Tom Moeller

<html>
<head>
<style>
.odd{
 background-color:#edf5ff;
}
.even{
 background-color:#dde5ef;
}
.grey1{
	background-color:#f0f0f0;
}
.grey2{
	background-color:#e2e2e2;
}
.grey3{
	background-color:#d4d4d4;
}
.grey4{
	background-color:#c6c6c6;
}
.grey5{
	background-color:#b8b8b8;
}
</style>
</head>
<body>
 



<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060804c.jpg" width="353">
July nonfarm payrolls rose 113,000 and the increase fell short of Consensus expectations for a 142,000 gain. Revisions increased slightly the rise in June payrolls to 124,000 and the rise in May payrolls to 100,000.
Year to date payrolls have risen an average 140,000 per month versus an average of 165,000 last year and an average 175,000 during 2004.
Average hourly earnings rose the same 0.4% as a downwardly revised 0.4% June gain but exceeded expectations for a 0.3% rise. The increase in factory sector earnings moderated to 0.1% (1.5% y/y) from the 0.2% increase in June.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060804b.jpg" width="353">
From the household survey the unemployment rate rose to 4.8% versus an expected 4.6%. It was the highest level since February and the increase reflected a 34,000 (+1.6% y/y) decline in employment which followed a 387,000 jump during June. The labor force rose 213,000 (1.3% y/y) as the labor force participation rate remained up at 66.2% though the rate for adult males stayed low at 75.7%. The participation rate for females over 20 rose to a three year high of 60.8%.
The breadth of one month gain in private payrolls fell sharply to 53.2% in July, the lowest since last September. In the factory sector the one month breadth of gain fell to a less-than break even 45.2%.
Factory sector payrolls reversed most of the prior month&#39;s gain with a 15,000 decline. Jobs in the computer &amp; electronic products industry fell 8,200 (+0.2% y/y) and the number of motor vehicle &amp; parts jobs fell 7,900 (+0.4% y/y). <img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060804a.jpg" width="353">
Private service-producing jobs rose 115,000 (1.5% y/y), improved from an upwardly revised 86,000 June increase. Retail trade sector jobs continued weak and were unchanged (-0.6% y/y) after several months of decline. Financial sector jobs rose 6,000 (2.2% y/y) and professional &amp; business services employment rose 43,000 (2.7% y/y). Temporary help services jobs fell for the fifth month this year, by 2,400 (+3.1% y/y). Jobs in education &amp; health services rose 24,000 (2.1% y/y).
Construction employment rose 6,000 (3.0% y/y) following two months of moderate decline. Year to year growth in residential construction jobs moderated further to 2.9% from the peak of 6.0% last year and 7.0% during 2004. Growth in nonresidential construction jobs picked up to 5.5% from 1.7% last year and negative growth in 2004.
The workweek remained elevated at 33.9 hours in private industry versus the 2Q level of 33.9.
Click <a href="changes.pdf"> here</a> for The Unemployment Effects of Proposed Changes in Social Security&#39;s &quot;Normal Retirement Age.&quot; <span style="FONT-SIZE: 10pt; FONT-FAMILY: Verdana; mso-fareast-font-family: &#39;Times New Roman&#39;; mso-ansi-language: EN-US; mso-fareast-language: EN-US; mso-bidi-language: AR-SA; mso-bidi-font-family: &#39;Times New Roman&#39;">This paper was published by the National Association for Business Economics (<a href="http://www.nabe.com/">www.nabe.com</a>) in the April 2006 issue of the NABE journal Business Economics.
Participation Dynamics: The More, the Merrier is from the Federal Reserve Bank of St. Louis and it can be found <a href="http://research.stlouisfed.org/publications/iet/20060801/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/USECON/@EB/@EB01/@EB01.HTM">Employment</a></th>
<th scope="col">July</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">Payroll Employment</td>
<td>113,000</td>
<td>124,000</td>
<td>1.3%</td>
<td>1.5%</td>
<td>1.1%</td>
<td>-0.3%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Manufacturing</td>
<td>-15,000</td>
<td>22,000</td>
<td>0.1%</td>
<td>-0.6%</td>
<td>-1.3%</td>
<td>-4.9%</td>
</tr>
<tr class="odd">
<td class="firstcol">Average Weekly Hours</td>
<td>33.9</td>
<td>33.9</td>
<td>33.8 (July &#39;05)</td>
<td>33.8</td>
<td>33.7</td>
<td>33.7</td>
</tr>
<tr>
<td class="firstcol">Average Hourly Earnings</td>
<td>0.4%</td>
<td>0.4%</td>
<td>3.8%</td>
<td>2.8%</td>
<td>2.1%</td>
<td>2.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">Unemployment Rate</td>
<td>4.8%</td>
<td>4.6%</td>
<td>5.0% (July &#39;05)</td>
<td>5.1%</td>
<td>5.5%</td>
<td>6.0%</td>
</tr>
</tbody>
</table>
Pause in Canada Labor Market Advance 
by <a href="/comment/Stone.html">Carol Stone</a> August 4, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060804d.jpg" width="353">
We last wrote about the Canadian labor force four months ago and we extolled the 31-year low in unemployment, 6.3% in March. After an uptick in April, the rate dropped to another 31-year low of 6.1% in both May and June. But July saw it climb back to 6.4%. Part of the rise is explained by an increase in participation, particularly among women. This increase in the number of people willing to work met with a modest decrease in employment by 5,500 after a 4,600 loss in June. The resulting employment rate (employment as a % of population) fell to 63.0%, the lowest since April.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060804e.jpg" width="353">
The press reports note that the fall in employment and the rise in unemployment were not expected and are therefore very dramatic. But these developments come in the wake of an extraordinary employment gain of 96,700 in May. That was the second largest monthly increase since 1976, with the largest in this span just a bit more, 97,000, in January 2002. So it is hard not to expect some pause to follow that big move. And what we have in these two latest months is minuscule, 0.03% each time, so it&#39;s more that employment stabilized rather than &quot;falling&quot;.
In the big May rise, several industry groups participated, particularly finance and related services, health care and public administration. There were also notable gains in professional services, culture &amp; recreation and accommodations &amp; food services. In the subsequent months, only one, professional services, lost all of its May increase. Others grew in at least one of June or July; accommodation and food services increased in both. The total services sector grew 1.1% in the last three months and is up 2.9% over a year ago.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060804f.jpg" width="353">
Goods-producing industries are not so strong, as a brief flurry in manufacturing back in the spring faded quickly. Mining and construction have stronger trends, but mining is small -- roughly 325,000 employees all together -- so 7% growth there over a year ago doesn&#39;t add many total workers. Construction has more impact, though, and it too is up more than 7% year-on-year, adding almost 72,000 workers. So there is diverse growth in Canadian employment opportunities and a two-month pause hardly indicates that these gains have stopped in their tracks. 

