. This creates a notable US–Japan policy divergence, which has already influenced currency and bond-market behaviour and could become a larger global shock-transmission channel in 2026.

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**Financial market stress**
The third chart highlights another source of downside risk: the widening gap between financial-market calm and real-economy anxiety. The US VIX has spent most of the past year hovering near multi-decade lows, consistent with rich valuations, abundant liquidity and a broadly optimistic macro narrative. Yet measured global economic policy uncertainty remains unusually elevated, reflecting geopolitical fragmentation, shifting trade regimes, and highly uncertain fiscal trajectories. This disconnect matters. Periods in which markets price near-perfection while the policy environment deteriorates have often been precursors to sharp repricing episodes. With valuations stretched and volatility compressed, it would not take much—a policy misstep, a geopolitical shock, or a rapid shift in rate expectations—to trigger a correction big enough to destabilise confidence in 2026.

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**AI expectations**
Against that backdrop, our next chart highlights a more subtle but no less important vulnerability: expectations around AI-driven growth. While AI has undoubtedly been a powerful tailwind for market sentiment—and arguably a key reason why forecasters have nudged up 2026 growth projections—our survey suggests that most respondents believe financial markets are overestimating the likely economic gains. Only around a third think current expectations are broadly accurate; almost nobody believes markets are underestimating AI’s impact. This imbalance matters. When valuations are rich and optimism is heavily front-loaded, any disappointment in AI adoption, productivity gains or investment payoffs could unwind a meaningful chunk of the recent market strength. In other words, the same force lifting the outlook today could become a meaningful downside catalyst in 2026 if reality fails to keep pace with expectation.

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**Trade disruption** 
A further downside risk comes from the latent fragilities in global trade and logistics. The Baltic Dry Index has climbed sharply in recent months, hinting at firmer shipping demand and rising transport costs, even as the Global Supply Chain Pressure Index has edged lower. That combination is telling: headline congestion may not yet be building, but underlying pressures—tight vessel availability, shifting trade routes, selective port bottlenecks and stronger goods flows—are quietly re-accumulating beneath the surface. None of this resembles the acute disruptions of 2021–22, but the risk is that a seemingly contained system can tighten very quickly. For a global economy that remains vulnerable to cost shocks and production delays, any renewed squeeze in trade logistics would add another meaningful downside risk as we look toward 2026.

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**Geopolitical shocks** 
Geopolitical risk has eased from the extremes seen during the early stages of the Israel–Gaza conflict, but the broader backdrop remains far from settled. The global Geopolitical Risk Index is still running well above its pre-pandemic norm, and volatility is now being driven less by any single flashpoint and more by a crowded field of simmering risks. These range from an unstable Russia–Ukraine stalemate and intensifying U.S.–China strategic rivalry to ongoing tensions across the Taiwan Strait, a fragile security environment in the South China Sea, periodic flare-ups in the Caucasus and Sahel, and rising political strain ahead of multiple major elections in 2026. Venezuela’s increasing instability—both domestically and in relation to its border dispute with Guyana—adds another potential source of disruption, particularly for energy markets. While none of these risks is dominating headlines at present, history shows that geopolitical shocks rarely give advance warning. A sudden escalation in any of these theatres could easily unsettle trade flows, energy prices or investor sentiment—another meaningful downside risk as we approach 2026.

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As 2025 draws to a close, the global economy enters 2026 with a surprisingly resilient backdrop: equity markets are still trading near cycle highs, volatility is subdued, and consensus forecasts have been drifting upward in recent months—helped by a robust US economy, firmer momentum across Asia, and optimism that AI-related investment will continue to lift the medium-term outlook (chart 1). Against this relatively constructive starting point, we focus this week on the key downside risks that could challenge the consensus narrative next year: the possibility of monetary-policy miscalibration (chart 2); the gap between elevated policy uncertainty and unusually calm financial markets (chart 3); the risk that financial markets may be overestimating the gains from AI (chart 4); renewed strain in global trade (chart 5); and geopolitical tensions (chart 6). These risks do not dominate the baseline outlook, but they help frame the vulnerabilities that could matter if global conditions deteriorate. Next week, we will turn to the upside risks—the forces that could allow the world economy to outperform again in 2026.

