Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080801e.jpg" width="353">
The Institute for Supply Management &#39;s Composite Index of Manufacturing Sector Activity fell very slightly month-to-month during July to a break-even 50 from 50.2 in June. Still, the index is up from the monthly lows near 48 this past winter. Consensus expectations had been for more of a decline to 49.1 in July.
Despite the very recent improvement, the index&#39;s average level so far this year of 49.4 was its lowest since early-2003.
During the last twenty years there has been a 64% correlation between the level of the Composite Index and the three-month growth in factory sector industrial production.
It is appropriate to correlate the ISM index level with factory sector growth because the ISM index is a diffusion index. It measures growth by using all of the positive changes in activity added to one half of the zero change in activity measures.
The employment index improved markedly last month to a level of 51.9. That was the first reading above the break-even level of 50 since October. During the last twenty years there has been a 67% correlation between the level of the ISM employment index and the three-month growth in factory sector employment.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080801f.jpg" width="353">
The new orders index, however, offset that rise with a decline to 45.0 which was its lowest level since the recession of 2001. The new export orders sub-series declined sharply to 54.0 which was its lowest reading since last December. During the last ten years there has been a 53% correlation between the index and the q/q change in real exports of goods in the GDP accounts.
The production index rose modestly to 52.9 but the inventories series fell sharply to 45.0.
Prices paid backed off a bit to a still high index level of 88.5. During the last twenty years there has been a 79% correlation between the price index and the three-month change in the PPI for intermediate goods.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S2/@S201/@S201.HTM">ISM Mfg</a></th>
<th scope="col">July</th>
<th scope="col">June</th>
<th scope="col">July &#39;07</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
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</thead>
<tbody>
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<td class="firstcol">Composite Index</td>
<td>50.0</td>
<td>50.2</td>
<td>52.3</td>
<td>51.1</td>
<td>53.1</td>
<td>54.4</td>
</tr>
<tr>
<td class="firstcol">&nbsp; New Orders Index</td>
<td>45.0</td>
<td>49.6</td>
<td>56.9</td>
<td>54.3</td>
<td>55.4</td>
<td>57.4</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Employment Index</td>
<td>51.9</td>
<td>43.7</td>
<td>50.3</td>
<td>50.5</td>
<td>51.7</td>
<td>53.6</td>
</tr>
<tr>
<td class="firstcol">Prices Paid Index (NSA)</td>
<td>88.5</td>
<td>91.5</td>
<td>65.0</td>
<td>64.6</td>
<td>65.0</td>
<td>66.4</td>
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The Institute for Supply Management 's Composite Index of Manufacturing Sector Activity fell very slightly month-to-month during July to a break-even 50 from 50.2 in June. Still, the index is up from the monthly lows near 48 this past [...]