<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/CANSIM/@C6/@C601/@C601.HTM">Canada (Seasonally Adjusted)</a></th>
<th scope="col">Jul 2006</th>
<th scope="col">June 2006</th>
<th scope="col">May 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">Unemployment Rate (%)</td>
<td>6.4</td>
<td>6.1</td>
<td>6.1</td>
<td>6.8</td>
<td>6.8</td>
<td>7.2</td>
<td>7.6</td>
</tr>
<tr>
<td class="firstcol">Participation Rate (%)</td>
<td>67.3</td>
<td>67.2</td>
<td>67.3</td>
<td>67.2</td>
<td>67.2</td>
<td>67.5</td>
<td>67.5</td>
</tr>
<tr class="odd">
<td class="firstcol">Employment (Change, 000s/%)</td>
<td>-5.5</td>
<td>-4.6</td>
<td>+96.7</td>
<td>2.0%</td>
<td>1.4%</td>
<td>1.8%</td>
<td>2.4%</td>
</tr>
<tr>
<td class="firstcol">Goods-Producing </td>
<td>-7.4</td>
<td>-34.7</td>
<td>-9.8</td>
<td>-0.6%</td>
<td>0.2%</td>
<td>1.7%</td>
<td>1.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">Service-Producing</td>
<td>+1.8</td>
<td>+30.2</td>
<td>+106.4</td>
<td>2.9%</td>
<td>2.1%</td>
<td>1.8%</td>
<td>2.7%</td>
</tr>
</tbody>
</table>
</body>
</html>

July nonfarm payrolls rose 113,000 and the increase fell short of Consensus expectations for a 142,000 gain. Revisions increased slightly the rise in June payrolls to 124,000 and the rise in May payrolls to 100,000. Year to date [...]

U.S. Payrolls & Wages Moderate

Carol Stone, CBE

<html>
<head>
<style>
.odd{
 background-color:#edf5ff;
}
.even{
 background-color:#dde5ef;
}
.grey1{
	background-color:#f0f0f0;
}
.grey2{
	background-color:#e2e2e2;
}
.grey3{
	background-color:#d4d4d4;
}
.grey4{
	background-color:#c6c6c6;
}
.grey5{
	background-color:#b8b8b8;
}
</style>
</head>
<body>
 



<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060803e.jpg" width="353">
Inflation in Turkey has picked up a bit in recent months, but remains quite modest compared with Turkey&#39;s historical experience. The CPI in July was up 1.7% from June, seasonally adjusted (by Haver Analytics), and 11.7% from a year ago. June and May were both up about 10% from year-earlier levels. Our standard table shows only the last three years of data and for this period, these recent numbers would look a bit discouraging. Nonetheless, these are low. As recently as 2002, inflation ran just under 30% and from early 1994 to late 1998, the lowest 12-month reading was 75.7%, with numerous months above 100%.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060803f.jpg" width="353">
Since 2003, the Turkish Statistical Institute has published some detail data. As seen in the graph, food prices are one of the sources of the recent rise in inflation. Actually so are clothing prices, but at a much lower level: year-on-year changes were in fact negative in the first few months of 2006, but that index has stabilized and even risen slightly in May, June and July. Otherwise, we see that various measures of &quot;core&quot; inflation are not much affected by the exclusion of food, energy and administered prices.
Note that Turkey data offerings are contained in Haver&#39;s EMERGEMA database, which includes Middle Eastern and African countries.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060803g.jpg" width="353">
Haver is also accumulating a growing amount of data on other emerging markets. Late yesterday, the Statistical Office of Macedonia reported its consumer prices for June. These data are included in EMERGECW, along with other Central, Southern and Eastern European countries. Macedonia&#39;s total CPI began in 2000, with a standard breakdown starting in 2004. Over the time span available, inflation in that small nation (about the size of Vermont, according to the CIA&#39;s &quot;World Factbook&quot;) has been quite modest. In June, the total index was 3.1% above June 2005, also a pickup the couple of years. In 2005 overall, the index rose just 1.3% and it fell in 2004 by 2.1%. Among components, food, energy and home furnishings all saw price weakness through part or all of 2005, but they have since firmed. However, their rates generally remain lower than elsewhere, with housing and utilities costs rising 1.3% in June and transportation 10.0%. 

