Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061026d.jpg" width="353">
The median sales price of a new single family home fell 9.3% to $217,000 during September. Though the August level of prices was revised up, the year to year change of -9.7% was the worst since 1970 and it lowered prices below the average level of 2004.
Sales of new single family homes sales rose 5.3% during September to 1.075M and exceeded expectations for a gain to 1.040M. Sales in August were revised down moderately.
New home sales during the first nine months of this year are down 15.6% from the first nine months of 2005 and in September were 21.4% below the monthly peak during July 2005.
Sales rose m/m only in the West (-13.6% y/y) and in the South (-7.9% y/y). In the Northeast sales reversed nearly all of the prior month&#39;s jump (-6.6% y/y) and in the Midwest sales also fell hard (-36.6% y/y.
The number of new homes for sale edged fell for the second month (+14.4% y/y). The year to year breakdown by region is as follows: Northeast, 11.1%; West, 17.8%; South, 18.2%; Midwest, -1.0%.

<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/@E9/@E904/@E904.HTM">U.S. New Homes</a></th>
<th scope="col">September</th>
<th scope="col">August</th>
<th scope="col">Y/Y</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Total Sales (AR, 000&#39;s)</td>
<td>1,075</td>
<td>1,021</td>
<td>-14.2%</td>
<td>1,280</td>
<td>1,201</td>
<td>1,091</td>
</tr>
<tr>
<td class="firstcol">Median Price (NSA)</td>
<td>$217,100</td>
<td>$239,300</td>
<td>-9.7%</td>
<td>$234,208</td>
<td>$217,817</td>
<td>$191,383</td>
</tr>
</tbody>
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The median sales price of a new single family home fell 9.3% to $217,000 during September. Though the August level of prices was revised up, the year to year change of -9.7% was the worst since 1970 and it lowered prices below the [...]

New Home Prices Down, Sales Up

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061026b.jpg" width="353">
Orders for civilian aircraft &amp; parts nearly tripled m/m during September and propelled total new orders for durable goods up 7.8%. That followed a little revised 0.1% dip during August and it beat Consensus expectations for a 2.0% increase.
During the last ten years there has been a 69% correlation between the y/y change in durable goods orders and the change in output of durable goods.
The surge in aircraft orders recovered sharp declines that had occurred during four of the prior five months while orders for motor vehicles &amp; parts fell 6.1% (-12.0% y/y).
Durable goods orders less the transportation sector altogether ticked up just 0.1 after a 1.5% August decline. Consensus expectations had been for a 1.0% rise in orders outside of the transportation sector.
Orders for nondefense capital goods less aircraft rose 1.1% after an upwardly revised 0.8% August increase. Orders for machinery rose 1.3% (12.3% y/y) and recovered a 1.1% decline in August that was shallower than initially estimated. Electrical equipment &amp; appliance orders recovered part of the prior month&#39;s decline with a 3.7% (0.8% y/y) gain. During the last ten years there has been an 86% correlation between the y/y change in capital goods orders less aircraft and the y/y change in business fixed investment in equipment &amp; software from the GDP accounts.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061026c.jpg" width="353">
Orders for computers &amp; electronic products slipped 0.1% (+9.5% y/y) as computer orders fell another 2.3% (-2.4% y/y) on top of the 10.2% August skid. Orders for communications equipment fell 5.3% (+24.6% y/y).
Shipments of durable goods fell 2.8% (+4.2% y/y) and less the transportation sector fell 2.2% (+6.6% y/y). During the last ten years there has been an 82% correlation between the y/y change in durable goods shipments and the change in industrial production of durable goods.
Order backlogs surged 3.8% (21.8% y/y) and less transportation rose 1.1% (13.0% y/y). Unfilled orders for nondefense aircraft &amp; parts jumped 7.0% (53.1% y/y).
Durable inventories rose 1.0% (7.6% y/y) after a 0.6% August rise. Less the transportation sector inventories rose 0.9% (8.3% y/y) after an upwardly revised 1.1% August gain. The inventory to shipments ratio outside of the transportation sector surged to its highest level in over a year.
Modeling the Transition to a New Economy: Lessons from Two Technological Revolutions from the Federal Resesrve Bank of Minneapolis can be found <a href="http://www.minneapolisfed.org/research/SR/SR296.pdf"> here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@ED/@ED01/@ED0101/@ED0101.HTM">NAICS Classification</a></th>
<th scope="col">September</th>
<th scope="col">August</th>
<th scope="col">Y/Y</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Durable Goods Orders</td>
<td>7.8%</td>
<td>-0.1%</td>
<td>14.1%</td>
<td>9.0%</td>
<td>6.4%</td>
<td>-0.6%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp; Excluding Transportation</td>
<td>0.1%</td>
<td>-1.5%</td>
<td>6.2%</td>
<td>9.4%</td>
<td>7.6%</td>
<td>-1.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">Nondefense Capital Goods</td>
<td>21.9%</td>
<td>-2.2%</td>
<td>34.6%</td>
<td>21.4%</td>
<td>5.6%</td>
<td>-3.4%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Excluding Aircraft</td>
<td>1.1%</td>
<td>0.8%</td>
<td>10.9%</td>
<td>12.3%</td>
<td>2.8%</td>
<td>-2.0%</td>
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Orders for civilian aircraft & parts nearly tripled m/m during September and propelled total new orders for durable goods up 7.8%. That followed a little revised 0.1% dip during August and it beat Consensus expectations for a 2.0% [...]

