Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060921f.jpg" width="353">
The Philadelphia Federal Reserve Bank&#39;s September Index of General Business Conditions in the manufacturing sector was negative for the first month since April 2003. The figure fell to -0.4 from an unrevised, very firm 18.5 in August. Consensus expectations had been for a slight decline to 14.8.
During the last ten years there has been a 65% correlation between the level of the Philadelphia Fed Business Conditions Index and three month growth in factory sector industrial production. There has been a 49% correlation with q/q growth in real GDP.
With the exceptions of inventories and employment, each of the sub indexes turned negative in September. The employment index, in fact, rose back into the middle of its range of the last year. During the last ten years there has been a 75% correlation between the employment index and the three month growth in factory payrolls.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060921g.jpg" width="353">
The business conditions index reflects a separate survey question, not the sub indexes.
The prices paid index dropped further m/m to the lowest level since April. During the last ten years there has been a 76% correlation between the prices paid index and the three month growth in the intermediate goods PPI. There has been an 85% correlation with the change in core intermediate goods prices.
The separate index of expected business conditions in six months also was negative for the first month since January 2001, though expectations for orders, shipments and employment remained positive.
The latest Business Outlook survey from the Philadelphia Federal Reserve Bank can be found <a href="http://www.phil.frb.org/files/bos/bos0906.html">here</a>.

<table border="0" cellspacing="0" width="100%">
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<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S5/@S504/@S504.HTM">Philadelphia Fed Business Outlook</a></th>
<th scope="col">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">General Activity Index</td>
<td>-0.4</td>
<td>18.5</td>
<td>7.0</td>
<td>12.4</td>
<td>28.0</td>
<td>10.5</td>
</tr>
<tr>
<td class="firstcol">Prices Paid Index</td>
<td>38.1</td>
<td>45.3</td>
<td>50.6</td>
<td>43.5</td>
<td>51.2</td>
<td>16.8</td>
</tr>
</tbody>
</table>
</body>
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The Philadelphia Federal Reserve Bank's September Index of General Business Conditions in the manufacturing sector was negative for the first month since April 2003. The figure fell to -0.4 from an unrevised, very firm 18.5 in August. [...]

Philadelphia Fed Index Negative

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060921e.jpg" width="353">
The August National Activity Index (CFNAI) from the Federal Reserve Bank of Chicago at -0.18 was negative for the third month in the last four and that was enough to pull the three-month moving average of the CFNAI fell to 0.05, its lowest level in over a year.
A zero value of the CFNAI indicates that the economy is expanding at its historical trend rate of growth and 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_September2006.pdf">here</a>.

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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">August</th>
<th scope="col">July</th>
<th scope="col">August &#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>-0.18</td>
<td>-0.07</td>
<td>0.13</td>
<td>0.20</td>
<td>0.35</td>
<td>-0.15</td>
</tr>
</tbody>
</table>
</body>
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The August National Activity Index (CFNAI) from the Federal Reserve Bank of Chicago at -0.18 was negative for the third month in the last four and that was enough to pull the three-month moving average of the CFNAI fell to 0.05, its [...]

Chicago Fed Nat'l Activity Index Negative Again

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060921d.jpg" width="353">
In August, the number of mass layoff events rose for the third consecutive month. The 6.0% m/m increase pulled the y/y comparison positive for the first time since December.
During the last ten years there has been a (negative) 85% correlation between the three month average level of layoff announcements and the y/y change in payroll employment.
The number of persons affected last month by mass layoffs surged 11.4% m/m but were up just 0.3% y/y. The number of persons affected by mass layoffs during the first eight months of this year fell 12.6% from the first eight months of 2005.
Increased layoffs in manufacturing (21.2% y/y) and information (-35.0% y/y) dominated the increase in claimants for unemployment insurance last month. Declines elsewhere were widespread.
The Mass Layoff Statistics (MLS) program collects reports on mass layoff actions that result in workers being separated from their jobs. Monthly mass layoff numbers are from establishments which have at least 50 initial claims for unemployment insurance (UI) filed against them during a 5-week period.