ISM Index Roughly About Stable M/M But Still Up From Recent Lows

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080801a.jpg" width="353">
Nonfarm payrolls fell 51,000 last month after a revised decline of 51,000 during June, according to the Bureau of Labor Statistics. The latest decline was less than expectations for a 75,000 drop but payrolls have declined in each month of this year. The total drop so far in 2008 amounts to 463,000 jobs and during the last three months payrolls fell at a 0.4% annual rate. That compared to a rate of decline in excess of 2.0% by the end of the last recession.
Weakness in the latest jobs report reflects the effect of recent floods in the Midwest region of the country.
Factory sector jobs fell 35,000, the same as during June, and at a 2.7% rate over the last three months. That was improved from the fastest rate of decline (-4.2%) this cycle and it was slower than during the 2001 recession employment when jobs dropped at a 10% rate.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080801b.jpg" width="353">
Construction sector employment dropped 22,000 last month, half the June decline, and at a 5.9% rate during the last three months.
Hiring in the service sector fell 5,000 and rose at a rate of just 0.1% in the last three months. That negligible rate of increase has been stable since March and compares to a 1.6% rise last year.
Government sector jobs continued to rise, last month by 25,000, after firmer gains in May and June. They&#39;ve increased at a 2.2% rate during the last three months. Federal government hiring rose at a 0.7% rate during the last three months while state as well as local government hiring rose at a 2.2% and a 2.4% rate, respectively.
Private service sector jobs continued to weaken as indicated by a 76,000 decline last month which followed a 94,000 June drop. It was the eighth consecutive monthly decline and the three-month rate of job loss was -0.9% during that period. Retail sector job loss continued at a 1.2% rate during the last three months, though that was eased from the 3.0% rate this past April. Motor vehicle &amp; parts dealers jobs fell at a 4.7% rate. Jobs in the information sector fell 13,000 last month and at a 3.2% rate during the last three. Professional &amp; business services sector have fallen at a 2.5%.
These declines have been offset by 7.5% three-month growth in the number of jobs in education and by 2.6% growth health care jobs. The number of finance sector jobs were unchanged last month but they&#39;re down at a 0.8% rate during the last three. Temporary help services jobs, often a leading indicator of employment growth, fell 29,000 last month and at a 14.8% rate during the last three. Real estate sector jobs have been falling at a 0.7% annual rate during the last three months which is an improvement from the 3% to 4% rates of job loss late last year and early this year. <img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080801c.jpg" width="353">
The one month diffusion index, which measures the breadth of job gain or loss (50 is the break-even level), dropped to a new low for this cycle and stood at 41.2%. The three- month index also reached a new low of 40.0%. The three-month figure for the factory sector was weaker at 32.1%.
The Bureau of Labor Statistics household sector survey indicated that the unemployment rate rose to 5.7% in July versus expectations for a 5.6% rate. That was the highest level since January of 2004 as employment fell another 72,000 (-0.2% y/y) after the 155,000 June decline. The level of the unemployed rose 285,000 (23.1% y/y) after a 12,000 rise during June.
The labor force reversed the June decline and rose 213,000 (0.9% y/y) last month. The labor force participation rate was stable m/m at 66.1%, 66.0% during all of last year and 66.2% in 2006. The participation rate amongst adult men was 75.9%, the same as averaged last year, and amongst adult women it was 60.8% versus 60.6% averaged during 2007.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080801d.jpg" width="353">
The average duration of unemployment slipped m/m to 17.1 weeks but that was still up from 16.9% weeks averaged during the last two years.
Average hourly earnings increased 0.3%, the same as during the prior two months, but three-month growth rose slightly to 3.9% after 4.0% growth during 2006 and 2007. Factory sector earnings rose 1.8% during the last three months, the weakest rate of gain since last summer, while private service sector earnings rose at a 0.5% rate.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EB/@EB01/@EB01.HTM">Employment: 000s</a></th>
<th scope="col">July</th>
<th scope="col">June</th>
<th scope="col">May</th>
<th scope="col">Y/Y</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
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<td class="firstcol">Payroll Employment</td>
<td>-51</td>
<td>-51</td>
<td>-47</td>
<td>-0.0%</td>
<td>1.1%</td>
<td>1.8%</td>
<td>1.7%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Previous</td>
<td>--</td>
<td>-62</td>
<td>-62</td>
<td>--</td>
<td>1.3%</td>
<td>1.9%</td>
<td>1.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Manufacturing</td>
<td>-35</td>
<td>-35</td>
<td>-21</td>
<td>-2.8%</td>
<td>-1.9%</td>
<td>-0.5%</td>
<td>-0.6%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Construction</td>
<td>-22</td>
<td>-49</td>
<td>-38</td>
<td>-6.0%</td>
<td>-1.0%</td>
<td>4.9%</td>
<td>5.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">Average Weekly Hours</td>
<td>33.6</td>
<td>33.7</td>
<td>33.7</td>
<td>33.8 (July &#39;07)</td>
<td>33.8</td>
<td>33.9</td>
<td>33.8</td>
</tr>
<tr>
<td class="firstcol">Average Hourly Earnings</td>
<td>0.3%</td>
<td>0.3%</td>
<td>0.3%</td>
<td>3.4%</td>
<td>4.0%</td>
<td>3.9%</td>
<td>2.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">Unemployment Rate</td>
<td>5.7%</td>
<td>5.5%</td>
<td>5.5%</td>
<td>4.7% (July &#39;07)</td>
<td>4.6%</td>
<td>4.6%</td>
<td>5.1%</td>
</tr>
</tbody>
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Nonfarm payrolls fell 51,000 last month after a revised decline of 51,000 during June, according to the Bureau of Labor Statistics. The latest decline was less than expectations for a 75,000 drop but payrolls have declined in each [...]