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">CPI% Changes</th>
<th scope="col">July 2006</th>
<th scope="col">June 2006</th>
<th scope="col">May 2006</th>
December/December
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">2005</td>
<td>2004</td>
<td>2003</td>
</tr>
<tr>
<td class="firstcol">Turkey: SA, Mo/Mo</td>
<td>1.7</td>
<td>1.2</td>
<td>2.1</td>
<td>--</td>
<td>--</td>
<td>--</td>
</tr>
<tr class="odd">
<td class="firstcol">NSA, Yr/Yr</td>
<td>11.7</td>
<td>10.1</td>
<td>9.9</td>
<td>7.7</td>
<td>9.4</td>
<td>12.7</td>
</tr>
<tr>
<td class="firstcol">Ex Energy</td>
<td>11.2</td>
<td>9.6</td>
<td>9.9</td>
<td>7.8</td>
<td>8.7</td>
<td>12.2*</td>
</tr>
<tr class="odd">
<td class="firstcol">Ex Energy, Others**</td>
<td>10.5</td>
<td>9.0</td>
<td>8.7</td>
<td>6.6</td>
<td>9.9</td>
<td>11.5*</td>
</tr>
<tr>
<td class="firstcol">&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">Macedonia</td>
<td>--</td>
<td>3.1</td>
<td>4.0</td>
<td>1.3</td>
<td>-2.1</td>
<td>2.5</td>
</tr>
</tbody>
</table>
</body>
</html>

Inflation in Turkey has picked up a bit in recent months, but remains quite modest compared with Turkey's historical experience. The CPI in July was up 1.7% from June, seasonally adjusted (by Haver Analytics), and 11.7% from a year [...]

CPI Inflation in Turkey & Macedonia: Up, but Not High

<html>
<head>
<style>
.odd{
 background-color:#edf5ff;
}
.even{
 background-color:#dde5ef;
}
.grey1{
	background-color:#f0f0f0;
}
.grey2{
	background-color:#e2e2e2;
}
.grey3{
	background-color:#d4d4d4;
}
.grey4{
	background-color:#c6c6c6;
}
.grey5{
	background-color:#b8b8b8;
}
</style>
</head>
<body>
 



<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060803d.jpg" width="353">
Factory inventories rose 0.8% during June for the fifth month of firm accumulation this year. Year to date inventories have risen at a 7.8% annual rate, nearly double the rate of accumulation during all of last year.
Primary metals inventories rose 0.8% (6.2% y/y) and have been rising at a 17.2% annual rate so far this year. Inventories of computers &amp; electronic products rose 0.4% (8.4% y/y) and the year to date annual rate of accumulation has been 9.2%. Inventories of electrical equipment jumped 2.2% (9.3% y/y) but machinery inventories ticked up just 0.1% (5.7% y/y).
Total factory orders surged 1.2%. Durable goods orders jumped 2.9% that was little revised from the advance report of a 3.1% gain. Factory orders less transportation rose just 0.1% (7.8% y/y) due to a 0.7% drop in nondurables.
Factory shipments fell 0.3%. Less transportation shipments also fell 0.2% (8.0% y/y). Petroleum shipments fell 0.2% (+20.9% y/y) and factory shipments less transportation &amp; petroleum slipped 0.2% (+6.7% y/y).
Unfilled orders increased another 1.6% but less the transportation sector altogether backlogs still rose a strong 1.4% (14.2% y/y).<a href="http://research.stlouisfed.org/publications/review/05/07/Gali.pdf"> </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/@ED/@ED01/@ED0101/@ED01016/@ED01016.HTM">Factory Survey</a> (NAICS)</th>
<th scope="col">June</th>
<th scope="col">May</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">Inventories</td>
<td>0.8%</td>
<td>0.7%</td>
<td>5.5%</td>
<td>4.0%</td>
<td>6.9%</td>
<td>-7.4%</td>
</tr>
<tr>
<td class="firstcol">New Orders</td>
<td>1.2%</td>
<td>1.0%</td>
<td>6.0%</td>
<td>8.5%</td>
<td>7.5%</td>
<td>0.9%</td>
</tr>
<tr class="odd">
<td class="firstcol">Shipments</td>
<td>-0.3%</td>
<td>2.5%</td>
<td>7.5%</td>
<td>7.1%</td>
<td>6.8%</td>
<td>0.2%</td>
</tr>
<tr>
<td class="firstcol">Unfilled Orders</td>
<td>1.6%</td>
<td>0.7%</td>
<td>19.3%</td>
<td>16.3%</td>
<td>4.5%</td>
<td>-1.0%</td>
</tr>
</tbody>
</table>
</body>
</html>

Factory inventories rose 0.8% during June for the fifth month of firm accumulation this year. Year to date inventories have risen at a 7.8% annual rate, nearly double the rate of accumulation during all of last year. Primary metals [...]