<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/WEEKLY/@W5/@W507/@W507.HTM">Mass Layoffs</a></th>
<th scope="col">August</th>
<th scope="col">July</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">All US Industries (# Events, SA)</td>
<td>1,193</td>
<td>1,125</td>
<td>4.2%</td>
<td>15,699</td>
<td>15,926</td>
<td>19,220</td>
</tr>
<tr>
<td class="firstcol">Total (# Persons, SA)</td>
<td>127,944</td>
<td>114,895</td>
<td>0.3%</td>
<td>1,722,452</td>
<td>1,591,081</td>
<td>1,946,548</td>
</tr>
</tbody>
</table>
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In August, the number of mass layoff events rose for the third consecutive month. The 6.0% m/m increase pulled the y/y comparison positive for the first time since December. During the last ten years there has been a (negative) 85% [...]

Mass Layoffs Up

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060921b.jpg" width="353">
The composite index of leading economic indicators fell 0.2% in August for the second month. It was the fifth m/m decline in the index reported by the Conference Board this year and matched Consensus expectations.
During the last ten years there has been a 59% correlation between the y/y change in the leading indicators and the lagged change in real GDP.
The breadth of one month gain amongst the 10 components of the leading index fell to 30%, the lowest level since May but the percentage of components that rose over a six month span improved marginally to 50%.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060921c.jpg" width="353">
The method of calculating the contribution to the leading index from the spread between 10 year Treasury securities and the Fed funds rate has been revised. A negative contribution will now occur only when the spread inverts rather than when declining as in the past. More details can be found <a href="http://www.conference-board.org/pdf_free/economics/bci/lei0705.pdf">here</a>.
The leading index is based on eight previously reported economic data series. Two series, orders for consumer goods and orders for capital goods, are estimated.
The coincident indicators increased 0.1% after an unrevised 0.2% July gain. During the last six months all of the coincident series rose but in August the one month percentage increasing slipped to 75%. Over the last ten years there has been a 91% correlation between the y/y change in the coincident indicators and real GDP growth.
The lagging indicators rose 0.3% as C&amp;I loans rose. Nevertheless, the ratio of coincident to lagging indicators which is a measure of actual economic performance versus excess fell.
Visit the Conference Board&#39;s <a href="http://www.conference-board.org">site</a> for coverage of leading indicator series from around the world.
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/BCI/BCI.HTM">Business Cycle Indicators</a></th>
<th scope="col">August</th>
<th scope="col">July</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">Leading</td>
<td>-0.2%</td>
<td>-0.2%</td>
<td>0.4%</td>
<td>2.3%</td>
<td>7.4%</td>
<td>5.0%</td>
</tr>
<tr>
<td class="firstcol">Coincident</td>
<td>0.1%</td>
<td>0.2%</td>
<td>3.2%</td>
<td>2.2%</td>
<td>2.5%</td>
<td>0.4%</td>
</tr>
<tr class="odd">
<td class="firstcol">Lagging</td>
<td>0.3%</td>
<td>-0.2%</td>
<td>2.6%</td>
<td>3.5%</td>
<td>0.0%</td>
<td>-0.0%</td>
</tr>
</tbody>
</table>
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The composite index of leading economic indicators fell 0.2% in August for the second month. It was the fifth m/m decline in the index reported by the Conference Board this year and matched Consensus expectations. During the last ten [...]

Leading Economic Indicators Fell

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060921a.jpg" width="353">
Initial claims for unemployment insurance rose 7,000 last week to 318,000 reversing two weeks of moderate decline. Consensus expectations had been for 310,000 claims. Last year, claims surged in the aftermath of Hurricane Katrina.
The latest figure covers the survey period for September nonfarm payrolls and filings rose 4,000 (1.3%) from the August period.
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 was unchanged at 315,000 (-15.0% y/y).
Continuing claims for unemployment insurance fell 29,000 after a 9,000 increase the prior week that was half the rise initially reported.
The insured rate of unemployment was steady at 1.9% where it has been since February.
Would an Inflation Target Help Anchor U.S. Inflation Expectations? from the Federal Reserve Bank of San Francisco can be found <a href="http://www.frbsf.org/publications/economics/letter/2006/el2006-20.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/WEEKLY/@W5/@W507/@W507.HTM">Unemployment Insurance (000s)</a></th>
<th scope="col">9/16/06</th>
<th scope="col">9/09/06</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>318</td>
<td>311</td>
<td>-24.5%</td>
<td>332</td>
<td>343</td>
<td>403</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Continuing Claims</td>
<td>--</td>
<td>2,461</td>
<td>-6.9%</td>
<td>2,662</td>
<td>2,924</td>
<td>3,532</td>
</tr>
</tbody>
</table>
</body>
</html>

Initial claims for unemployment insurance rose 7,000 last week to 318,000 reversing two weeks of moderate decline. Consensus expectations had been for 310,000 claims. Last year, claims surged in the aftermath of Hurricane Katrina. The [...]

