Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090626e.jpg" width="353">
Though the overall economy has yet to make a convincing turn towards the better, the University of Michigan&#39;s June reading of consumer sentiment suggests a coming improvement in retail spending. The full-month index level rose slightly to 70.8, an improvement from the mid-month reading and up sharply from the November low. The figure was better than Consensus expectations for a reading of 69.0. Indeed, spending improvement is suggested since during the last ten years, there has been a 61% correlation between the level of sentiment and the growth in real spending during the next five months.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090626f.jpg" width="353">
The current economic conditions jumped ten percent from May to its highest level since last September. The reading for current personal finances just about made up the May decline. however, it was the jump in the reading of current conditions for buying large household goods to the highest level since March of last year that powered the increase. Showing a huge increase was the reading of current conditions for buying a motor vehicle. Though conditions for buying a house slipped, the level remained up sharply from last year.
The expectations component of the index improved from the mid-month reading and was up by nearly half versus a year earlier. Expectations for personal finances jumped with higher stock prices. Though expected business conditions during the next year slipped, they remained up sharply from last year. Expected conditions during the next five years also slipped versus May but they were up sharply from one year ago.
The read of current conditions, conversely, deteriorated from mid-month but remained off its winter low. Buying conditions for large household goods were at their highest level since early last year but personal finances were viewed as flat.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090626g.jpg" width="353">
The opinion of government policy, which may eventually influence economic expectations, fell this month after having jumped through May. It remained near the highest level since 2002. A reduced 24% of respondents thought that a good job was being done by government while 28% thought that a poor job was being done. Nevertheless, despite these monthly changes, the trend is still very much toward a favorable reading of policy actions.
Inflation expectations for the next year rose further to 3.9%. That compares to a low of 1.7% last December but remained down from a reading which was as high as 7.0% last May.
The University of Michigan survey data is not seasonally adjusted. The reading is based on telephone interviews with about 500 households at month-end; the mid-month results are based on about 300 interviews. The summary indexes are in Haver&#39;s USECON database with details in the proprietary UMSCA database.
Inflation and Monetary Policy from the Federal Reserve Bank of Richmond can be found <a href="http://www.richmondfed.org/research/our_research_focus/in_depth/index.cfm">here.</a>
The State of our Interstates from the Federal Reserve Bank of Chicago is available <a href="http://www.chicagofed.org/publications/fedletter/cfljuly2009_264.pdf">here.</a>

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<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EF/@EF14/@EF1402/@EF1402.HTM">University of Michigan</a></th>
<th scope="col">June (Final)</th>
<th scope="col">Mid-June</th>
<th scope="col">May</th>
<th scope="col">April</th>
<th scope="col">June y/y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Consumer Sentiment</td>
<td>70.8</td>
<td>69.0</td>
<td>68.7</td>
<td>65.1</td>
<td>25.5%</td>
<td>63.8</td>
<td>85.6</td>
<td>87.3</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Current Conditions</td>
<td>73.2</td>
<td>74.5</td>
<td>67.7</td>
<td>68.3</td>
<td>8.3</td>
<td>73.7</td>
<td>101.2</td>
<td>105.1</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Expectations</td>
<td>69.2</td>
<td>65.4</td>
<td>69.4</td>
<td>63.1</td>
<td>40.7</td>
<td>57.3</td>
<td>75.6</td>
<td>75.9</td>
</tr>
</tbody>
</table>
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Though the overall economy has yet to make a convincing turn towards the better, the University of Michigan's June reading of consumer sentiment suggests a coming improvement in retail spending. The full-month index level rose [...]

Michigan Consumer Sentiment Improves With Higher Expectations

Robert Brusca

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090626d.jpg" align="left" border="0" height="265" width="353">
Consumer confidence in France has risen in three of the last
for months with one month marking a pause in the rising trend. French
confidence hit its low point in July of 2008 at a level of -48. Since
then although the recession has worsen in most of the world, French
consumer confidence has embarked on a rising trend that has extended
its trend rise during this whole period of economic malaise. 
 

This is probably one reason that France has weathered the
recession better than other European countries. Another reason being,
of course, that French fiscal spending has been greater, and today we
are hearing some misgivings about the size of the French fiscal
deficit. French Prime Minister Francois Fillon warned on Friday that
budget deficits "could compromise even the survival of our economic
systems if we do not manage to control them." 
 

Confidence is still in the lower 19% of its range since 1990.
By count, confidence has been weaker than this only 6.4% of the time.
So the range reading is more comforting than it should be. 
 

Consumer concern about unemployment is the highest it has
been. Still the outlook for living standards in the 12 months ahead is
in its 17th range percentile compared to a standing of 9% over the past
21 months. Both figures however have been worse only 5.6% of the time.
In that sense there is not improvement in the outlook. 
 

Only about 25% say the time is right for a major purchases;
the response is worse than that only 15% of the time. 
 

On balance the good news is that the French figures show some
improvement. But let&#8217;s not kid ourselves; the readings are still
painfully weak. Europe&#8217;s leaders should not be counting their chickens
before they are hatched. There is still a lot of risk out there. In
response to a question about European recovery, European Commissioner
for Economic and Monetary Affairs Joaquin Almunia said Friday. "We are
not there. The U.S. Economy is starting to give signals that it is near
to or at the beginning of a recovery." Even though the US is in the
lead no one is &#8216;there&#8217; yet. And there is no room for complacency. Maybe
the US congress should be more concerned with doing things to aid
recovery than to find itself a scapegoat for an economy gone bad and
stimulus monies (it approved) less than well spent. 



<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr><th colspan="11" scope="col"> INSEE Household Monthly Survey </th>
</tr>
</thead>
<tbody>
<tr class="grey5">
<td class="firstcol" colspan="5">&nbsp;</td>
<td colspan="2">Since Jan 1990</td>
<td colspan="4">Since Jan 1990</td>
</tr>
<tr class="grey4">
<td class="firstcol">&nbsp;</td>
<td> Jun 09</td>
<td> May 09</td>
<td> Apr 09</td>
<td> Mar -09</td>
<td> Percentile</td>
<td> Rank %</td>
<td> Max</td>
<td> Min</td>
<td> Range</td>
<td> Mean</td>
</tr>
<tr class="grey3">
<td class="firstcol">Household Confidence</td>
<td> -37</td>
<td> -40</td>
<td> -40</td>
<td> -42</td>
<td> 19.0</td>
<td> 6.4</td>
<td> 10</td>
<td> -48</td>
<td> 58</td>
<td> -19</td>
</tr>
<tr class="grey2">
<td class="firstcol" colspan="11"> Living Standards</td>
</tr>
<tr class="grey3">
<td class="firstcol">&nbsp; Past 12 Mos</td>
<td>-73</td>
<td>-75</td>
<td>-75</td>
<td>-76</td>
<td>9.0</td>
<td> 5.6</td>
<td>18</td>
<td>-82</td>
<td>100</td>
<td>-40</td>
</tr>
<tr class="grey3">
<td class="firstcol">&nbsp; Next 12-Mos</td>
<td>-47</td>
<td>-50</td>
<td>-53</td>
<td>-58</td>
<td>17.1</td>
<td> 5.6</td>
<td>16</td>
<td>-60</td>
<td>76</td>
<td>-21</td>
</tr>
<tr class="grey3">
<td class="firstcol"> Unemployment: Next 12</td>
<td>96</td>
<td>89</td>
<td>84</td>
<td>79</td>
<td>100.0</td>
<td> 99.6</td>
<td>96</td>
<td>-37</td>
<td>133</td>
<td>31</td>
</tr>
<tr class="grey2">
<td class="firstcol" colspan="11"> Price Developments</td>
</tr>
<tr class="grey3">
<td class="firstcol">&nbsp; Past 12Mo</td>
<td>-24</td>
<td>-18</td>
<td>-12</td>
<td>-7</td>
<td>27.3</td>
<td> 48.3</td>
<td>64</td>
<td>-57</td>
<td>121</td>
<td>-16</td>
</tr>
<tr class="grey3">
<td class="firstcol">&nbsp; Next 12-Mos</td>
<td>-53</td>
<td>-55</td>
<td>-53</td>
<td>-51</td>
<td>7.5</td>
<td> 3.4</td>
<td>33</td>
<td>-60</td>
<td>93</td>
<td>-34</td>
</tr>
<tr class="grey2">
<td class="firstcol" colspan="11"> Savings</td>
</tr>
<tr class="grey3">
<td class="firstcol">&nbsp; Favorable to save</td>
<td> 9</td>
<td> 7</td>
<td> 10</td>
<td> 14</td>
<td> 33.3</td>
<td> 7.3</td>
<td> 39</td>
<td> -6</td>
<td> 45</td>
<td> 22</td>
</tr>
<tr class="grey3">
<td class="firstcol">&nbsp; Ability to save Next
12</td>
<td>-18</td>
<td>-20</td>
<td>-15</td>
<td>-13</td>
<td>17.2</td>
<td> 6.4</td>
<td>6</td>
<td>-23</td>
<td>29</td>
<td>-9</td>
</tr>
<tr class="grey2">
<td class="firstcol" colspan="11"> Spending</td>
</tr>
<tr class="grey3">
<td class="firstcol">&nbsp; Favorable for major
purchase</td>
<td> -27</td>
<td> -28</td>
<td> -30</td>
<td> -29</td>
<td> 25.9</td>
<td> 15.4</td>
<td> 16</td>
<td> -42</td>
<td> 58</td>
<td> -14</td>
</tr>
<tr class="grey2">
<td class="firstcol" colspan="11"> Financial Situation</td>
</tr>
<tr class="grey3">
<td class="firstcol">&nbsp; Current</td>
<td> 12</td>
<td> 12</td>
<td> 12</td>
<td> 12</td>
<td> 42.9</td>
<td> 57.3</td>
<td> 24</td>
<td> 3</td>
<td> 21</td>
<td> 12</td>
</tr>
<tr class="grey3">
<td class="firstcol">&nbsp; Past 12 MOs</td>
<td>-23</td>
<td>-28</td>
<td>-26</td>
<td>-28</td>
<td>43.8</td>
<td> 17.9</td>
<td>-5</td>
<td>-37</td>
<td>32</td>
<td>-17</td>
</tr>
<tr class="grey3">
<td class="firstcol">&nbsp; Next 12-Mos</td>
<td>-13</td>
<td>-16</td>
<td>-17</td>
<td>-20</td>
<td>31.4</td>
<td> 8.1</td>
<td>11</td>
<td>-24</td>
<td>35</td>
<td>-1</td>
</tr>
<tr class="grey1">
<td colspan="11" class="firstcol">&nbsp; Number of observations
in the period 234</td>
</tr>
</tbody>
</table>
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Consumer confidence in France has risen in three of the last for months with one month marking a pause in the rising trend. French confidence hit its low point in July of 2008 at a level of -48. Since then although the recession has [...]

