Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/041022a.jpg" width="353">
The Chicago Fed National Activity Index (CFNAI) fell in September to the second negative reading in four months. Last month&#39;s level of -0.01 followed a downwardly revised figure in August.
The three-month moving average of the CFNAI ticked up but was near the lowest level of the year.
A zero value of the CFNAI indicates that the economy is expanding at its historical trend rate of growth.
During the last twenty years there has been a 74% correlation between the level of the CFNAI and q/q growth in real GDP.
The CFNAI is a weighted average of 85 indicators of economic activity. The indicators reflect activity in the following categories: production and income, the labor market, personal consumption and housing, manufacturing and trade sales, and inventories &amp; orders.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S5/@S503/@S503.HTM"> Chicago Fed</a></th>
<th scope="col">Sept</th>
<th scope="col">Aug</th>
<th scope="col">Sept &#39;03</th>
<th scope="col"> 2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
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</thead>
<tbody>
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<td class="firstcol">CFNAI</td>
<td>-0.01</td>
<td>0.03</td>
<td>0.38</td>
<td>-0.11</td>
<td>-0.40</td>
<td>-1.19</td>
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</tbody>
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The Chicago Fed National Activity Index (CFNAI) fell in September to the second negative reading in four months. Last month's level of -0.01 followed a downwardly revised figure in August. The three-month moving average of the CFNAI [...]

Nat'l Activity Index Negative: Chicago Fed

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/041021e.jpg" width="353">
Retail sales in the UK bounced in September, surging by 1.0% in volume terms from August, and growing 6.8% from a year ago.
The strength was in household goods, &quot;other&quot; non-food stores (which would include car dealers and a myriad of other kinds of stores) and non-stores (i.e., on-line and mail order sales). Food stores had moderate 0.6% growth in the month and textiles and clothing were up 0.4%. Among the published store groupings, the only decline was in &quot;non-specialized stores&quot;, where sales were down 1.0%.
In several of the categories, sales had moved markedly in the opposite direction in August. To smooth what is likely transitory volatility, the UK&#39;s Office of National Statistics tries to encourage data users to focus on three-month averages. We can look at their behavior using the Excel mode of DLXVG3 to make a spreadsheet to calculate percent changes in three-month moving averages. This reveals that the gain of 1.1% in the three months to September over the prior three months actually follows larger three-month moves in August and July, so the trend in sales may actually be slowing. Among selected categories of retailers, non-stores, which were so strong in September alone, turn out to be down on the three-month period by 1.0%. Household goods outlets, however, are maintaining their strength, up 3.3% in the latest three-month period, continuing a similar pace that yielded 3.6% in August and 3.1% in July. Thus, while total sales may be moderating a bit, British consumers continue to spend with some vigor.

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<th scope="col" class="firstcol">% Changes, Selected Store Types</th>
<th scope="col">Sept 2004*</th>
<th scope="col">Aug 2004*</th>
<th scope="col">Jul 2004*</th>
<th scope="col">Year-Ago</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
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<td class="firstcol">Total</td>
<td>1.0</td>
<td>0.6</td>
<td>-0.6</td>
<td>6.8</td>
<td>3.1</td>
<td>6.5</td>
<td>6.1</td>
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<tr>
<td class="firstcol">&nbsp;&nbsp; 3-Month Average</td>
<td>1.1</td>
<td>1.5</td>
<td>1.8</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
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<td class="firstcol">Food</td>
<td>0.6</td>
<td>0.8</td>
<td>-0.7</td>
<td>4.1</td>
<td>3.3</td>
<td>4.1</td>
<td>4.1</td>
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<td class="firstcol">Textiles</td>
<td>0.4</td>
<td>3.3</td>
<td>-1.8</td>
<td>8.0</td>
<td>6.4</td>
<td>10.9</td>
<td>9.4</td>
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<td class="firstcol">Non-Stores</td>
<td>3.1</td>
<td>-2.0</td>
<td>-2.2</td>
<td>13.3</td>
<td>-5.4</td>
<td>7.2</td>
<td>6.2</td>
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<td class="firstcol">&nbsp;&nbsp; 3-Month Average</td>
<td>-1.0</td>
<td>0.8</td>
<td>3.8</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
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Retail sales in the UK bounced in September, surging by 1.0% in volume terms from August, and growing 6.8% from a year ago. The strength was in household goods, "other" non-food stores (which would include car dealers and a myriad of [...]