Initial Jobless Insurance Claims Rose More Than Expected

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060921a.jpg" width="353">
Initial claims for unemployment insurance rose 7,000 last week to 318,000 reversing two weeks of moderate decline. Consensus expectations had been for 310,000 claims. Last year, claims surged in the aftermath of Hurricane Katrina.
The latest figure covers the survey period for September nonfarm payrolls and filings rose 4,000 (1.3%) from the August period.
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 was unchanged at 315,000 (-15.0% y/y).
Continuing claims for unemployment insurance fell 29,000 after a 9,000 increase the prior week that was half the rise initially reported.
The insured rate of unemployment was steady at 1.9% where it has been since February.
Would an Inflation Target Help Anchor U.S. Inflation Expectations? from the Federal Reserve Bank of San Francisco can be found <a href="http://www.frbsf.org/publications/economics/letter/2006/el2006-20.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/WEEKLY/@W5/@W507/@W507.HTM">Unemployment Insurance (000s)</a></th>
<th scope="col">9/16/06</th>
<th scope="col">9/09/06</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>318</td>
<td>311</td>
<td>-24.5%</td>
<td>332</td>
<td>343</td>
<td>403</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Continuing Claims</td>
<td>--</td>
<td>2,461</td>
<td>-6.9%</td>
<td>2,662</td>
<td>2,924</td>
<td>3,532</td>
</tr>
</tbody>
</table>
Leading Economic Indicators Fell 
by <a href="/comment/Moeller.html">Tom Moeller</a> September 21, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060921b.jpg" width="353">
The composite index of leading economic indicators fell 0.2% in August for the second month. It was the fifth m/m decline in the index reported by the Conference Board this year and matched Consensus expectations.
During the last ten years there has been a 59% correlation between the y/y change in the leading indicators and the lagged change in real GDP.
The breadth of one month gain amongst the 10 components of the leading index fell to 30%, the lowest level since May but the percentage of components that rose over a six month span improved marginally to 50%.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060921c.jpg" width="353">
The method of calculating the contribution to the leading index from the spread between 10 year Treasury securities and the Fed funds rate has been revised. A negative contribution will now occur only when the spread inverts rather than when declining as in the past. More details can be found <a href="http://www.conference-board.org/pdf_free/economics/bci/lei0705.pdf">here</a>.
The leading index is based on eight previously reported economic data series. Two series, orders for consumer goods and orders for capital goods, are estimated.
The coincident indicators increased 0.1% after an unrevised 0.2% July gain. During the last six months all of the coincident series rose but in August the one month percentage increasing slipped to 75%. Over the last ten years there has been a 91% correlation between the y/y change in the coincident indicators and real GDP growth.
The lagging indicators rose 0.3% as C&amp;I loans rose. Nevertheless, the ratio of coincident to lagging indicators which is a measure of actual economic performance versus excess fell.
Visit the Conference Board&#39;s <a href="http://www.conference-board.org">site</a> for coverage of leading indicator series from around the world.
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/BCI/BCI.HTM">Business Cycle Indicators</a></th>
<th scope="col">August</th>
<th scope="col">July</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">Leading</td>
<td>-0.2%</td>
<td>-0.2%</td>
<td>0.4%</td>
<td>2.3%</td>
<td>7.4%</td>
<td>5.0%</td>
</tr>
<tr>
<td class="firstcol">Coincident</td>
<td>0.1%</td>
<td>0.2%</td>
<td>3.2%</td>
<td>2.2%</td>
<td>2.5%</td>
<td>0.4%</td>
</tr>
<tr class="odd">
<td class="firstcol">Lagging</td>
<td>0.3%</td>
<td>-0.2%</td>
<td>2.6%</td>
<td>3.5%</td>
<td>0.0%</td>
<td>-0.0%</td>
</tr>
</tbody>
</table>
Mass Layoffs Up 
by <a href="/comment/Moeller.html">Tom Moeller</a> September 21, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060921d.jpg" width="353">
In August, the number of mass layoff events rose for the third consecutive month. The 6.0% m/m increase pulled the y/y comparison positive for the first time since December.
During the last ten years there has been a (negative) 85% correlation between the three month average level of layoff announcements and the y/y change in payroll employment.
The number of persons affected last month by mass layoffs surged 11.4% m/m but were up just 0.3% y/y. The number of persons affected by mass layoffs during the first eight months of this year fell 12.6% from the first eight months of 2005.
Increased layoffs in manufacturing (21.2% y/y) and information (-35.0% y/y) dominated the increase in claimants for unemployment insurance last month. Declines elsewhere were widespread.
The Mass Layoff Statistics (MLS) program collects reports on mass layoff actions that result in workers being separated from their jobs. Monthly mass layoff numbers are from establishments which have at least 50 initial claims for unemployment insurance (UI) filed against them during a 5-week period.

