Winnie Tapasanun

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Manufacturing activity in Texas continued to improve in February, according to the Texas Manufacturing Outlook Survey conducted by the Federal Reserve Bank of Dallas. The overall measure, the general business activity index, jumped to 14.0 in February, up from 2.0 in January and 7.8 in December. The February reading was the highest since October but below 18.2 last February. A higher 22.3% of respondents reported improved business activity in February, up from 20.8% in January. A lessened 8.3% of respondents reported a worsening of business conditions, down from 18.8%. The company outlook index rebounded to 6.4 this month from 2.2 in January. Data were collected from 96 Texas manufacturers between February 15 and 23.

The production index, a key measure of state manufacturing conditions, eased to 14.5 in February from 16.6 in January, still indicating above-average output growth. The new orders index improved to 23.1 from 20.0 and the growth rate of orders index was unchanged at 12.6; both readings were significantly above average. The shipments index recovered to 23.5, a three-month high, from 8.6. The capacity utilization index slipped to 11.5 from 12.0 and the unfilled orders index dropped to 7.7 from 13.8; both readings were at their lowest levels since January 2021. The delivery times index rose to 21.4 from 17.9, suggesting slower delivery speeds.

The employment index declined to 18.4 in February from 27.7 in January, registering the lowest level since last February but still at an elevated level. Twenty-seven percent of firms reported more hiring this month while 8.6% reported net layoffs. The hours worked index fell to 19.0, the lowest level since October, from 21.3. The wages & benefits index declined to 44.0 from 49.6, still well above its average reading of 19.8, as 44.0% of respondents paid higher wages.

The index for prices received for finished goods rose to 44.6 in February, the highest level since October, from 37.1 in January. The February reading reflected a higher 50.2% of respondents reporting price rises while an increased 5.6% reported price declines. The index of prices paid for raw materials advanced to 73.4 from 62.1, near November’s record high of 83.3.

The future general business activity index increased to 20.6 in February from 16.5 in January. Other measures of future manufacturing activity showed mixed movements, still remaining in positive territory. Expected wages & benefits, production, shipments and growth rate of orders rose in February, to 74.3, 42.1, 39.2 and 27.1, respectively. In contrast, expected employment and delivery times declined to 45.2 and 3.6, respectively.

Each index is calculated by subtracting the percentage reporting a decrease from the percentage reporting an increase. When all firms report rising activity, an index will register 100. An index will register -100 when all firms report a decrease. An index will be zero when the number of firms reporting an increase equals the number reporting a decrease. Data for the Texas Manufacturing Outlook can be found in Haver's **SURVEYS** database.

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* **General business activity at a four-month high and company outlook up but at a lesser extent.**
* **Production declines slightly, still suggesting above-average output growth.**
* **New orders growth holds steady, albeit at an above-average level.**
* **Current employment at a one-year low but still at an elevated level; future employment down slightly.**
* **Price received at a four-month high and price paid at a three-month high; both near record levels.**

Texas Manufacturing Activity and Expectations Indexes Advance in February

Tom Moeller

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The Pending Home Sales Index from the National Association of Realtors fell 5.7% (-9.5% y/y) to 109.5 in January following a 2.3% December fall, revised from -3.8%. Earlier figures also were revised. It was the third consecutive monthly decline with sales down 14.5% from the August 2020 peak. The Realtors Association indicated, "With inventory at an all-time low, buyers are still having a difficult time finding a home."

Pending home sales declined in most major regions of the country. Sales in the Northeast weakened 12.1% last month (-16.7% y/y) after a 1.3% December decline. Sales in the South were off 6.3% during January (-8.7% y/y) to the lowest level in six months. January sales in the Midwest declined 5.9% both m/m and y/y. To the upside, sales in the West increased 1.5% (-9.7% y/y), the first increase in three months.

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 **SURVEYW** database.

Europe

* **Pending home sales weaken to lowest level in nine months.**
* **Sales fall in most of country.**

U.S. Pending Home Sales Decline Again in January

Sandy Batten

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Manufacturers' new orders for durable goods rose a much larger-than-expected 1.6% m/m (+16.5% y/y) in January. The Action Economics Forecast Survey was expecting a 0.6% m/m increase. The initially reported 0.9% m/m fall in December was revised up markedly to a 1.2% m/m increase. The revision to December was due mostly to a large upward revision to transportation orders with the initially reported 3.9% m/m decline revised to a 1.7% m/m increase. Excluding transportation, orders were up a more modest, but still solid, 0.7% m/m in January following an upwardly revised 0.9% m/m gain in December (initially reported as +0.4% m/m).