U.S. Payrolls Down, Jobless Rate Up

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<div align="left"><img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080731j.jpg" width="353">
The index of help-wanted advertising, reported by the Conference Board, ticked up last month to 18 from 17 in May. Both levels were, however, still at or near the record lows for the two series.
During the last ten years there has been a 57% correlation between the level of help-wanted advertising and the three-month change in non-farm payrolls.</div>
Each region of the country held steady with the May level except the West South Central and the West North Central where the indexes rose slightly.
The Conference Board surveys help-wanted print advertising volume in 51 major newspapers across the country every month. The latest help wanted report from the Conference Board is available <a href="http://www.conference-board.org/economics/helpwanted.cfm">here</a>.
In 2006, the Conference Board introduced its Help Wanted Online Data Series and the latest release can be found in this <a href="http://www.conference-board.org/pdf_free/HWOnLine3183_PR.pdf">link</a>.
Economic Projections and Rules of Thumb for Monetary Policy from the Federal Reserve Bank of St. Louis can be found <a href="http://research.stlouisfed.org/publications/review/08/07/Orphanides.pdf"> here</a>.<div align="left"></div>

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/CBDB/@C3/@C3.HTM">Conference Board</a></th>
<th scope="col">June</th>
<th scope="col">May</th>
<th scope="col">June 2007</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
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<td class="firstcol">National Help Wanted Index</td>
<td>18</td>
<td>17</td>
<td>26</td>
<td>26</td>
<td>33</td>
<td>39</td>
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The index of help-wanted advertising, reported by the Conference Board, ticked up last month to 18 from 17 in May. Both levels were, however, still at or near the record lows for the two series. During the last ten years there has [...]

U.S. Help-Wanted Advertising Ticked Up

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080731h.jpg" width="353">
The Chicago Purchasing Manager&#39;s Association reported that its July business barometer improved again. The figure of 50.8, versus 49.6 in June, was the first reading above the break-even level of 50 since this past January. Consensus expectations had been for an unchanged reading of 49.0.
During the last ten years there has been a 67% correlation between the business barometer and the three-month change in US factory sector industrial production. There has been an 85% correlation between the Chicago figure and the national ISM index (due for release tomorrow) and that is the highest correlation of all the regional series with the national ISM index.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080731i.jpg" width="353">
Most of the components of the overall index improved in July. By far the largest came from the inventory series which rose sharply. The employment index, however, slipped after sharp improvement in June.
The production and new orders components inched up m/m and remained above the recent lows.
The prices paid index surged to its highest level since early 1980. During the last ten years there has been a 48% correlation between the price index and the three-month change in the finished goods PPI.
House Prices and the Stance of Monetary Policy from the Federal Reserve Bank of St. Louis is available <a href="http://research.stlouisfed.org/publications/review/08/07/Jarocinski.pdf"> here</a>.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S2/@S203/@S203.htm">Chicago PMI</a></th>
<th scope="col">&nbsp;July</th>
<th scope="col">&nbsp; June</th>
<th scope="col">July &#39;07</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
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</thead>
<tbody>
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<td class="firstcol">Chicago PMI Business Barometer Index</td>
<td>50.8</td>
<td>49.6</td>
<td>53.2</td>
<td>54.4</td>
<td>56.8</td>
<td>60.4</td>
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The Chicago Purchasing Manager's Association reported that its July business barometer improved again. The figure of 50.8, versus 49.6 in June, was the first reading above the break-even level of 50 since this past January. Consensus [...]

