Louise Curley

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081229a.jpg" align="right" border="0" height="265" width="353">
The results of the December Hometrack Survey of real estate
agents in England and Wales regarding the prices at which houses are
being sold and the ease or difficulty in making sales was released
today. The year to year decline in house prices that started in April,
2008 has continued and intensified. In December the weighted overall
average price of a house was 159,900 pounds, a price this low was last
seen in July and August of 2003, as can be seen in the first chart.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081229b.jpg" align="right" border="0" height="265" width="353">
The sales price of a house in December was 88.6% of the asking
price, the lowest ratio recorded since the survey began in January
2001. Similarly the time it took to complete a sale was 12 weeks, the
longest time recorded in the survey. The ratio of selling to asking
price and the number of weeks to complete a sale are shown in the
second chart.
Also released today were data on equity withdrawals during the
third quarter of this year. For the second quarter in a row, equity
withdrawals were negative. In order to see what this means it is useful
to see how the series is derived. According to the Bank of England,
equity withdrawals are equal to that part of secured borrowing that is
not invested in the housing market. The series is measured by the sum
of household's net lending secured on dwellings and capital grants for
households paid to persons and household associations less the sum of
expenditures on the construction of dwellings and net transfers of land
to the household sector. Data are available only for the net lending
and expenditures on dwellings, but these are by far the most important
factors in equity withdrawals. As can be seen in the third chart, the
difference between lending and construction is a close approximation of
equity withdrawals.

<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081229c.jpg" border="0" height="265" width="312"><img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081229d.jpg" border="0" height="265" width="312">
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">UNITED
KINGDOM&nbsp;</th>
<th scope="col">Dec 08</th>
<th scope="col">Nov&nbsp; 08&nbsp;</th>
<th scope="col">Oct 08&nbsp;</th>
<th scope="col">Sep 08&nbsp;</th>
<th scope="col">Aug 08&nbsp; &nbsp;</th>
<th scope="col">Jul 08</th>
<th scope="col">June 08</th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">Hometrack Housing
Survey</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;House Prices
(Thou GBP)</td>
<td>159.9</td>
<td>161.4</td>
<td>163.2</td>
<td>165.3</td>
<td>167.0</td>
<td>168.5</td>
<td>170.5</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;Ratio of
Sale Price to Asking Price&nbsp; (%)</td>
<td>88.6</td>
<td>88.9</td>
<td>89.2</td>
<td>90.0</td>
<td>90.7</td>
<td>90.9</td>
<td>91.6</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;Number of
Weeks to Complete Sale (Number)</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td class="firstcol"></td>
<td>&nbsp;Q3 08</td>
<td>Q2 08&nbsp;</td>
<td>Q1 08&nbsp;</td>
<td>Q4 07&nbsp;</td>
<td>Q3 07&nbsp;</td>
<td>Q2 07</td>
<td>Q1 07</td>
</tr>
<tr class="odd">
<td class="firstcol">Equity Withdrawals
(Mil. GBP)</td>
<td>-5695</td>
<td>-1951</td>
<td>5650</td>
<td>7317</td>
<td>11170</td>
<td>9846</td>
<td>13941</td>
</tr>
<tr class="odd">
<td class="firstcol">Net Lending -
Construction (Mil. GBP)</td>
<td>-6684</td>
<td>-99</td>
<td>7581</td>
<td>11190</td>
<td>14948</td>
<td>14077</td>
<td>15553</td>
</tr>
<tr class="odd">
<td class="firstcol">Net Lending Secured on
Dwellings (Mil. GBP)</td>
<td>4656</td>
<td>11628</td>
<td>20033</td>
<td>24032</td>
<td>28177</td>
<td>27352</td>
<td>28809</td>
</tr>
<tr class="odd">
<td class="firstcol">Expenditure on
Construction of Dwellings (Mil. GBP)</td>
<td>11340</td>
<td>11727</td>
<td>12452</td>
<td>12542</td>
<td>13229</td>
<td>13275</td>
<td>13256</td>
</tr>
</tbody>
</table>
</body></html>

The results of the December Hometrack Survey of real estate agents in England and Wales regarding the prices at which houses are being sold and the ease or difficulty in making sales was released today. The year to year decline in [...]