A 3.4% m/m (+29.4% y/y) increase in transportation orders (largely nondefense aircraft orders) led the January increase in total orders. This was the third consecutive monthly increase in transportation orders, which have risen 13.8% over this period. Orders for motor vehicles and parts slipped 0.4% m/m in January, their first monthly decline in the past four months, while orders for defense aircraft plunged 41.1% m/m on top of a 21.9% m/m decline in December. By contrast, orders for nondefense aircraft jumped up 15.6% in January, their third consecutive double-digit monthly increase. Apart from transportation orders, orders in other sectors were little changed except for a 2.3% m/m increase in machinery orders.

Durable goods shipments rose 1.2% m/m (+9.6% y/y) in January following an upwardly revised 1.3% m/m gain in December (initially reported as 0.8% m/m). In contrast to orders, transportation shipments did not play a leading role in the overall January gain. They were up only 0.3% m/m in January after a 1.6% m/m rise in December. Excluding these, other shipments rose 1.5% m/m in January on top of a 1.2% m/m increase in December. Meaningful increases were spread across major sectors. Fabricated metal products shipments rose 1.6% m/m; machinery shipments jumped up 2.7% m/m; and shipments of computers and electronic products rose 1.3% m/m as did shipments of electrical equipment and appliances.

This report now contains an advance reading on shipments of nondurable goods. They increased 1.3% m/m (13.1% y/y) following an upwardly revised 0.2% m/m increase in December (initially -0.1% m/m). Shipments in all manufacturing industries increased 1.2% m/m (10.9% y/y) in January after an upwardly revised 0.8% m/m rise in December (initially +0.3% m/m).

Also in the report are key readings on capital goods shipments and orders. The capital goods shipments figures provide a dependable reading on the course of business spending on equipment in the national accounts. Core (that is, excluding defense and aircraft) capital goods shipments increased a solid 1.9% m/m (10.9% y/y) in January on top of an upwardly revised 1.6% m/m gain in December (initially +1.3% m/m). This signals a strong beginning for business equipment spending in Q1 2022. Core capital goods orders increased 0.9% m/m (10.2% y/y) in January following an upwardly revised 0.4% m/m gain in December (initially +0.3% m/m).

Unfilled orders for durable goods rose 0.9% m/m (8.7% y/y) after an upwardly revised 0.8% m/m increase in December (initially +0.5% m/m). Unfilled orders are not calculated for nondurable goods. Manufacturing inventories increased 0.7% m/m (9.7% y/y) following an upwardly revised 0.4% m/m rise in December (initially +0.2% m/m), reflecting a 0.4% m/m rise in durable goods inventories and a 1.1% m/m jump in nondurable goods inventories.

The durable goods and nondurable goods data are available in Haver's **USECON** database. The Action Economics consensus forecast figure is in the **AS1REPNA** database.

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* **January increase led by strong nondefense aircraft orders.**
* **December decline revised up from decrease to a meaningful increase.**
* **Core capital goods shipments up 1.9% m/m, pointing to a solid beginning for Q1 equipment spending.**

U.S. Durable Goods Orders Surprise to Upside in January

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Consumer spending was surprisingly strong last month. Personal consumption expenditures surged 2.1% (11.8% y/y) during January following a 0.8% December decline, revised from -0.6%. It was the strongest since March 2021. A 1.5% rise had been expected in the Action Economics Forecast Survey. Adjusted for price inflation, spending rose 1.5% last month (5.4% y/y) after falling 1.3% in December.