<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">Mass Layoffs</a></th>
<th scope="col">August</th>
<th scope="col">July</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">All US Industries (# Events, SA)</td>
<td>1,193</td>
<td>1,125</td>
<td>4.2%</td>
<td>15,699</td>
<td>15,926</td>
<td>19,220</td>
</tr>
<tr>
<td class="firstcol">Total (# Persons, SA)</td>
<td>127,944</td>
<td>114,895</td>
<td>0.3%</td>
<td>1,722,452</td>
<td>1,591,081</td>
<td>1,946,548</td>
</tr>
</tbody>
</table>
Chicago Fed Nat'l Activity Index Negative Again 
by <a href="/comment/Moeller.html">Tom Moeller</a> September 21, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060921e.jpg" width="353">
The August National Activity Index (CFNAI) from the Federal Reserve Bank of Chicago at -0.18 was negative for the third month in the last four and that was enough to pull the three-month moving average of the CFNAI fell to 0.05, its lowest level in over a year.
A zero value of the CFNAI indicates that the economy is expanding at its historical trend rate of growth and 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_September2006.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/SURVEYS/@S5/@S503/@S503.HTM">Chicago Fed</a></th>
<th scope="col">August</th>
<th scope="col">July</th>
<th scope="col">August &#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>-0.18</td>
<td>-0.07</td>
<td>0.13</td>
<td>0.20</td>
<td>0.35</td>
<td>-0.15</td>
</tr>
</tbody>
</table>
Philadelphia Fed Index Negative 
by <a href="/comment/Moeller.html">Tom Moeller</a> September 21, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060921f.jpg" width="353">
The Philadelphia Federal Reserve Bank&#39;s September Index of General Business Conditions in the manufacturing sector was negative for the first month since April 2003. The figure fell to -0.4 from an unrevised, very firm 18.5 in August. Consensus expectations had been for a slight decline to 14.8.
During the last ten years there has been a 65% correlation between the level of the Philadelphia Fed Business Conditions Index and three month growth in factory sector industrial production. There has been a 49% correlation with q/q growth in real GDP.
With the exceptions of inventories and employment, each of the sub indexes turned negative in September. The employment index, in fact, rose back into the middle of its range of the last year. During the last ten years there has been a 75% correlation between the employment index and the three month growth in factory payrolls.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060921g.jpg" width="353">
The business conditions index reflects a separate survey question, not the sub indexes.
The prices paid index dropped further m/m to the lowest level since April. During the last ten years there has been a 76% correlation between the prices paid index and the three month growth in the intermediate goods PPI. There has been an 85% correlation with the change in core intermediate goods prices.
The separate index of expected business conditions in six months also was negative for the first month since January 2001, though expectations for orders, shipments and employment remained positive.
The latest Business Outlook survey from the Philadelphia Federal Reserve Bank can be found <a href="http://www.phil.frb.org/files/bos/bos0906.html">here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S5/@S504/@S504.HTM">Philadelphia Fed Business Outlook</a></th>
<th scope="col">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">General Activity Index</td>
<td>-0.4</td>
<td>18.5</td>
<td>7.0</td>
<td>12.4</td>
<td>28.0</td>
<td>10.5</td>
</tr>
<tr>
<td class="firstcol">Prices Paid Index</td>
<td>38.1</td>
<td>45.3</td>
<td>50.6</td>
<td>43.5</td>
<td>51.2</td>
<td>16.8</td>
</tr>
</tbody>
</table>
Israel's Economy Sees Slower Growth in the Face of War in Lebanon; Lebanon's Economy Falls Dramatically 
by <a href="/comment/Stone.html">Carol Stone</a> September 21, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060921h.jpg" width="353">
The Israel&#39;s Central Statistics Bureau today reported its &quot;State of the Economy Index&quot; for August, along with its available components. When we last checked in on the Israeli economy, about six weeks ago, the war in Lebanon was still in full swing and in describing Q2 GDP, we wondered out loud what the war would do to the economy in Q3. Today&#39;s report gives a bit of an indication. The overall index is estimated to have risen 0.3% in each July and August, marginally less than June&#39;s 0.4%, but noticeably less than the 0.6%/month in each of the prior four months. So some slowdown is clearly in process.
The index has five components covering industry, domestic and foreign trade and employment in the business sector (about 70% of total employment). Only exports and imports are published yet for August, and both of these are more than keeping up with their average of the past year. Imports grew 5.2% in August compared with a 12-month average gain of 1.4% and exports were up 3.5% versus an average of 1.1%. Industrial production through July was continuing with some strength as well, with monthly increases well over 1% then and in June, compared with 0.9% monthly for the last 12 months.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060921i.jpg" width="353">
The slowing is more evident in demand and employment indicators. The employment data lag, with the latest values only covering June and a detailed industrial breakdown only through Q2. But business sector employment by this monthly indicator peaked in March and fell slightly in each of the following months. Since this information is all prior to the Lebanon war, there is no impact evident here. Further, employment had expanded with some vigor since early in 2004. So perhaps there is nothing more in the recent pattern than a pause after a strong uptrend.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060921j.jpg" width="353">
Domestic sales, however, seem to be a different story. Revenues from trade and services dropped 2.5% in June and another 2.6% in July, erasing almost all of a nice rise over the nine months beginning last September. People could well hold back purchases or at least take a cautionary stance as political tensions mount. Fortuitously for their welfare, a truce was called quickly, and this likely helps the general economy as well.
In dramatic contrast, the impact of the war showed quickly and distinctly in Lebanon. Data offerings are fairly sparse, but a quick look at imports and exports, which were reported Monday by the Bank of Lebanon, shows a clear picture of significant economic damage. The third graph here tells the whole story.