UK House Prices Continue to Fall, Sales Harder to Make, Equity Withdrawals Turn Negative

Tom Moeller

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081224c.jpg" align="left" border="0" height="265" width="353">
Consumers further retrenched last month as spending was cut in
a successful attempt to raise savings. Personal consumption
expenditures fell 0.6% during November after an unrevised
1.0% October decline. The latest was the fifth consecutive monthly drop
which pulled the y/y rise to a barely positive 0.5%, the weakest since
1961.
So far in 4Q, spending is down at a 6.2% annual rate from 3Q,
but the drop in gasoline prices is helping to lift real
spending. It gained 0.6% during November and that was the
first rise since May. So far in 4Q, real spending is down at a 2.2%
annual rate from 3Q. That compares to a 3.8% decline during 3Q. During
the last three months together, real spending on motor vehicles fell at
a 50.3% annual rate. Furniture spending rose at a 3.7% rate due to
price deflation stimulating sales. Lower prices only somewhat helped
spending on clothing. Real spending here fell at a 0.8% rate during the
last three months, following their summer collapse, while nominal
spending continued to fall sharply at a 5.0% rate during those three
months.
Lower gasoline prices have fueled more driving. Since a year
ago gasoline prices have halved and they're down at an 86% annual rate
during the last three months. As a result, nominal spending on gasoline
&amp; oil is down at an 81% annual rate during the last three
months. But real spending is up at a 40% rate. The level of
real spending on gasoline is near its historic high. 
 

Disposable personal<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081224d.jpg" align="right" border="0" height="265" width="353">
 income fell 0.1% last month following a downwardly
revised 0.2% October increase. Again, lower prices have bolstered real
income. Adjusted for inflation disposable income rose 1.0% after a 0.7%
October increase. That raised the level of real take home
income pay by 1.6% versus a year ago and by 3.5% so far in 4Q versus 3Q.
Overall, personal income fell 0.2% last month versus
expectations for no change. October's income gain was revised down.
Wage &amp; salary income slipped 0.1% and that reversed an
unrevised 0.1% uptick during October. The y/y gain of 1.5% compares to
a 5.6% rise last year. Factory sector wages fell for the fourth
straight month (-2.4% y/y) and wages &amp; salaries in the private
service-providing industries slipped 0.1%. The 1.4% y/y rise compares
to 6% or greater growth from 2004 to 2007. Wages in the government
sector rose 0.3% and year-to-year growth of 5.5% has been steady.
Reduced spending combined with modest income growth
raised the personal savings rate to 2.8%. So far this year, the savings
rate has averaged 1.5%, the highest since 2004.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081224e.jpg" align="left" border="0" height="265" width="353">
The PCE chain price index fell 1.1% and
the index was slightly below its May level. Lower gasoline prices, off
28.5% (-27.9% y/y), again offset the rise in food prices which rose
0.3% (6.2% y/y). The core PCE price index fell
slightly for the second month and the decline matched Consensus
expectations. Three-month growth of 0.5% was the lowest since 2001.
Furniture prices fell yet again (-3.6% y/y) while apparel prices fell
0.3% y/y. Transportation costs continued firm and rose 5.4% y/y while
medical care prices rose 2.0% y/y.
The figures noted above are available in the Haver USECON
and in the 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> (%)</th>
<th scope="col">November</th>
<th scope="col">October</th>
<th scope="col">Y/Y</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Personal Income</td>
<td>-0.2</td>
<td>0.1</td>
<td>2.5</td>
<td>6.1</td>
<td>7.1</td>
<td>5.6</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Disposable
Personal Income</td>
<td>-0.1</td>
<td>0.2</td>
<td>3.0</td>
<td>5.5</td>
<td>6.4</td>
<td>4.4</td>
</tr>
<tr class="odd">
<td class="firstcol">Personal Consumption</td>
<td>-0.6</td>
<td>-1.0</td>
<td>0.5</td>
<td>5.5</td>
<td>5.9</td>
<td>6.2</td>
</tr>
<tr>
<td class="firstcol">Saving Rate</td>
<td>2.8</td>
<td>2.4</td>
<td>0.1 (Nov. '07)</td>
<td>0.5</td>
<td>0.7</td>
<td>0.3</td>
</tr>
<tr class="odd">
<td class="firstcol">PCE Chain Price Index</td>
<td>-1.1</td>
<td>-0.5</td>
<td>1.4</td>
<td>2.6</td>
<td>2.8</td>
<td>2.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Less food
&amp; energy</td>
<td>-0.0</td>
<td>-0.0</td>
<td>1.9</td>
<td>2.2</td>
<td>2.3</td>
<td>2.1</td>
</tr>
</tbody>
</table>
</body></html>

Consumers further retrenched last month as spending was cut in a successful attempt to raise savings. Personal consumption expenditures fell 0.6% during November after an unrevised 1.0% October decline. The latest was the fifth [...]