Real spending on durable goods advanced 8.5% in January (2.1% y/y) after December's 6.0% decline. The rise was led by a 12.9% jump (-1.5% y/y) in real outlays on motor vehicles & parts after two months of significant decline. Real purchases of recreational goods & vehicles jumped 7.6% last month (7.4% y/y) after falling 7.0% in December. Real furniture & appliance outlays rose 6.4% (-3.7% y/y) and recovered December's shortfall. Real nondurable goods buying improved 1.9% in January (4.6% y/y) after a 2.6% December decline. Adjusted for inflation, clothing outlays rose 4.5% in January (9.1% y/y) after a 6.8% decline in December. Real food & beverage expenditures reversed December's decline with a 1.2% increase (0.8% y/y) but spending on gasoline & other energy products weakened 2.9% (+11.1% y/y). Real outlays on services ticked 0.1% higher in January (6.4% y/y), the same as they did in both of the prior two months. A 0.6% increase (1.4% y/y) in spending on housing & utilities followed a 0.1% slip in December and offset a 0.9% decline (+21.0% y/y) in real outlays on recreation services. Real spending at hotels & restaurants weakened 1.5% last month (+20.0% y/y) after holding fairly steady in December.

Pricing power continues strong. The PCE chain price index rose 0.6% in January (6.1% y/y), about the same as it did in each of the prior three months. The price index excluding food and energy rose 0.5% also as it did in the prior three months. The 5.2% y/y increase was the largest since April 1983. Durable goods prices rose 1.0% (11.6% y/y) reflecting a 2.2% increase (11.0% y/y) in home furnishings & appliance prices which followed a 1.0% December gain. Prices for recreational goods & vehicles improved 0.9% (2.4% y/y) last month after falling 0.5% in December. Motor vehicle & parts prices rose 0.4% (24.0% y/y) following four monthly gains between 1.4% and 3.0%. The nondurables goods price index improved 0.7% (7.2% y/y) after rising 0.5% in December. Clothing & footwear prices jumped 1.0% (3.8% y/y), about as they did in each of the prior three months. Gasoline & oil costs eased 0.2% (+36.3% y/y) after a 1.2% strengthening. The services price index rose 0.4% last month (4.6% y/y) after a 0.5% December gain. The cost of housing & utilities rose 0.7% (4.9% y/y) after increasing 0.4% in each of the prior two months. Restaurant & hotel prices edged 0.1% higher (6.2% y/y) after two straight 0.6% increases.

Personal income held steady (-2.1% y/y) in January after rising 0.4% in December, revised from 0.3%. A 0.5% decline had been expected. Wages & salaries increased 0.5% last month (10.2% y/y) after rising 0.7% in January but transfer receipts declined 1.3% (-31.8% y/y) after holding steady in January. Rental income eased 0.3% (+5.9% y/y) after two straight 0.7% increases. Proprietors income rose 0.4% (12.4% y/y). Disposable income increased 0.1% (-4.4% y/y) in January, after rising 0.2% in December. Adjusted for price inflation, disposable income declined 0.5% (-9.9% y/y), off for the sixth straight month.

The personal savings rate declined to 6.4% in January from 8.2% in December. It remained down from a high of 33.8% in April of 2020. The level of personal savings declined 21.6% in January and has fallen by roughly two-thirds during the last twelve months.

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

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* **Strong goods purchases follow December's weakness.**
* **Core price inflation remains steady & strong.**
* **Wage & salary growth eases slightly.**

U.S. Personal Spending Jumps but Income Stagnates in January

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The Chicago Fed National Activity Index (CFNAI) was at 0.69 in January, up from 0.07 in December (-0.15 initially) and 0.51 in November (0.44 initially), according to the Federal Reserve Bank of Chicago, pointing to a pickup in U.S. economic growth. The January 0.69 reading was the highest level since October but down from 1.24 in January 2021.

The index's three-month moving average (CFNAI-MA3), which smooths out the m/m volatility in the index, slipped to 0.42 in January from 0.46 in December. During the last 10 years, there has been 76% correlation between the change in the Chicago Fed Index and quarterly growth in real GDP.

The Production & Income index recovered to 0.29 in January, a three-month high, from -0.10 in December. The Personal Consumption & Housing index rebounded to 0.23, the highest level since March 2021, from -0.14. In contrast, the Employment, Unemployment & Hours component dipped to 0.14, the lowest level since August, from 0.19. The Sales, Orders & Inventories reading slipped to 0.03 from 0.11.

The CFNAI diffusion index, which measures the breadth of movement in the component series, was at 0.33 in January, slightly down from 0.45 in December and 0.44 in November. Fifty-seven of the 85 component series contributed positively and 28 made negative contributions to the index overall.