French Confidence, Still In A Deep Pit, Rises

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090626a.jpg" width="353">
The economic recession continued to damp growth in wages last month, but &quot;automatic stabilizers&quot; kicked in to pick the slack. The result was a 1.4% jump in May personal income which was the largest monthly increase in a year. The rise owed to an 8.0% jump (12.2% y/y) in government payments which included a 3.5% (190.4% y/y) surge in unemployment insurance benefits and a 21.0% jump in &quot;other&quot; payments. As might be expected given the recession, these gains offset severe weakness in the income earned in the private sector. Wages &amp; salaries slipped 0.1% (-1.1% y/y) for the eighth decline in the last nine months. In addition, the decline in interest rates took its toll on interest income which in May was off 5.5% y/y while the corporate sector paid fewer dividends (-5.2% y/y) as earnings fell.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090626b.jpg" width="353">
Lower taxes added further to the income gains fueled by direct payments from the government. Tax payments were down nearly 20% since December. That lifted disposable personal income at a 10.8% annual rate so far this year and by 1.6% just during last month. Adjusted for inflation, real disposable income also has been quite firm and posted a 1.6% increase last month and is up at a 9.0% annual rate since December
With the recession, consumers have entered a cautious mode and they&#39;re letting the income gains rebuild their balance sheets. As a result the personal savings rate jumped again, last month to 6.9% which was the highest level since December of 1993.
Spending restraint was evidenced by the slight 0.3% rise in May personal consumption expenditures. That followed no change during April which was slightly better than a 0.1% decline reported last month. Adjusted for low inflation, May spending rose 0.2%. However, the 1.9% year-to-year retrenchment in real spending was near the fastest rate at which spending has ever been bulled back. The good news is that consumers seem to have grown tired of not spending. So far this year real personal consumption has risen at a 1.5% annual rate. <img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090626c.jpg" width="353">
The consumption details may suggest, however, that the idea of a stabilization still may be a stretch. Real spending on motor vehicles seems to stabilizing and rose 2.4% last month (-16.4% y/y) and it&#39;s actually up at a 4.3% annual rate since December. Real spending on furniture &amp; appliances also seems to be stabilizing though it&#39;s still down -5.6% y/y. Real spending on apparel made up for an April decline with a 0.2% increase (-7.4% y/y). Spending on services again was roughly unchanged (0.9% y/y).
Finally, all this spending restraint held back the PCE chain price index to a 0.1% uptick. The gain matched the rise in core prices and the annual rate of increase dropped to 1.8%. The latest increase in prices matched Consensus expectations.
The personal income &amp; consumption figures are available in Haver&#39;s USECON and USNA databases.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E7/@E711/@E71102/@E71102.HTM">Disposition of Personal Income</a> (%)&nbsp;</th>
<th scope="col">May</th>
<th scope="col">April</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Personal Income</td>
<td>1.4</td>
<td>0.7</td>
<td>0.3</td>
<td>3.8</td>
<td>6.1</td>
<td>7.1</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Disposable Personal Income</td>
<td>1.6</td>
<td>1.3</td>
<td>0.2</td>
<td>4.6</td>
<td>5.5</td>
<td>6.4</td>
</tr>
<tr class="odd">
<td class="firstcol">Personal Consumption Expenditures</td>
<td>0.3</td>
<td>0.0</td>
<td>-1.8</td>
<td>3.6</td>
<td>5.5</td>
<td>5.9</td>
</tr>
<tr>
<td class="firstcol">Saving Rate</td>
<td>6.9</td>
<td>5.6</td>
<td>4.8 (May &#39;08)</td>
<td>1.8</td>
<td>0.5</td>
<td>0.7</td>
</tr>
<tr class="odd">
<td class="firstcol">PCE Chain Price Index</td>
<td>0.1</td>
<td>0.1</td>
<td>0.1</td>
<td>3.3</td>
<td>2.6</td>
<td>2.8</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Less food &amp; energy</td>
<td>0.1</td>
<td>0.3</td>
<td>1.8</td>
<td>2.2</td>
<td>2.2</td>
<td>2.3</td>
</tr>
</tbody>
</table>
</body>
</html>

The economic recession continued to damp growth in wages last month, but "automatic stabilizers" kicked in to pick the slack. The result was a 1.4% jump in May personal income which was the largest monthly increase in a year. The rise [...]

U.S. Personal Income Surge Lifts Savings Rate To Its Highest Since 1993

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090626a.jpg" align="left" border="0" height="265" width="353">
The economic recession continued to damp growth in wages last
month, but "automatic stabilizers" kicked in to pick the slack. The
result was a 1.4% jump in May personal income which was the largest
monthly increase in a year. The rise owed to an 8.0% jump (12.2% y/y)
in government payments which included a 3.5% (190.4% y/y) surge in
unemployment insurance benefits and a 21.0% jump in "other" payments.
As might be expected given the recession, these gains offset severe
weakness in the income earned in the private sector. Wages &amp;
salaries slipped 0.1% (-1.1% y/y) for the eighth decline in the last
nine months. In addition, the decline in interest rates took its toll
on interest income which in May was off 5.5% y/y while the corporate
sector paid fewer dividends (-5.2% y/y) as earnings fell.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090626b.jpg" align="right" border="0" height="265" width="353">
Lower taxes added further to the income gains fueled by direct
payments from the government. Tax payments were down nearly 20% since
December. That lifted disposable personal income at
a 10.8% annual rate so far this year and by 1.6% just during last
month. Adjusted for inflation, real disposable income also has been
quite firm and posted a 1.6% increase last month and is up at a 9.0%
annual rate since December
With the recession, consumers have entered a cautious mode and
they're letting the income gains rebuild their balance sheets. As a
result the personal savings rate jumped again,
last month to 6.9% which was the highest level since December of 1993.
Spending restraint was evidenced by the slight 0.3% rise in
May personal consumption expenditures. That followed no change during
April which was slightly better than a 0.1% decline reported last
month. Adjusted for low inflation, May spending rose 0.2%. However, the
1.9% year-to-year retrenchment in real spending was near the fastest
rate at which spending has ever been bulled back. The good news is that
consumers seem to have grown tired of not spending. So far this year
real personal consumption has risen at a 1.5% annual rate. <img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090626c.jpg" align="left" border="0" height="265" width="353">
The consumption details may suggest, however, that the idea of
a stabilization still may be a stretch. Real spending on motor vehicles
seems to stabilizing and rose 2.4% last month (-16.4% y/y) and it's
actually up at a 4.3% annual rate since December. Real spending on
furniture &amp; appliances also seems to be stabilizing though it's
still down -5.6% y/y. Real spending on apparel made up for an April
decline with a 0.2% increase (-7.4% y/y). Spending on services again
was roughly unchanged (0.9% y/y).
Finally, all this spending restraint held back the PCE
chain price index to a 0.1% uptick. The gain matched the rise
in core prices and the annual rate of increase dropped to 1.8%. The
latest increase in prices matched Consensus expectations.
The personal income &amp; consumption figures are
available in Haver's USECON and USNA
databases.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E7/@E711/@E71102/@E71102.HTM">Disposition
of Personal Income</a> (%)&nbsp;</th>
<th scope="col">May</th>
<th scope="col">April</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Personal Income</td>
<td>1.4</td>
<td>0.7</td>
<td>0.3</td>
<td>3.8</td>
<td>6.1</td>
<td>7.1</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Disposable
Personal Income</td>
<td>1.6</td>
<td>1.3</td>
<td>0.2</td>
<td>4.6</td>
<td>5.5</td>
<td>6.4</td>
</tr>
<tr class="odd">
<td class="firstcol">Personal Consumption
Expenditures</td>
<td>0.3</td>
<td>0.0</td>
<td>-1.8</td>
<td>3.6</td>
<td>5.5</td>
<td>5.9</td>
</tr>
<tr>
<td class="firstcol">Saving Rate</td>
<td>6.9</td>
<td>5.6</td>
<td>4.8 (May '08)</td>
<td>1.8</td>
<td>0.5</td>
<td>0.7</td>
</tr>
<tr class="odd">
<td class="firstcol">PCE Chain Price Index</td>
<td>0.1</td>
<td>0.1</td>
<td>0.1</td>
<td>3.3</td>
<td>2.6</td>
<td>2.8</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Less food
&amp; energy</td>
<td>0.1</td>
<td>0.3</td>
<td>1.8</td>
<td>2.2</td>
<td>2.2</td>
<td>2.3</td>
</tr>
</tbody>
</table>
French Confidence, Still In A Deep
Pit, Rises 
by <a href="/comment/Brusca.html">Robert
Brusca</a> June 26, 2009