U.S. Factory Inventory Accumulation Strong

<html>
<head>
<style>
.odd{
 background-color:#edf5ff;
}
.even{
 background-color:#dde5ef;
}
.grey1{
	background-color:#f0f0f0;
}
.grey2{
	background-color:#e2e2e2;
}
.grey3{
	background-color:#d4d4d4;
}
.grey4{
	background-color:#c6c6c6;
}
.grey5{
	background-color:#b8b8b8;
}
</style>
</head>

 



<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060803b.jpg" width="353">
The Institute for Supply Management (ISM) reported that the July Business Activity Index for the non-manufacturing sector fell for the third straight month. The 2.2 point m/m decline to 54.8 exceeded Consensus expectations for a drop to 57.0 and left the index at its lowest level since September 2005.
Since the series&#39; inception in 1997 there has been a 50% correlation between the level of the Business Activity Index and the q/q change in real GDP for services plus construction.
The new orders sub-index fell for the third consecutive month to the lowest level in three year. The employment index, however, recovered nearly half of a sharp six point decline in June. 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/060803c.jpg" width="353">
Pricing power also recovered a bit of its June decline and rose to 74.8, a level above the 2Q average. 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 back to July 1997.
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.
Instability in U.S. Inflation: 1967-2005 from the Federal Reserve Bank of Atlanta can be found <a href="http://www.frbatlanta.org/invoke.cfm?objectid=F6A27989-5056-9F12-12B536A6D5EE7AED&amp;method=display"> 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">July</th>
<th scope="col">June</th>
<th scope="col">July &#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>54.8</td>
<td>57.0</td>
<td>60.4</td>
<td>60.1</td>
<td>62.5</td>
<td>58.3</td>
</tr>
<tr>
<td class="firstcol">Prices Index</td>
<td>74.8</td>
<td>73.9</td>
<td>69.5</td>
<td>67.9</td>
<td>68.8</td>
<td>56.6</td>
</tr>
</tbody>
</table>


</html>

The Institute for Supply Management (ISM) reported that the July Business Activity Index for the non-manufacturing sector fell for the third straight month. The 2.2 point m/m decline to 54.8 exceeded Consensus expectations for a drop [...]

ISM Nonmanufacturing Index Off

<html>
<head>
<style>
.odd{
 background-color:#edf5ff;
}
.even{
 background-color:#dde5ef;
}
.grey1{
	background-color:#f0f0f0;
}
.grey2{
	background-color:#e2e2e2;
}
.grey3{
	background-color:#d4d4d4;
}
.grey4{
	background-color:#c6c6c6;
}
.grey5{
	background-color:#b8b8b8;
}
</style>
</head>
<body>
 



<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060803a.jpg" width="353">
Initial claims for unemployment insurance increased 14,000 to 315,000 last week following a revised 4,000 drop the prior week. Consensus expectations had been for 310,000 claims and during all of July claims averaged 314,000, up a bit from 308,000 during June.
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 rose to slightly 313,750 (-1.8% y/y).
Continuing claims for unemployment insurance rose 11,000 after a little revised 29,000 decline the prior week.
The insured rate of unemployment held steady at 1.9% where it has been since February.
Implementation of Optimal Monetary Policy from the Federal Reserve Bank of Richmond is available <a href="http://www.richmondfed.org/publications/economic_research/economic_quarterly/pdfs/spring2006/dotsey_hornstein.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">07/29/06</th>
<th scope="col">07/22/06</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>315</td>
<td>301</td>
<td>-0.9%</td>
<td>332</td>
<td>343</td>
<td>403</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Continuing Claims</td>
<td>--</td>
<td>2,480</td>
<td>-4.5%</td>
<td>2,663</td>
<td>2,923</td>
<td>3,530</td>
</tr>
</tbody>
</table>
</body>
</html>

Initial claims for unemployment insurance increased 14,000 to 315,000 last week following a revised 4,000 drop the prior week. Consensus expectations had been for 310,000 claims and during all of July claims averaged 314,000, up a bit [...]