The CFNAI is a weighted average of 85 monthly indicators of national economic activity. It is constructed to have an average value of zero and a standard deviation of one. Since economic activity tends toward trend growth rate over time, a positive index reading corresponds to growth above trend and a negative index reading corresponds to growth below trend. The CFNAI was constructed using data available as of February 22, 2022. January data for 51 of the 85 indicators had been published at that time. For all missing data, estimates were used in constructing the index.

The index is constructed by the Federal Reserve Bank of Chicago. These figures are available in Haver's **SURVEYS** database.

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* **January CFNAI at 0.69, a three-month high, indicates a pickup in U.S. economic growth.**
* **Two of four components decline slightly, but all four show positive readings.**

Chicago Fed National Activity Index Rebounds in January

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New single-family home sales fell 4.5% m/m (-19.3% y/y) to 801,000 at an annual rate in January with upward revisions to sales in both November and December. Sales in December were revised up to 839,000 from 811,000 previously, and sales in November were revised up to 749,000 from 725,000 previously. The most recent peak in sales was 993,000 in January 2021. The Action Economics Forecast Survey expected 809,000 sales in January.

By region, sales in December fell in three of the four major regions, rising only in the West (1.2% m/m for the third consecutive monthly gain). Sales in the Northeast slumped 10.7% m/m, their third consecutive monthly decline to the lowest level since April 2020. Sales in the Midwest declined 3.7% m/m in January after an outsized 39.7% m/m jump in December. Sales in the South decreased 7.4% m/m in January, their first decline in three months.

The median price of a new home rebounded in January, rising 7.0% m/m (+13.4% y/y), reversing a 7.0% m/m decline in December. The average sales price of a new home rose 3.0% m/m (+18.7% y/y) in January to a record high $496,900. These sales price data are not seasonally adjusted.

The supply of new homes for sale rose to 6.1 months in January from 5.6 months in December. The recent low was 3.5 months reached in August, September and October of 2020. The median number of months a new home stayed on the market fell to 2.5 months, tying the record low reached in October, from 3.3 months in December. These figures date back to January 1975.

New home sales activity and prices are available in Haver's **USECON** database. The consensus expectation figure from Action Economics is available in the **AS1REPNA** database.

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* **Sales fell in Jan after two double-digit percent increases, but with upward revisions to both Nov and Dec.**
* **Sales fell in three of four major regions with only gain in the West.**
* **Median sales price rebounded after two consecutive monthly declines.**

U.S. New Home Sales Fell in January

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Economic improvement in the fourth quarter of 2021 was slightly better than measured initially. Real GDP growth in Q4'21 accelerated to 7.0% (SAAR) from 2.3% in Q3. This estimate compares to the initial estimate of 6.9% growth. It remained the strongest growth since Q3'20. During all of 2021, growth picked up to 5.7%, the fastest increase since 1984. A 7.1% GDP rise in Q4 had been expected in the Action Economics Forecast Survey.

Inventories contribution to growth was unchanged at 4.9 percentage points.

Domestic final sales growth was raised to 2.0% (5.4% y/y) from 1.9%. Business fixed investment grew 3.1% last quarter (6.6% y/y), revised from 2.0% estimated earlier. Equipment outlays rose 2.4% (6.3% y/y), revised from 0.8%. Investment in intellectual property strengthened an unrevised 10.6% (11.9% y/y) in Q4. Structures investment fell 9.4% (-2.9% y/y), revised from -11.4%.

Also adding to growth, residential investment outlays increased 1.0% (-11.7% y/y), revised from a 0.8% decline estimated earlier.

Offsetting these additions, consumer spending growth was lessened to 3.1% (7.0% y/y) from 3.3% as spending on services rose 3.9% (6.9% y/y). Recreation outlays rose 13.7% (26.9% y/y) and transportation spending surged 16.8% (29.3% y/y). These two gains were shaved. Housing & utilities spending edged 0.5% higher (1.1% y/y), revised from 0.2%. Spending on durable goods rose 2.7% (6.7% y/y) including a 4.0% decline (-3.3% y/y) in expenditures on motor vehicles and an 12.3% surge (13.4% y/y) in spending on recreational goods. These two gains were lifted. Nondurable goods spending increased 0.8% (7.9% y/y), revised from -0.1% as the decline in apparel outlays was lessened to 1.9% (+16.2% y/y) from 2.4%.

