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/060406c.jpg" width="353">
The number of jobs in Israel increased 5,000 in January from December, seasonally adjusted, to 2.59 million, according to data reported today by Israel&#39;s Central Bureau of Statistics (CBS). The gain from a year ago was 79,000 jobs, or 2.9%. The CBS also publishes a subset of the jobs data that excludes foreign workers, mostly Palestinians. There were 82,000 of them in January, up from 70,000 a year ago. So the number of jobs covered by Israeli workers was 2.508 million, up just 1,000 from December and 2.7% from January 2005. Both the total number of jobs and those held by Israelis increased by 3.3% for 2005 as a whole.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060406d.jpg" width="353">
The average job paid NIS7,232 for the month of January, about US$1,565. For jobs held by Israelis only, the comparable figure was NIS7,614, about US$1,648. In shekels, both total and Israeli wages were up 1.6% from a year ago. Taking account of inflation, &quot;real&quot; wages have fallen 1.3% for all workers and 1.0% for Israeli workers since January 2005.
While real purchasing power per job in Israel has stagnated over the last few years, the number of jobs themselves has advanced nicely. As we point out frequently here, employment in Europe is nearly at a standstill, and in the US, prior to the release tomorrow of March data, recent trends show roughly 1.5% gains in nonfarm payrolls, only about half the pace in Israel. So midst all the Middle East tension, the Israeli economy is presently able to increase jobs and overall growth as well. In industry data through Q4 2005, accommodation, trade and business services were seeing the greatest percentage job gains.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">&nbsp;</th>
<th scope="col">Jan 2006</th>
<th scope="col">Dec 2005</th>
<th scope="col">Year Ago</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total Number of Jobs (thous.)</td>
<td>2,590</td>
<td>2,585</td>
<td>2,511</td>
<td>2,548</td>
<td>2,466</td>
<td>2,425</td>
</tr>
<tr>
<td class="firstcol">Yr/Yr % Change</td>
<td>2.9</td>
<td>3.0</td>
<td>--</td>
<td>3.3</td>
<td>2.2</td>
<td>-0.7</td>
</tr>
<tr class="odd">
<td class="firstcol">Jobs ex Foreign Workers (thous.)</td>
<td>2,508</td>
<td>2,507</td>
<td>2,441</td>
<td>2,472</td>
<td>2,393</td>
<td>2,342</td>
</tr>
<tr>
<td class="firstcol">Yr/Yr % Change</td>
<td>2.7</td>
<td>2.9</td>
<td>--</td>
<td>3.3</td>
<td>2.8</td>
<td>-0.1</td>
</tr>
<tr class="odd">
<td class="firstcol">Average Wages, All Jobs (NIS)</td>
<td>7,232</td>
<td>7,208</td>
<td>7,138</td>
<td>7,225</td>
<td>7,000</td>
<td>6,863</td>
</tr>
<tr>
<td class="firstcol">Yr/Yr % Change</td>
<td>1.6</td>
<td>-1.4</td>
<td>--</td>
<td>3.3</td>
<td>2.1</td>
<td>-2.3</td>
</tr>
<tr class="odd">
<td class="firstcol">Average Wages, ex Foreign Workers (NIS)</td>
<td>7,614</td>
<td>7,636</td>
<td>7,481</td>
<td>7,334</td>
<td>7,081</td>
<td>6,981</td>
</tr>
<tr>
<td class="firstcol">Yr/Yr % Change</td>
<td>1.6</td>
<td>-1.2</td>
<td>--</td>
<td>3.1</td>
<td>2.2</td>
<td>-2.5</td>
</tr>
</tbody>
</table>
</body>
</html>

The number of jobs in Israel increased 5,000 in January from December, seasonally adjusted, to 2.59 million, according to data reported today by Israel's Central Bureau of Statistics (CBS). The gain from a year ago was 79,000 jobs, or [...]

Employment Grows in Israel; Wages Rise, but Lose Ground to Inflation

Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060406a.jpg" width="353">
Initial claims for unemployment insurance dropped for the third consecutive period last week. The 5,000 person decline to 299,000 compared to Consensus expectations for 305,000 claims. It followed a 8,000 fall the prior week which was slightly less than initially estimated.
During the last ten years there has been a (negative) 75% correlation between the level of initial jobless insurance claims and the m/m change in payroll employment.
The four-week moving average of initial claims fell to 308,500 (-9.9% y/y).<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060406b.jpg" width="353">
Continuing claims for unemployment insurance fell a sharp 22,000 during the latest week following a revised decline of 1,000 the prior period, initially reported as an increase.
The insured rate of unemployment was stable at 1.9% for the seventh week.
The highest insured unemployment rates during the week ending March 18 were in Alaska (5.1%), Michigan (4.5%), Wisconsin (3.5%), Puerto Rico (3.4%), Pennsylvania (3.3%), Rhode Island (3.3%), New Jersey (3.1%), Vermont (3.1%), Massachusetts (3.0%), Connecticut (2.8%), and Oregon (2.8%).
Look Who&#39;s Working Now from the Federal Reserve Bank of St. Louis is available <a href="http://research.stlouisfed.org/publications/net/20060401/cover.pdf"> here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/WEEKLY/@W5/@W507/@W507.HTM">Unemployment Insurance (000s)</a></th>
<th scope="col">04/01/06</th>
<th scope="col">03/25/06</th>
<th scope="col">Y/Y</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Initial Claims</td>
<td>299</td>
<td>304</td>
<td>-13.6%</td>
<td>332</td>
<td>343</td>
<td>402</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>--</td>
<td>2,440</td>
<td>-9.0%</td>
<td>2,663</td>
<td>2,924</td>
<td>3,532</td>
</tr>
</tbody>
</table>
</body>
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Initial claims for unemployment insurance dropped for the third consecutive period last week. The 5,000 person decline to 299,000 compared to Consensus expectations for 305,000 claims. It followed a 8,000 fall the prior week which was [...]