<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/EMERGEMA/@M7/@M7.HTM">Israel: SA, % Chg</a></th>
<th scope="col">Weight (%)</th>
<th scope="col">Aug 2006</th>
<th scope="col">July 2006</th>
<th scope="col">June 2006</th>
<th scope="col">Yr Ago (Mo. Avg)</th>
Yearly % Change
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">2005</td>
<td>2004</td>
<td>2003</td>
</tr>
<tr>
<td class="firstcol">Total Index</td>
<td>100</td>
<td>0.3</td>
<td>0.3</td>
<td>0.4</td>
<td>0.5</td>
<td>7.1</td>
<td>6.9</td>
<td>-0.7</td>
</tr>
<tr class="odd">
<td class="firstcol">Industrial Production</td>
<td>28</td>
<td>--</td>
<td>1.3</td>
<td>1.6</td>
<td>0.9</td>
<td>4.6</td>
<td>7.2</td>
<td>-0.3</td>
</tr>
<tr>
<td class="firstcol">Imports</td>
<td>15</td>
<td>5.2</td>
<td>2.4</td>
<td>-2.3</td>
<td>1.4</td>
<td>2.3</td>
<td>14.6</td>
<td>-4.8</td>
</tr>
<tr class="odd">
<td class="firstcol">Trade &amp; Services Revenues</td>
<td>28</td>
<td>--</td>
<td>-2.6</td>
<td>-2.5</td>
<td>0.1</td>
<td>8.1</td>
<td>8.0</td>
<td>-0.6</td>
</tr>
<tr>
<td class="firstcol">Employees in Business Sector</td>
<td>19</td>
<td>--</td>
<td>--</td>
<td>-0.3</td>
<td>0.2</td>
<td>4.7</td>
<td>2.4</td>
<td>-0.5</td>
</tr>
<tr class="odd">
<td class="firstcol">Exports</td>
<td>10</td>
<td>3.5</td>
<td>-10.2</td>
<td>9.4</td>
<td>1.1</td>
<td>7.1</td>
<td>17.4</td>
<td>4.4</td>
</tr>
</tbody>
</table>
</body>
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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/060920g.jpg" width="353">
Spain&#39;s National Institute of Statistics (INE) reported on labor costs today for Q2 2006. These costs, measured as monthly compensation per worker, picked up to a 3.5% growth rate year-on-year from 3.4% in Q1 and at or near 3.0% for the previous two calendar years. The data are in a simple format: in Haver&#39;s SPAIN database, they are available in euros and an index of 2000=100, for three sectors of the economy, industry, construction and services, and for the total and two components, earnings and &quot;other&quot;. So there are 12 numbers in each quarterly report for each the euro amount and the index level. Could such a small array be interesting? Indeed.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060920h.jpg" width="353">
In Q2, while labor costs accelerated in total, they slowed in basic industry and construction and not by small increments. The industry sector increased 3.5% following 4.5% in Q1. Construction gained 3.9% in the latest quarter, after 4.3% in Q1. But the rapidly expanding service sector had 3.8% growth in Q2, well more than the 3.2% in Q1. So labor compensation in services gained visibly even as it slowed in more traditional sectors. However, this may have been a transitory shift, as the average annual gains over the prior five years had the reverse pattern: industry and construction both had vigorous increases, 4.1% annually for industry and 4.7% for construction, with services at 3.6%. So it&#39;s hard to tell if the old-line economy is moving to a slower trend or just pausing after sizable gains in earlier periods. In fact, if anything, these data show how consistent the service sector has been, hovering all the while in a range around 3-1/2% average yearly gains.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060920i.jpg" width="353">