An increased 0.1 percentage point deterioration in the international trade effect compared to no effect on growth that was estimated earlier. It followed subtractions from growth in the prior five quarters. Exports grew 23.6% (5.2% y/y) compared to 24.5% estimated earlier while imports rose 17.6% (9.6% y/y), revised from 17.7%.

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The decline in government spending was lessened to 2.6% (+0.1% y/y) from 2.9%. Federal government outlays fell a slightly increased 4.5% (-1.1% y/y) owing to a 6.1% drop (-3.7% y/y) in defense spending. State & local government purchases weakened a lessened 1.4% (+0.9% y/y).

The estimate of pricing pressures was increased, and it remained strong last quarter. The GDP price index rose 7.1% (5.9% y/y), revised from 6.9%, after a 6.0% Q3 gain. A steady 6.9% rise had been expected. The rise in the residential investment price index was lifted to 12.1% (13.6% y/y) from 9.5% estimated initially. Growth in the business fixed investment price index was strengthened to 7.7% (3.4% y/y) from 7.5%. Offsetting these changes, strength in the personal consumption price index was lessened to 6.3% (5.5% y/y) from 6.5% estimated last month.

The GDP figures 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. Both databases include tables of the newly published not seasonally adjusted data. The Action Economics consensus estimates can be found in **AS1REPNA**.

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* **Inventories remain the main impulse for growth.**
* **Domestic final demand growth raised. Foreign trade effect turns negative.**
* **Price inflation strengthened.**

U.S. GDP Growth Is Revised Up Slightly in Q4'21

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**Initial unemployment insurance claims** fell to 232,000 in the week ended February 19 from a slightly upwardly revised 249,000 (initially 248,000) in the previous week. This was the fifth weekly decline in the past six weeks. The Action Economics Forecast Survey expected 234,000 claims for the latest week. The 4-week moving average of claims fell to 236,250 from 243,500 in the prior week, revised up from 243,250.

In the week ended February 12, seasonally adjusted **continued claims for regular state unemployment insurance** were 1.476 million, down from 1.588 million in the previous week (revised down from 1.593 million). The February 12 reading was the lowest level since early 1970.

Initial claims for the federal Pandemic Unemployment Assistance (PUA) program, which expired on September 6, 2021, are no longer included in this report. This program provided benefits to individuals who were not eligible for regular state unemployment insurance benefits, such as the self-employed.

**The insured unemployment rate** was unchanged at 1.1% in the week ended February12 with the 1.2% reading in the prior week revised down 0.1 percentage point. The 1.1% reading ties a record low first reached in the week ended January 1.

Continued claims for both the PUA program and for Pandemic Emergency Unemployment Compensation (a program for those unemployed who had exhausted their state benefits) are no longer included in this report as both programs have expired.

In the week ended February 5, the not seasonally adjusted **total number of continuing weeks claimed in all programs** fell 30,906 to 2.033 million.

**The state insured rates of unemployment** in regular programs vary widely. In the week ending February 5, the highest insured unemployment rates were in California (2.71%), Alaska (2.64%), New Jersey (2.52%), Minnesota (2.46%), Illinois (2.45%) and Rhode Island (2.44%). The lowest rates were in Virginia (0.20%), Alabama (0.25%), North Carolina (0.36%), Arizona (0.45%) and New Hampshire (0.47%). Other state insured rates of unemployment in regular programs include New York (2.30%), Pennsylvania (1.80%), Ohio (1.19%), Texas (0.89%) and Florida (0.49%). These state rates are not seasonally adjusted.

Data on weekly unemployment claims going back to 1967 are contained in Haver's **WEEKLY** database, and they are summarized monthly in **USECON**. Data for individual states are in **REGIONW**. The expectations figure is from the Action Economics Forecast Survey and is in the **AS1REPNA** database.

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* **Fifth weekly decline in past six weeks.**
* **Continued claims fell in week ended Feb 12 to lowest since early 1970.**
* **Insured unemployment rate tied record low.**

U.S. Unemployment Claims Continued to Fall

Cost of transporting crude oil has soared to series high

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

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

Is recent drop in sentiment signaling softer growth ahead?