Surge in U.S. Durable Goods Orders All Air

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061026b.jpg" width="353">
Orders for civilian aircraft &amp; parts nearly tripled m/m during September and propelled total new orders for durable goods up 7.8%. That followed a little revised 0.1% dip during August and it beat Consensus expectations for a 2.0% increase.
During the last ten years there has been a 69% correlation between the y/y change in durable goods orders and the change in output of durable goods.
The surge in aircraft orders recovered sharp declines that had occurred during four of the prior five months while orders for motor vehicles &amp; parts fell 6.1% (-12.0% y/y).
Durable goods orders less the transportation sector altogether ticked up just 0.1 after a 1.5% August decline. Consensus expectations had been for a 1.0% rise in orders outside of the transportation sector.
Orders for nondefense capital goods less aircraft rose 1.1% after an upwardly revised 0.8% August increase. Orders for machinery rose 1.3% (12.3% y/y) and recovered a 1.1% decline in August that was shallower than initially estimated. Electrical equipment &amp; appliance orders recovered part of the prior month&#39;s decline with a 3.7% (0.8% y/y) gain. During the last ten years there has been an 86% correlation between the y/y change in capital goods orders less aircraft and the y/y change in business fixed investment in equipment &amp; software from the GDP accounts.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061026c.jpg" width="353">
Orders for computers &amp; electronic products slipped 0.1% (+9.5% y/y) as computer orders fell another 2.3% (-2.4% y/y) on top of the 10.2% August skid. Orders for communications equipment fell 5.3% (+24.6% y/y).
Shipments of durable goods fell 2.8% (+4.2% y/y) and less the transportation sector fell 2.2% (+6.6% y/y). During the last ten years there has been an 82% correlation between the y/y change in durable goods shipments and the change in industrial production of durable goods.
Order backlogs surged 3.8% (21.8% y/y) and less transportation rose 1.1% (13.0% y/y). Unfilled orders for nondefense aircraft &amp; parts jumped 7.0% (53.1% y/y).
Durable inventories rose 1.0% (7.6% y/y) after a 0.6% August rise. Less the transportation sector inventories rose 0.9% (8.3% y/y) after an upwardly revised 1.1% August gain. The inventory to shipments ratio outside of the transportation sector surged to its highest level in over a year.
Modeling the Transition to a New Economy: Lessons from Two Technological Revolutions from the Federal Resesrve Bank of Minneapolis can be found <a href="http://www.minneapolisfed.org/research/SR/SR296.pdf">here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@ED/@ED01/@ED0101/@ED0101.HTM">NAICS Classification</a></th>
<th scope="col">September</th>
<th scope="col">August</th>
<th scope="col">Y/Y</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Durable Goods Orders</td>
<td>7.8%</td>
<td>-0.1%</td>
<td>14.1%</td>
<td>9.0%</td>
<td>6.4%</td>
<td>-0.6%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp; Excluding Transportation</td>
<td>0.1%</td>
<td>-1.5%</td>
<td>6.2%</td>
<td>9.4%</td>
<td>7.6%</td>
<td>-1.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">Nondefense Capital Goods</td>
<td>21.9%</td>
<td>-2.2%</td>
<td>34.6%</td>
<td>21.4%</td>
<td>5.6%</td>
<td>-3.4%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Excluding Aircraft</td>
<td>1.1%</td>
<td>0.8%</td>
<td>10.9%</td>
<td>12.3%</td>
<td>2.8%</td>
<td>-2.0%</td>
</tr>
</tbody>
</table>
New Home Prices Down, Sales Up 
by <a href="/comment/Moeller.html">Tom Moeller</a> October 26, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061026d.jpg" width="353">
The median sales price of a new single family home fell 9.3% to $217,000 during September. Though the August level of prices was revised up, the year to year change of -9.7% was the worst since 1970 and it lowered prices below the average level of 2004.
Sales of new single family homes sales rose 5.3% during September to 1.075M and exceeded expectations for a gain to 1.040M. Sales in August were revised down moderately.
New home sales during the first nine months of this year are down 15.6% from the first nine months of 2005 and in September were 21.4% below the monthly peak during July 2005.
Sales rose m/m only in the West (-13.6% y/y) and in the South (-7.9% y/y). In the Northeast sales reversed nearly all of the prior month&#39;s jump (-6.6% y/y) and in the Midwest sales also fell hard (-36.6% y/y.
The number of new homes for sale edged fell for the second month (+14.4% y/y). The year to year breakdown by region is as follows: Northeast, 11.1%; West, 17.8%; South, 18.2%; Midwest, -1.0%.