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090626d.jpg" align="left" border="0" height="265" width="353">
Consumer confidence in France has risen in three of the last
for months with one month marking a pause in the rising trend. French
confidence hit its low point in July of 2008 at a level of -48. Since
then although the recession has worsen in most of the world, French
consumer confidence has embarked on a rising trend that has extended
its trend rise during this whole period of economic malaise. 
 

This is probably one reason that France has weathered the
recession better than other European countries. Another reason being,
of course, that French fiscal spending has been greater, and today we
are hearing some misgivings about the size of the French fiscal
deficit. French Prime Minister Francois Fillon warned on Friday that
budget deficits "could compromise even the survival of our economic
systems if we do not manage to control them." 
 

Confidence is still in the lower 19% of its range since 1990.
By count, confidence has been weaker than this only 6.4% of the time.
So the range reading is more comforting than it should be. 
 

Consumer concern about unemployment is the highest it has
been. Still the outlook for living standards in the 12 months ahead is
in its 17th range percentile compared to a standing of 9% over the past
21 months. Both figures however have been worse only 5.6% of the time.
In that sense there is not improvement in the outlook. 
 

Only about 25% say the time is right for a major purchases;
the response is worse than that only 15% of the time. 
 

On balance the good news is that the French figures show some
improvement. But let&#8217;s not kid ourselves; the readings are still
painfully weak. Europe&#8217;s leaders should not be counting their chickens
before they are hatched. There is still a lot of risk out there. In
response to a question about European recovery, European Commissioner
for Economic and Monetary Affairs Joaquin Almunia said Friday. "We are
not there. The U.S. Economy is starting to give signals that it is near
to or at the beginning of a recovery." Even though the US is in the
lead no one is &#8216;there&#8217; yet. And there is no room for complacency. Maybe
the US congress should be more concerned with doing things to aid
recovery than to find itself a scapegoat for an economy gone bad and
stimulus monies (it approved) less than well spent. 


<table border="0" cellspacing="0" width="100%"> <colgroup></colgroup>
<thead><tr>
<th colspan="11" scope="col">
INSEE Household Monthly Survey </th>
</tr>
</thead>
<tbody>
<tr class="grey5">
<td class="firstcol" colspan="5">&nbsp;</td>
<td colspan="2">Since Jan 1990</td>
<td colspan="4">Since Jan 1990</td>
</tr>
<tr class="grey4">
<td class="firstcol">&nbsp;</td>
<td> Jun 
09</td>
<td> May 
09</td>
<td> Apr 
09</td>
<td> Mar 
-09</td>
<td> Percentile</td>
<td> Rank %</td>
<td> Max</td>
<td> Min</td>
<td> Range</td>
<td> Mean</td>
</tr>
<tr class="grey3">
<td class="firstcol">Household
Confidence</td>
<td> -37</td>
<td> -40</td>
<td> -40</td>
<td> -42</td>
<td> 19.0</td>
<td> 6.4</td>
<td> 10</td>
<td> -48</td>
<td> 58</td>
<td> -19</td>
</tr>
<tr class="grey2">
<td class="firstcol" colspan="11"> Living Standards</td>
</tr>
<tr class="grey3">
<td class="firstcol">&nbsp; Past 12
Mos</td>
<td>-73</td>
<td>-75</td>
<td>-75</td>
<td>-76</td>
<td>9.0</td>
<td> 5.6</td>
<td>18</td>
<td>-82</td>
<td>100</td>
<td>-40</td>
</tr>
<tr class="grey3">
<td class="firstcol">&nbsp; Next
12-Mos</td>
<td>-47</td>
<td>-50</td>
<td>-53</td>
<td>-58</td>
<td>17.1</td>
<td> 5.6</td>
<td>16</td>
<td>-60</td>
<td>76</td>
<td>-21</td>
</tr>
<tr class="grey3">
<td class="firstcol">
Unemployment: Next 12</td>
<td>96</td>
<td>89</td>
<td>84</td>
<td>79</td>
<td>100.0</td>
<td> 99.6</td>
<td>96</td>
<td>-37</td>
<td>133</td>
<td>31</td>
</tr>
<tr class="grey2">
<td class="firstcol" colspan="11"> Price Developments</td>
</tr>
<tr class="grey3">
<td class="firstcol">&nbsp; Past
12Mo</td>
<td>-24</td>
<td>-18</td>
<td>-12</td>
<td>-7</td>
<td>27.3</td>
<td> 48.3</td>
<td>64</td>
<td>-57</td>
<td>121</td>
<td>-16</td>
</tr>
<tr class="grey3">
<td class="firstcol">&nbsp; Next
12-Mos</td>
<td>-53</td>
<td>-55</td>
<td>-53</td>
<td>-51</td>
<td>7.5</td>
<td> 3.4</td>
<td>33</td>
<td>-60</td>
<td>93</td>
<td>-34</td>
</tr>
<tr class="grey2">
<td class="firstcol" colspan="11"> Savings</td>
</tr>
<tr class="grey3">
<td class="firstcol">&nbsp;
Favorable to save</td>
<td> 9</td>
<td> 7</td>
<td> 10</td>
<td> 14</td>
<td> 33.3</td>
<td> 7.3</td>
<td> 39</td>
<td> -6</td>
<td> 45</td>
<td> 22</td>
</tr>
<tr class="grey3">
<td class="firstcol">&nbsp; Ability
to save Next
12</td>
<td>-18</td>
<td>-20</td>
<td>-15</td>
<td>-13</td>
<td>17.2</td>
<td> 6.4</td>
<td>6</td>
<td>-23</td>
<td>29</td>
<td>-9</td>
</tr>
<tr class="grey2">
<td class="firstcol" colspan="11"> Spending</td>
</tr>
<tr class="grey3">
<td class="firstcol">&nbsp;
Favorable for major
purchase</td>
<td> -27</td>
<td> -28</td>
<td> -30</td>
<td> -29</td>
<td> 25.9</td>
<td> 15.4</td>
<td> 16</td>
<td> -42</td>
<td> 58</td>
<td> -14</td>
</tr>
<tr class="grey2">
<td class="firstcol" colspan="11"> Financial Situation</td>
</tr>
<tr class="grey3">
<td class="firstcol">&nbsp; Current</td>
<td> 12</td>
<td> 12</td>
<td> 12</td>
<td> 12</td>
<td> 42.9</td>
<td> 57.3</td>
<td> 24</td>
<td> 3</td>
<td> 21</td>
<td> 12</td>
</tr>
<tr class="grey3">
<td class="firstcol">&nbsp; Past 12
MOs</td>
<td>-23</td>
<td>-28</td>
<td>-26</td>
<td>-28</td>
<td>43.8</td>
<td> 17.9</td>
<td>-5</td>
<td>-37</td>
<td>32</td>
<td>-17</td>
</tr>
<tr class="grey3">
<td class="firstcol">&nbsp; Next
12-Mos</td>
<td>-13</td>
<td>-16</td>
<td>-17</td>
<td>-20</td>
<td>31.4</td>
<td> 8.1</td>
<td>11</td>
<td>-24</td>
<td>35</td>
<td>-1</td>
</tr>
<tr class="grey1">
<td colspan="11" class="firstcol">&nbsp;
Number of observations
in the period 234</td>
</tr>
</tbody>
</table>
Michigan Consumer Sentiment
Improves With Higher Expectations 
by <a href="/comment/Moeller.html">Tom
Moeller</a> June 26, 2009