Lower Prices Raise Real Income

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081224a.jpg" width="353">
Initial claims for unemployment insurance rose sharply last week and the 30,000 increase to 586,000 pushed them to a level nearly double the lows of last year.Expectations had been for stability in claims last week at 551,000. The rise in the trend level of claims is reinforced by the gain in the four-week moving average of initial claims to a cycle high of 558,000, up 61.9% y/y.
The rise in initial claims has been accompanied by a 1.4% decline in nonfarm payrolls since year-end 2007.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081224b.jpg" width="353">
The Labor Department indicated that the largest increases in initial claims for the week ending December 13 were in Oklahoma (+1,590), Connecticut (+1,286), Illinois (+962), Maine (+707), and Utah (+402), while the largest decreases were in North Carolina (-20,526), California (-16,493), Pennsylvania (-12,438), Georgia (-12,053), and South Carolina (-8,432).
Continuing claims for unemployment insurance during the week of December 13 fell 17,000 after a revised 44,000 decline during the prior week. But again the trend is up sharply. As a result of a huge 340,000 increase at the end of November, continuing claims were still near their highest level since 1982. The four-week average of continuing claims rose to 4,319,750. Continuing claims provide some indication of workers&#39; ability to find employment and they lag the initial claims figures by one week.
The insured rate of unemployment held for the third consecutive week at this cycle&#39;s high of 3.3%.
The highest insured unemployment rates in the week ending December 6 were in Oregon (5.2 percent), Puerto Rico (5.2), Michigan (4.9), Idaho (4.7), Pennsylvania (4.7), Nevada (4.6), Wisconsin (4.3), South Carolina (4.2), California (4.1), Alaska (4.0), Arkansas (4.0), and New Jersey (4.0).
On Economic Conditions and Building a Recovery is the recent speech given by Dennis P. Lockhart, President and Chief Executive Officer of the Federal Reserve Bank of Atlanta and it can be found <a href="http://www.frbatlanta.org/invoke.cfm?objectid=222D6340-5056-9F12-1223B443E9C1EB7B&amp;method=display">here.</a>

<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">12/20/08</th>
<th scope="col">12/13/08</th>
<th scope="col">12/06/08</th>
<th scope="col">Y/Y</th>
<th scope="col">2007</th>
<th scope="col">2006&nbsp;</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Initial Claims</td>
<td>586</td>
<td>556</td>
<td>575</td>
<td>66.0%</td>
<td>322</td>
<td>313</td>
<td>331</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>--</td>
<td>4,370</td>
<td>4,387</td>
<td>61.7%</td>
<td>2,552</td>
<td>2,459</td>
<td>2,662</td>
</tr>
</tbody>
</table>
</body>
</html>

Initial claims for unemployment insurance rose sharply last week and the 30,000 increase to 586,000 pushed them to a level nearly double the lows of last year.Expectations had been for stability in claims last week at 551,000. The [...]