<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/@E9/@E904/@E904.HTM">U.S. New Homes</a></th>
<th scope="col">September</th>
<th scope="col">August</th>
<th scope="col">Y/Y</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Total Sales (AR, 000&#39;s)</td>
<td>1,075</td>
<td>1,021</td>
<td>-14.2%</td>
<td>1,280</td>
<td>1,201</td>
<td>1,091</td>
</tr>
<tr>
<td class="firstcol">Median Price (NSA)</td>
<td>$217,100</td>
<td>$239,300</td>
<td>-9.7%</td>
<td>$234,208</td>
<td>$217,817</td>
<td>$191,383</td>
</tr>
</tbody>
</table>
Initial Claims for Unemployment Insurance Reversed Decline 
by <a href="/comment/Moeller.html">Tom Moeller</a> October 26, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061026a.jpg" width="353">
Initial claims for unemployment insurance last week rose 8,000 and reversed the little revised 9,000 worker decline during the prior period. At 308,000 claims remained low but up slightly from the lowest levels near 280,000 reached this past January. Consensus expectations had been for 309,000 claims during the latest week.
During the last ten years there has been a (negative) 78% correlation between the level of initial claims and the m/m change in nonfarm payroll employment.
The four-week moving average of initial claims fell to 305,250 (-13.6% y/y).
Continuing claims for unemployment insurance rose 3,000 after a downwardly revised 18,000 increase the prior week.
The insured rate of unemployment was steady at 1.9% where it has been since February.
How Labor Market Policies Shape Immigrants&#146; Opportunities from the Federal Reserve Bank of Dallas is available <a href="http://dallasfed.org/research/eclett/2006/el0607.html"> here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/WEEKLY/@W5/@W507/@W507.HTM">Unemployment Insurance (000s)</a></th>
<th scope="col">10/21/06</th>
<th scope="col">10/14/06</th>
<th scope="col">Y/Y</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Initial Claims</td>
<td>308</td>
<td>300</td>
<td>-3.4%</td>
<td>332</td>
<td>343</td>
<td>403</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Continuing Claims</td>
<td>--</td>
<td>2,449</td>
<td>-12.3%</td>
<td>2,662</td>
<td>2,924</td>
<td>3,532</td>
</tr>
</tbody>
</table>
Help-Wanted Advertising: Stable & Low 
by <a href="/comment/Moeller.html">Tom Moeller</a> October 26, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061026e.jpg" width="353">
The Conference Board reported that its Index of Help-Wanted Advertising held at 30 in September after having dropped the prior month to a new forty five year low.
During the last ten years there has been a 57% correlation between the level of help-wanted advertising and the three month change in non-farm payrolls.
The proportion of labor markets with rising want-ad volume ticked up to 33% from the one year low of 25% in August.
The Conference Board surveys help-wanted advertising volume in 51 major newspapers across the country every month.
The latest help wanted report from the Conference Board is available <a href="http://www.conference-board.org/economics/helpwanted.cfm">here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/CBDB/@C3/@C3.HTM">Conference Board</a></th>
<th scope="col">September</th>
<th scope="col">August</th>
<th scope="col">September &#39;05</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">National Help Wanted Index</td>
<td>30</td>
<td>30</td>
<td>39</td>
</tr>
</tbody>
</table>
Building Permits Down Sharply in 8 of 9 Census Divisions; Only Oil Patch Shows Gain 
by <a href="/comment/Stone.html">Carol Stone</a> October 26, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061026f.jpg" width="353">
It&#39;s almost unanimous. Housing is slumping in almost every region of the country. The Census Bureau reported building permit data today for September and the year-to-date for regions, divisions, states and metro areas as well as counties and individual &quot;permit-issuing places&quot;, i.e., towns. These data include the number of units, the number of separate buildings and their aggregate value. Haver maintains these in the PERMITY and other PERMIT databases, which are part of our REGIONAL offerings.
As we know, total building permits for the nation have fallen in every month since January; September&#39;s were off 5.2% from August (seasonally adjusted) and 31% from a year ago (not seasonally adjusted). Single-family housing permits were down 5.1% from August and 35.6% from September 2005.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061026g.jpg" width="353">
The Regional permit data for single-family houses show a year-to-date decline of 13.9% from the comparable period of 2005. Every &quot;division&quot; of the country except &quot;West South Central&quot; has participated in this contraction. The biggest declines in single-family units have been in the Pacific states and the East North Central, both down about 22%. In value terms, the total dollar value of building permits in the Pacific states is down 18.9% and in the East North Central division, 17.8%. The Pacific states include California, Washington, Oregon, Alaska and Hawaii. The East North Central group includes Illinois, Indiana, Michigan, Ohio and Wisconsin.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061026h.jpg" width="353">
The West South Central division comprises Arkansas, Louisiana, Oklahoma and Texas. This area is benefiting from the surge in energy prices and is also the subject of much rebuilding effort after last year&#39;s hurricanes. This latter effect is not yet fully evident, though; permits in New Orleans are still very low, but they have rebounded in Gulfport-Biloxi, Mississippi and Lafayette, Louisiana. In Texas, the energy factor is a notable stimulus: there are major gains in the Midland-Odessa areas in the West Texas oil fields and also in Houston, Dallas and Waco. Even so, in the West South Central division as a whole, the momentum is flagging. In the East South Central States, which include Mississippi plus Alabama, Kentucky and Tennessee, the number of permits is down slightly and their value is up. For all Census divisions, the value of permits is not as weak as the number, indicating persisting increases in the value per unit. We did not examine the month-by-month data to see if this is ongoing or if it has petered out as the year has worn on for the weakening housing market and as other home price measures show outright declines. Indeed, the year-on-year price declines in national data for new and existing home sales set in just in the last couple of months, so the year-to-date could still be up from last year. This isn&#39;t likely to last much longer, though. 