Another significant point in this little array of data concerns the split between wages and &quot;other&quot; labor costs. Over the period 2000-2005, earnings grew at an average annual rate of 3.3%. But other labor compensation advanced at a 5.0% pace. These costs cover the same general items referred to in the US as &quot;supplements to wages and salaries&quot; or &quot;benefits&quot;: disability and unemployment, and also in Spain compensation for tools, uniforms and transportation, and similar job-related expenses. In both countries, these also cover employers&#39; payments into the social security system. And in Spain as in the US, to continue the parallel, these &quot;other&quot; costs are growing as a portion of total compensation: in 2000, &quot;other&quot; labor costs were 24.6% of compensation in Spain and by the first half of this year, they absorbed 26.7%. For the US, comparable shares were 16.5% in 2000 and 19.3% this year.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">Spain: Monthly Labor Cost/ Worker (&#128;, NSA)</th>
<th scope="col">Q2 2006</th>
<th scope="col">Q1 2006</th>
<th scope="col">Q2 2005</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2000</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>2197</td>
<td>2114</td>
<td>2122</td>
<td>2110</td>
<td>2058</td>
<td>1992</td>
<td>1758</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Yr/Yr % Chg</td>
<td>3.5</td>
<td>3.4</td>
<td>3.4</td>
<td>2.9</td>
<td>3.0</td>
<td>4.2</td>
<td>3.7</td>
</tr>
<tr class="odd">
<td class="firstcol">Earnings</td>
<td>1624</td>
<td>1538</td>
<td>1575</td>
<td>1560</td>
<td>1521</td>
<td>1480</td>
<td>1326</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Yr/Yr % Chg</td>
<td>3.1</td>
<td>3.0</td>
<td>3.4</td>
<td>2.6</td>
<td>2.8</td>
<td>3.8</td>
<td>3.3</td>
</tr>
<tr class="odd">
<td class="firstcol">&quot;Other&quot;</td>
<td>574</td>
<td>575</td>
<td>547</td>
<td>550</td>
<td>531</td>
<td>512</td>
<td>432</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Yr/Yr % Chg</td>
<td>4.9</td>
<td>4.4</td>
<td>3.5</td>
<td>3.6</td>
<td>3.6</td>
<td>5.4</td>
<td>5.0</td>
</tr>
<tr class="odd">
<td class="firstcol">&quot;Other&quot; as % of Total</td>
<td>26.1</td>
<td>27.2</td>
<td>25.8</td>
<td>26.1</td>
<td>25.9</td>
<td>25.7</td>
<td>24.6</td>
</tr>
<tr>
<td class="firstcol">Memo: Similar US Share</td>
<td>19.3</td>
<td>19.3</td>
<td>19.4</td>
<td>19.4</td>
<td>19.1</td>
<td>19.0</td>
<td>16.5</td>
</tr>
</tbody>
</table>
</body>
</html>