U.S. Weekly Claims For Jobless Insurance Double From Last Year's Lows

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081224a.jpg" align="left" border="0" height="265" width="353">
Initial claims for unemployment insurance rose sharply last
week and the 30,000 increase to 586,000 pushed them to a level nearly
double the lows of last year.Expectations had been for stability in
claims last week at 551,000. The rise in the trend level of claims is
reinforced by the gain in the four-week moving average of initial
claims to a cycle high of 558,000, up 61.9% y/y.
The rise in initial claims has been accompanied by a 1.4%
decline in nonfarm payrolls since year-end 2007.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081224b.jpg" align="right" border="0" height="265" width="353">
The Labor Department indicated that the largest increases in
initial claims for the week ending December 13 were in Oklahoma
(+1,590), Connecticut (+1,286), Illinois (+962), Maine (+707), and Utah
(+402), while the largest decreases were in North Carolina (-20,526),
California (-16,493), Pennsylvania (-12,438), Georgia (-12,053), and
South Carolina (-8,432).
Continuing claims for unemployment insurance during the week
of December 13 fell 17,000 after a revised 44,000 decline during the
prior week. But again the trend is up sharply. As a result of a huge
340,000 increase at the end of November, continuing claims were still
near their highest level since 1982. The four-week average of
continuing claims rose to 4,319,750. Continuing claims provide some
indication of workers' ability to find employment and they lag the
initial claims figures by one week.
The insured rate of unemployment held for the third
consecutive week at this cycle's high of 3.3%.
The highest insured unemployment rates in the week ending
December 6 were in Oregon (5.2 percent), Puerto Rico (5.2), Michigan
(4.9), Idaho (4.7), Pennsylvania (4.7), Nevada (4.6), Wisconsin (4.3),
South Carolina (4.2), California (4.1), Alaska (4.0), Arkansas (4.0),
and New Jersey (4.0).
On Economic
Conditions and Building a Recovery is the recent speech given
by Dennis P. Lockhart, President and Chief Executive
Officer of the Federal Reserve Bank of Atlanta and it can be found <a href="http://www.frbatlanta.org/invoke.cfm?objectid=222D6340-5056-9F12-1223B443E9C1EB7B&amp;method=display">here.</a>

<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">12/20/08</th>
<th scope="col">12/13/08</th>
<th scope="col">12/06/08</th>
<th scope="col">Y/Y</th>
<th scope="col">2007</th>
<th scope="col">2006&nbsp;</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Initial Claims</td>
<td>586</td>
<td>556</td>
<td>575</td>
<td>66.0%</td>
<td>322</td>
<td>313</td>
<td>331</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>--</td>
<td>4,370</td>
<td>4,387</td>
<td>61.7%</td>
<td>2,552</td>
<td>2,459</td>
<td>2,662</td>
</tr>
</tbody>
</table>
Lower Prices Raise Real
Income 
by <a href="/comment/Moeller.html">Tom
Moeller</a> December 24, 2008


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081224c.jpg" align="left" border="0" height="265" width="353">
Consumers further retrenched last month as spending was cut in
a successful attempt to raise savings. Personal consumption
expenditures fell 0.6% during November after an unrevised
1.0% October decline. The latest was the fifth consecutive monthly drop
which pulled the y/y rise to a barely positive 0.5%, the weakest since
1961.
So far in 4Q, spending is down at a 6.2% annual rate from 3Q,
but the drop in gasoline prices is helping to lift real
spending. It gained 0.6% during November and that was the
first rise since May. So far in 4Q, real spending is down at a 2.2%
annual rate from 3Q. That compares to a 3.8% decline during 3Q. During
the last three months together, real spending on motor vehicles fell at
a 50.3% annual rate. Furniture spending rose at a 3.7% rate due to
price deflation stimulating sales. Lower prices only somewhat helped
spending on clothing. Real spending here fell at a 0.8% rate during the
last three months, following their summer collapse, while nominal
spending continued to fall sharply at a 5.0% rate during those three
months.
Lower gasoline prices have fueled more driving. Since a year
ago gasoline prices have halved and they're down at an 86% annual rate
during the last three months. As a result, nominal spending on gasoline
&amp; oil is down at an 81% annual rate during the last three
months. But real spending is up at a 40% rate. The level of
real spending on gasoline is near its historic high. 
 