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/HOUSING.HTM">Building Permits, Single-Family Houses</a><a href="http://www.haverselect.com/dlx/HOUSING.HTM">, by Division</a></th>
<th scope="col">Type</th>
Year-to-Date Through September
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">2006</td>
<td>2005</td>
<td>2004</td>
<td>2003</td>
</tr>
<tr>
<td class="firstcol">New England</td>
<td>Number</td>
<td>26,518</td>
<td>32,563</td>
<td>31,764</td>
<td>28,359</td>
</tr>
<tr class="odd">
<td class="firstcol"></td>
<td>Value (Mil.$)</td>
<td>$5,239</td>
<td>$6,251</td>
<td>$5,790</td>
<td>$4,852</td>
</tr>
<tr>
<td class="firstcol">Middle Atlantic</td>
<td>Number</td>
<td>56,757</td>
<td>63,581</td>
<td>65,702</td>
<td>59,903</td>
</tr>
<tr class="odd">
<td class="firstcol"></td>
<td>Value (Mil.$)</td>
<td>$10,100</td>
<td>$10,902</td>
<td>$10,318</td>
<td>$8,820</td>
</tr>
<tr>
<td class="firstcol">East North Central</td>
<td>Number</td>
<td>117,179</td>
<td>150,249</td>
<td>149,104</td>
<td>145,138</td>
</tr>
<tr class="odd">
<td class="firstcol"></td>
<td>Value (Mil.$)</td>
<td>$21,355</td>
<td>$25,970</td>
<td>$24,768</td>
<td>$22,711</td>
</tr>
<tr>
<td class="firstcol">West North Central</td>
<td>Number</td>
<td>58,730</td>
<td>73,264</td>
<td>71,593</td>
<td>68,881</td>
</tr>
<tr class="odd">
<td class="firstcol"></td>
<td>Value (Mil.$)</td>
<td>$10,170</td>
<td>$11,923</td>
<td>$11,015</td>
<td>$10,061</td>
</tr>
<tr>
<td class="firstcol">South Atlantic</td>
<td>Number</td>
<td>345,613</td>
<td>399,893</td>
<td>357,661</td>
<td>312,148</td>
</tr>
<tr class="odd">
<td class="firstcol"></td>
<td>Value (Mil.$)</td>
<td>$59,597</td>
<td>$64,069</td>
<td>$52,141</td>
<td>$42,545</td>
</tr>
<tr>
<td class="firstcol">East South Central</td>
<td>Number</td>
<td>70,270</td>
<td>71,707</td>
<td>70,193</td>
<td>62,550</td>
</tr>
<tr class="odd">
<td class="firstcol"></td>
<td>Value (Mil.$)</td>
<td>$10,438</td>
<td>$10,113</td>
<td>$9,219</td>
<td>$7,588</td>
</tr>
<tr>
<td class="firstcol">West South Central</td>
<td>Number</td>
<td>167,220</td>
<td>161,940</td>
<td>143,032</td>
<td>133,465</td>
</tr>
<tr class="odd">
<td class="firstcol"></td>
<td>Value (Mil.$)</td>
<td>$25,323</td>
<td>$23,021</td>
<td>$19,373</td>
<td>$17,180</td>
</tr>
<tr>
<td class="firstcol">Mountain</td>
<td>Number</td>
<td>142,321</td>
<td>173,719</td>
<td>162,029</td>
<td>134,341</td>
</tr>
<tr class="odd">
<td class="firstcol"></td>
<td>Value (Mil.$)</td>
<td>$26,159</td>
<td>$29,327</td>
<td>$25,438</td>
<td>$19,450</td>
</tr>
<tr>
<td class="firstcol">Pacific</td>
<td>Number</td>
<td>137,741</td>
<td>177,339</td>
<td>168,764</td>
<td>154,026</td>
</tr>
<tr class="odd">
<td class="firstcol"></td>
<td>Value (Mil.$)</td>
<td>$29,389</td>
<td>$36,225</td>
<td>$33,374</td>
<td>$28,782</td>
</tr>
</tbody>
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Carol Stone, CBE