Initial Claims for Jobless Insurance Below Expectations

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

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

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060405b.jpg" width="353">
The total number of mortgage applications rose for the second consecutive period. The 7.2% increase last week limited the average decline during March to 1.0% after a 6.3% drop during February.
Purchase applications jumped 8.4% at month end and the average level during March ticked up 0.2% after a 10.2% decline during February.
During the last ten years there has been a 54% correlation between the y/y change in purchase applications and the change in new plus existing single family home sales.
Applications to refinance also recovered with a 5.3% increase last week though the average March level fell 2.4% m/m after a 2.0% February drop.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060405a.jpg" width="353">
The effective interest rate on a conventional 30-year mortgage rose sharply. The sixteen basis point increase w/w lifted the effective rate to 6.72% and the rate on 15-year financing likewise surged to 6.43%, its highest since June 2002. Interest rates on 15 and 30 year mortgages are closely correlated (&gt;90%) with the rate on 10 year Treasury securities and during the last ten years there has been a (negative) 82% correlation between purchase applications and the effective rate on a 30-Year mortgage.
The Mortgage Bankers Association surveys between 20 to 35 of the top lenders in the U.S. housing industry to derive its refinance, purchase and market indexes. The weekly survey accounts for more than 40% of all applications processed each week by mortgage lenders. Visit the Mortgage Bankers Association site <a href="http://www.mbaa.org">here</a>.
A New Perspective on Policy, yesterday&#39;s speech by Dallas Federal Reserve Bank President &amp; CEO Richard W. Fisher, is available <a href="http://www.dallasfed.org/news/speeches/fisher/2006/fs060404.html"> here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYW/@S5/@S5.HTM">MBA Mortgage Applications (3/16/90=100)</a></th>
<th scope="col">03/31/06</th>
<th scope="col">03/24/06</th>
<th scope="col">Y/Y</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total Market Index</td>
<td>612.8</td>
<td>571.7</td>
<td>-4.9%</td>
<td>708.6</td>
<td>735.1</td>
<td>1,067.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Purchase</td>
<td>438.2</td>
<td>404.1</td>
<td>-1.7%</td>
<td>470.9</td>
<td>454.5</td>
<td>395.1</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Refinancing</td>
<td>1,640.8</td>
<td>1,558.4</td>
<td>-8.8%</td>
<td>2,092.3</td>
<td>2,366.8</td>
<td>4,981.8</td>
</tr>
</tbody>
</table>
</body>
</html>

The total number of mortgage applications rose for the second consecutive period. The 7.2% increase last week limited the average decline during March to 1.0% after a 6.3% drop during February. Purchase applications jumped 8.4% at [...]

Mortgage Applications Manage Late-March Recovery

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060405c.jpg" width="353">
The March Business Activity Index for the non-manufacturing sector inched up to 60.5 from 60.1 during February, reported the Institute for Supply Management (ISM). These levels are much improved versus the low January reading of 56.8 and the latest beat Consensus expectations for a decline to 59.0.
Since the series&#39; inception in 1997 there has been a 53% correlation between the level of the Business Activity Index and the q/q change in real GDP for services plus construction.
The new orders index improved to the highest level this year, though at 59.5 remained below the 2005 average. The employment index backpedaled to 54.6 and so far this year is down slightly from the 2005 average of 55.9. Since the series&#39; inception in 1997 there has been a 60% correlation between the level of the ISM non-manufacturing employment index and the m/m change in payroll employment in the service producing plus the construction industries. <img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060405d.jpg" width="353">
Pricing power fell again and has fallen continually since the series peak last September. Since inception eight years ago, there has been a 70% correlation between the price index and the y/y change in the GDP Services chain price index.
ISM surveys more than 370 purchasing managers in more than 62 industries including construction, law firms, hospitals, government and retailers. The non-manufacturing survey dates only to July 1997, therefore its seasonal adjustment should be viewed tentatively.
Business Activity Index for the non-manufacturing sector reflects a question separate from the subgroups mentioned above. In contrast, the NAPM manufacturing sector composite index is a weighted average five components.
&quot;This is Bangalore Calling: Hang Up or Speed Dial? What Technology-Enabled International Trade in Services Means for the U.S. Economy and Workforce from the Federal Reserve Bank of Cleveland can be found <a href="http://www.clevelandfed.org/Research/Com2005/0115.pdf"> here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EF/@EF03/@EF03.HTM">ISM Nonmanufacturing Survey</a></th>
<th scope="col">Mar</th>
<th scope="col">Feb</th>
<th scope="col">Mar &#39;05</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Business Activity Index</td>
<td>60.5</td>
<td>60.1</td>
<td>61.8</td>
<td>60.1</td>
<td>62.5</td>
<td>58.3</td>
</tr>
<tr>
<td class="firstcol">Prices Index</td>
<td>60.5</td>
<td>64.8</td>
<td>65.9</td>
<td>67.9</td>
<td>68.8</td>
<td>56.6</td>
</tr>
</tbody>
</table>