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081224d.jpg" align="right" border="0" height="265" width="353">
Disposable personal income fell 0.1% last
month following a downwardly revised 0.2% October increase. Again,
lower prices have bolstered real income. Adjusted for inflation
disposable income rose 1.0% after a 0.7% October increase. That raised
the level of real take home income pay by 1.6% versus a year
ago and by 3.5% so far in 4Q versus 3Q.
Overall, personal income fell 0.2% last month versus
expectations for no change. October's income gain was revised down.
Wage &amp; salary income slipped 0.1% and that reversed an
unrevised 0.1% uptick during October. The y/y gain of 1.5% compares to
a 5.6% rise last year. Factory sector wages fell for the fourth
straight month (-2.4% y/y) and wages &amp; salaries in the private
service-providing industries slipped 0.1%. The 1.4% y/y rise compares
to 6% or greater growth from 2004 to 2007. Wages in the government
sector rose 0.3% and year-to-year growth of 5.5% has been steady.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081224e.jpg" align="left" border="0" height="265" width="353">
Reduced spending combined with modest income growth
raised the personal savings rate to 2.8%. So far this year, the savings
rate has averaged 1.5%, the highest since 2004.
The PCE chain price index fell 1.1% and
the index was slightly below its May level. Lower gasoline prices, off
28.5% (-27.9% y/y), again offset the rise in food prices which rose
0.3% (6.2% y/y). The core PCE price index fell
slightly for the second month and the decline matched Consensus
expectations. Three-month growth of 0.5% was the lowest since 2001.
Furniture prices fell yet again (-3.6% y/y) while apparel prices fell
0.3% y/y. Transportation costs continued firm and rose 5.4% y/y while
medical care prices rose 2.0% y/y.
The figures noted above are available in the Haver USECON
and in the 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> (%)</th>
<th scope="col">November</th>
<th scope="col">October</th>
<th scope="col">Y/Y</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Personal Income</td>
<td>-0.2</td>
<td>0.1</td>
<td>2.5</td>
<td>6.1</td>
<td>7.1</td>
<td>5.6</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Disposable
Personal Income</td>
<td>-0.1</td>
<td>0.2</td>
<td>3.0</td>
<td>5.5</td>
<td>6.4</td>
<td>4.4</td>
</tr>
<tr class="odd">
<td class="firstcol">Personal Consumption</td>
<td>-0.6</td>
<td>-1.0</td>
<td>0.5</td>
<td>5.5</td>
<td>5.9</td>
<td>6.2</td>
</tr>
<tr>
<td class="firstcol">Saving Rate</td>
<td>2.8</td>
<td>2.4</td>
<td>0.1 (Nov. '07)</td>
<td>0.5</td>
<td>0.7</td>
<td>0.3</td>
</tr>
<tr class="odd">
<td class="firstcol">PCE Chain Price Index</td>
<td>-1.1</td>
<td>-0.5</td>
<td>1.4</td>
<td>2.6</td>
<td>2.8</td>
<td>2.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Less food
&amp; energy</td>
<td>-0.0</td>
<td>-0.0</td>
<td>1.9</td>
<td>2.2</td>
<td>2.3</td>
<td>2.1</td>
</tr>
</tbody>
</table>
</body></html>

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081223n.jpg" align="left" border="0" height="265" width="353">
The United Kingdom, the United States, Denmark, the
Netherlands and New Zealand released their, for the most part, final
estimates of Gross Domestic Product for the third quarter of 2008
today. The quarterly percent changes in GDP for New Zealand, Denmark,
the Netherlands and the U.K. are shown in the first chart.
All five countries appear to be in recession or heading
towards it although their paths are diverse. The data show that New
Zealand has now reported three successive quarters of decline and is
definitely in recession. After a rebound in the second quarter, Denmark
has once again reported a decline in GDP. GDP in the Netherlands has
hovered around zero growth in all three quarters of 2008. GDP in the U.
K. declined 0.65% in the third quarter, more than expected and the
biggest decline since 1990. GDP in Denmark declined 0.38% in the third
quarter after rising 0.43% in the second quarter. As can be seen in the
first chart, quarterly movements in Denmark's GDP are much more
volatile than those of the other countries shown.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081223o.jpg" align="right" border="0" height="265" width="353">
GDP in the United States, which had declined 0.04% in the
fourth quarter of 2007, increased by 0.22 % in the first quarter of
2008 and 0.70% in the second quarter, declined 0.13% in the third
quarter. (The U. S. typically shows quarterly changes in GDP at annual
rates, while most other countries use quarterly changes such as those
shown here. The comparable annual rate figures for the U. S. are
-0.17%, 0.87% , 2.83 % and -0.51% respectively.)
The National Bureau of Economic Research, the arbiter of
recession dating in the U. S., has declared the fourth quarter of 2007
to be the peak of the expansion and thus the first quarter of 2008, the
beginning of recession. Quarterly changes in the GDP of the U. S
together with recession shading are shown in the second chart. Other
countries have yet to make an official announcement, but when they do,
Haver will record the recession dating and shading in the Graph Menu in
DLXVG3.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">QUARTERLY
CHANGES IN GDP &nbsp;</th>
<th scope="col">Q3 08</th>
<th scope="col">Q2 08&nbsp;</th>
<th scope="col">Q1 08&nbsp;</th>
<th scope="col">Q4 07&nbsp;</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">New Zealand</td>
<td>-0.68</td>
<td>-0.52</td>
<td>-0.57</td>
<td>0.33</td>
</tr>
<tr>
<td class="firstcol">Denmark</td>
<td>-0.38</td>
<td>0.43</td>
<td>-1.16</td>
<td>-0.23</td>
</tr>
<tr class="odd">
<td class="firstcol">The Netherlands</td>
<td>-0.02</td>
<td>0.00</td>
<td>0.33</td>
<td>1.25</td>
</tr>
<tr>
<td class="firstcol">United Kingdom</td>
<td>-0.65</td>
<td>0.00</td>
<td>0.38</td>
<td>0.55</td>
</tr>
<tr class="odd">
<td class="firstcol">United States</td>
<td>-0.13</td>
<td>0.70</td>
<td>0.22</td>
<td>-0.04</td>
</tr>
</tbody>
</table>
</body></html>