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090626e.jpg" align="left" border="0" height="265" width="353">
Though the overall economy has yet to make a convincing turn
towards the better, the University of Michigan's June reading of
consumer sentiment suggests a coming improvement in retail spending.
The full-month index level rose slightly to 70.8, an improvement from
the mid-month reading and up sharply from the November low. The figure
was better than Consensus expectations for a reading of 69.0. Indeed,
spending improvement is suggested since during the last ten years,
there has been a 61% correlation between the level of sentiment and the
growth in real spending during the next five months.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090626f.jpg" align="right" border="0" height="265" width="353">
The current economic conditions jumped ten percent from May to
its highest level since last September. The reading for current
personal finances just about made up the May decline. however, it was
the jump in the reading of current conditions for buying large
household goods to the highest level since March of last year that
powered the increase. Showing a huge increase was the reading of
current conditions for buying a motor vehicle. Though conditions for
buying a house slipped, the level remained up sharply from last year.
The expectations component of the index improved from the
mid-month reading and was up by nearly half versus a year earlier.
Expectations for personal finances jumped with higher stock prices.
Though expected business conditions during the next year slipped, they
remained up sharply from last year. Expected conditions during the next
five years also slipped versus May but they were up sharply from one
year ago.
The read of current conditions, conversely, deteriorated from
mid-month but remained off its winter low. Buying conditions for large
household goods were at their highest level since early last year but
personal finances were viewed as flat.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090626g.jpg" align="left" border="0" height="265" width="353">
The opinion of government policy, which may eventually
influence economic expectations, fell this month after having jumped
through May. It remained near the highest level since 2002. A reduced
24% of respondents thought that a good job was being done by government
while 28% thought that a poor job was being done. Nevertheless, despite
these monthly changes, the trend is still very much toward a favorable
reading of policy actions.
Inflation expectations for the next year rose further to 3.9%.
That compares to a low of 1.7% last December but remained down from a
reading which was as high as 7.0% last May.
The University of Michigan survey data is not seasonally
adjusted. The reading is based on telephone interviews with about 500
households at month-end; the mid-month results are based on about 300
interviews. The summary indexes are in Haver's USECON database
with details in the proprietary UMSCA database.
Inflation and Monetary Policy from the
Federal Reserve Bank of Richmond can be found <a href="http://www.richmondfed.org/research/our_research_focus/in_depth/index.cfm">here.</a>
The State of our Interstates from the
Federal Reserve Bank of Chicago is available <a href="http://www.chicagofed.org/publications/fedletter/cfljuly2009_264.pdf">here.</a>

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EF/@EF14/@EF1402/@EF1402.HTM">University
of Michigan</a></th>
<th scope="col">June (Final)</th>
<th scope="col">Mid-June</th>
<th scope="col">May</th>
<th scope="col">April</th>
<th scope="col">June y/y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Consumer Sentiment</td>
<td>70.8</td>
<td>69.0</td>
<td>68.7</td>
<td>65.1</td>
<td>25.5%</td>
<td>63.8</td>
<td>85.6</td>
<td>87.3</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Current Conditions</td>
<td>73.2</td>
<td>74.5</td>
<td>67.7</td>
<td>68.3</td>
<td>8.3</td>
<td>73.7</td>
<td>101.2</td>
<td>105.1</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Expectations</td>
<td>69.2</td>
<td>65.4</td>
<td>69.4</td>
<td>63.1</td>
<td>40.7</td>
<td>57.3</td>
<td>75.6</td>
<td>75.9</td>
</tr>
</tbody>
</table>
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<img align="left" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090625f.jpg" width="353">
Earlier improvement in the labor market improvement stalled in June. Initial claims for unemployment insurance edged up last week by 15,000 to 627,000, their highest level since May. The latest increase followed a modest 7,000 rise during the prior week. Despite these gains, however, initial claims were down from their March peak of 674,000. In addition, the four-week average of claims, which smoothes out some of the volatility in the weekly numbers, fell slightly to 617,250 which was its lowest level since since mid-February. The latest weekly level by far exceeded the Consensus expectation for 601,000 claims.
The Labor Department indicated that the largest increases in initial claims for the week ending June 13 were in Florida (+8,383), Pennsylvania (+3,191), Missouri (+2,874), Puerto Rico (+2,561), and California (+2,540), while the largest decreases were in Michigan (-5,414), New York (-5,299), North Carolina (-4,714), Tennessee (-4,414), and Ohio (-3,802).<img align="right" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090625g.jpg" width="353">
Though continuing claims for unemployment inched up in the latest week, modest improvement in the job market still is evident in the figures. Claims rose a slight 29,000 following a sharp 126,000 decline from their high during the prior week. Continuing claims provide an indication of workers&#39; ability to find employment. At 6,738,000, however, claims remained more than twice the year ago level. Further suggesting that the job market&#39;s improvement is just modest was that the four-week average of continuing claims fell just slightly from their record high. The series dates back to 1966.
Also indicating marginal labor market improvement was the insured unemployment rate, which held at 5.0% versus the cycle high of 5.1%. The level remained more than double that of June 2008 and the highest since 1983. During the last ten years there has been a 93% correlation between the level of the insured unemployment rate and the overall rate of unemployment published by the Bureau of Labor Statistics.
Clearly, the latest weekly figure understates labor market distress in some states.The highest insured unemployment rates in the week ending June 6 were in Michigan (7.0 percent), Oregon (6.8), Puerto Rico (6.7), Nevada (6.3), Pennsylvania (6.2), Wisconsin (5.7), California (5.4), Arkansas (5.3), Illinois (5.3), and North Carolina (5.3).
The unemployment insurance claims data is available in Haver&#39;s WEEKLY database and the state data is in the REGIONW database.

<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/WEEKLY/@W5/@W507/@W507.HTM">Unemployment Insurance (000s)</a>&nbsp;</th>
<th scope="col">06/20/09</th>
<th scope="col">06/13/09</th>
<th scope="col">06/06/09</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006&nbsp;</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Initial Claims</td>
<td>627</td>
<td>612</td>
<td>605</td>
<td>59.9%</td>
<td>420</td>
<td>321</td>
<td>313</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>--</td>
<td>6,738</td>
<td>6,709</td>
<td>114.0%</td>
<td>3,342</td>
<td>2,552</td>
<td>2,459</td>
</tr>
</tbody>
</table>
</body>
</html>

Earlier improvement in the labor market improvement stalled in June. Initial claims for unemployment insurance edged up last week by 15,000 to 627,000, their highest level since May. The latest increase followed a modest 7,000 rise [...]

U.S. Initial Jobless Insurance Claims Edge Up To Highest in Four Weeks

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090625e.jpg" align="left" border="0">
Orders in the Area fell by 32.1% a new Yr/Yr record leading to
headlines about how slow the European recovery is going to be. But the
pace of decline in orders over three months has been sharply reduced to
an annual rate of decline of 8.2% compared to 30-plus percent drop over
six months and 12-months. Both foreign-sourced and domestic&#8211;sourced
orders have trimmed their respective rates of decline sharply over
three months. The strongly negative Yr/Yr growth rate is mostly due to
legacy weakness over the earlier period. 
 

Country level statistics are encouraging. Germany and France
have cut their respective three month growth rate declines to a pace
that is single digits; the annualized rate of decline is less than a 5%
pace. Italy is still shedding orders at nearly a 30% pace. In the UK a
spike in orders has boosted the three month growth rate to a +53%
annual rate. 
 

Other signs in the Area show improvement as well. Italy,
despite pronounced order weakness, has been showing improved confidence
for both businesses and households. It posted a surprise rise in IP as
well. The EMU-wide PMI indices for MFG and for Services are showing
improvement on the month. On balance their trends are nothing to be
disappointed about, taking into account the extent of the weakness in
the Area which has hit countries somewhat unevenly and where fiscal
responses have been far from uniform as well. For example The
Netherlands today confirmed that its GDP drop in Q1 was the worst in
sixty years. It takes time to come back from that kind of weakness 



<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr><th colspan="10" scope="col">E-Area-13 and UK Industrial Orders </th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">Saar except m/m</td>
<td colspan="3">Mo/Mo</td>
<td>Apr-09</td>
<td>Mar-09</td>
<td>Apr-09</td>
<td>Mar-09</td>
<td>Apr-09</td>
<td>Mar-09</td>
</tr>
<tr class="odd">
<td class="firstcol">E-Area Detail</td>
<td>Apr-09</td>
<td>Mar-09</td>
<td>Feb-09</td>
<td>3-Mo</td>
<td>3-Mo</td>
<td>6-mo</td>
<td>6-mo</td>
<td>12-mo</td>
<td>12-mo</td>
</tr>
<tr>
<td class="firstcol">&nbsp; MFG Orders</td>
<td>-1.0%</td>
<td>-0.2%</td>
<td>-0.9%</td>
<td>-8.2%</td>
<td>-14.0%</td>
<td>-34.4%</td>
<td>-42.0%</td>
<td>-32.1%</td>
<td>-31.0%</td>
</tr>
<tr class="odd">
<td class="firstcol" colspan="11">Memo:MFG</td>
</tr>
<tr>
<td class="firstcol">E-13 Domestic MFG orders</td>
<td>-0.5%</td>
<td>-1.4%</td>
<td>1.7%</td>
<td>-0.9%</td>
<td>-11.9%</td>
<td>-34.4%</td>
<td>-39.7%</td>
<td>-32.5%</td>
<td>-20.8%</td>
</tr>
<tr>
<td class="firstcol">E-13 Foreign MFG orders</td>
<td>-2.1%</td>
<td>-0.6%</td>
<td>1.5%</td>
<td>-5.1%</td>
<td>-25.8%</td>
<td>-43.5%</td>
<td>-49.2%</td>
<td>-39.5%</td>
<td>-32.3%</td>
</tr>
<tr class="odd">
<td class="firstcol">Countries:</td>
<td>Apr-09</td>
<td>Mar-09</td>
<td>Feb-09</td>
<td>3-Mo</td>
<td>3-Mo</td>
<td>6-mo</td>
<td>6-mo</td>
<td>12-mo</td>
<td>12-mo</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Germany (MFG):</td>
<td>-1.1%</td>
<td>3.7%</td>
<td>-3.3%</td>
<td>-3.4%</td>
<td>-27.7%</td>
<td>-39.8%</td>
<td>-47.0%</td>
<td>-35.6%</td>
<td>-34.3%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; France (Ind):</td>
<td>0.9%</td>
<td>-7.4%</td>
<td>6.7%</td>
<td>-1.4%</td>
<td>-13.9%</td>
<td>-18.9%</td>
<td>-34.9%</td>
<td>-30.4%</td>
<td>-24.7%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Italy (Ind):</td>
<td>-3.7%</td>
<td>-2.7%</td>
<td>-2.2%</td>
<td>-29.4%</td>
<td>-30.0%</td>
<td>-36.9%</td>
<td>-40.1%</td>
<td>-31.8%</td>
<td>-29.9%&nbsp;</td>
</tr>
<tr>
<td class="firstcol">&nbsp; UK (Engineering
Industy):</td>
<td>-8.3%</td>
<td>7.1%</td>
<td>13.3%</td>
<td>53.0%</td>
<td>-56.3%</td>
<td>-28.2%</td>
<td>-45.2%</td>
<td>-27.0%</td>
<td>-11.4%</td>
</tr>
</tbody>
</table>
</body></html>