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061025j.jpg" width="353">
A week ago, we wrote here about further deterioration in trade accounts in Europe for August as energy costs continued to raise import values. We called this &quot;Old News&quot;, since we knew already that petroleum prices had already started to drop in September. Sure enough, in today&#39;s report of Japan&#39;s trade for September, some improvement is evident. The trade surplus rose to &yen;1.014 trillion from &yen;949 billion in September 2005. Imports were still up, rising 16.9% from a year ago to &yen;5.818 trillion. But within this total, &quot;mineral fuels&quot; had their smallest year-on-year increase, 18.2%, since July 2004. In this heavy oil importing nation, mineral fuels peaked at a 72.7% yearly surge in February 2006. <img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061025i.jpg" width="353">
News services today highlight strength in exports, especially motor vehicles, as a reason for the better trade surplus, and this is also the case. On the month, transportation equipment rose 19.9%, yielding a third successive month of 20%-plus yearly increases. A good many of the vehicle shipments head for the US, and the surplus with the US increased to &yen;913 billion in September from &yen;711 billion a year ago. <img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061025h.jpg" width="353">
One other point in Japan&#39;s favor is a renewed acceleration of exports to China. After a significant slowdown in early and mid-2005, Japan&#39;s shipments there have also seen a sustained period of year-on-year growth around 20%. These gains, while not erasing Japan&#39;s trade deficit with China, have kept it range-bound near &yen;200 billion monthly for the last five months. These developments with the US and China help emphasize that trade relations can be improved by gains in exports, not only with restraints on imports.