UK Retail Sales Strong in September, But Trend Moderates

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/041021f.jpg" width="353">
Mass layoffs in the US as reported to the Bureau of Labor Statistics fell another 12.5% following the 61.4% in August to the lowest level since August 1999.
These layoffs generated 68,972 (-16.5% y/y) initial claims for unemployment insurance.
Since the series inception in 1995 there has been a (negative) 45% correlation between the number of initial claims generated by mass layoffs and the one month change in non-farm payrolls.
The Mass Layoff Statistics (MLS) program collects reports on mass layoff actions that result in workers being separated from their jobs. Monthly mass layoff numbers are from establishments which have at least 50 initial claims for unemployment insurance (UI) filed against them during a 5-week period. Extended mass layoff numbers (issued quarterly) are from a subset of such establishments--where private sector non-farm employers indicate that 50 or more workers were separated from their jobs for at least 31 days.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EF/@EF10/@EF1001/@EF1001.HTM"> Mass Layoffs</a></th>
<th scope="col"> Sept</th>
<th scope="col"> Aug</th>
<th scope="col">Y/Y</th>
<th scope="col"> 2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
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<td class="firstcol">Number of Events: All Industries</td>
<td>708</td>
<td>809</td>
<td>-18.4%</td>
<td>18,963</td>
<td>20,277</td>
<td>21,467</td>
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<td class="firstcol">Numbers of Persons Filing Initial Unemployment Insurance Claim: All Industries</td>
<td>68,972</td>
<td>69,033</td>
<td>-16.5%</td>
<td>1,888,926</td>
<td>2,245,051</td>
<td>2,514,862</td>
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Mass layoffs in the US as reported to the Bureau of Labor Statistics fell another 12.5% following the 61.4% in August to the lowest level since August 1999. These layoffs generated 68,972 (-16.5% y/y) initial claims for unemployment [...]

Mass Layoffs Plunge Again

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/041021d.jpg" width="353">
The Philadelphia Fed&#146;s October index of general business conditions in the manufacturing sector rebounded more than expected to 28.5. The 15.1 point rise versus September exactly matched that month&#39;s drop. Consensus expectations had been for a lesser increase to 19.0.
During the last ten years there has been a 71% correlation between the level of the Philadelphia Fed Business Conditions Index and three month growth in factory sector industrial production. There has been a 53% correlation with q/q growth in real GDP.
Reversing the pattern of the prior month, virtually all of the sub indexes declined. The index for the number of employees fell to the lowest since June.
The business conditions index reflects a separate survey question, not the sub indexes.
The separate index of expected business conditions in six months dropped sharply for the second consecutive month.
The prices paid index rose to the second highest level since 1988. During the last ten years there has been a 75% correlation between the prices paid index and the three month growth in the PPI for intermediate goods. The correlation with the finished goods PPI has been 41% and with the CPI it&#39;s been 45%.
The Philadelphia Fed index is based on a survey of 250 regional manufacturing firms, but these firms sell nationally and internationally.
The latest Business Outlook survey from the Philadelphia Federal Reserve Bank can be found <a href="http://www.phil.frb.org/files/bos/bos1004.html">here</a>.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S5/@S504/@S504.HTM"> Philadelphia Fed Business Outlook</a></th>
<th scope="col">Oct</th>
<th scope="col">Sept</th>
<th scope="col">Oct &#39;03</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
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<td class="firstcol">General Activity Index</td>
<td>28.5</td>
<td>13.4</td>
<td>29.2</td>
<td>10.6</td>
<td>7.7</td>
<td>-17.2</td>
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<td class="firstcol">Prices Paid Index</td>
<td>57.1</td>
<td>56.4</td>
<td>23.5</td>
<td>16.7</td>
<td>12.2</td>
<td>-0.9</td>
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The Philadelphia Feds October index of general business conditions in the manufacturing sector rebounded more than expected to 28.5. The 15.1 point rise versus September exactly matched that month's drop. Consensus expectations had [...]