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Charts of the Week: The Downside Risks

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The U.S. trade deficit in goods and services (BOP basis) narrowed to $52.8 billion in September from $59.3 billion in August, revised from $59.6 billion, according to the U.S. Census Bureau. The Action Economics Forecast Survey expected a deficit of $64.6 billion. The goods deficit fell to $79.0 billion in September from $86.1 billion in August, while the services surplus slipped to $26.2 billion from $26.8 billion in August. The real (inflation-adjusted) trade deficit in goods narrowed to $79.0 (2017$) in September from $83.7 billion in August. For all of Q3’25, the real deficit averaged $87.4 billion versus $87.7 billion in Q2, and thus it should be a modest addition to Q3 economic growth after a 4.8 percentage point addition in Q2.

Exports of goods & services rose 3.0% (5.7% y/y) in September following a 0.2% August slip. Goods exports (Census basis) strengthened 4.9% after a 0.8% slip. Nonauto consumer goods exports surged 19.1%. Industrial supplies & materials exports increased 12.1% while foods, feeds & beverage exports rose 3.4%. “Other” goods exports rose 7.6%. To the downside, capital goods exports excluding autos declined 5.3% while auto & parts exports fell 2.2%. Services exports eased 0.4%. Exports of financial services rose 1.4% while exports of maintenance & service repairs rose 0.8%. Exports of government goods and services rose 1.7%.

Imports of goods & services in September increased 0.6% (-3.7% y/y) after a 5.2% decline. Goods imports rose 0.7% (-5.9% y/y) in September after a 6.6% August decline. Nonauto consumer goods jumped 18.4% while industrial supplies & materials imports were little-changed. Elsewhere, imports fell. Capital goods excluding auto imports slumped 6.0%, auto imports fell 4.1% and food imports declined 1.6%. Total services imports rose 0.3% in September after a 0.3% decline. Maintenance & repair services increased 3.1%, construction service imports rose 1.1%, transport rose 1.5% but travel weakened 1.2%. Imports of government goods & services held steady.

By country, the goods trade deficit with China narrowed to $11.4 billion (SA) in September from $15.4 billion in August. Exports to China rose 1.8% while imports from China weakened 16.1%. The trade deficit with the European Union doubled m/m to $17.8 billion in September. Exports rose 13.2% but imports surged by one-third. The deficit with Japan declined sharply to $3.6 billion in September. Exports increased 7.9% while imports declined 12.7%.

The international trade data can be found in Haver’s **USECON** database. Detailed figures on international trade are available in the **USINT** and **USTRADE** databases. The expectations figures are from the Action Economics Forecast Survey in **AS1REPNA**.

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- Foreign trade deficit shrinks to lowest since June 2020.
- Surge in exports is driven by foods, industrial supplies & nonauto consumer goods.
- Minimal import increase is held down by fewer capital goods, autos & foods.
- Services surplus eases.

U.S. Trade Deficit Narrows to Five-Year Low in September

Kathleen Stephansen, CBE

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Initial claims for unemployment insurance rose 44,000 to 236,000 during the week of December 6, after declining to 192,000 during the week of November 29, revised from 191,000. The four-week moving average of initial claims was 216,750, an increase of 2,000 from the previous week unrevised average of 214,750, which was the lowest level since January 2025.

Federal government employees initially filed 643 (NSA) jobless insurance claims in the week ended November 29, after 1,126 filed in the week ended November 22, revised from 1,125.

Continuing claims for unemployment insurance posted a sharp decline of 99,000 to 1,838,000 in the week ending November 29, from 1,937,000 the prior week, revised from 1.939 million. The four-week moving average decreased by 27,000 to 1,918,000 in the week ended November 29, from 1945,250 the prior week, revised from 1.945 million. The insured unemployment rate stood at 1.2% in the week of November 29, a decrease from 1.3% in the prior week.

Federal government employees continuing benefits fell to 12,732 (NSA) in the week ended November 22, from 17,862 in the week ended November 15, revised from 17,851.

The insured unemployment rate varied greatly across individual states and territories. In the week ended November 22, the highest unemployment rates were in New Jersey (2.18%), Washington (2.23%), Massachusetts (1.95%), Connecticut (1.83%) and Rhode Island (1.82%). The lowest rates were in Florida (0.27%), South Dakota (0.34%), North Carolina (0.39%), Louisiana (0.42%), Alabama (0.44%), Virginia and Tennessee (both 0.46%), and Arkansas and Nebraska (both 0.48%). Rates in other notable states include California (1.74%), New York (1.63%), Pennsylvania (1.46%), Illinois (1.45%), and Texas (1.07%). 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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U.S. Initial Claims for Unemployment Insurance Rose in Latest Week