</html>

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

ISM Nonmanufacturing Index Sustained Improvement

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060405c.jpg" width="353">
The March Business Activity Index for the non-manufacturing sector inched up to 60.5 from 60.1 during February, reported the Institute for Supply Management (ISM). These levels are much improved versus the low January reading of 56.8 and the latest beat Consensus expectations for a decline to 59.0.
Since the series&#39; inception in 1997 there has been a 53% correlation between the level of the Business Activity Index and the q/q change in real GDP for services plus construction.
The new orders index improved to the highest level this year, though at 59.5 remained below the 2005 average. The employment index backpedaled to 54.6 and so far this year is down slightly from the 2005 average of 55.9. Since the series&#39; inception in 1997 there has been a 60% correlation between the level of the ISM non-manufacturing employment index and the m/m change in payroll employment in the service producing plus the construction industries. <img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060405d.jpg" width="353">
Pricing power fell again and has fallen continually since the series peak last September. Since inception eight years ago, there has been a 70% correlation between the price index and the y/y change in the GDP Services chain price index.
ISM surveys more than 370 purchasing managers in more than 62 industries including construction, law firms, hospitals, government and retailers. The non-manufacturing survey dates only to July 1997, therefore its seasonal adjustment should be viewed tentatively.
Business Activity Index for the non-manufacturing sector reflects a question separate from the subgroups mentioned above. In contrast, the NAPM manufacturing sector composite index is a weighted average five components.
&quot;This is Bangalore Calling: Hang Up or Speed Dial? What Technology-Enabled International Trade in Services Means for the U.S. Economy and Workforce from the Federal Reserve Bank of Cleveland can be found <a href="http://www.clevelandfed.org/Research/Com2005/0115.pdf"> here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EF/@EF03/@EF03.HTM">ISM Nonmanufacturing Survey</a></th>
<th scope="col">Mar</th>
<th scope="col">Feb</th>
<th scope="col">Mar &#39;05</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Business Activity Index</td>
<td>60.5</td>
<td>60.1</td>
<td>61.8</td>
<td>60.1</td>
<td>62.5</td>
<td>58.3</td>
</tr>
<tr>
<td class="firstcol">Prices Index</td>
<td>60.5</td>
<td>64.8</td>
<td>65.9</td>
<td>67.9</td>
<td>68.8</td>
<td>56.6</td>
</tr>
</tbody>
</table>
Mortgage Applications Manage Late-March Recovery 
by <a href="/comment/Moeller.html">Tom Moeller</a> April 5, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060405b.jpg" width="353">
The total number of mortgage applications rose for the second consecutive period. The 7.2% increase last week limited the average decline during March to 1.0% after a 6.3% drop during February.
Purchase applications jumped 8.4% at month end and the average level during March ticked up 0.2% after a 10.2% decline during February.
During the last ten years there has been a 54% correlation between the y/y change in purchase applications and the change in new plus existing single family home sales.
Applications to refinance also recovered with a 5.3% increase last week though the average March level fell 2.4% m/m after a 2.0% February drop.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060405a.jpg" width="353">
The effective interest rate on a conventional 30-year mortgage rose sharply. The sixteen basis point increase w/w lifted the effective rate to 6.72% and the rate on 15-year financing likewise surged to 6.43%, its highest since June 2002. Interest rates on 15 and 30 year mortgages are closely correlated (&gt;90%) with the rate on 10 year Treasury securities and during the last ten years there has been a (negative) 82% correlation between purchase applications and the effective rate on a 30-Year mortgage.
The Mortgage Bankers Association surveys between 20 to 35 of the top lenders in the U.S. housing industry to derive its refinance, purchase and market indexes. The weekly survey accounts for more than 40% of all applications processed each week by mortgage lenders. Visit the Mortgage Bankers Association site <a href="http://www.mbaa.org">here</a>.
A New Perspective on Policy, yesterday&#39;s speech by Dallas Federal Reserve Bank President &amp; CEO Richard W. Fisher, is available <a href="http://www.dallasfed.org/news/speeches/fisher/2006/fs060404.html"> here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYW/@S5/@S5.HTM">MBA Mortgage Applications (3/16/90=100)</a></th>
<th scope="col">03/31/06</th>
<th scope="col">03/24/06</th>
<th scope="col">Y/Y</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total Market Index</td>
<td>612.8</td>
<td>571.7</td>
<td>-4.9%</td>
<td>708.6</td>
<td>735.1</td>
<td>1,067.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Purchase</td>
<td>438.2</td>
<td>404.1</td>
<td>-1.7%</td>
<td>470.9</td>
<td>454.5</td>
<td>395.1</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Refinancing</td>
<td>1,640.8</td>
<td>1,558.4</td>
<td>-8.8%</td>
<td>2,092.3</td>
<td>2,366.8</td>
<td>4,981.8</td>
</tr>
</tbody>
</table>
MIT Center for Real Estate Compiles Price and Total Return Indexes for Commercial Real Estate Transactions: Properties Earn 34% in 2005 
by <a href="/comment/Stone.html">Carol Stone</a> April 5, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060405e.jpg" width="353">
Commercial real estate has increased significantly in importance as an investment medium in recent years. Securitization of commercial mortgage securities and direct interests in portfolios of properties join residential real estate as outlets for capital. But it is complicated to assess the returns on such investments. Each property is sizable and very different from every other property. So, unlike other objects to be priced, there are not simple rules-of-thumb or statistical properties that can be exploited to derive valuations.
Just in mid-February, the Massachusetts Institute of Technology&#39;s Center for Real Estate introduced a helpful tool in this process, the Transactions-Based Index. A client brought these new quarterly series to Haver&#39;s attention, and they were added to our basic USECON product about two weeks ago.
The Total Return Index shows that commercial real estate holdings earned 34.3% in 2005, following valuation gains of 16.0% in 2004 and 10.0% in 2003. Returns based on price change alone were 29.4% last year, 10.7% in 2004 and 4.2% in 2003.
These figures are weighted indexes for &quot;All Properties&quot;, including apartments, industrial buildings, offices and retail centers. Sub-indexes are available for each one of these segments. Retail properties were the strongest in 2005, with a 40.2% total return, while industrial buildings earned &quot;only&quot; 24.2%.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060405f.jpg" width="353">
The secret to these indexes is a proprietary database maintained by the National Council of Real Estate Investment Fiduciaries (NCREIF). This group is a trade association of pension funds managers; they collectively own some $200 billion worth of commercial properties numbering about 5,000. Data on pricing and income is taken from actual transactions involving these properties.
Further, since the properties are all distinct, the &quot;average&quot; value of transactions cannot by obtained by simply toting up individual prices and dividing by some appropriate number. The indexes are compiled by appeal to the same kind of weighted &quot;hedonic&quot;, quality-adjusting econometric techniques used by BEA and BLS for constructing many of the price indexes used by economists every day. The NCREIF database has been maintained for many years, allowing the MIT econometricians to construct 22 years of history for the &quot;All Property&quot; index and 12 years for the individual property types. A press release and more detailed description of the data are found <a href="http://web.mit.edu/cre/news/060216-tbi.html">here</a> on the website of the MIT Center for Real Estate. 