Philadelphia Fed Activity Index Rebounded

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/041021b.jpg" width="353">
The 0.1% September decline in the Conference Board&#39;s Composite Index of Leading Economic Indicators was expected and the fourth consecutive monthly drop. August&#39;s 0.3% decline was unrevised.
Among the 10 components of the leading index 60% fell over a one month span with a narrower yield curve and quicker vendor deliveries providing the largest negative influences. Over a six month span 70% of the leaders fell.
The leading index is based on eight previously reported economic data series. Two series, orders for consumer goods and orders for capital goods, are estimated.
The coincident indicators rose 0.2% but the six-month growth rate slipped to 2.1% from its high of 3.3% early this year. During the last ten years there has been an 82% correlation between the six month growth in the coincident indicators and two quarter growth in real GDP.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/041021c.jpg" width="353">
The lagging indicators were unchanged following a deepened 0.3% August drop. The ratio of the coincident to the lagging indicators, a measure of how the economy is performing relative to its excess, rose slightly but positive six month growth in the lagging index indicates that excesses may be building.
Visit the Conference Board&#39;s <a href="http://www.conference-board.org">site</a> for coverage of leading indicator series from around the world.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/BCI/BCI.HTM"> Business Cycle Indicators</a></th>
<th scope="col">Sept</th>
<th scope="col">Aug</th>
<th scope="col">6-Month Chg</th>
<th scope="col"> 2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Leading</td>
<td>-0.1%</td>
<td>-0.3%</td>
<td>-0.3%</td>
<td>1.3%</td>
<td>2.2%</td>
<td>-0.8%</td>
</tr>
<tr>
<td class="firstcol">Coincident</td>
<td>0.2%</td>
<td>0.1%</td>
<td>2.1%</td>
<td>0.4%</td>
<td>-0.5%</td>
<td>-0.5%</td>
</tr>
<tr class="odd">
<td class="firstcol">Lagging</td>
<td>0.0%</td>
<td>-0.3%</td>
<td>1.2%</td>
<td>-2.2%</td>
<td>-2.8%</td>
<td>-1.4%</td>
</tr>
</tbody>
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The 0.1% September decline in the Conference Board's Composite Index of Leading Economic Indicators was expected and the fourth consecutive monthly drop. August's 0.3% decline was unrevised. Among the 10 components of the leading [...]

Leading Indicators Down Again

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/041021a.jpg" width="353">
Initial claims for unemployment insurance dropped 25,000 last week following a revised gain of 16,000 the week prior. The decline to 329,000 was to the lowest level in over a month and compared to the Consensus expectation for 345,000 claims.
The latest figure is for the October survey period for nonfarm payrolls and initial claims fell 22,000 (6.3%) from the September period.
During the last ten years there has been a (negative) 73% correlation between the level of initial claims and the m/m change in payroll employment.
The 4-week moving average of initial claims fell to 348,250 (-11.1% y/y).
Ongoing claims for unemployment insurance fell 8,000 following a 51,000 decline the prior week that was revised from -11,000.
The insured rate of unemployment remained at 2.2% versus the downwardly revised level of the prior week.
&quot;Why Do Americans Work So Much More Than Europeans?&quot; by Nobel Prize winner Edward C. Prescott can be found <a href="http://www.minneapolisfed.org/research/sr/sr321.pdf"> here</a>.

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<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"> 10/16/04</th>
<th scope="col"> 10/09/04</th>
<th scope="col">Y/Y</th>
<th scope="col"> 2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
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<td class="firstcol">Initial Claims</td>
<td>329</td>
<td>354</td>
<td>-15.9%</td>
<td>402</td>
<td>404</td>
<td>406</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>--</td>
<td>2,798</td>
<td>-19.7%</td>
<td>3,531</td>
<td>3,570</td>
<td>3,018</td>
</tr>
</tbody>
</table>
</body>
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Initial claims for unemployment insurance dropped 25,000 last week following a revised gain of 16,000 the week prior. The decline to 329,000 was to the lowest level in over a month and compared to the Consensus expectation for 345,000 [...]

Initial Jobless Insurance Claims Drop Suggests Labor Market Firmed

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/041021a.jpg" width="353">
Initial claims for unemployment insurance dropped 25,000 last week following a revised gain of 16,000 the week prior. The decline to 329,000 was to the lowest level in over a month and compared to the Consensus expectation for 345,000 claims.
The latest figure is for the October survey period for nonfarm payrolls and initial claims fell 22,000 (6.3%) from the September period.
During the last ten years there has been a (negative) 73% correlation between the level of initial claims and the m/m change in payroll employment.
The 4-week moving average of initial claims fell to 348,250 (-11.1% y/y).
Ongoing claims for unemployment insurance fell 8,000 following a 51,000 decline the prior week that was revised from -11,000.
The insured rate of unemployment remained at 2.2% versus the downwardly revised level of the prior week.
&quot;Why Do Americans Work So Much More Than Europeans?&quot; by Nobel Prize winner Edward C. Prescott can be found <a href="http://www.minneapolisfed.org/research/sr/sr321.pdf"> here</a>.