<table border="0" cellspacing="0" width="100%">
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/JAPAN/@J9/@J9.HTM">Japan</a><a href="http://www.haverselect.com/dlx/JAPAN/@J9/@J9.HTM">, Bil.&yen;&nbsp;</a></th>
<th scope="col">Sept 2006</th>
<th scope="col">Aug 2006</th>
<th scope="col">July 2006</th>
<th scope="col">Sept 2005</th>
Monthly Averages
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">2005</td>
<td>2004</td>
<td>2003</td>
</tr>
<tr>
<td class="firstcol">Trade Balance, NSA</td>
<td>1014</td>
<td>196</td>
<td>858</td>
<td>949</td>
<td>726</td>
<td>996</td>
<td>849</td>
</tr>
<tr class="odd">
<td class="firstcol">Trade Balance, SA</td>
<td>420</td>
<td>661</td>
<td>757</td>
<td>642</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol">Exports, SA*</td>
<td>6360</td>
<td>6435</td>
<td>6331</td>
<td>5592</td>
<td>5471</td>
<td>5097</td>
<td>4546</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; % Change*</td>
<td>3.2</td>
<td>0.2</td>
<td>1.3</td>
<td>14.2</td>
<td>7.3</td>
<td>12.1</td>
<td>4.7</td>
</tr>
<tr>
<td class="firstcol">Imports, SA*</td>
<td>5940</td>
<td>5774</td>
<td>5574</td>
<td>4951</td>
<td>4746</td>
<td>4101</td>
<td>3697</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; % Change*</td>
<td>0.6</td>
<td>4.3</td>
<td>-6.9</td>
<td>16.8</td>
<td>15.7</td>
<td>10.9</td>
<td>5.1</td>
</tr>
</tbody>
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A week ago, we wrote here about further deterioration in trade accounts in Europe for August as energy costs continued to raise import values. We called this "Old News", since we knew already that petroleum prices had already started [...]

Japan's Trade Accounts Benefit from Lower Oil Prices and Rising Exports

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061025f.jpg" width="353">
The target interest rate for Federal funds was held steady at 5.25%, where it has been since late June, at today&#39;s meeting of the Federal Open Market Committee.
Voting against the decision for the third consecutive meeting was Richmond Federal Reserve Bank President Jeffrey M. Lacker, who preferred an increase of 25 basis points in the federal funds rate target.
The discount rate also was held steady at 6.25%.
Today&#39;s decision was widely expected by analysts.
The Fed&#39;s rationale for leaving rates unchanged was that &quot;Economic growth has slowed over the course of the year, partly reflecting a cooling of the housing market. Going forward, the economy seems likely to expand at a moderate pace.&quot;<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061025g.jpg" width="353">
The need for continued vigilance was stressed by the Fed. &quot;... the Committee judges that some inflation risks remain. The extent and timing of any additional firming that may be needed to address these risks will depend on the evolution of the outlook for both inflation and economic growth, as implied by incoming information
For the complete text of the Fed&#39;s latest press release please follow this <a href="http://www.federalreserve.gov/boarddocs/press/monetary/2006/20061025/default.htm">link</a>.
Inflation Persistence in an Era of Well-Anchored Inflation Expectations from the Federal Reserve Bank of San Francisco can be found <a href="http://www.frbsf.org/publications/economics/letter/2006/el2006-27.pdf"> here</a>

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The target interest rate for Federal funds was held steady at 5.25%, where it has been since late June, at today's meeting of the Federal Open Market Committee. Voting against the decision for the third consecutive meeting was [...]