Spain's National Institute of Statistics (INE) reported on labor costs today for Q2 2006. These costs, measured as monthly compensation per worker, picked up to a 3.5% growth rate year-on-year from 3.4% in Q1 and at or near 3.0% for [...]

Spain's Labor Costs Pick Up in Q2; Benefits Outstrip Wage Gains

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060920f.jpg" width="353">
The target interest rate for Federal funds was again held steady at 5.25% at today&#39;s meeting of the Federal Open Market Committee. Voting against the decision for the second time 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 indicated that &quot;The moderation in economic growth appears to be continuing, partly reflecting a cooling of the housing market.&quot;
Need for further rate increases was stressed by the Fed. &quot;The extent and timing of any additional firming that may be needed to address these (inflation) risks will depend on the evolution of the outlook for both inflation and economic growth, as implied by incoming information.&quot;<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060920e.jpg" width="353">
For the complete text of the Fed&#39;s latest press release please follow this <a href="http://www.federalreserve.gov/boarddocs/press/monetary/2006/20060920/default.htm">link</a>.
The accompanying chart plots the U.S. economy&#39;s actual rate of growth during the last two quarters versus its so called &quot;potential&quot;, i.e., growth in the labor force plus the growth in labor productivity. The economy&#39;s potential for 4% growth was exceeded slightly in the first half due to the 5.6% surge in 1Q&#39;06 growth.
Knut Wicksell: The Birth of Modern Monetary Policy from the Federal Reserve Bank of Dallas can be found <a href="http://dallasfed.org/research/ei/ei0401.pdf">here</a>.
Modern Macroeconomics in Practice: How Theory is Shaping Policy from the Federal Reserve Bank of Minneapolis is available <a href="http://www.minneapolisfed.org/research/SR/SR376.pdf">here</a>.

</body>
</html>

The target interest rate for Federal funds was again held steady at 5.25% at today's meeting of the Federal Open Market Committee. Voting against the decision for the second time was Richmond Federal Reserve Bank President Jeffrey M. [...]

Federal Funds Rate Again Held at 5.25%

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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Andrew Cates

**China-US shipping activity** 
The economic fallout from escalating US-China trade tensions is becoming increasingly visible in the data. A clear example is the chart below, which highlights a sharp drop in vessel arrivals at the ports of Los Angeles and Long Beach, along with a notable decline in ships waiting offshore. These trends point to a tangible weakening in bilateral trade flows, as the effects of tit-for-tat tariffs imposed by both countries begin to bite. Given the outsized role the US and China play in global commerce, this slowdown is likely to reverberate through global supply chains, weighing on trade volumes, dampening demand, and curbing economic growth worldwide.

250501Z1.jpg

**GDP growth in Q1**
Data this week showed that the US economy contracted, albeit modestly, in Q1 even as the euro area recorded a modest expansion—an unusual divergence. The contraction in US GDP can be largely attributed to a sharp increase in imports, as firms rushed to front-load purchases ahead of anticipated tariff hikes. In addition, domestic demand was subdued, with weaker contributions from both consumer spending and government consumption. This decoupling between the US and euro area economies is particularly striking given the current global focus on the US dollar. While the euro area has shown unexpected signs of resilience, the US downturn raises important questions about its underlying momentum, especially as trade dynamics and policy uncertainty continue to cloud the outlook.

250501Z2.jpg

**The US dollar versus yield differentials**
Chart 3 below illustrates a sharp breakdown in the correlation between the US-Germany 10-year yield differential and the EUR/USD exchange rate. Historically, the dollar has moved closely with interest rate spreads, as yield-seeking capital flowed into US assets. But since early 2025—and more acutely following the April tariff actions—the dollar has weakened markedly even as the yield spread has narrowed only modestly. This decoupling underscores a critical shift: capital markets are reacting not just to monetary policy, but to rising trade and geopolitical uncertainty. In other words, the exchange rate is now being driven as much by risk sentiment as by interest rate arbitrage.