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">MIT Commercial Real Estate &quot;TBI&quot; Indexes</th>
<th scope="col">Q4 2005</th>
<th scope="col">Q3 2005</th>
<th scope="col">Q2 2005</th>
Year-End
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">2004</td>
<td>2003</td>
<td>2002</td>
</tr>
<tr>
<td class="firstcol">Total Return Index</td>
<td>668.0</td>
<td>638.9</td>
<td>601.1</td>
<td>497.1</td>
<td>428.5</td>
<td>389.5</td>
</tr>
<tr class="odd">
<td class="firstcol">Yr/Yr % Change</td>
<td>34.3</td>
<td>31.8</td>
<td>26.0</td>
<td>16.0</td>
<td>10.0</td>
<td>11.5</td>
</tr>
<tr>
<td class="firstcol">TBI Price Index</td>
<td>194.3</td>
<td>187.3</td>
<td>177.7</td>
<td>150.2</td>
<td>135.7</td>
<td>130.2</td>
</tr>
<tr class="odd">
<td class="firstcol">Yr/Yr % Change</td>
<td>29.4</td>
<td>26.6</td>
<td>20.6</td>
<td>10.7</td>
<td>4.2</td>
<td>4.3</td>
</tr>
</tbody>
</table>


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Louise Curley

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060404f.jpg" width="353">
The accumulation of foreign reserves by the developing countries in the Far East appears to be decelerating. Reserves are still increasing, but much more slowly than the pace of early 2004 when the year-to-year increases in reserves were of the order of 30-50%. Taiwan and South Korea are the latest countries to report. Total foreign reserves in Taiwan were unchanged in March from February and only 2.4% above March 2005, down from year-to-year increases of 35% in early 2004. Total reserves in South Korea were up less than one percent from February and less than 6% from March 2005, compared to year-to-year increases of over 30% in early 2004. The year-to-year increases in reserves in Taiwan and South Korea are shown in the first chart.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060404g.jpg" width="353">
China is much slower to report its reserve holdings. The latest data are for December, but even here a deceleration can be detected. In December the year-over-year increase in reserves was down to 33.7% from 51.1% in August. 2005. The deceleration has been going on longer in India where the year-to-year increase in reserves was 11.5% in February, 2006, down from 52.5% in April, 2004. The year-to-year increases in the reserves of China and India are shown in the second chart.
The International Monetary Fund has recently published information on the composition of total reserves and those held by the industrial countries and developing countries. Data are available in US Dollars, Euros, Pounds Sterling, Japanese Yen, Swiss Francs and a miscellaneous category &quot;other currencies&quot;. (These data are found in the IFS data base.) The data, however, show only the composition of allocated reserves, which, in the case of the developing countries, is only slightly more than half the total. Nevertheless, the changing composition of these allocated reserves gives some indication of the broader shifts that may be taking place in total reserves. Over the period from the first quarter of 1999 when the data began to the fourth quarter of 2005, the proportion of euro claims in the allocated reserves of the developing countries rose from 19% to 29% while the proportion of US$ claims declined from 70% to 60%. (See the third and fourth charts.)<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060404i.jpg" width="353"><img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060404h.jpg" width="353">