Federal Funds Rate Steady at 5.25%

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061025c.jpg" width="353">
The National Activity Index (CFNAI) from the Federal Reserve Bank of Chicago dropped to a negative 0.51 in September, the third negative monthly reading in a row. As a result, the three-month moving average of the CFNAI fell to -0.25, its first negative value in a year.
A zero value of the CFNAI indicates that the economy is expanding at its historical trend rate of growth. During the last twenty years there has been a 68% correlation between the level of the CFNAI and q/q growth in real GDP.
The CFNAI is a weighted average of 85 indicators of economic activity. The indicators reflect activity in the following categories: production and income, the labor market, personal consumption and housing, manufacturing and trade sales, and inventories &amp; orders.
The latest CFNAI report is available <a href="http://www.chicagofed.org/economic_research_and_data/files/cfnai_October2006.pdf">here</a>.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061025d.jpg" width="353">
The Federal Reserve Bank of Richmond also indicated that its October Composite Index from the manufacturing survey at -2 was at its lowest level since January. During the last ten years there has been a 38% correlation between the diffusion index level and the one month change in U.S. manufacturing industrial production. The October report can be found <a href="http://www.richmondfed.org/research/regional_conditions/manufacturing_conditions/index.cfm">here</a>.
The Richmond Fed&#39;s survey of the service sector also fell m/m but remained in positive territory. The percentage of firms reporting increasing revenues fell to 5%, the lowest percentage since July, but the percentage of employees held at a high 13%. The latest report is available<a href="http://www.richmondfed.org/research/regional_conditions/service_sector/index.cfm"> here</a>.

<table border="0" cellspacing="0" width="100%">
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<thead>
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S5/@S503/@S503.HTM">Chicago Fed</a></th>
<th scope="col">September</th>
<th scope="col">August</th>
<th scope="col">Sept. &#39;05</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">CFNAI</td>
<td>-0.51</td>
<td>-.06</td>
<td>-0.74</td>
<td>0.20</td>
<td>0.36</td>
<td>-0.15</td>
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The National Activity Index (CFNAI) from the Federal Reserve Bank of Chicago dropped to a negative 0.51 in September, the third negative monthly reading in a row. As a result, the three-month moving average of the CFNAI fell to -0.25, [...]

Negative Readings from the Chicago Fed & the Richmond Fed

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061025e.jpg" width="353">
 Total existing home sales in September fell 1.9% to 6.18M from an unrevised August level, according to the National Association of Realtors. The decline was the sixth in a row and the latest level fell short of Consensus expectations for 6.21M sales.
The data cover sales closed in the latest and previous months, and contrast to the new home sales data which tally sales at the signing of a contract.
Sales of single-family homes fell 1.6% m/m in September to 5.42M and are down 14.4% from the peak in June of 2005.
Lower prices accompanied the decline in sales as the median price of an existing single-family home fell 1.9% after a deepened 3.0% August drop. The price figures are not seasonally adjusted.
Single family home sales fell hard last month in the Northeast (-11.8% y/y) and sales in the West fell as well (-24.7% y/y). A 3.2% decline in sales in the Midwest (-14.1% y/y) was offset by a slight 0.9% (-7.9% y/y) gain down South.
The inventory of unsold existing homes fell for the second month (+35.1% y/y). The supply of unsold single family homes fell 2.6% (+33.9% y/y) and the supply of condos &amp; coops for sale slipped 1.4% m/m (+42.9% y/y).
The latest release from the National Association of Realtors is available <a href="http://www.realtor.org/research.nsf/pages/EHSPage?OpenDocument">here</a>.
A Supervisor&#39;s Perspective on Mortgage Markets and Mortgage Lending Practices, remarks by Fed Governor Susan Schmidt Bies, are available <a href="http://www.federalreserve.gov/boarddocs/speeches/2006/20060614/default.htm">here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E9/@E905/@E90501/@E90501.HTM">Existing Home Sales (000, AR)</a></th>
<th scope="col">September</th>
<th scope="col">August</th>
<th scope="col">Y/Y</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total Home Sales</td>
<td>&nbsp;6,180</td>
<td>6,300</td>
<td>-14.2%</td>
<td>7,064</td>
<td>6,722</td>
<td>6,176</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Single Family Home Sales</td>
<td>5,420</td>
<td>5,510</td>
<td>-13.8%</td>
<td>6,170</td>
<td>5,912</td>
<td>5,443</td>
</tr>
<tr class="odd">
<td class="firstcol">Single Family Median Home Price (000) </td>
<td>$219.8 </td>
<td>$224.0 </td>
<td>-2.5% </td>
<td>$217.5</td>
<td>$192.8 </td>
<td>$178.3 </td>
</tr>
</tbody>
</table>