Orders in the Area fell by 32.1% a new Yr/Yr record leading to headlines about how slow the European recovery is going to be. But the pace of decline in orders over three months has been sharply reduced to an annual rate of decline of [...]

Despite Headlines About New Record Drops, Europe Is Healing

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090625a.jpg" align="left" border="0">
The Commerce Department indicated that the second and "final"
estimate of 1Q '09 real GDP was -5.5% (AR), little different from the
"preliminary" estimate released last month. The large drop,
however, came on the heels of the 6.3% decline during 4Q '08 and
together they were the worst since early-1958. The latest
revision compares to Consensus expectations for a 5.7% decline.
Total corporate profits also were revised little and posted a
3.8% (-17.6% y/y) increase due to the near-doubling of financial sector
earnings versus 4Q. Nevertheless, these earnings were still off by
42.1% from 1Q '08. <img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090625b.jpg" align="right" border="0" height="265" width="353">
The decline in nonfinancial sector earnings was
lessened slightly to 6.6% (-11.5% y/y) following a 10.7% 4Q decline,
but as recessions abroad progressed, the decline in earnings in the
foreign sector was deepened to 4.2% (-4.8% y/y).
The GDP effect of the reduction of unwanted inventories, in
the face of declining demand, was revised little at -2.2 percentage
points. Regardless, the subtraction was the most since the first
quarter of 2000 and it rivals the largest negative contribution from
inventories since the early-1980s. Real U.S. final sales to domestic
purchasers fell at a little-revised 5.4% rate. Combined with the 4Q '08
decline of 5.8%, final sales to domestic purchasers fell the most since
1958.
The rise in personal consumption expenditures last quarter
again was lessened slightly to 1.4% (-1.4% y/y). This modest increase
followed sharp declines during the prior two quarters. Spending on
motor vehicles rose moderately during the quarter (-18.7% y/y) after
five consecutive down periods. As corporate profits fell along with the
prospects for overall economic growth, business fixed investment fell
at a 37.3% rate (-16.1% y/y) and residential investment dropped at an
unrevised 38.8% rate (-23.4% y/y) from 4Q.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090625c.jpg" align="right" border="0" height="265" width="353">
The significant shortfall in expenditures by the government
sector still accounts for a significant portion of last quarter's
weakness in GDP. The little revised 3.1% decline was the first since
late-2005. The drop was led by a 4.4% decline (+5.5% y/y) in Federal
spending that was paced by a 6.7% decline (+5.1% y/y) in defense
expenditures. Budget cutbacks due to the decline in tax revenues with
the recession caused state &amp; local spending to fall at a 2.2%
annual rate (-0.1% y/y).
The foreign trade sector made up for some of the domestic
economy's weakness as net exports contributed a little-revised 2.4
percentage points to 1Q GDP growth. Imports fell at a 36.4% annual rate
(-17.2% y/y) while recessions abroad pulled U.S. exports down at a
lesser 30.6% rate (-11.5% y/y).
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090625d.jpg" align="right" border="0" height="265" width="353">
Inflation continued to show signs of firming. The unrevised
2.8% increase in the GDP chain price index was up
from the 0.5% annual rate of increase during 4Q. The reason for the
acceleration is that import prices fell at a faster rate than export
prices. Domestic prices, however, reflected the weak economy and fell
at a 1.0% annual rate (+0.8% y/y) after a 4.3% 4Q decline.The PCE price
index fell at a 0.9% annual rate (+0.8% y/y) while the residential
investment chain price index fell at a 4.9% rate (-5.3% y/y). The
weakness in business spending caused the nonresidential investment
price index also to slip at a 1.5% rate (+2.4% y/y), the first
quarterly decline since 2007.
The U.S. National Income &amp; Product Account data is
available in Haver's USECON and the USNA
databases.
Acquisition of Merrill Lynch by Bank of America is
this morning's testimony by Fed Chairman Ben S. Bernanke and it is
available <a href="http://www.federalreserve.gov/newsevents/testimony/bernanke20090625a.htm">here.</a>

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E7/@E701/@E701.HTM">Chained
2000$, % AR</a></th>
<th scope="col">1Q '09 (Final)</th>
<th scope="col">1Q '09&nbsp;
(Preliminary)</th>
<th scope="col">1Q '09 (Advance)</th>
<th scope="col">4Q '08</th>
<th scope="col">1Q Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">GDP</td>
<td>-5.5</td>
<td>-5.7</td>
<td>-6.1</td>
<td>-6.3</td>
<td>-2.5</td>
<td>1.1</td>
<td>2.0</td>
<td>2.8</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Inventory
Effect</td>
<td>-2.2</td>
<td>-2.3</td>
<td>-2.8</td>
<td>-0.1</td>
<td>-0.8</td>
<td>0.1</td>
<td>-0.4</td>
<td>0.0</td>
</tr>
<tr class="odd">
<td class="firstcol">Final Sales</td>
<td>-3.3</td>
<td>-3.4</td>
<td>-3.4</td>
<td>-6.2</td>
<td>-1.7</td>
<td>1.4</td>
<td>2.4</td>
<td>2.8</td>
</tr>
<tr>
<td class="firstcol">Foreign Trade Effect</td>
<td>2.4</td>
<td>2.2</td>
<td>2.0</td>
<td>-0.2</td>
<td>-1.4</td>
<td>1.4</td>
<td>0.6</td>
<td>0.2</td>
</tr>
<tr class="odd">
<td class="firstcol">Domestic Final Demand</td>
<td>-5.4</td>
<td>-5.3</td>
<td>-5.1</td>
<td>-5.8</td>
<td>-3.1</td>
<td>-0.0</td>
<td>1.8</td>
<td>2.6</td>
</tr>
<tr>
<td class="firstcol">Chained GDP Price Index</td>
<td>2.8</td>
<td>2.8</td>
<td>2.9</td>
<td>0.5</td>
<td>2.1</td>
<td>2.2</td>
<td>2.7</td>
<td>3.2</td>
</tr>
</tbody>
</table>
</body></html>

The Commerce Department indicated that the second and "final" estimate of 1Q '09 real GDP was -5.5% (AR), little different from the "preliminary" estimate released last month. The large drop, however, came on the heels of the 6.3% [...]