250501Z3.jpg

**The US economy’s structural outperformance and the dollar**
A second dynamic, captured in the next chart, reveals a tight correlation between the US real effective exchange rate and the potential GDP growth differential between the US and euro area over the past 50-60 years. This raises the question: has dollar strength (until recently) merely been a reflection of US growth leadership—or are capital inflows themselves helping to sustain this growth outperformance? In effect, the tail may be wagging the dog. Global investors have long allocated capital to the US, attracted by its macroeconomic resilience, technological leadership, and deep, liquid financial markets. The danger now is that the US trade war may disrupt this equilibrium. A sharp or sustained reduction in capital inflows could undermine growth, weaken the dollar, and trigger broader financial instability. Moreover, reversing this dynamic is not straightforward—barring a credible structural resurgence in European (or Asian) growth, the global investment landscape remains tilted toward the US.

250501Z4.jpg

**US competitiveness versus Europe, China and Japan** 
The next chart below examines relative unit labour costs across major economies since 2011. The US and China have seen a broadly similar trajectory, with steady increases in relative cost structures, while the euro area has remained flat and Japan has seen dramatic improvement. This suggests that, from a cost competitiveness standpoint, the US is not uniquely disadvantaged vis-à-vis China. However, as we discuss further below, this parallel erosion of cost competitiveness is occurring at much higher nominal wage levels in the US, which blunts its ability to regain export share through tariff-related shifts alone. The trade war strategy—absent a corresponding improvement in productivity or structural reforms—risks imposing costs without delivering material competitiveness gains.

250501Z5.jpg

**Average wages in selected developed and developing economies**
This point is reinforced by the final chart, which shows estimates for average monthly wages across countries in 2024. US labour remains much more expensive than in peer or emerging economies. So even if China’s costs rise in tandem with the US, the global supply chain has ample alternatives. 'China plus one' strategies are accelerating, and the US remains structurally misaligned with low-cost production hubs. Tariffs aimed at reshoring supply chains are unlikely to deliver sustained gains unless accompanied by deep supply-side reforms, and risk further disincentivizing foreign direct investment if global firms perceive US trade policy as erratic or punitive.

250501Z6.jpg

Financial markets found a measure of calm this week, buoyed by some subtle shifts in tone from US policymakers. A softening in the administration’s rhetoric around trade tariffs coupled with a less confrontational stance toward Federal Reserve Chair Jerome Powell, helped ease tensions that had roiled markets earlier in the month. Equities rebounded modestly, and volatility indicators edged lower, reflecting cautious optimism that the worst of the policy shocks may be behind us. But beneath the surface, significant downside risks persist. New shipping data point to a pronounced slowdown in US-China trade flows (chart 1), suggesting the damage from recent tariff escalations is already rippling through global supply chains. Meanwhile, incoming data for the US revealed an unexpected contraction in the economy in Q1 and further signs of weakness in the labour market (chart 2). The US dollar, in the meantime, while long supported by superior growth and yield differentials, has begun to decouple from traditional drivers (charts 3 and 4) suggesting growing pressure on capital flows. At the same time, structural imbalances are drawing renewed scrutiny: unit labour cost comparisons show the US steadily losing competitiveness (chart 5), while nominal wage disparities remain stark versus China and other Asian economies, further complicating any effort to restore trade balance without broader reforms (chart 6). In short, while markets may be drawing temporary comfort from a pause in tariff brinkmanship, the deeper economic and financial vulnerabilities exposed this month remain unresolved—and increasingly central to the global macro narrative.

<iframe style="border-radius:12px" src="https://open.spotify.com/embed/episode/3PzXXKrkHcwtOLipohEdnB?utm_source=generator" width="100%" height="152" frameBorder="0" allowfullscreen="" allow="autoplay; clipboard-write; encrypted-media; fullscreen; picture-in-picture" loading="lazy"></iframe>

Charts of the Week: Tariff Truce, Tenuous Trust

250430N1.jpg

250430O1.jpg

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.

Economy in Brief: September 2006

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Philadelphia Fed Index Negative

Chicago Fed Nat'l Activity Index Negative Again

Mass Layoffs Up

Leading Economic Indicators Fell

Initial Jobless Insurance Claims Rose More Than Expected

Initial Jobless Insurance Claims Rose More Than Expected

Spain's Labor Costs Pick Up in Q2; Benefits Outstrip Wage Gains

Federal Funds Rate Again Held at 5.25%