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Total existing home sales in September fell 1.9% to 6.18M from an unrevised August level, according to the National Association of Realtors. The decline was the sixth in a row and the latest level fell short of Consensus expectations [...]

U.S. Existing Home Sales & Prices Down

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061025b.jpg" width="353">
The total number of mortgage applications ticked 0.5% higher last week following two consecutive weeks of hefty decline, according to the Mortgage Bankers Association. Due to a sharp increase at the end of last month, the average level of applications during October nevertheless is 0.3% higher than during September.
A 1.8% w/w rise in applications to refinance followed two consecutive weeks of decline. Refis in October are 4.9% higher than during September.
Moving the other way, purchase applications slipped 0.6%. That lowered the average level of purchase apps in October 3.1% below September which rose 3.2% from August.
During the last ten years there has been a 58% correlation between the y/y change in purchase applications and the change in new plus existing single family home sales. sharp increases late last month.
The effective interest rate on a conventional 30-year mortgage rose to 6.57%. The peak for 30 year financing was 7.08% late in June. The rate for 15-year financing also rose slightly to w/w to 6.29% versus 6.20% averaged last month. The peak rate was 6.75%. Interest rates on 15 and 30 year mortgages are closely correlated (&gt;90%) with the rate on 10 year Treasury securities.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061025a.jpg" width="353">
During the last ten years there has been a (negative) 79% correlation between the level of applications for purchase and the effective interest rate on a 30-year mortgage.
The Mortgage Bankers Association surveys between 20 to 35 of the top lenders in the U.S. housing industry to derive its refinance, purchase and market indexes. The weekly survey accounts for more than 40% of all applications processed each week by mortgage lenders. Visit the Mortgage Bankers Association site <a href="http://www.mbaa.org">here</a>.
The latest release from the Mortgage Bankers Association indicated that 4.4% of mortgage loans were past due during the second quarter of this year, down sharply from the 4.7% past due at the end of 2005. Foreclosure had been started, however, on an increased 4.43% of loans versus 4.36% at the 2003 low.
Do Households Benefit from Financial Deregulation and Innovation? The Case of the Mortgage Market from the Federal Reserve Bank of Boston is available <a href="http://www.bos.frb.org/economic/ppdp/2006/ppdp066.pdf"> here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYW/@S5/@S5.HTM">MBA Mortgage Applications (3/16/90=100)</a></th>
<th scope="col">10/20/06</th>
<th scope="col">10/13/06</th>
<th scope="col">Y/Y</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total Market Index</td>
<td>588.6</td>
<td>585.8</td>
<td>-13.3%</td>
<td>708.6</td>
<td>735.1</td>
<td>1,067.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Purchase</td>
<td>382.4</td>
<td>384.7</td>
<td>-18.0%</td>
<td>470.9</td>
<td>454.5</td>
<td>395.1</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Refinancing</td>
<td>1,790.4</td>
<td>1,758.2</td>
<td>-6.6%</td>
<td>2,092.3</td>
<td>2,366.8</td>
<td>4,981.8</td>
</tr>
</tbody>
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The total number of mortgage applications ticked 0.5% higher last week following two consecutive weeks of hefty decline, according to the Mortgage Bankers Association. Due to a sharp increase at the end of last month, the average [...]

Mortgage Applications Ticked Higher

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: October 2006

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New Home Prices Down, Sales Up

Surge in U.S. Durable Goods Orders All Air

Surge in U.S. Durable Goods Orders All Air

Japan's Trade Accounts Benefit from Lower Oil Prices and Rising Exports

Federal Funds Rate Steady at 5.25%

Negative Readings from the Chicago Fed & the Richmond Fed

U.S. Existing Home Sales & Prices Down

Mortgage Applications Ticked Higher