Decline in U.S. 1Q GDP Is Trimmed

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090625a.jpg" align="left" border="0">
The Commerce Department indicated that the second and "final"
estimate of 1Q '09 real GDP was -5.5% (AR), little different from the
"preliminary" estimate released last month. The large drop,
however, came on the heels of the 6.3% decline during 4Q '08 and
together they were the worst since early-1958. The latest
revision compares to Consensus expectations for a 5.7% decline.
Total corporate profits also were revised little and posted a
3.8% (-17.6% y/y) increase due to the near-doubling of financial sector
earnings versus 4Q. Nevertheless, these earnings were still off by
42.1% from 1Q '08. <img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090625b.jpg" align="right" border="0" height="265" width="353">
The decline in nonfinancial sector earnings was
lessened slightly to 6.6% (-11.5% y/y) following a 10.7% 4Q decline,
but as recessions abroad progressed, the decline in earnings in the
foreign sector was deepened to 4.2% (-4.8% y/y).
The GDP effect of the reduction of unwanted inventories, in
the face of declining demand, was revised little at -2.2 percentage
points. Regardless, the subtraction was the most since the first
quarter of 2000 and it rivals the largest negative contribution from
inventories since the early-1980s. Real U.S. final sales to domestic
purchasers fell at a little-revised 5.4% rate. Combined with the 4Q '08
decline of 5.8%, final sales to domestic purchasers fell the most since
1958.
The rise in personal consumption expenditures last quarter
again was lessened slightly to 1.4% (-1.4% y/y). This modest increase
followed sharp declines during the prior two quarters. Spending on
motor vehicles rose moderately during the quarter (-18.7% y/y) after
five consecutive down periods. As corporate profits fell along with the
prospects for overall economic growth, business fixed investment fell
at a 37.3% rate (-16.1% y/y) and residential investment dropped at an
unrevised 38.8% rate (-23.4% y/y) from 4Q.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090625c.jpg" align="right" border="0" height="265" width="353">
The significant shortfall in expenditures by the government
sector still accounts for a significant portion of last quarter's
weakness in GDP. The little revised 3.1% decline was the first since
late-2005. The drop was led by a 4.4% decline (+5.5% y/y) in Federal
spending that was paced by a 6.7% decline (+5.1% y/y) in defense
expenditures. Budget cutbacks due to the decline in tax revenues with
the recession caused state &amp; local spending to fall at a 2.2%
annual rate (-0.1% y/y).
The foreign trade sector made up for some of the domestic
economy's weakness as net exports contributed a little-revised 2.4
percentage points to 1Q GDP growth. Imports fell at a 36.4% annual rate
(-17.2% y/y) while recessions abroad pulled U.S. exports down at a
lesser 30.6% rate (-11.5% y/y).
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090625d.jpg" align="right" border="0" height="265" width="353">
Inflation continued to show signs of firming. The unrevised
2.8% increase in the GDP chain price index was up
from the 0.5% annual rate of increase during 4Q. The reason for the
acceleration is that import prices fell at a faster rate than export
prices. Domestic prices, however, reflected the weak economy and fell
at a 1.0% annual rate (+0.8% y/y) after a 4.3% 4Q decline.The PCE price
index fell at a 0.9% annual rate (+0.8% y/y) while the residential
investment chain price index fell at a 4.9% rate (-5.3% y/y). The
weakness in business spending caused the nonresidential investment
price index also to slip at a 1.5% rate (+2.4% y/y), the first
quarterly decline since 2007.
The U.S. National Income &amp; Product Account data is
available in Haver's USECON and the USNA
databases.
Acquisition of Merrill Lynch by Bank of America is
this morning's testimony by Fed Chairman Ben S. Bernanke and it is
available <a href="http://www.federalreserve.gov/newsevents/testimony/bernanke20090625a.htm">here.</a>

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E7/@E701/@E701.HTM">Chained
2000$, % AR</a></th>
<th scope="col">1Q '09 (Final)</th>
<th scope="col">1Q '09&nbsp;
(Preliminary)</th>
<th scope="col">1Q '09 (Advance)</th>
<th scope="col">4Q '08</th>
<th scope="col">1Q Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">GDP</td>
<td>-5.5</td>
<td>-5.7</td>
<td>-6.1</td>
<td>-6.3</td>
<td>-2.5</td>
<td>1.1</td>
<td>2.0</td>
<td>2.8</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Inventory
Effect</td>
<td>-2.2</td>
<td>-2.3</td>
<td>-2.8</td>
<td>-0.1</td>
<td>-0.8</td>
<td>0.1</td>
<td>-0.4</td>
<td>0.0</td>
</tr>
<tr class="odd">
<td class="firstcol">Final Sales</td>
<td>-3.3</td>
<td>-3.4</td>
<td>-3.4</td>
<td>-6.2</td>
<td>-1.7</td>
<td>1.4</td>
<td>2.4</td>
<td>2.8</td>
</tr>
<tr>
<td class="firstcol">Foreign Trade Effect</td>
<td>2.4</td>
<td>2.2</td>
<td>2.0</td>
<td>-0.2</td>
<td>-1.4</td>
<td>1.4</td>
<td>0.6</td>
<td>0.2</td>
</tr>
<tr class="odd">
<td class="firstcol">Domestic Final Demand</td>
<td>-5.4</td>
<td>-5.3</td>
<td>-5.1</td>
<td>-5.8</td>
<td>-3.1</td>
<td>-0.0</td>
<td>1.8</td>
<td>2.6</td>
</tr>
<tr>
<td class="firstcol">Chained GDP Price Index</td>
<td>2.8</td>
<td>2.8</td>
<td>2.9</td>
<td>0.5</td>
<td>2.1</td>
<td>2.2</td>
<td>2.7</td>
<td>3.2</td>
</tr>
</tbody>
</table>
Despite Headlines About New RecordDrops, Europe Is Healing 
by <a href="/comment/Brusca.html">Robert
Brusca</a> June 25, 2009


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090625e.jpg" align="left" border="0">
Orders in the Area fell by 32.1% a new Yr/Yr record leading to
headlines about how slow the European recovery is going to be. But the
pace of decline in orders over three months has been sharply reduced to
an annual rate of decline of 8.2% compared to 30-plus percent drop over
six months and 12-months. Both foreign-sourced and domestic&#8211;sourced
orders have trimmed their respective rates of decline sharply over
three months. The strongly negative Yr/Yr growth rate is mostly due to
legacy weakness over the earlier period. 
 

Country level statistics are encouraging. Germany and France
have cut their respective three month growth rate declines to a pace
that is single digits; the annualized rate of decline is less than a 5%
pace. Italy is still shedding orders at nearly a 30% pace. In the UK a
spike in orders has boosted the three month growth rate to a +53%
annual rate. 
 

Other signs in the Area show improvement as well. Italy,
despite pronounced order weakness, has been showing improved confidence
for both businesses and households. It posted a surprise rise in IP as
well. The EMU-wide PMI indices for MFG and for Services are showing
improvement on the month. On balance their trends are nothing to be
disappointed about, taking into account the extent of the weakness in
the Area which has hit countries somewhat unevenly and where fiscal
responses have been far from uniform as well. For example The
Netherlands today confirmed that its GDP drop in Q1 was the worst in
sixty years. It takes time to come back from that kind of weakness 


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="10" scope="col">E-Area-13
and UK Industrial Orders </th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">Saar except m/m</td>
<td colspan="3">Mo/Mo</td>
<td>Apr-09</td>
<td>Mar-09</td>
<td>Apr-09</td>
<td>Mar-09</td>
<td>Apr-09</td>
<td>Mar-09</td>
</tr>
<tr class="odd">
<td class="firstcol">E-Area Detail</td>
<td>Apr-09</td>
<td>Mar-09</td>
<td>Feb-09</td>
<td>3-Mo</td>
<td>3-Mo</td>
<td>6-mo</td>
<td>6-mo</td>
<td>12-mo</td>
<td>12-mo</td>
</tr>
<tr>
<td class="firstcol">&nbsp; MFG Orders</td>
<td>-1.0%</td>
<td>-0.2%</td>
<td>-0.9%</td>
<td>-8.2%</td>
<td>-14.0%</td>
<td>-34.4%</td>
<td>-42.0%</td>
<td>-32.1%</td>
<td>-31.0%</td>
</tr>
<tr class="odd">
<td class="firstcol" colspan="11">Memo:MFG</td>
</tr>
<tr>
<td class="firstcol">E-13 Domestic MFG orders</td>
<td>-0.5%</td>
<td>-1.4%</td>
<td>1.7%</td>
<td>-0.9%</td>
<td>-11.9%</td>
<td>-34.4%</td>
<td>-39.7%</td>
<td>-32.5%</td>
<td>-20.8%</td>
</tr>
<tr>
<td class="firstcol">E-13 Foreign MFG orders</td>
<td>-2.1%</td>
<td>-0.6%</td>
<td>1.5%</td>
<td>-5.1%</td>
<td>-25.8%</td>
<td>-43.5%</td>
<td>-49.2%</td>
<td>-39.5%</td>
<td>-32.3%</td>
</tr>
<tr class="odd">
<td class="firstcol">Countries:</td>
<td>Apr-09</td>
<td>Mar-09</td>
<td>Feb-09</td>
<td>3-Mo</td>
<td>3-Mo</td>
<td>6-mo</td>
<td>6-mo</td>
<td>12-mo</td>
<td>12-mo</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Germany (MFG):</td>
<td>-1.1%</td>
<td>3.7%</td>
<td>-3.3%</td>
<td>-3.4%</td>
<td>-27.7%</td>
<td>-39.8%</td>
<td>-47.0%</td>
<td>-35.6%</td>
<td>-34.3%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; France (Ind):</td>
<td>0.9%</td>
<td>-7.4%</td>
<td>6.7%</td>
<td>-1.4%</td>
<td>-13.9%</td>
<td>-18.9%</td>
<td>-34.9%</td>
<td>-30.4%</td>
<td>-24.7%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Italy (Ind):</td>
<td>-3.7%</td>
<td>-2.7%</td>
<td>-2.2%</td>
<td>-29.4%</td>
<td>-30.0%</td>
<td>-36.9%</td>
<td>-40.1%</td>
<td>-31.8%</td>
<td>-29.9%&nbsp;</td>
</tr>
<tr>
<td class="firstcol">&nbsp; UK (Engineering
Industy):</td>
<td>-8.3%</td>
<td>7.1%</td>
<td>13.3%</td>
<td>53.0%</td>
<td>-56.3%</td>
<td>-28.2%</td>
<td>-45.2%</td>
<td>-27.0%</td>
<td>-11.4%</td>
</tr>
</tbody>
</table>
U.S. Initial Jobless Insurance
Claims Edge Up To Highest in Four Weeks 
by <a href="/comment/Moeller.html">Tom
Moeller</a> June 25, 2009