The United Kingdom, the United States, Denmark, the Netherlands and New Zealand released their, for the most part, final estimates of Gross Domestic Product for the third quarter of 2008 today. The quarterly percent changes in GDP for [...]

GDP Data For Third Quarter Of 2008: Paths To Recession

Robert Brusca

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081223l.jpg" align="left" border="0" height="265" width="353">
With the release of the new detail, the IFO headline has not
changed but the report now reveals how impacted the whole of the survey
is from the ongoing weakness and gathering gloom. 
 

Germany&#8217;s IFO headline at 82.6 in Dec. from 96.3 in Nov. is
now the weakest since 1991. The current manufacturing situation is in
the bottom 19th percent of its range for that period. Business
expectations, activity and orders on hand all are the worst readings on
record for the period. The reading for &#8216;Foreign orders on hand&#8217; is now
the relative strongest category and it resides in the bottom 25% of its
range. 
 

The three-month outlook for expected MFG activity has slipped
to its weakest reading of the period since 1998. Orders, expectations
for Retailing and Wholesaling are around the bottom 20% of their
respective ranges. Despite foreign orders on hand having held up the
expectations for export business on the part of manufactures is the
worst of the survey period. Employment expectations in manufacturing
are also their worst of the period. The German IFO survey leaves little
cheer for Christmas. 
 