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<thead>
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<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"> 10/16/04</th>
<th scope="col"> 10/09/04</th>
<th scope="col">Y/Y</th>
<th scope="col"> 2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Initial Claims</td>
<td>329</td>
<td>354</td>
<td>-15.9%</td>
<td>402</td>
<td>404</td>
<td>406</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>--</td>
<td>2,798</td>
<td>-19.7%</td>
<td>3,531</td>
<td>3,570</td>
<td>3,018</td>
</tr>
</tbody>
</table>
Leading Indicators Down Again 
by <a href="/comment/Moeller.html">Tom Moeller</a> October 21, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/041021b.jpg" width="353">
The 0.1% September decline in the Conference Board&#39;s Composite Index of Leading Economic Indicators was expected and the fourth consecutive monthly drop. August&#39;s 0.3% decline was unrevised.
Among the 10 components of the leading index 60% fell over a one month span with a narrower yield curve and quicker vendor deliveries providing the largest negative influences. Over a six month span 70% of the leaders fell.
The leading index is based on eight previously reported economic data series. Two series, orders for consumer goods and orders for capital goods, are estimated.
The coincident indicators rose 0.2% but the six-month growth rate slipped to 2.1% from its high of 3.3% early this year. During the last ten years there has been an 82% correlation between the six month growth in the coincident indicators and two quarter growth in real GDP.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/041021c.jpg" width="353">
The lagging indicators were unchanged following a deepened 0.3% August drop. The ratio of the coincident to the lagging indicators, a measure of how the economy is performing relative to its excess, rose slightly but positive six month growth in the lagging index indicates that excesses may be building.
Visit the Conference Board&#39;s <a href="http://www.conference-board.org">site</a> for coverage of leading indicator series from around the world.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/BCI/BCI.HTM"> Business Cycle Indicators</a></th>
<th scope="col">Sept</th>
<th scope="col">Aug</th>
<th scope="col">6-Month Chg</th>
<th scope="col"> 2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
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<td class="firstcol">Leading</td>
<td>-0.1%</td>
<td>-0.3%</td>
<td>-0.3%</td>
<td>1.3%</td>
<td>2.2%</td>
<td>-0.8%</td>
</tr>
<tr>
<td class="firstcol">Coincident</td>
<td>0.2%</td>
<td>0.1%</td>
<td>2.1%</td>
<td>0.4%</td>
<td>-0.5%</td>
<td>-0.5%</td>
</tr>
<tr class="odd">
<td class="firstcol">Lagging</td>
<td>0.0%</td>
<td>-0.3%</td>
<td>1.2%</td>
<td>-2.2%</td>
<td>-2.8%</td>
<td>-1.4%</td>
</tr>
</tbody>
</table>
Philadelphia Fed Activity Index Rebounded 
by <a href="/comment/Moeller.html">Tom Moeller</a> October 21, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/041021d.jpg" width="353">
The Philadelphia Fed&#146;s October index of general business conditions in the manufacturing sector rebounded more than expected to 28.5. The 15.1 point rise versus September exactly matched that month&#39;s drop. Consensus expectations had been for a lesser increase to 19.0.
During the last ten years there has been a 71% correlation between the level of the Philadelphia Fed Business Conditions Index and three month growth in factory sector industrial production. There has been a 53% correlation with q/q growth in real GDP.
Reversing the pattern of the prior month, virtually all of the sub indexes declined. The index for the number of employees fell to the lowest since June.
The business conditions index reflects a separate survey question, not the sub indexes.
The separate index of expected business conditions in six months dropped sharply for the second consecutive month.
The prices paid index rose to the second highest level since 1988. During the last ten years there has been a 75% correlation between the prices paid index and the three month growth in the PPI for intermediate goods. The correlation with the finished goods PPI has been 41% and with the CPI it&#39;s been 45%.
The Philadelphia Fed index is based on a survey of 250 regional manufacturing firms, but these firms sell nationally and internationally.
The latest Business Outlook survey from the Philadelphia Federal Reserve Bank can be found <a href="http://www.phil.frb.org/files/bos/bos1004.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/SURVEYS/@S5/@S504/@S504.HTM"> Philadelphia Fed Business Outlook</a></th>
<th scope="col">Oct</th>
<th scope="col">Sept</th>
<th scope="col">Oct &#39;03</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">General Activity Index</td>
<td>28.5</td>
<td>13.4</td>
<td>29.2</td>
<td>10.6</td>
<td>7.7</td>
<td>-17.2</td>
</tr>
<tr>
<td class="firstcol">Prices Paid Index</td>
<td>57.1</td>
<td>56.4</td>
<td>23.5</td>
<td>16.7</td>
<td>12.2</td>
<td>-0.9</td>
</tr>
</tbody>
</table>
Mass Layoffs Plunge Again 
by <a href="/comment/Moeller.html">Tom Moeller</a> October 21, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/041021f.jpg" width="353">
Mass layoffs in the US as reported to the Bureau of Labor Statistics fell another 12.5% following the 61.4% in August to the lowest level since August 1999.
These layoffs generated 68,972 (-16.5% y/y) initial claims for unemployment insurance.
Since the series inception in 1995 there has been a (negative) 45% correlation between the number of initial claims generated by mass layoffs and the one month change in non-farm payrolls.
The Mass Layoff Statistics (MLS) program collects reports on mass layoff actions that result in workers being separated from their jobs. Monthly mass layoff numbers are from establishments which have at least 50 initial claims for unemployment insurance (UI) filed against them during a 5-week period. Extended mass layoff numbers (issued quarterly) are from a subset of such establishments--where private sector non-farm employers indicate that 50 or more workers were separated from their jobs for at least 31 days.