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/JAPAN/@J5/@J5.HTM">International Reserves:&nbsp; Developing Countries in the Far East</a> (Bil US$)</th>
<th scope="col">Mar 06</th>
<th scope="col">Feb 06</th>
<th scope="col">Jan 06</th>
<th scope="col">Dec 05</th>
<th scope="col">Y/Y % Current</th>
<th scope="col">Y/Y % Past Peak&nbsp;</th>
<th scope="col">2004&nbsp;</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">South Korea</td>
<td>217.3</td>
<td>215.9</td>
<td>216.9</td>
<td>210.3</td>
<td>5.8</td>
<td>32.4</td>
<td>April</td>
</tr>
<tr>
<td class="firstcol">Taiwan&nbsp;</td>
<td>257.0</td>
<td>257.0</td>
<td>257.3</td>
<td>253.3</td>
<td>2.4</td>
<td>35.2</td>
<td>February</td>
</tr>
<tr class="odd">
<td class="firstcol">China</td>
<td></td>
<td></td>
<td></td>
<td>821.5</td>
<td>33.7</td>
<td>51.1</td>
<td>August</td>
</tr>
<tr>
<td class="firstcol">India</td>
<td></td>
<td>135.9</td>
<td>134.7</td>
<td>131.9</td>
<td>11.5</td>
<td>52.5</td>
<td>April</td>
</tr>
</tbody>
</table>
</body>
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The accumulation of foreign reserves by the developing countries in the Far East appears to be decelerating. Reserves are still increasing, but much more slowly than the pace of early 2004 when the year-to-year increases in reserves [...]

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

Surging orders for computers and electronics propelling durable goods orders

Next year's inflation forecasts are on the rise and above target

Disrupted global supply chains placing upward pressure on US goods prices

Construction of data centers has overtaken transportation construction in US

Elevated energy prices putting intense upward pressure on input prices around the globe

US is big leader in global surge in private AI investment

Larger-than-usual income tax refunds this year are supporting consumer spending

Sharply rising share of AI-related jobs

Inflationary impact of surge in oil prices larger in Europe than in the US

Futures market thinks the price of oil will recede significantly over the next six months

Recent pickup in US defense orders could help support overall growth ahead

Cost of transporting crude oil has soared to series high

Market-based inflation expectations have not yet reflected recent surge in oil prices

Global equity markets are fearing a major economic disruption from soaring oil prices

Is recent drop in sentiment signaling softer growth ahead?

With the Iran conflict, geopolitical risk has soared to alarming levels

Soaring AI-related investment in US underpinning strong contribution of business spending to overall growth

AI-related outperformance of IP in Advanced Asia ex Japan

Resilient US economy pushing up Blue Chip 2026 outlook

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

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Winnie Tapasanun

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The ISM U.S. manufacturing PMI fell to a lower-than-expected 53.3 in June, the first m/m fall since February, following a 1.3-point increase to 54.0 in May, according to data from the Institute for Supply Management. The June reading, above the 50 expansion-contraction threshold, indicated the U.S. manufacturing sector expanded for the sixth straight month, albeit at a slightly slower pace. A reading of 53.8 for June had been expected in the Action Economics Forecast Survey. The June manufacturing PMI, while above a contraction-level 49.0 in June 2025 and a low of 47.0 in October 2024, remained below a peak of 63.8 in March 2021.

The production index declined to 52.2 in June from 54.3 in May, indicating production expanded for the eighth consecutive month but at the slowest pace since December. The index was above a low of 44.8 in April 2025 but below a peak of 66.5 in March 2021. In June, 19.0% (NSA) of respondents reported higher production while 13.0% reported lower production. The new orders index slipped to 56.0 in June from 56.8 in May, signaling new orders grew for the sixth straight month following four successive months of contraction. The index remained well above a low of 41.8 in January 2023 but below a high of 67.0 in May 2021. In June, 22.3% (NSA) of respondents reported higher new orders while 13.4% reported declines. The inventories index climbed to 51.4 in June from 49.9 in May, marking the first expansion since April 2025. The index was slightly below a high of 52.7 in March 2025 but above a low of 43.8 in October 2024. Meanwhile, the supplier deliveries index fell to 57.4 in June from 60.6 in May and April, indicating slowing delivery performance for the seventh consecutive month after faster deliveries in November. In June, 18.1% (NSA) of respondents reported slower delivery speeds while 3.4% reported faster speeds.