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

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

AI-related outperformance of IP in Advanced Asia ex Japan

Resilient US economy pushing up Blue Chip 2026 outlook

US and China big leaders in adoption of AI models

Robust US demand for advanced technology products

China's export growth rotating away from the US

More pronounced upward revisions in countries more exposed to AI investment

Stable job openings and hiring rates point to cautious hiring

Global freight costs are on the rise while supply chain pressures are contained

Accelerating positive economic surprises in the G10 are boosting the global economy

Considerably more monetary ease expected from US and UK as Japan tightens

Tighter US immigration enforcement adversely impacting labor force

Economic policy uncertainty, while still elevated, is declining

Gradual disinflation and easier monetary policies across advanced economies

Largest October layoffs since 2003, led by technology

Subdued global shipping costs not yet pointing to supply chain problems

PMIs show still-elevated but slowing US inflation

AI boosting US investment in data centers

US productivity growth has been significantly faster than in other major economies

Consumers' short-term US inflation expectations still elevated while longer-term expectations of financial markets are steady

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Michael J. Moran

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

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

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

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

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

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

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

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

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

Payroll Employment: Another Surprise in March, The Third Consecutive

Robert Brusca

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French manufacturing industrial production was flat in February after a January rebound; output rose by 0.2% following a 0.8% decline in December.

The components of industrial production in February showed 2.6% increase in consumer durables, a 0.4% increase in consumer nondurables, flat output from capital goods, and a 0.7% month to month decline in intermediate output.

Sequentially, French output had been growing at a slow, steady pace of 0.8% at an annual rate over both 12 months and six months, but then slipped to a 6.1% contraction at an annual rate over three months. Consumer durable goods output on this span shows consistent increases, but there are no trends to clear acceleration or deceleration. Consumer nondurables trace an accelerating path of moderate means from -1.8% over 12 months, to -0.4% over six months, and then rising at a 5.5% annual rate over three months. Capital goods output is moving in the opposite direction, growing by 3.4% over 12 months, slowing to a 0.7% annual pace over six months, and then contracting at a 9.5% annual rate over three months. Intermediate goods output is falling at 0.8% pace over 12 months, but then it switches to an expansion rate of 0.8% over six months and 0.6% and over three months. There's nothing remarkable about these patterns, except there's some acceleration, some deceleration, and a lot of mulling about at low growth rates.

As a separate item, French auto production is slipping and decelerating, falling by 7.1% at an annual rate over 12 months, falling at a 7.9% pace over six months, and then plunging at a 19.3% annual rate over three months. On these same horizons, motor vehicle registrations fall by 14.7% over 12 months; the weakness pares back to an 11.2% annual rate decline over six months, and then it steps up to a 22.1% decline at an annual rate over three months. French demand for autos is not in good shape.

In the quarter to date—now two months into the first quarter—manufacturing industrial production is falling at a 0.8% annual rate. That pace is boosted by 9.4% annual rate gain in consumer durables output but restrained by just a 0.2% annual rate increase in consumer nondurable goods. Capital goods output is falling at a 1.9% annual rate, while intermediate goods output is falling at a 1% annual rate. Also in the quarter to date, automobile production is plunging at a 24.3% annual rate, while on the demand side, motor vehicle registrations are falling at a 15% annual rate.

French manufacturing data are somewhat confusing. The chart shows that the industrial production trend has been showing consistent increases over 12 months, but it has recently been pulling back relatively sharply. On the other hand, the manufacturing PMI for France has been consistently negative going back to mid-2022 and only in early 2026 has the manufacturing PMI been posting some values above the 50% mark, indicating that output was starting to actually expand. In March, the PMI reading for manufacturing has slipped back by the thinnest margin below the 50% mark.

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Of course, events in the Middle East make everything more speculative, with the war effectively closing the Strait of Hormuz and no certainty about how or when that is going to be sorted out. In the meantime, the potential threat of ongoing oil price pressures has put both the ECB and the Bank of England in a position to be more wary with policy, and they warned markets about the potential for rate hikes as soon as their next meetings are engaged. That also raises questions about the outlook for growth. But we continue to track and chronicle trends in the data. It's also quite clear that we could have events that will play out that could completely undermine these trends before they get a chance to run to conclusion. It's an important time to be wary and watch all developments—a lot is in play.

France

French IP Waffles

Kathleen Stephansen, CBE

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Global Manufacturing PMIs Stall—Will It Get Worse?

Andrew Cates

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

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

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

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

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

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

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