<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/@EF10/@EF1001/@EF1001.HTM"> Mass Layoffs</a></th>
<th scope="col"> Sept</th>
<th scope="col"> Aug</th>
<th scope="col">Y/Y</th>
<th scope="col"> 2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Number of Events: All Industries</td>
<td>708</td>
<td>809</td>
<td>-18.4%</td>
<td>18,963</td>
<td>20,277</td>
<td>21,467</td>
</tr>
<tr>
<td class="firstcol">Numbers of Persons Filing Initial Unemployment Insurance Claim: All Industries</td>
<td>68,972</td>
<td>69,033</td>
<td>-16.5%</td>
<td>1,888,926</td>
<td>2,245,051</td>
<td>2,514,862</td>
</tr>
</tbody>
</table>
</body>
</html>

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

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

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Michael J. Moran

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The report on payroll employment for March was impressive when viewed in isolation. Job growth was strong at 178,000, and the advance was broadly based. The construction and manufacturing sectors both posted solid gains, and the service-producing sector registered its firmest performance in more than a year. However, the gain might be viewed as a continuation of an unusual bout of random volatility. The March advance followed a notable drop in February (-133,000, revised down from -92,000), which followed an upside surprise in January (160,000, revised up from 126,000).

To be sure, statistical noise has been a factor in the past three months, but the results also represent an encouraging shift in job growth from that in the second half of last year, when employment rose only marginally in the third quarter and fell in the fourth. The net change in the past three months seems to signal that job growth is not drying up. The net advance so far this year is far from brisk, but it is clearly in the plus column and noticeably better than results in late 2025.

The unemployment rate also might be viewed as favorable, as it dipped 0.1 percentage point to 4.3%, although it was a “soft” decline. That is, employment as measured by the household survey declined 64,000, but the size of the labor force fell by a larger amount (off 396,000). Still, the jobless rate has climbed only modestly higher since the labor market started to ease in 2023, and it has inched lower in the past few months.

Unemployment has been contained despite modest hiring because layoffs also have been light. Initial claims for unemployment benefits have moved sideways in the past few years, indicating no change in the pace of layoffs. This pattern is confirmed by terminations data in the report on job openings and labor turnover (JOLTs) from the Bureau of Labor Statistics.

A supply-side shift in the labor market also has helped to contain the unemployment rate. Growth in the size of the labor force has slowed, and with fewer individuals seeking employment, those searching are more easily absorbed. Measures of the size of the labor force can be difficult to assess because there are breaks in the series every year. The Bureau of Labor Statistics adjusts the population controls used in its estimating procedure every January without revising past data to align with the new estimates. Thus, every January involves a discontinuity in the series, which will distort year-over-year changes.

However, Haver Analytics maintains a smoothed series originally developed by BLS to eliminate the breaks in the labor force data. As shown in the chart below, the smoothed series on the size of the labor force had been growing at a pace centered on 1.2% through 2022, but it has slowed irregularly since then (an observation for October is not available because of limited data collection during the government shutdown). The overall labor force is still growing, but the slower pace means fewer individuals looking for work, which most likely results in fewer being counted as unemployed.

The BLS collects data every month on both native-born and foreign-born individuals in the labor force. The breaks in these series are an issue, and Haver does not maintain smoothed series. However, the use of moving averages achieves enough smoothing to provide a sense of underlying changes. The native-born labor force has moved erratically in the past couple of years, but it has continued to advance. The foreign-born labor force, in contrast, seems to have peaked in mid-2025 and has generally declined since then.