Robert Brusca

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Sweden’s inflation rate has developed into a very interesting oddity as headline inflation as measured by the harmonized index of consumer prices (HICP), that is used in Europe, has come to diverge sharply from the Swedish national rate of inflation measured by its national CPI. The HICP inflation rate is 2.2% over the last 12 months; Sweden’s national rate is up by only 0.2%. If we rank each of these two inflation rates on data back to 2001, the rank of the HICP is in its 72.2 percentile while the rank of the national CPI is in only its 19.4 percentile, the lower one-fifth of its historic range of national inflation rates. These two rankings occur over the same periods and so there's nothing about the periodicity that's responsible for this; there's simply very different performance over the recent span.

**About measuring inflation**
The HICP was adopted in Europe once the monetary union was formed and the countries of Europe were not able to get together to decide how to treat housing costs, which are important element in the CPI. They had entered into CPIs in different countries in different ways at that point. In the United States, inflation statistics are often criticized because of the way the housing component fits into them. Housing has such a large weight in the U.S. inflation measure. U.S. housing costs consider the cost of running the house in terms of taxes and utility costs; they look at the rental equivalent values, and they also have an owner imputed rent for people who live in their own homes. Of course, owner equivalent rent is a made-up number; it's completely imputed. Because a lot of European mortgages are short-term and they reprice when the central bank changes its rate, it’s very important to be careful how interest rates are treated in the housing cost indexes in Europe. The central bank did not want to be in a position where it would be raising interest rates to fight inflation and causing inflation to be higher because they were raising the mortgage interest rates on homes and causing the cost of housing to go up. For this reason, the HICP measures do not include housing costs. As we can see in the Swedish details for this month, housing and fuel costs are down 3.1% year-over-year. If we look at the ranking of housing costs for year-over-year growth, we see that they rank in the lower 6.4 percentile and are one of the most important factors in driving the national CPI lower and, of course, that metric is absent from the HICP.

**Inflation is always rife with controversy**: All of this is simply just another way to point out that inflation, while we measure it and talk about it, it's a controversial subject. How we measure it does matter. However, for monetary policy purposes, if we construct a measure that is reasonable and if we follow it consistently over the years, it should give us good signals and a good way to measure inflation and engage monetary policy. Yet, very clearly, if there are two competing gauges, it could become a real problem to jump from one to the other because they track different circumstances.

**The current state of Swedish inflation**: Swedish inflation in November fell by 0.3% month-to-month after rising by 0.5% in October and falling by 0.1% in September. The diffusion, or breadth, of inflation acceleration was only 33.3% in November. It jumped up to 55.6% in October, but it had been lower in September at 33%. Looking at Swedish inflation over 12-month, 6-month, and 3-month periods, the HICP goes from 2.2% over 12 months to an annualized pace of 5.7% over 6 months and then back down to 0.5% over 3 months. The national CPI has the same sort of topography but different growth rates with the CPI up by only 0.2% over 12 months, accelerating to 1.5% over 6 months and then declining at a -0.9% annual rate over 3 months. Inflation diffusion over 3 months in the national index is only 11.1%, over 6 months it jumps up to 66.7%, and over 12 months it's at 44.4% which is below 50% marking inflation as having more deceleration than acceleration.

**Controlled inflation**: On balance, Swedish inflation appears to be under control using either method. The ranking for inflation by category shows high inflation for food & nonalcoholic beverages, education, other goods & services, and medical care. However, inflation is below its median pace and bears low rankings for clothing & footwear, housing, fuel & lighting, recreation & culture, and transportation. Inflation is always somewhat mixed across sectors. That’s another thing that makes it hard to pin down exactly what inflation is, because people who consume different baskets of goods are going to experience different inflation rates. However, Sweden appears to have its inflation situation under control whichever metric you look at. The chart makes it clear that after its spike during COVID, inflation has come back down to a reasonable long-term pace that appears to be close to something that the central bank would find acceptable. The recent rise in HICP inflation seems to be unwinding and year-over-pace is down to a moderate 2.2%.

Economy in Brief

Jump to:

Japan Labor Data Ease in June, But Conditions Remain Positive

U.S. Consumer Sentiment Improved in Late July

Gain in the Employment Cost Index Accelerated

US GDP Growth Slowed

US GDP Growth Slowed

Low Unemployment in Nordic Countries

Help-Wanted Advertising Remained Low

Initial Jobless Insurance Claims Fell Further