Initial Claims for Unemployment Insurance Rose

<html>
<head>
<style>
.odd{
 background-color:#edf5ff;
}
.even{
 background-color:#dde5ef;
}
.grey1{
	background-color:#f0f0f0;
}
.grey2{
	background-color:#e2e2e2;
}
.grey3{
	background-color:#d4d4d4;
}
.grey4{
	background-color:#c6c6c6;
}
.grey5{
	background-color:#b8b8b8;
}
</style>
</head>

 



<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060803a.jpg" width="353">
Initial claims for unemployment insurance increased 14,000 to 315,000 last week following a revised 4,000 drop the prior week. Consensus expectations had been for 310,000 claims and during all of July claims averaged 314,000, up a bit from 308,000 during June.
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 rose to slightly 313,750 (-1.8% y/y).
Continuing claims for unemployment insurance rose 11,000 after a little revised 29,000 decline the prior week.
The insured rate of unemployment held steady at 1.9% where it has been since February.
Implementation of Optimal Monetary Policy from the Federal Reserve Bank of Richmond is available <a href="http://www.richmondfed.org/publications/economic_research/economic_quarterly/pdfs/spring2006/dotsey_hornstein.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">07/29/06</th>
<th scope="col">07/22/06</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>315</td>
<td>301</td>
<td>-0.9%</td>
<td>332</td>
<td>343</td>
<td>403</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Continuing Claims</td>
<td>--</td>
<td>2,480</td>
<td>-4.5%</td>
<td>2,663</td>
<td>2,923</td>
<td>3,530</td>
</tr>
</tbody>
</table>
ISM Nonmanufacturing Index Off 
by <a href="/comment/Moeller.html">Tom Moeller</a> August 3, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060803b.jpg" width="353">
The Institute for Supply Management (ISM) reported that the July Business Activity Index for the non-manufacturing sector fell for the third straight month. The 2.2 point m/m decline to 54.8 exceeded Consensus expectations for a drop to 57.0 and left the index at its lowest level since September 2005.
Since the series&#39; inception in 1997 there has been a 50% correlation between the level of the Business Activity Index and the q/q change in real GDP for services plus construction.
The new orders sub-index fell for the third consecutive month to the lowest level in three year. The employment index, however, recovered nearly half of a sharp six point decline in June. 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/060803c.jpg" width="353">
Pricing power also recovered a bit of its June decline and rose to 74.8, a level above the 2Q average. 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 back to July 1997.
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.
Instability in U.S. Inflation: 1967-2005 from the Federal Reserve Bank of Atlanta can be found <a href="http://www.frbatlanta.org/invoke.cfm?objectid=F6A27989-5056-9F12-12B536A6D5EE7AED&amp;method=display"> 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">July</th>
<th scope="col">June</th>
<th scope="col">July &#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>54.8</td>
<td>57.0</td>
<td>60.4</td>
<td>60.1</td>
<td>62.5</td>
<td>58.3</td>
</tr>
<tr>
<td class="firstcol">Prices Index</td>
<td>74.8</td>
<td>73.9</td>
<td>69.5</td>
<td>67.9</td>
<td>68.8</td>
<td>56.6</td>
</tr>
</tbody>
</table>
U.S. Factory Inventory Accumulation Strong 
by <a href="/comment/Moeller.html">Tom Moeller</a> August 3, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060803d.jpg" width="353">
Factory inventories rose 0.8% during June for the fifth month of firm accumulation this year. Year to date inventories have risen at a 7.8% annual rate, nearly double the rate of accumulation during all of last year.
Primary metals inventories rose 0.8% (6.2% y/y) and have been rising at a 17.2% annual rate so far this year. Inventories of computers &amp; electronic products rose 0.4% (8.4% y/y) and the year to date annual rate of accumulation has been 9.2%. Inventories of electrical equipment jumped 2.2% (9.3% y/y) but machinery inventories ticked up just 0.1% (5.7% y/y).
Total factory orders surged 1.2%. Durable goods orders jumped 2.9% that was little revised from the advance report of a 3.1% gain. Factory orders less transportation rose just 0.1% (7.8% y/y) due to a 0.7% drop in nondurables.
Factory shipments fell 0.3%. Less transportation shipments also fell 0.2% (8.0% y/y). Petroleum shipments fell 0.2% (+20.9% y/y) and factory shipments less transportation &amp; petroleum slipped 0.2% (+6.7% y/y).
Unfilled orders increased another 1.6% but less the transportation sector altogether backlogs still rose a strong 1.4% (14.2% y/y).<a href="http://research.stlouisfed.org/publications/review/05/07/Gali.pdf"> </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/@ED/@ED01/@ED0101/@ED01016/@ED01016.HTM">Factory Survey</a> (NAICS)</th>
<th scope="col">June</th>
<th scope="col">May</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">Inventories</td>
<td>0.8%</td>
<td>0.7%</td>
<td>5.5%</td>
<td>4.0%</td>
<td>6.9%</td>
<td>-7.4%</td>
</tr>
<tr>
<td class="firstcol">New Orders</td>
<td>1.2%</td>
<td>1.0%</td>
<td>6.0%</td>
<td>8.5%</td>
<td>7.5%</td>
<td>0.9%</td>
</tr>
<tr class="odd">
<td class="firstcol">Shipments</td>
<td>-0.3%</td>
<td>2.5%</td>
<td>7.5%</td>
<td>7.1%</td>
<td>6.8%</td>
<td>0.2%</td>
</tr>
<tr>
<td class="firstcol">Unfilled Orders</td>
<td>1.6%</td>
<td>0.7%</td>
<td>19.3%</td>
<td>16.3%</td>
<td>4.5%</td>
<td>-1.0%</td>
</tr>
</tbody>
</table>
CPI Inflation in Turkey & Macedonia: Up, but Not High 
by <a href="/comment/Stone.html">Carol Stone</a> August 3, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060803e.jpg" width="353">
Inflation in Turkey has picked up a bit in recent months, but remains quite modest compared with Turkey&#39;s historical experience. The CPI in July was up 1.7% from June, seasonally adjusted (by Haver Analytics), and 11.7% from a year ago. June and May were both up about 10% from year-earlier levels. Our standard table shows only the last three years of data and for this period, these recent numbers would look a bit discouraging. Nonetheless, these are low. As recently as 2002, inflation ran just under 30% and from early 1994 to late 1998, the lowest 12-month reading was 75.7%, with numerous months above 100%.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060803f.jpg" width="353">
Since 2003, the Turkish Statistical Institute has published some detail data. As seen in the graph, food prices are one of the sources of the recent rise in inflation. Actually so are clothing prices, but at a much lower level: year-on-year changes were in fact negative in the first few months of 2006, but that index has stabilized and even risen slightly in May, June and July. Otherwise, we see that various measures of &quot;core&quot; inflation are not much affected by the exclusion of food, energy and administered prices.
Note that Turkey data offerings are contained in Haver&#39;s EMERGEMA database, which includes Middle Eastern and African countries.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060803g.jpg" width="353">
Haver is also accumulating a growing amount of data on other emerging markets. Late yesterday, the Statistical Office of Macedonia reported its consumer prices for June. These data are included in EMERGECW, along with other Central, Southern and Eastern European countries. Macedonia&#39;s total CPI began in 2000, with a standard breakdown starting in 2004. Over the time span available, inflation in that small nation (about the size of Vermont, according to the CIA&#39;s &quot;World Factbook&quot;) has been quite modest. In June, the total index was 3.1% above June 2005, also a pickup the couple of years. In 2005 overall, the index rose just 1.3% and it fell in 2004 by 2.1%. Among components, food, energy and home furnishings all saw price weakness through part or all of 2005, but they have since firmed. However, their rates generally remain lower than elsewhere, with housing and utilities costs rising 1.3% in June and transportation 10.0%. 