The employment and earnings data are collected from surveys taken each month during the week containing the 12th day of the month. The labor market data are contained in Haver's **USECON** database. Detailed figures are in the **EMPL** and **LABOR** databases. The expectations figures are in the **AS1REPNA** database.

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- The jump of 178,000 in payroll employment in March easily exceeded the expected gain of 51,000.
- Following a net gain in January and February, the employment setting seems to have brightened slightly.
- A dip in the unemployment rate continued the recent pattern of marginal changes.

Payroll Employment: Another Surprise in March, The Third Consecutive

Kathleen Stephansen, CBE

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Initial claims for unemployment insurance declined by 9,000 to 202,000 in the week ending March 28, from 211,000 in the week ending March 21, revised from 210,000. The four-week average declined 3,000 to 207,750 in the week ending March 28, from 210,750 the March 21 week, revised from 210,500. The Forecast Survey looked for 212,000 claims to have been filed.

The total number of unemployment insurance beneficiaries—also known as “continuing claims”—rose by 25,000 to 1.841 million in the week ending March 21, from 1.816 million in the week ending March 14. The four-week moving average declined to 1.839 million in the latest week from 1.846 million in the March 14 week. This is the lowest level for this average since September 28, 2024 when it was 1.834 million. The insured unemployment rate remained at 1.2% in the week of March 21. It has remained at that level since the week of November 29, 2025.

The insured unemployment rate varied greatly across individual states and territories. In the week ending March 14, the highest unemployment rates were in Rhode Island (2.83%), New Jersey (2.73%), Massachusetts (2.66%), Washington (2.39%), Minnesota (2.31%), California (2.17%), and New York (2.01%). The lowest rates were in Florida (0.31%), Louisiana (0.32%), Arkansas (0.36%), Alabama (0.38%), and North Carolina (0.40%). Rates in other notable states include Illinois (1.99%), Connecticut (1.82%), Pennsylvania (1.72%), and Texas (1.07%). These state data are not seasonally adjusted.

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

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- New claims declined by 9,000 to 202,000.
- Continuing claims rose by 25,000 to 1.841 million.
- The insured unemployment rate remained at 1.2%.

U.S. Initial Unemployment Claims Edged Down in the Week of March 28

Robert Brusca

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The S&P manufacturing PMIs for March showed improvements in 44.4% of the 18 reporters. The median reading for the month was at 50.9, indicating that expanding output was the median reading through the period. The median change showed a small step back of 0.1 diffusion points month-to-month.

Sequentially, looking at average yearly activity compared to a year ago, six months compared to 12 months, and three months compared to six months, we see progress in train. For three months compared to six months, the proportion of reporters showing improvement is 72.2%. For these reporters, over six months compared to 12 months, there is a 61.1% improvement proportion, while for 12 months compared to 12 months ago, there is only a 27.8% improvement.

The median reading over three months on average is 50.7, while the median reading over six months is 50.0 and the median reading over 12 months is 49.4. These readings show a very slow but steady improvement in manufacturing over this horizon.

In addition, we calculate the queue percentile standings for each reporter—that is, the level of the current diffusion index compared to all of the observations back to January 2022, expressing the final number as the percentile standing for the current month in that queue. On that basis, the median percentile standing for this group of reporters is 76.5%. It tells us that the median standing is in the top 25 percentile of all the readings since January 2022 to date. That's a reasonably good result. For the euro area, the queue percentile standing is at the 89.8 percentile, while for Germany it's at its 91.8 percentile. For the Monetary Union and for Germany, the current numbers are some of the best we've seen during this period. However, that doesn't mean that they're necessarily stellar readings.

**PMI diffusion vs. PMI rank standings**
German diffusion in manufacturing is 52.2 in March; for the EMU it is 51.6. Germany posts the fourth-highest PMI rank standing and the fifth highest raw standing in March. The highest standing among all reporters is 52.6 from South Korea. This is a period in which no country was posting very strong manufacturing results. In fact, the United States, with a manufacturing PMI rank standing of 79.6, has a diffusion reading in March just a tick below Germany’s whose queue standing at 91.8 seems miles ahead of the U.S.—but it isn’t. Remember that the queue standings are about relative positioning.

Looking at the details, we see that below-median rank readings were logged by Mexico, Russia, India, Brazil, Indonesia, and Turkey. The Asian markets and developing economies seem to have a harder time working up to the standards achieved by other countries.

We also have averages by certain groups of countries. For example, the U.S., the U.K., the Monetary Union, Canada, and Japan—an expanded G10 groping—had an average reading of 51.3 in March, and for that group of countries, the improvements have been steady from 12 months to six months to three months. For the BRIC countries in March, the average standing was 50.4, and for that group there has been a very slight ongoing erosion. For the Asian group, on average, the March reading is 51.2, and there has been a progression to stronger readings from 49.9 over 12 months to 50.5 over six months and to 50.8 over three months.