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="9" scope="col"> IFO
Survey: Germany</th>
</tr>
</thead>
<tbody>
<tr class="grey7">
<td class="firstcol">&nbsp;</td>
<td colspan="5">Percent: Yr/Yr</td>
<td colspan="3">INDEX NUMBERS</td>
</tr>
<tr class="grey6">
<td class="firstcol">&nbsp;</td>
<td>Dec-08</td>
<td>Nov-08</td>
<td>Oct-08</td>
<td>Sep-08</td>
<td>Aug-08</td>
<td>Current</td>
<td>Average</td>
<td>Percentile</td>
</tr>
<tr class="grey5">
<td class="firstcol">Biz Climate</td>
<td>-20.0%</td>
<td>-17.8%</td>
<td>-13.4%</td>
<td>-10.9%</td>
<td>-10.5%</td>
<td>82.6</td>
<td>96.3</td>
<td>0.0%</td>
</tr>
<tr class="grey5">
<td class="firstcol">Current Situation</td>
<td>-18.1%</td>
<td>-14.2%</td>
<td>-8.9%</td>
<td>-9.4%</td>
<td>-7.5%</td>
<td>88.8</td>
<td>96.3</td>
<td>18.0%</td>
</tr>
<tr class="grey5">
<td class="firstcol">Biz Expectations: Next 6-Mos</td>
<td>-22.0%</td>
<td>-21.3%</td>
<td>-17.6%</td>
<td>-12.6%</td>
<td>-13.4%</td>
<td>76.8</td>
<td>96.4</td>
<td>0.0%</td>
</tr>
<tr class="grey4">
<td class="firstcol" colspan="9">&nbsp;</td>
</tr>
<tr class="grey6">
<td class="firstcol">Manufacturing:</td>
<td>Dec-08</td>
<td>Nov-08</td>
<td>Oct-08</td>
<td>Sep-08</td>
<td>Aug-08</td>
<td>Current</td>
<td>Average</td>
<td>Percentile</td>
</tr>
<tr class="grey3">
<td class="firstcol" colspan="9">Current
Situation</td>
</tr>
<tr class="grey5">
<td class="firstcol">MFG</td>
<td>-25.8%</td>
<td>-19.5%</td>
<td>-12.4%</td>
<td>-11.9%</td>
<td>-8.9%</td>
<td>81.1</td>
<td>93.5</td>
<td>19.6%</td>
</tr>
<tr class="grey3">
<td class="firstcol" colspan="9">Biz
Expectations: Next
6-Mos</td>
</tr>
<tr class="grey5">
<td class="firstcol">MFG</td>
<td>-27.0%</td>
<td>-25.4%</td>
<td>-21.5%</td>
<td>-15.8%</td>
<td>-16.9%</td>
<td>70.8</td>
<td>95.8</td>
<td>0.0%</td>
</tr>
<tr class="grey3">
<td class="firstcol" colspan="9">Activity
(m/m)</td>
</tr>
<tr class="grey5">
<td class="firstcol">MFG</td>
<td>-25.1%</td>
<td>-17.8%</td>
<td>-7.7%</td>
<td>-10.1%</td>
<td>-8.5%</td>
<td>75.1</td>
<td>96.9</td>
<td>0.0%</td>
</tr>
<tr class="grey3">
<td class="firstcol" colspan="9">Demand
M/M</td>
</tr>
<tr class="grey5">
<td class="firstcol">MFG</td>
<td>-27.5%</td>
<td>-25.8%</td>
<td>-15.3%</td>
<td>-16.0%</td>
<td>-10.8%</td>
<td>70.1</td>
<td>96.5</td>
<td>0.0%</td>
</tr>
<tr class="grey3">
<td class="firstcol" colspan="9">Orders
on hand</td>
</tr>
<tr class="grey5">
<td class="firstcol">MFG</td>
<td>-26.7%</td>
<td>-22.5%</td>
<td>-13.2%</td>
<td>-14.7%</td>
<td>-11.2%</td>
<td>73.6</td>
<td>96.1</td>
<td>0.0%</td>
</tr>
<tr class="grey3">
<td class="firstcol" colspan="9">Foreign
orders on hand</td>
</tr>
<tr class="grey5">
<td class="firstcol">MFG</td>
<td>-23.3%</td>
<td>-17.6%</td>
<td>-14.0%</td>
<td>-9.7%</td>
<td>-7.7%</td>
<td>84.6</td>
<td>94.8</td>
<td>24.5%</td>
</tr>
<tr class="grey5">
<td colspan="9" class="firstcol">Yr/Yr
percentage changes in
underlying Indices</td>
</tr>
<tr class="grey2">
<td colspan="9" class="firstcol">IFO
outlook for 3-Months
ahead</td>
</tr>
<tr class="grey7">
<td class="firstcol">3-Mos ahead</td>
<td colspan="5">Percent: Yr/Yr</td>
<td colspan="3">INDEX NUMBERS</td>
</tr>
<tr class="grey6">
<td class="firstcol">Expected Activity</td>
<td>Dec-08</td>
<td>Nov-08</td>
<td>Oct-08</td>
<td>Sep-08</td>
<td>Aug-08</td>
<td>Current</td>
<td>Average</td>
<td>Percentile</td>
</tr>
<tr class="grey5">
<td class="firstcol">MFG</td>
<td>-24.8%</td>
<td>-22.2%</td>
<td>-13.9%</td>
<td>-9.2%</td>
<td>-10.8%</td>
<td>77.3</td>
<td>96.7</td>
<td>0.0%</td>
</tr>
<tr class="grey1">
<td class="firstcol">Orders Expectations</td>
<td colspan="5">Changes over
12-months</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="grey5">
<td class="firstcol">Retail Orders&nbsp;</td>
<td>-22.0%</td>
<td>-24.0%</td>
<td>-5.0%</td>
<td>-4.0%</td>
<td>-10.0%</td>
<td>-32.0</td>
<td>-16.1</td>
<td>22.4%</td>
</tr>
<tr class="grey5">
<td class="firstcol">Wholesale</td>
<td>-32.0%</td>
<td>-30.0%</td>
<td>-16.0%</td>
<td>-12.0%</td>
<td>-15.0%</td>
<td>-26.0</td>
<td>-12.4</td>
<td>17.9%</td>
</tr>
<tr class="grey1">
<td class="firstcol" colspan="9">EXPORT
Biz Expectations</td>
</tr>
<tr class="grey5">
<td class="firstcol">MFG</td>
<td>-23.3%</td>
<td>-19.0%</td>
<td>-13.3%</td>
<td>-9.6%</td>
<td>-7.2%</td>
<td>80.7</td>
<td>98.1</td>
<td>0.0%</td>
</tr>
<tr class="grey1">
<td class="firstcol" colspan="9">Employment
Expectations</td>
</tr>
<tr class="grey5">
<td class="firstcol">MFG (Since June 1997)</td>
<td>-20.6%</td>
<td>-15.5%</td>
<td>-9.8%</td>
<td>-8.7%</td>
<td>-8.3%</td>
<td>87.4</td>
<td>96.2</td>
<td>0.0%</td>
</tr>
</tbody>
</table>
</body></html>