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">CPI% Changes</th>
<th scope="col">July 2006</th>
<th scope="col">June 2006</th>
<th scope="col">May 2006</th>
December/December
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">2005</td>
<td>2004</td>
<td>2003</td>
</tr>
<tr>
<td class="firstcol">Turkey: SA, Mo/Mo</td>
<td>1.7</td>
<td>1.2</td>
<td>2.1</td>
<td>--</td>
<td>--</td>
<td>--</td>
</tr>
<tr class="odd">
<td class="firstcol">NSA, Yr/Yr</td>
<td>11.7</td>
<td>10.1</td>
<td>9.9</td>
<td>7.7</td>
<td>9.4</td>
<td>12.7</td>
</tr>
<tr>
<td class="firstcol">Ex Energy</td>
<td>11.2</td>
<td>9.6</td>
<td>9.9</td>
<td>7.8</td>
<td>8.7</td>
<td>12.2*</td>
</tr>
<tr class="odd">
<td class="firstcol">Ex Energy, Others**</td>
<td>10.5</td>
<td>9.0</td>
<td>8.7</td>
<td>6.6</td>
<td>9.9</td>
<td>11.5*</td>
</tr>
<tr>
<td class="firstcol">&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">Macedonia</td>
<td>--</td>
<td>3.1</td>
<td>4.0</td>
<td>1.3</td>
<td>-2.1</td>
<td>2.5</td>
</tr>
</tbody>
</table>


</html>

<html>
<head>
<style>
.odd{
 background-color:#edf5ff;
}
.even{
 background-color:#dde5ef;
}
.grey1{
	background-color:#f0f0f0;
}
.grey2{
	background-color:#e2e2e2;
}
.grey3{
	background-color:#d4d4d4;
}
.grey4{
	background-color:#c6c6c6;
}
.grey5{
	background-color:#b8b8b8;
}
</style>
</head>
<body>
 



<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060802e.jpg" width="353">
As the first potential hurricane of 2006, Chris, forms near the Dominican Republic and Cuba, we are reminded, of course, of the drastic impact of last year&#39;s Katrina. This morning, the BLS released the household survey data for June for metropolitan areas, and we can get an assessment of economic conditions now in some of the affected cities. These data are carried in Haver&#39;s EMPLR database. Series for labor force, employment, unemployment and the unemployment rate are included for hundreds of metro areas, micro areas, and the other standard combinations of urban communities in all 50 States, the District of Columbia and Puerto Rico.
In New Orleans, the center of Katrina&#39;s damage, the number of people employed is up about 25,000 from its October low, but is clearly still well off the pre-storm numbers. Unemployment, while not at the extreme of October, remains higher than 2003 and 2004, suggesting that even with a reduced labor force, job opportunities are not relatively as plentiful.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060802f.jpg" width="353">
Gulfport-Biloxi is also continuing to face strained economic conditions. Unemployment remains far higher than before and also higher than in New Orleans, even though the unemployment rates in the two areas were about the same in the 2003-04 period.
Other cities in the region are doing better. Baton Rouge, the State Capital, saw its unemployment rate shoot up immediately after Katrina, as workers from New Orleans poured into the area. As seen in the table, the rate rose even as the number of employed persons expanded by slightly more than 10,000. Since then, however, employment has fallen back to its pre-storm level and so has unemployment, as the transient workers apparently returned home or moved on.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060802g.jpg" width="353">
Cities in Texas also received people from the storm-damaged region. Beaumont-Port Arthur, very near the Louisiana state line, experienced a spike in its labor force and its unemployment rate, but this dissipated. Presently, employment is running about the same as in 2004 and 2005, and the unemployment rate is actually somewhat lower than previously.
Finally, in Houston, the labor force expanded by 25,400 in September and for the most part, these people stayed. Employment rose even more and unemployment fell. Only in June did some of this labor market vigor fade a bit, with a somewhat larger-than-normal June rise in the unemployment rate. So Houston generally was able to absorb its new workers and find jobs for them, and the labor force in Houston is nearly 2.5% larger than a year ago, compared with 1.5% in the nation as a whole.