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On balance, manufacturing was quite uneven in March; however, there's a progression of improvement that is still in place. But with rising oil prices, war in Iran, and lots of knock-on effects to supply trains, it's likely that these readings are going to fall on harder times in the months ahead—unless the Iran war can be wrapped up in very, very, short order. According to the Baltic Dry index, there hasn't been much reduction in global shipping of dry goods. That index excludes oil and other wet goods shipments that clearly have been impeded. However, giving it more time, we may see that the dry index begins to show some difficulties.

Global Manufacturing PMIs Stall—Will It Get Worse?

Andrew Cates

**Global shipping costs**
The Baltic Dirty Tanker Index has surged to multi-year highs, reflecting a sharp tightening in global oil shipping markets. The primary driver is the escalation in Middle East tensions, particularly the effective disruption to flows through the Strait of Hormuz—a critical artery for roughly a fifth of global oil trade. Heightened security risks, including missile and drone attacks on vessels and port infrastructure, have forced rerouting, increased insurance premia and reduced effective tanker supply. At the same time, longer voyage distances—especially for Gulf exports diverted around the Cape—are tying up capacity and amplifying rate pressures. The result is a classic squeeze: constrained supply of available ships meeting elevated demand for transport, pushing freight costs sharply higher.

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**Supply Chain Bottlenecks**
Flash PMI data point to a renewed build-up of supply chain pressures across the major economies. Supplier delivery times—where readings below 50 indicate slower deliveries—have deteriorated in both the US and UK, with the latter showing a particularly sharp decline. The euro area, while more stable, is also drifting in the same direction. This broad-based softening suggests that the disruptions visible in energy and shipping markets are now feeding into the real economy. Longer delivery times are typically an early indicator of tightening supply conditions, rising input costs and, ultimately, renewed pipeline inflation pressures. While not yet at the extremes seen during the pandemic, the direction of travel is clear: supply chains are becoming less efficient just as geopolitical risks intensify.

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**Policy Uncertainty Versus Market Volatility**
A striking divergence is emerging between policy uncertainty and financial market volatility. The US Economic Policy Uncertainty Index has risen sharply, reflecting the intensifying geopolitical backdrop, trade disruptions and an increasingly complex policy environment. By contrast, the VIX—while off its lows—remains relatively contained by historical standards. This gap suggests that financial markets may be underpricing the scale and persistence of current risks. Either uncertainty begins to recede, or market volatility has further to rise. For now, the message is clear: policymakers are operating in a far more uncertain world than markets appear to be discounting.

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**Oil Prices and Monetary Policy** 
The sharp rise in oil prices is once again feeding directly into short-term interest rate expectations, with a strong positive correlation evident between WTI and US 2-year Treasury yields. As energy prices surge, markets are reassessing the near-term inflation outlook and the likely policy response, pushing yields higher. This reflects a familiar dynamic: energy shocks tighten financial conditions not just directly, but via expectations of more restrictive monetary policy. That said, there are important caveats. Medium-term market-based inflation expectations remain relatively well contained, suggesting credibility in central banks’ ability to anchor inflation over time. Moreover, recent communication from Fed Chair Powell indicates that the Federal Reserve is in no immediate hurry to raise rates, pointing instead to a more cautious, data-dependent approach in the face of heightened uncertainty.

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**Loose Labour Markets**
Wage growth across the US, UK and euro area continues to moderate, pointing to a gradual loosening in labour market conditions. The sharp post-pandemic surge in wage pressures—particularly pronounced in the US—has clearly faded, with all three regions now on a downward trajectory. This matters in the current context: while the oil shock is pushing headline inflation higher and complicating the near-term outlook, easing wage dynamics reduce the risk of persistent second-round effects. In turn, this lessens the urgency for central banks to respond aggressively with tighter policy. The result is a more nuanced policy backdrop—one where energy-driven inflation pressures are rising, but underlying domestic cost pressures are moving in the opposite direction.

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**Headline Inflation in Advanced Economies**
Despite the recent energy shock, broader inflation dynamics across advanced economies remain relatively well behaved. The euro area HICP flash estimate rose from 1.9% in February to 2.5% in March, driven largely by higher energy prices. However, core inflation edged down to 2.3% from 2.4%, suggesting that pass-through into underlying price pressures remains limited for now. More generally, inflation across many advanced economies continues to hover close to central bank targets—a marked contrast to the peaks seen in 2022. While higher oil prices will almost certainly continue to lift headline inflation in the near term, and the risk is clearly tilted toward further upside, the broader picture for now remains one of relatively contained underlying pressures. This suggests the current shock is more likely to complicate the disinflation process—potentially slowing or interrupting it—rather than decisively reversing it, though the balance of risks has become less favourable.