With the release of the new detail, the IFO headline has not changed but the report now reveals how impacted the whole of the survey is from the ongoing weakness and gathering gloom. Germany’s IFO headline at 82.6 in Dec. from 96.3 in [...]

IFO Details Show Widespread Gloom in Germany

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081223f.jpg" width="353">
The full-month reading of consumer sentiment in December from the University of Michigan recovered slightly from the the dismal November level. At 60.1 the figure was improved slightly from the mid-month level and that was up 8.7% from November. It was the highest level since September. It still was down, however, by nearly one quarter from last year. The December reading beat Consensus expectations for 58.7.
During the last ten years there has been a 58% correlation between the level of sentiment and the three-month change in real consumer spending.
The same as in the mid-month report, weak prices most likely pushed up the index of buying conditions for large household goods by one-third from November. The view of current personal finances improved just slightly from November&#39;s record low level, and the figure remained off by nearly one half from last year&#39;s average.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081223g.jpg" width="353">
The expectations component of consumer sentiment remained roughly unchanged m/m. The series was near its lowest since 1990 and close to the low of 1980. Expectations for business conditions during the next year dropped to the lowest since 1980 and expectations for conditions during the next five years ticked up. The expected change in personal finances improved slightly for the second consecutive month.
The opinion of government policy, which apparently influences economic expectations, ticked up for the second month (-25.7% y/y). A higher 45% thought that a fair job was being done but a lesser 4% thought that a good job was being done. That was nearly the lowest percentage on record. Forty nine percent of survey participants thought that a poor job was being done by government.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081223m.jpg" width="353">
Recent economic weakness and lower oil prices caused inflation expectations to fall. The mean expected rate of inflation during the next year fell further to 1.7%. It was as high as 7.0% in May. The expected inflation rate during the next five years fell to 2.6%, a record low for the series which dates back to 1980.
The University of Michigan survey 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.

<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">December</th>
<th scope="col">Mid-December</th>
<th scope="col">November</th>
<th scope="col">October</th>
<th scope="col">December y/y</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Consumer Sentiment</td>
<td>60.1</td>
<td>59.1</td>
<td>55.3</td>
<td>57.6</td>
<td>-20.4%</td>
<td>85.6</td>
<td>87.3</td>
<td>88.5</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Current Conditions</td>
<td>69.5</td>
<td>69.4</td>
<td>57.5</td>
<td>58.4</td>
<td>-23.6</td>
<td>101.2</td>
<td>105.1</td>
<td>105.9</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Expectations</td>
<td>54.0</td>
<td>52.4</td>
<td>53.9</td>
<td>57.0</td>
<td>-17.7</td>
<td>75.6</td>
<td>75.9</td>
<td>77.4</td>
</tr>
</tbody>
</table>
</body>
</html>

The full-month reading of consumer sentiment in December from the University of Michigan recovered slightly from the the dismal November level. At 60.1 the figure was improved slightly from the mid-month level and that was up 8.7% [...]

Michigan Consumer Sentiment Improved Slightly in December

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: 2008

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UK House Prices Continue to Fall, Sales Harder to Make, Equity Withdrawals Turn Negative

UK House Prices Continue to Fall, Sales Harder to Make, Equity Withdrawals Turn Negative

Lower Prices Raise Real Income

U.S. Weekly Claims For Jobless Insurance Double From Last Year's Lows

U.S. Weekly Claims For Jobless Insurance Double From Last Year's Lows

GDP Data For Third Quarter Of 2008: Paths To Recession

IFO Details Show Widespread Gloom in Germany

Michigan Consumer Sentiment Improved Slightly in December