On the labor front, the employment index improved to 49.7 in June from 48.6 in May, showing employment contracted for the 33rd straight month but at the slowest contraction pace since January 2025. The index was above a low of 44.1 in November 2025 but below a high of 56.5 in March 2022. In June, 16.2% (NSA) of respondents reported higher employment while 13.8% reported lower hiring.

On the pricing front, the prices paid index fell to a still-high 73.0 (NSA) in June, a 9.1-point drop—the largest decline since July 2022—from 82.1 in May, indicating raw materials prices rose for the 21st straight month but at the slowest rising pace since February. The index remained well above a low of 39.4 in December 2022 but below a high of 87.1 in March 2022 and a peak of 92.1 in June 2021. In June, 55.1% (NSA) of respondents reported higher prices while 9.2% reported price declines.

In other ISM series not included in the composite index, the new export orders index fell to 48.5 in June from 50.6 in May, indicating new export orders contracted for the third time in four months. The index was up from a low of 40.1 in May 2025 but down from a high of 52.4 in January 2025 and a peak of 57.1 in February 2022. The imports index edged down to 52.9 in June from 53.0 in May, suggesting imports expanded for the fifth successive month. The index was below its recent high of 54.9 in February but above a low of 39.9 in May 2025. The order backlog index decreased to 50.5 (NSA) in June from 52.2 in May, showing backlog levels grew at the slowest pace in six months. The index was below a high of 56.6 in February and a peak of 70.6 in May 2021 but well above a low of 37.5 in May 2023.

The ISM figures are based on responses from over 400 purchasing and supply executives from 18 industries, which are weighted according to each industry’s contribution to GDP. These data are diffusion indexes where a reading above 50 indicates expansion; below 50 indicates contraction. The ISM Manufacturing PMI is a composite index based on the diffusion indexes of five of the indexes (seasonally adjusted) with equal weights: New Orders, Production, Employment, Supplier Deliveries, and Inventories. The figures from the Institute for Supply Management can be found in Haver’s **USECON** database; further detail is found in the **SURVEYS** database. The expectations number is available in Haver’s **AS1REPNA** database.

260701C23.jpg

260701D23.jpg

- ISM Mfg. PMI down slightly to 53.3 in June; sixth straight month above 50.
- Production (52.2) expands for the eighth consecutive mth.; new orders (56.0) for the sixth successive mth.
- Employment (49.7) contracts for the 33rd straight mth.; at the slowest contraction pace since Jan. ’25.
- Prices Index (73.0) at a four-month low, still indicating prices rising for the 21st consecutive mth.
- Exports (48.5) contract for the third time in four mths.; imports (52.9) continue to grow.

U.S. ISM Manufacturing PMI Still Expansionary in June; New Orders and Production Growing at a Slower Pace; Employment Contracting

Michael J. Moran

260701A.jpg

260701B.jpg

The monthly report on construction activity receives scant attention in the financial press, and investors and traders in financial markets typically pay little heed. However, it is a valuable report for economists, as it provides a broad-based view of building activity, covering private residential and business construction, as well as government-related activity. The figures feed into the calculation of GDP. Unfortunately, results have been soft since early 2025.

Total construction activity rose 0.1 percent in May, marking the third consecutive increase. However, the gains have not been especially large, averaging 0.3%, and they have barely dented the string of weak readings in the preceding 17 months. The year-over-year change in May totaled -1.5%.

Private residential construction, the largest component of the total (41% share), rose 0.3% in May, adding to an average gain of 1.1% in the prior two months and leaving a year-over-year increase of 1.8% (chart, upper left). Most of the advance in the past year was the result of improvements to existing homes (up 8.1%). Construction of new multi-family units has shown little net change in the past year or so, while new single-family building has traced a mild downward trend (off 4.0% in the past year). Public construction has been flat in the past year, with both the federal government and state and local governments showing little net change (chart, upper right).

Private nonresidential construction (34% of the total) has received considerable press attention in the past few years because of explosive growth in the building of data centers. Growth has indeed been vigorous. Building started in 2020 and grew moderately at first, but this sector took off in 2022, about the time when artificial intelligence models became publicly available (chart, lower left, in levels to show the strong trend more clearly). Average annual growth for the three years ended 2025 totaled 48%.

Interestingly, despite the rapid growth in the building of data centers, the private nonresidential sector has been the weakest area of the construction report, with activity trending lower since early 2025 (chart, lower right). Some components of private nonresidential construction have held steady or improved (e.g. amusement & recreation, electric power), but three areas stand out on the soft side: general office, commercial, and manufacturing.

The construction figures can be found in Haver's **USECON** database. The expectations figure is from the Action Economics Forecast Survey in **AS1REPNA**.

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- Building activity in the US was firm in 2023 and 2024, but it has lost ground since then.
- Government-related construction and private residential building have been little changed in the past year or so.
- Private nonresidential construction has been notably weak, despite robust activity in the building of data centers.