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Amid tentative signs of de-escalation from the US administration over the past 48 hours—including suggestions that the conflict with Iran could conclude relatively quickly—financial markets have begun to retrace some of last week’s sharp repricing of Middle East risk. Oil prices have come off their highs, while equities and bonds have rallied as risk premia ease. That said, the earlier phase of the week saw a decisive adjustment: oil surged, front-end yields moved higher, and uncertainty rose as investors grappled with the implications of disrupted energy flows. Even now, the overall adjustment has been uneven—volatility has picked up, but not to levels typically associated with sustained geopolitical stress—raising questions about how fully markets are internalising both the risks and the rapidly shifting outlook. Our charts this week capture these cross-currents. Tanker rates have spiked as shipping routes are disrupted and capacity tightens (chart 1), while PMI delivery times point to early signs of supply chain strain feeding into the real economy (chart 2). At the same time, the divergence between elevated policy uncertainty and relatively contained market volatility suggests there could have been a degree of complacency (chart 3). The rise in oil prices is already feeding into higher short-term yields, though this is being tempered by cooling labour markets, anchored inflation expectations and more cautious central bank signalling (charts 4 and 5). Meanwhile, euro area flash CPI has picked up, but core inflation remains relatively benign, suggesting underlying price pressures are still contained for now (chart 6).

Charts of the Week: Strait Stress

Sandy Batten

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Total retail sales rebounded in February, rising a larger-than-expected 0.6% m/m (+3.7% y/y) following an upwardly revised 0.1% monthly decline in January (previously -0.2% m/m), according to data from the U.S. Census Bureau. The Action Economics Forecast Survey expected a 0.4% monthly increase. Excluding autos, other sales were up 0.5% m/m (+3.6% y/y), the first monthly increase in three months. The Action Economics Forecast Survey looked for a 0.3% m/m increase.

The control group of sales (those categories that the BEA uses to construct PCE in the national accounts) increased 0.5% m/m in February following a 0.2% increase in January. The January/February average for this variable is 2.1% annualized above the Q4 average. In Q4, the control group rose 2.8% saar from Q3. So, today’s figures point to a slight slowdown in PCE growth in the first quarter. Note, however, that the data released today predates the escalation of the conflict between the US/Israel and Iran which has led to a marked rise in gasoline/energy prices. The increase in energy prices to date, if maintained, could stress household finances and thereby significantly slow consumer spending ahead.

Sales of motor vehicles and parts jumped 1.2% m/m in February, their first monthly gain in three months and their largest monthly increase since last July. Furniture sales declined 1.0% m/m in February while sales of electronics and appliances rose 0.5% m/m. Sales of building materials increased 0.4% m/m, their fourth consecutive monthly gain. Sales at health and personal care stores jumped 2.3% m/m, their first monthly gain in five months. Sales at gasoline stations rose 0.9% m/m in February, their third monthly gain in the past four months, ahead of the sharp price increases that occurred in March. Clothing store sales jumped 2.0% m/m, their first monthly increase in three months. Department store sales gained 3.0% m/m, their first monthly increase in four months. Food sales slumped 1.0% m/m in February, their first monthly decline in three months. Sales of nonstore retailers increased 0.7% m/m in February on top of a 1.4% m/m jump in January. Eating out sales rose 0.4% m/m, their first monthly gain in three months.

Retail sales data can be found in Haver’s **USECON** database. The expectations figures are from the Action Economics Forecast Survey in **AS1REPNA**.

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- Total sales increased 0.6% m/m after a 0.1% m/m decline in January
- Excluding autos, sales increase 0.5% m/m in February after having been unchanged in January.
- Sales of the retail control group that is used to construct PCE rose 0.5% m/m in February.

Economy in Brief

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Nat'l Activity Index Negative: Chicago Fed

Nat'l Activity Index Negative: Chicago Fed

UK Retail Sales Strong in September, But Trend Moderates

Mass Layoffs Plunge Again

Philadelphia Fed Activity Index Rebounded

Leading Indicators Down Again

Initial Jobless Insurance Claims Drop Suggests Labor Market Firmed

Initial Jobless Insurance Claims Drop Suggests Labor Market Firmed