<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/EMPLR/@H01/@H0102/@H0102.HTM">Employment, NSA, Thous</a></th>
<th scope="col">June 2006</th>
<th scope="col">May 2006</th>
<th scope="col">Oct 2005</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">New Orleans, LA*</td>
<td>412.0</td>
<td>404.5</td>
<td>388.5</td>
<td>610.9</td>
<td>n.m.</td>
<td>587.6</td>
<td>578.7</td>
</tr>
<tr>
<td class="firstcol">Unemployment Rate (%)</td>
<td>7.2</td>
<td>6.4</td>
<td>17.1</td>
<td>6.1</td>
<td>n.m.</td>
<td>5.1</td>
<td>5.5</td>
</tr>
<tr class="odd">
<td class="firstcol">Gulfport-Biloxi, MS</td>
<td>95.4</td>
<td>94.1</td>
<td>97.9</td>
<td>118.4</td>
<td>n.m.</td>
<td>115.5</td>
<td>114.1</td>
</tr>
<tr>
<td class="firstcol">Unemployment Rate (%)</td>
<td>12.5</td>
<td>12.9</td>
<td>21.2</td>
<td>6.9</td>
<td>n.m.</td>
<td>5.2</td>
<td>5.1</td>
</tr>
<tr class="odd">
<td class="firstcol">Baton Rouge, LA</td>
<td>341.0</td>
<td>339.3</td>
<td>348.3</td>
<td>338.2</td>
<td>n.m.</td>
<td>329.7</td>
<td>319.9</td>
</tr>
<tr>
<td class="firstcol">Unemployment Rate (%)</td>
<td>5.3</td>
<td>4.4</td>
<td>9.7</td>
<td>6.7</td>
<td>n.m.</td>
<td>5.9</td>
<td>6.3</td>
</tr>
<tr class="odd">
<td class="firstcol">Beaumont-Port Arthur, TX</td>
<td>164.0</td>
<td>164.1</td>
<td>163.2</td>
<td>166.4</td>
<td>164.9</td>
<td>163.6</td>
<td>165.0</td>
</tr>
<tr>
<td class="firstcol">Unemployment Rate (%)</td>
<td>7.1</td>
<td>6.3</td>
<td>11.2</td>
<td>7.6</td>
<td>7.7</td>
<td>8.3</td>
<td>8.8</td>
</tr>
<tr class="odd">
<td class="firstcol">Houston, TX*</td>
<td>2544.0</td>
<td>2532.2</td>
<td>2521.0</td>
<td>2480.3</td>
<td>2484.4</td>
<td>2419.1</td>
<td>2379.2</td>
</tr>
<tr>
<td class="firstcol">Unemployment Rate (%)</td>
<td>5.6</td>
<td>5.0</td>
<td>5.4</td>
<td>5.7</td>
<td>5.5</td>
<td>6.2</td>
<td>6.8</td>
</tr>
</tbody>
</table>
</body>
</html>

As the first potential hurricane of 2006, Chris, forms near the Dominican Republic and Cuba, we are reminded, of course, of the drastic impact of last year's Katrina. This morning, the BLS released the household survey data for June [...]

Local Employment Data Show Gulf Port Cities Still Struggle 9 Months After Katrina, But Houston Gains

<html>
<head>
<style>
.odd{
 background-color:#edf5ff;
}
.even{
 background-color:#dde5ef;
}
.grey1{
	background-color:#f0f0f0;
}
.grey2{
	background-color:#e2e2e2;
}
.grey3{
	background-color:#d4d4d4;
}
.grey4{
	background-color:#c6c6c6;
}
.grey5{
	background-color:#b8b8b8;
}
</style>
</head>
<body>
 



<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060802d.jpg" width="353">
A 1.2% decline last week in the total number of mortgage applications extended the recent decline to three consecutive weeks. Applications for all of July fell 1.9% from June when applications fell 1.5% from May.
Lower purchase applications led last week&#39;s decline with 3.3% drop which pulled the July average 2.1% below June, the third consecutive down month.
During the last ten years there has been a 58% correlation between the y/y change in purchase applications and the change in new plus existing single family home sales.
Applications to refinance added 2.3% to the prior week&#39;s 0.6% recovery to limit the decline during all of July to 1.8% versus June. Refis fell 3.1% during June from the May average.
The effective interest rate on a conventional 30-year mortgage fell nine basis points w/w to 6.82%. The peak for 30 year financing was 7.08% late in June. The rate on 15-year financing also fell to 6.53% and the peak rate was 6.75%. Interest rates on 15 and 30 year mortgages are closely correlated (&gt;90%) with the rate on 10 year Treasury securities.
During the last ten years there has been a (negative) 79% correlation between the level of applications for purchase and the effective interest rate on a 30-year mortgage.
In July, 35.4% of all loan applications were to refinance, down from 44.2% last July.
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>.