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090625f.jpg" align="left" height="265" width="353">
Earlier improvement in the labor market improvement stalled in
June. Initial claims for unemployment insurance edged up last week by
15,000 to 627,000, their highest level since May. The latest increase
followed a modest 7,000 rise during the prior week. Despite these
gains, however, initial claims were down from their March peak of
674,000. In addition, the four-week average of claims, which smoothes
out some of the volatility in the weekly numbers, fell slightly to
617,250 which was its lowest level since since mid-February. The latest
weekly level by far exceeded the Consensus expectation for 601,000
claims.
The Labor Department indicated that the largest increases in
initial claims for the week ending June 13 were in Florida (+8,383),
Pennsylvania (+3,191), Missouri (+2,874), Puerto Rico (+2,561), and
California (+2,540), while the largest decreases were in Michigan
(-5,414), New York (-5,299), North Carolina (-4,714), Tennessee
(-4,414), and Ohio (-3,802).<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090625g.jpg" align="right" height="265" width="353">
Though continuing claims for unemployment inched up in the
latest week, modest improvement in the job market still is evident in
the figures. Claims rose a slight 29,000 following a sharp 126,000
decline from their high during the prior week. Continuing claims
provide an indication of workers' ability to find employment. At 6,738,000,
however, claims remained more than twice the year ago level. Further
suggesting that the job market's improvement is just modest was that
the four-week average of continuing claims fell just slightly from
their record high. The series dates back to 1966.
Also indicating marginal labor market improvement was the
insured unemployment rate, which held at 5.0% versus the cycle high of
5.1%. The level remained more than double that of June 2008 and the
highest since 1983. During the last ten years there has been a 93%
correlation between the level of the insured unemployment rate and the
overall rate of unemployment published by the Bureau of Labor
Statistics.
Clearly, the latest weekly figure understates labor market
distress in some states.The highest insured unemployment rates in the
week ending June 6 were in Michigan (7.0 percent), Oregon (6.8), Puerto
Rico (6.7), Nevada (6.3), Pennsylvania (6.2), Wisconsin (5.7),
California (5.4), Arkansas (5.3), Illinois (5.3), and North Carolina
(5.3).
The unemployment insurance claims data is available in Haver's
WEEKLY database and the state data is in the REGIONW
database.

<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/WEEKLY/@W5/@W507/@W507.HTM">Unemployment
Insurance (000s)</a>&nbsp;</th>
<th scope="col">06/20/09</th>
<th scope="col">06/13/09</th>
<th scope="col">06/06/09</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006&nbsp;</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Initial Claims</td>
<td>627</td>
<td>612</td>
<td>605</td>
<td>59.9%</td>
<td>420</td>
<td>321</td>
<td>313</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>--</td>
<td>6,738</td>
<td>6,709</td>
<td>114.0%</td>
<td>3,342</td>
<td>2,552</td>
<td>2,459</td>
</tr>
</tbody>
</table>
</body></html>

Decline in U.S. 1Q GDP IsTrimmed

USD/EUR exchange rate uncoupling from interest rate differential

Widespread downgrading of 2025 GDP outlook

Trade and fiscal policy uncertainty has exploded with the new administration

Much lower US electricity costs gives it a competitive advantage

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

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

US policy gyrations boosting policy uncertainty worldwide

Expected tariff hikes have boosted inflation expectations

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

US economy expected to outperform other major economies in 2025

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

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

Heavy US manufacturing states underperforming while Sun Belt states outperforming

Rising long-term yields a global phenomenon

US financial market concerns shifting from growth to inflation

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

Policy uncertainty has surged since the US national elections.

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

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

Headline US PCE inflation elevated by sticky services prices

US and global equity prices have recently diverged

US leading global upturn in economic surprises

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

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

Underperforming German economy generating increased policy uncertainty relative to Europe and the US

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Real GDP eased 0.3% SAAR (+2.1% y/y) during the first quarter of 2025 after increasing 2.4% in Q4’24 and 3.1% in Q3’24. A 0.4% increase had been expected in the Action Economics Forecast Survey. It was the first decline since Q1 2022.

Foreign trade subtracted 4.83 percentage points from growth last quarter as imports surged 41.3% (13.4% y/y) ahead of tariffs, which began to come into effect in the first quarter. The rise followed a 1.9% decline in Q4’24. Exports rose 1.8% (3.0% y/y) after easing 0.2% in Q4. Inventories added 2.25 percentage points to growth after subtracting 0.84 percentage point from Q4 growth.

Real final sales to domestic purchasers grew 2.3% (2.9% y/y) in Q1 after rising 3.0% in Q4. Personal consumption expenditures rose 1.8% (3.1% y/y) following a 4.0% gain. Durable goods spending fell 3.4% (+5.3% y/y) after surging 12.4% in Q4. Motor vehicle purchases declined 11.1% (+5.5% y/y) after strengthening 19.7% in Q4. Spending on home furnishings & appliances gained 1.5% (6.1% y/y) following a 5.4% rise. Recreational goods & vehicle outlays rose 2.5% (7.0% y/y) last quarter after a 13.9% Q4 increase.

Nondurable goods outlays rose 2.7% (3.0% y/y) following 3.1% growth in Q4. Apparel spending increased 6.7% (2.5% y/y) following a 5.0% rise. Food & beverage buying gained 2.5% (2.3% y/y) after a 1.8% increase. Gasoline & fuel oil purchases increased 4.6% (3.4% y/y) after falling 2.0% in Q4.

Spending on services increased 2.4% last quarter (2.7% y/y) after a 3.0% gain. Outlays on housing & utilities increased 3.4% (1.8% y/y) after rising 1.1% in Q4. Health care expenditures rose 4.0% (4.8% y/y) following a 4.7% strengthening. Transportation outlays increased 5.3% (4.6% y/y) after a 3.7% rise while recreation spending rose 4.7% (2.8% y/y) following a 4.5% rise. Restaurant & hotel expenditures declined 2.1% (+0.5% y/y) following a 2.8% rise. Financial services expenditures rose 1.9% (2.0% y/y) after a 3.1% Q4 increase.

Business fixed investment increased 9.8% (3.6% y/y) following a 3.0% decline in Q4. Expenditures on structures rose 0.4% (-0.4% y/y) after a 2.9% increase. Expenditures on producers’ durable equipment jumped 22.5% (8.0% y/y) after falling 8.7%.  Outlays on information processing equipment soared 69.3% (18.9% y/y) following a 7.3% decline. Industrial equipment investment fell 1.4% (-0.3% y/y) after easing 0.9%. Intellectual property product spending rose 4.1% (1.8% y/y) following a 0.5% decline. 

Residential structures investment increased 1.3% (-0.1% y/y) in Q1 after a 5.5% Q4 rise.

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Government spending fell 1.5% (+2.4% y/y) after a 3.1% Q4 rise. Federal government expenditures declined 5.1% (+2.9% y/y) after rising 4.0% in Q4. National defense expenditures declined 8.0% (+4.0% y/y) after increasing 4.8% in Q4. State & local government spending rose 0.8% (2.1% y/y) following a 2.5% rise.

The GDP price index rose 3.7% (2.6% y/y) after increasing 2.3% in Q4. It was the largest increase since Q4’22. A 2.4% increase had been expected. The PCE chain price index increased 3.6% (2.5% y/y) following a 2.4% rise. The PCE price index excluding food and energy rose 3.5% (2.8% y/y) after increasing 2.6% in Q4. The business fixed investment price index rose 0.4% (1.8% y/y) after 1.5% rise. The residential price index strengthened 3.9% (3.2% y/y) after a 1.9% rise while the government price index increased 4.7% (2.8% y/y) following a 2.1% rise.

The GDP data can be found in Haver’s **USECON** and **USNA** databases. **USNA** contains virtually all of the Bureau of Economic Analysis detail in the national accounts. The Action Economics consensus estimates can be found in **AS1REPNA**.

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- Decline in GDP is first in three years.
- Foreign trade subtracts substantially ahead of tariffs.
- Domestic final demand growth weakens.
- Price index strengthens with higher core PCE prices.

U.S. GDP Unexpectedly Declines in Q1’25; Prices Strengthen

Michael J. Moran

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High-side readings on the price indexes for personal consumption expenditures in January and February caused some concern about emerging price pressure, especially with some policies of the Trump administration possibly adding to the upward force. However, March brought notable relief, with the headline price index falling slightly (-0.04%). A marked decline in energy prices was helpful (-2.7%), but core prices also were subdued, increasing less than 0.1%.  Year-over-year changes were still above the Fed’s target of 2%, but only barely so for the headline measure (2.3%). The core index backed away from the reading of 3.0% in February, but the latest reading of 2.7% was in line with observations in the past year, and still uncomfortably above target.

Consumers roused from a winter slumber in March, with nominal outlays increasing 0.7%. With inflation restrained, real outlays also posted a gain of 0.7%. Spending on durable gods stood out, with real outlays advancing 3.2%. Real outlays for both nondurable goods and services rose 0.4%, a solid pace. Signs of life were certainly welcome after an average decline of 0.1% in January and February. The March rebound left growth of 1.8% (annual rate) in the first quarter.