Construction in May: Another Soft Reading

Robert Brusca

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The manufacturing PMI values for June showed more worsening than improving, with 10 of 18 reporters showing conditions unchanged or getting worse on a month-to-month basis. However, taking into account the size of the changes across the various reporters, the median PMI rating for manufacturing in June improved to 51.4, an increase of 0.5 points from the month before. The month-to-month deterioration is relatively broad; however, it's also relatively mixed, and when taking the size of the changes into account, there's actually a monthly improvement.

The chart shows that manufacturing has been undergoing improvements generally since late last year, although in the last few months, there has been a topping, a capping, and in some cases a backtracking from the recent high readings. That action reflects the onset of hostilities between the United States and Iran and the on-again, off-again situation with the Strait of Hormuz being open or closed.

Over three months compared to six months ago, the average readings show deterioration in only 5 of 18 reporters. This clearly reflects what we see in the chart, which is a recent improvement over three months compared to six months. The next comparison of 6-month averages to 12-month averages finds that only four reporters are worse off over six months than they were over 12 months. Those four are Mexico, India, Indonesia, and Vietnam. Over 12 months compared to 12 months ago, conditions are better everywhere except in India.

In addition, we can evaluate the manufacturing performance by ranking the current month's observation in a queue of data back to January 2022, a period of about 4½ years. Viewed over that span, only four countries have readings in June below their period medians. Those are Indonesia, India, Turkey, and Russia. All the rest have readings above the 50th percentile, putting them above their historic medians. Japan has an exceptionally strong reading in June relative to its history, posting a 95.4 percentile standing. Mexico, China, Malaysia, and Taiwan also post strong standings, in their 80th percentile.

The median queue standing for the entire group is a 69.2 percentile standing, which is still quite strong. Other summary measures of sequential diffusion show that the proportion of reporters improving over 12 months is 94.4%, compared to 72.2% over 6 months and 61.1% over 3 months. The breadth of this improvement is shrinking over the near-term horizons; however, the tendency for improvement is unmistakable.

Average readings for certain groups at the bottom of the table show that the United States, the United Kingdom, EMU countries, Canada, and Japan, on an unweighted basis, have steady improvements in place from 12 months to six months to three months, with a one-month reading even stronger. The BRIC countries have readings that are marginally stronger but are staying in a tight low range around 50.8 to 51.5. The Asian average shows an improvement from 12 months to 6 months and then backtracking, with the current 3-month diffusion values just slightly above 51, around 51.5.

The global economy has shown some significant improvement recently in the manufacturing sector, and this has occurred despite the ongoing war in Ukraine and stepped-up hostilities involving Iran, including the on-again, off-again closure of the Strait of Hormuz. Oil prices have spiked and have since come down substantially. However, the outlook for peace remains clouded as both sides continue to talk positively about an agreement and a ceasefire, then turn around and violate near-term conditions they have set. This makes it very difficult to handicap the future.

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Mixed but Broad Backtrack in Global Manufacturing in June 

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The Conference Board U.S. Consumer Confidence Index rose 0.7% m/m (-4.2% y/y) to a lower-than-expected 91.2 in June, the fourth monthly rise in five months, after a downwardly revised 3.4% decline to a four-month-low 90.6 in May (-0.7%; 93.1 initially). A reading of 94.3 had been expected in the Action Economics Forecast Survey. The June reading was 6.4% above a low of 85.7 in April 2025 but down from 95.2 in June 2025 and 19.1% below a high of 112.8 in November 2024.

Consumers' views of present economic conditions weakened for the second consecutive month in June, while the views of future economic conditions improved m/m. The Present Situation Index—which assesses current business and labor market conditions—fell 2.5% m/m (-12.5% y/y) to 116.4 in June, the lowest level since February 2021, following a 4.0% drop to 119.4 in May and two successive m/m increases. The index was lower than 133.0 in June 2025 and 25.0% below a high of 155.3 in June 2023. The Expectations Index—which measures the short-term outlook for income, business, and labor market conditions—rose 4.2% m/m (6.4% y/y) to 74.4 this month, the highest level since December and the second increase in three months, after a 2.7% decline to 71.4 in May. The index was higher than 69.9 in June 2025, while 20.6% below a high of 93.7 in November 2024.

Labor market readings showed less optimism this month. The jobs gap—representing the difference between respondents indicating that jobs are plentiful and those saying jobs are hard to get—dropped to 2.4% in June, the lowest reading since February 2021, from 5.0% in May. Calculated by Haver Analytics, this series had an 85% correlation with the unemployment rate over the last 20 years. The jobs plentiful measure inched up to 24.9% of respondents in June from 24.8% in May (the lowest since February 2021). Perceptions of the current labor market weakened, with the jobs hard-to-get measure rising to 22.5% this month, the highest level since January 2021, from 19.8% in May.