<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">07/28/06</th>
<th scope="col">07/21/06</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>527.6</td>
<td>533.8</td>
<td>-29.8%</td>
<td>708.6</td>
<td>735.1</td>
<td>1,067.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Purchase</td>
<td>376.2</td>
<td>389.0</td>
<td>-23.9%</td>
<td>470.9</td>
<td>454.5</td>
<td>395.1</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Refinancing</td>
<td>1,417.2</td>
<td>1,385.2</td>
<td>-37.0%</td>
<td>2,092.3</td>
<td>2,366.8</td>
<td>4,981.8</td>
</tr>
</tbody>
</table>
</body>
</html>

A 1.2% decline last week in the total number of mortgage applications extended the recent decline to three consecutive weeks. Applications for all of July fell 1.9% from June when applications fell 1.5% from May. Lower purchase [...]

Mortgage Applications Down Further

US and China big leaders in adoption of AI models

Robust US demand for advanced technology products

China's export growth rotating away from the US

More pronounced upward revisions in countries more exposed to AI investment

Stable job openings and hiring rates point to cautious hiring

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

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

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

Tighter US immigration enforcement adversely impacting labor force

Economic policy uncertainty, while still elevated, is declining

Gradual disinflation and easier monetary policies across advanced economies

Largest October layoffs since 2003, led by technology

Subdued global shipping costs not yet pointing to supply chain problems

PMIs show still-elevated but slowing US inflation

AI boosting US investment in data centers

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

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

US financial markets have gotten used to elevated policy uncertainty

FOMC now expects more rate cuts going forward than in June

China gaining ASEAN exports while US exports slump

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

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

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

Equity market exuberance outpacing macroeconomic data

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

Our global data offering is unparalleled in terms of coverage, quality, and organization. We offer 290+ databases from 2500 government and private sources, a wealth of key survey and forecast data covering the world’s economies, and a robust offering of archive databases that drive machine learning for big data applications.

Optimized for precision analytics, our data is seamlessly integrated with Microsoft Office and all leading statistical packages through our DLX® software and platform independent HaverView™ website. We further offer direct database feeds, client server or cloud-based delivery, and RESTful API.


Privacy Policy

Disclaimer

Contact us

Service Health

A premier time series data platform for the global strategy, research, and quant communities. 

London

Singapore

Tokyo

New York

Economy in Brief

Viewpoints

Contact Us

Our Data

Our Products

What We Do

Our Authors

About Us

Data News

Featured Data Additions

Resources

Release Calendars

Training Center

Webinars

Newsletters

Download Software

For Clients

Live Updates

Andrew Cates

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

260205Z1.jpg

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

260205Z2.jpg

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

260205Z3.jpg

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

260205Z4.jpg

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

260205Z5.jpg

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

260205Z6.jpg

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

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

Robert Brusca

260206E.jpg

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

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

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

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

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

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

260206.jpg

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

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

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

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

Germany

German IP Reveals Chaotic Trends

Winnie Tapasanun

260205X15.jpg

260205Y15.jpg

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

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

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

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

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

260205C15.jpg

260205D15.jpg

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

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

Sandy Batten

260205A2.jpg

260205B2.jpg

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

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

The insured unemployment rate varied greatly across individual states and territories. In the week ending January 17, the highest unemployment rates were in Rhode Island (2.83%), New Jersey (2.77%), Massachusetts (2.67%), Washington (2.54%), and Minnesota (2.45%). The lowest rates were in Florida (0.30%), North Carolina (0.42%), Louisiana (0.43%), Alabama (0.46%), and Arkansas (0.47). Rates in other notable states include Illinois (2.15%), California, (2.08%), New York (2.02%), Pennsylvania (1.91%), and Texas (1.09%). These state data are not seasonally adjusted.

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

260205C2.jpg

260205D2.jpg

- New claims jumped 22,000 to 231,000, the highest level since December 6.
- Continuing claims rose to 1.844 million from 1.819 million.

U.S. Initial Unemployment Claims Surged in Latest Week

260205E.jpg

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

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

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

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

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

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

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

Economy in Brief

Jump to:

U.S. Payrolls & Wages Moderate

CPI Inflation in Turkey & Macedonia: Up, but Not High

U.S. Factory Inventory Accumulation Strong

ISM Nonmanufacturing Index Off

Initial Claims for Unemployment Insurance Rose

Initial Claims for Unemployment Insurance Rose

Local Employment Data Show Gulf Port Cities Still Struggle 9 Months After Katrina, But Houston Gains

Mortgage Applications Down Further