The brisk increase in spending in March was supported by a solid gain in personal income (0.5% in both nominal and real terms). Growth in wage income was firm at 0.5%, while proprietors’ income was robust with a gain of 1.8% (not annualized!). The farm sector led the advance in proprietors’ income, but the nonfarm sector also was strong (0.6%).

The personal income and consumption figures are available in Haver’s **USECON** database with detail in the **USNA** database. The Action Economics forecasts are in **AS1REPNA**.

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- Price pressure eases.
- Spending rebounds after two soft months.

Personal Income, Consumption, and Prices in March

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The Pending Home Sales Index, a forward-looking home sales measure based on contract signings, from the National Association of Realtors rose 6.1% to 76.5 (-0.6% y/y) during March after rising a little-revised 2.1% in February. These changes followed a 4.6% January decline.

The rise in March sales occurred as the rate on a 30-year mortgage eased to an average 6.65% from 6.84% in February. This rate was well above a low of 2.68% averaged in December 2020.

Pending home sales were up in most regions of the country. Sales in the Midwest rose 4.9% (1.4% y/y) last month after rising 1.8% in February. Sales in the South increased 9.8% (-0.4% y/y) following a 5.8% February rise. Sales in the West improved 4.8% (-2.0% y/y) after falling 3.0% in February. Sales in the Northeast were off 0.5% (-3.0% y/y) in March after falling 0.9% in February.

The pending home sales index measures sales at the time the contract for the purchase of an existing home is signed, similar to the Census Bureau's new home sales data. In contrast, the National Association of Realtors' existing home sales data are recorded when the sale is closed, which is usually a couple of months after the sales contract has been signed. In developing the pending home sales index, the NAR found that the level of monthly sales contract activity leads the level of closed existing home sales by about two months.

The series dates back to 2001 and are available in Haver's **PREALTOR** database. Weekly mortgage interest rates from the Mortgage Bankers Association can be found in the **WEEKLY** database.

- Sales rise to highest level in four months.
- Strength is evident throughout most of country.

U.S. Pending Home Sales Surge in March

Sandy Batten

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The employment cost index (ECI) for civilian workers, arguably the most accurate measure of labor compensation in the United States, rose 0.9% q/q (3.6% y/y) in Q1, the same quarterly increase as in last year’s Q4, according to the Bureau of Labor Statistics. The quarterly gains have fluctuated between 0.8% and 1.0% for the past six quarters. The Action Economics Forecast Survey had expected a 0.9% q/q increase and a 3.5% y/y gain.

Wages and salaries for civilian workers rose 0.8% q/q (3.5% y/y) in Q1, down from 1.0% q/q in Q4. This tied the Q3 2024 quarterly rise as the smallest increase since Q2 2021. It was also the smallest y/y increase since Q2 2021. Benefits increased by an outsized 1.2% q/q (3.9% y/y) in Q1 versus 0.8% q/q in Q4. This is the largest quarterly gain since Q2 2022. In general, employment cost gains remain above the pace observed prior to the pandemic but are slowing gradually.

Private industry workers’ compensation rose 0.8% q/q (3.4% y/y) in Q1, down from 0.9% q/q (3.6% y/y) in Q4. Wages and salaries for private industry workers increased 0.8% q/q (3.4% y/y) in Q1 versus 0.8% q/q (3.7% y/y) in Q4. The quarterly gain in Q1 tied that in Q3 2024 as the smallest increase since Q4 2020. Benefits for private industry workers jumped 1.2% q/q (3.6% y/y). the largest quarterly gain since Q2 2022. The acceleration in benefits in Q1 was primarily in service-producing industries.

Compensation in private goods-producing industries increased 1.0% q/q (3.2% y/y) in Q1, the largest quarterly gain in five quarters, versus a 0.7% q/q increase in Q4. Compensation in construction jumped 1.3% q/q, its largest quarterly increase since Q2 2022, up from a 0.6% q/q gain in Q4. Manufacturing compensation growth slowed to 0.7% q/q, its slowest quarterly advance since Q4 2020, from 0.8% q/q in Q4. Compensation in private service-producing industries increased 0.8% q/q (3.5% y/y), down slightly from a 0.9% q/q gain in Q4. Compensation in education and health services jumped 1.3% q/q, its largest quarterly gain since Q3 2023. In contrast, compensation in other services edged up 0.1% q/q in Q1, its smallest quarterly advance since before the pandemic.

The employment cost index measures the change in the cost of labor, free from the influence of employment shifts across occupations and industries. It is provided by the Bureau of Labor Statistics and is available in Haver’s **USECON** database. Consensus estimates from the Action Economics Forecast Survey are in Haver’s **AS1REPNA** database.

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- Compensation grew 0.9 q/q in Q1, the same pace as in Q4.
- Wage growth slowed to 0.8% q/q while benefits surged 1.2% q/q, their largest quarterly increase since Q2 2022.

Employment Cost Growth Steady in Q1 2025

Kathleen Stephansen, CBE

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The ADP National Employment Report indicated that nonfarm private sector payrolls rose 62,000 (1.4% y/y) during April after increasing 147,000 (1.4% y/y) during March, revised from 155,000. A 124,000 April rise in ADP employment had been expected in the Action Economics Forecast Survey.

Growth in median annual pay for "job stayers" eased to 4.5% y/y during April, from 4.6% y/y in March and from 4.7% y/y in the prior two months. Manufacturing sector pay grew 4.6% y/y during April, down from 4.8% y/y in March. Construction sector pay was unchanged at 4.7% y/y. Natural resource & mining sector pay grew 4.4% y/y. Financial sector pay rose 5.1% y/y, while education & health services pay rose 4.7% y/y. Leisure & hospitality pay also increased 4.7% y/y. Professional & business service sector pay increased 4.3% y/y as did trade, transportation & utilities pay. Information pay rose 4.1% y/y. Median annual pay for “job changers” rose 6.9% y/y after 6.7% y/y in March.

Small business hiring (less than 50 employees) rose 11,000 (0.6% y/y) after rising 18,000 (0.6% y/y) in March, revised down from 52,000. Employment at medium-sized firms (50-499,000 employees) rose 40,000 (1.1% y/y) after rising 43,000 (1.1% y/y). Large business hiring (500+ employees) rose 12,000 (3.4% y/y) in April, after rising 61,000 (3.6% y/y) in March, revised from 59,000.

Goods-producing employment rose 26,000 (1.3% y/y) in April, after rising 16,000 (1.3% y/y) during March, revised from 24,000. Manufacturing jobs rose 4,000 (-0.2% y/y) after rising 17,000 (-0.3% y/y) in March. The number of construction sector jobs rose 16,000 (3.4% y/y) in April, following a 2,000 (3.6% y/y) March increase, revised from 6,000. Natural resources & mining jobs rose 6,000 (2.8% y/y) in April after falling 3,000 (+1.9% y/y) in March.

The number of service-producing jobs rose 34,000 (1.4% y/y) during April, following a rise of 131,000 (1.4% y/y) in March. Professional & business services employment fell 2,000 (0.6% y/y) after rising 46,000 (0.7% y/y) in the prior month, revised from 57,000. Employment in the financial industry rose 20,000 (2.1% y/y) in April, after rising 38,000 (2.0% y/y) in March. Leisure and hospitality employment increased 27,000 (3.0% y/y), following a 23,000 (2.9% y/y) March increase, revised from 17,000. The number of education & health care jobs fell 23,000 (1.6% y/y) in April, following a 15,000 (1.8% y/y) rise in March, revised from 12,000. Information sector employment fell 8,000 (-0.1% y/y) after a rise of 3,000 (0.2% y/y) in March. The number of jobs in trade, transportation & utilities rose 21,000 (0.4% y/y) in April, after falling 4,000 (+0.4% y/y) in March, revised from a 6,000 fall. Employment in “other” services rose fell 1,000 (+3.2% y/y) following a 10,000 (3.4% y/y) rise in March, revised from 11,000.

By region, employment in the Northeast increased 10,000 (1.9% y/y) in April, following an increase of 95,000 (2.0% y/y) in March, revised from 89,000. Employment in the Midwest rose 42,000 (1.5% y/y) after a gain of 84,000 (1.4% y/y) in March, revised from 81,000. In the South, employment rose 3,000 (1.3% y/y) during April, after rising 10,000 (1.4% y/y) in March, revised from 27,000. In the West, employment rose 9,000 (0.6% y/y) after declining 43,000 (+0.6% y/y), revised from a 41,000 decline in March.

The ADP National Employment Report and Pay Insights data can be found in Haver's **USECON** database. Historical figures date back to January 2010 for private employment. Pay data date back to October 2020. The expectation figure is available in Haver's **AS1REPNA** database.

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- Employment increase is modest in both services & factory sectors.
- Wage growth for “job stayers” moderates.
- Small and medium-sized business employment slows.

Economy in Brief: June 2009

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Michigan Consumer Sentiment Improves With Higher Expectations

French Confidence, Still In A Deep Pit, Rises

U.S. Personal Income Surge Lifts Savings Rate To Its Highest Since 1993

U.S. Personal Income Surge Lifts Savings Rate To Its Highest Since 1993

U.S. Initial Jobless Insurance Claims Edge Up To Highest in Four Weeks

Despite Headlines About New Record Drops, Europe Is Healing

Decline in U.S. 1Q GDP Is Trimmed

Decline in U.S. 1Q GDP IsTrimmed