Consumers generally viewed business conditions as slightly more favorable compared to last month. Current business conditions were perceived as good by 20.0% of respondents in June, up from 19.2% in May but below a high of 23.4% in June 2023. Expectations that business conditions would improve in six months were 19.0% of respondents, up from 18.8% in May but below a high of 24.7% in November 2024. More jobs were expected in six months by 15.2% of respondents, slightly down from 16.6% in May and below a high of 22.8% in November 2024. The percentage expecting rising income rose to 20.8% in June from 19.2% in May, the highest since February 2020 and above a low of 14.4% in February 2023.

Inflation expectations eased this month but remained elevated. The expected inflation rate in twelve months slipped to 6.0% in June, the lowest since February, after holding at 6.2% for three straight months. The latest reading was below a high of 7.0% in April 2025 but above a low of 5.0% in November 2024. In June, 61.5% of respondents expected that interest rates would rise over the next twelve months, down from 62.4% in May but up from 42.1% in January 2024.

The share of respondents planning to buy a home within six months rebounded to 6.6% in June from 6.5% in May. It was below its most recent high of 7.0% in April but above a low of 4.6% in February 2024. Those planning to buy automobiles rose to 13.3% of respondents this month from 12.6% in May; it was up from a low of 10.6% in April 2025. Meanwhile, the share of respondents planning a vacation within six months declined to 39.1%, the lowest since April 2021, from 41.4% in May.

The Consumer Confidence data are available in Haver’s **CBDB** database. The total indexes, which are indexed to 1985=100, appear in **USECON**, and market expectations are in **AS1REPNA**.

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- Headline up 0.6 pts. to 91.2 in June, below expectations; fourth m/m increase in five mths.
- Present Situation Index down 3.0 pts. to 116.4, lowest since Feb. ’21.
- Expectations Index up 3.0 pts. to 74.4, a six-month high.
- Consumers less optimistic about current business & labor market conditions; more upbeat about future business & financial conditions.
- Inflation expectations down to 6.0%, lowest since Feb., as lower oil prices in recent weeks eased consumer inflation fears.

U.S. Consumer Confidence Rebounds in June from a Four-Month Low

Sandy Batten

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Total job openings edged up 0.1% m/m (+3.9% y/y) to 7.594 million in May from a downwardly revised 7.585 million in April (previously 7.618 million), according to the Job Openings and Labor Turnover Survey. Even with only a small rise, the level of openings in May was the highest since May 2024. Accordingly, the job openings rate (the ratio of openings to nonfarm employment plus openings) was unchanged at 4.6% in May. The April and May readings for the job openings rate were the highest since November 2024. In May, the number of unemployed fell while the number of openings edged up. Consequently, the number of openings rose further above the number of unemployed for the second consecutive month, another sign that previously observed softening in labor market conditions may be reversing.

Private sector openings were essentially unchanged in May from April, edging up 2,000 (+4.3% y/y) with the private job openings rate unchanged at 4.8%. The sluggishness in private openings in May was due entirely to a 119,000 decline in private education and health care openings. However, this followed a total increase of 298,000 in March and April. Openings increased in all other major sectors, led by a 95,000 increase in openings in leisure and hospitality. Openings were up 32,000 in construction, 33,000 in manufacturing, and 37,000 in trade and transportation. Total government openings rose 7,000 in May after an upwardly revised 63,000 jump in April (previously +47,000).

Total hiring slipped 0.9% m/m (-3.0% y/y) to 5.170 million in May from an upwardly revised 5.215 million in April (previously 5.116 million). This was the third monthly decline in hiring in the past four months. The hiring rate was unchanged in May at 3.3%. Private sector hiring fell 1.6% m/m (-3.5% y/y) in May, also the third monthly decline in the past four months. The weakness in hiring in May was concentrated in trade and transportation (-56,000) and in construction (-24,000). Manufacturing posted a small decline while professional and business services, and private education and health care posted small increases. Leisure and hospitality hiring rose 15,000, the second monthly increase in the past three months. Total government hiring increased 32,000 in May.

Total separations increased 1.3% (-3.5% y/y) to 5.101 million in May from an upwardly revised 5.038 million in April (previously 4.978 million). Both quits (+22,000) and layoffs (+41,000) increased in May with no change in other separations. The separation rate in May was unchanged at 3.2%. Private separations also rose 1.3% m/m (+62,000, -2.9% y/y) in May. Private quits increased 37,000, private layoffs rose 27,000, while other private separations declined 2,000. The rise in private layoffs was concentrated in construction (+47,000), trade and transportation (+52,000), and private education and healthcare (+52,000). Layoffs declined 18,000 in manufacturing, fell 37,000 in professional and business services, and decreased 50,000 in leisure and hospitality. Even with the rise in private quits in May, they have been trending down in 2026, implying that workers are feeling less comfortable with their employment prospects and hence are choosing to remain in their current jobs.

On the whole, employers remain cautious in hiring. Furthermore, workers are sufficiently unsure of their alternative employment prospects that they are refraining from leaving their current position. Still, openings have gradually risen since the end of last year after having gradually fallen throughout 202 and once again exceed the number of unemployed.

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

- Openings edged up 9,000 but to the highest level since May 2024.
- However, hiring fell 45,000 for the third monthly decline in the past four months.
- Separations rose 63,000 with increases in both quits and layoffs.

Economy in Brief

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