Chicago Purchasing Managers' Barometer Improved Again, Prices Surged

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080731f.jpg" width="353">
Initial claims for unemployment insurance surged last week to 448,000 from 404,000 during the prior week. The latest level was the highest in five years but it may have been upwardly biased by summer workers. The weekly level surpassed Consensus expectations for 390,000 claims.
As a result of the latest jump in initial claims, the four-week moving average increased to 393,000 (27.4% y/y). During June claims averaged 391,000.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080731g.jpg" width="353">
A claims level below 400,000 typically has been associated with growth in nonfarm payrolls. During the last ten years there has been a (negative) 76% correlation between the level of initial claims and the m/m change in nonfarm payroll employment. Over the longer period of time, the level of claims for jobless insurance has not trended higher with the size of the labor force due to a higher proportion of self-employed workers who are not eligible for benefits.
Continuing claims for unemployment insurance during the latest week jumped 185,000 after declines during the prior two weeks. The four-week moving average of continuing claims rose and reached the highest level since early 2004.
Continuing claims provide some indication of workers&#39; ability to find employment and they lag the initial claims figures by one week.
The insured rate of unemployment rose to 2.5% from 2.3%. The latest was the highest level since early 2004. 

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/WEEKLY/@W5/@W507/@W507.HTM">Unemployment Insurance (000s)</a>&nbsp;</th>
<th scope="col">07/26/08</th>
<th scope="col">07/19/08</th>
<th scope="col">Y/Y</th>
<th scope="col">2007</th>
<th scope="col">2006&nbsp;</th>
<th scope="col">2005</th>
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</thead>
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<td class="firstcol">Initial Claims</td>
<td>&nbsp;448</td>
<td>404</td>
<td>43.1%</td>
<td>322</td>
<td>313</td>
<td>331</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>--</td>
<td>3,282</td>
<td>29.1%</td>
<td>2,552</td>
<td>2,459</td>
<td>2,662</td>
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Initial claims for unemployment insurance surged last week to 448,000 from 404,000 during the prior week. The latest level was the highest in five years but it may have been upwardly biased by summer workers. The weekly level [...]

U.S. Initial Claims for Jobless Insurance Surged Again

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080731d.jpg" width="353">
The employment cost index for private industry workers increased by 0.6% last quarter and that was the weakest rate of gain since 1Q 2006. It fell short of Consensus expectations for a 0.7% rise. The rise held roughly steady the y/y growth in compensation at 3.0% which was steady with the gains of the last three years.
During the last twenty years there has been a 54% correlation between the growth in employee compensation and the rise in the PCE price index. That level of correlation goes neither up or down, when either series is led or lagged the other. This suggests a self reinforcing effect between the two series.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080731e.jpg" width="353">
Wage and salary growth dipped slightly to 0.7% versus 0.8% increases during the prior four quarters. Wages account for roughly 70% of the compensation index. Wages in the services industries grew a steady 0.7% (3.1% y/y) while wages in the goods producing industries grew 0.6% (3.1% y/y) after the 1.0% pop during 1Q.
The rise in benefit costs slowed further to 0.5%. Year-to-year, the 2.6% rise in benefit costs in the service producing industries was roughly steady with the prior two years but down sharply from 4-6% growth back to 2000. In the goods producing sector benefits rose 0.3% (2.2% y/y).
Health benefit costs rose a somewhat reduced 4.6% y/y.
The Fed&#39;s announcement of steps to enhance the effectiveness of its existing liquidity facilities can be found <a href="http://www.federalreserve.gov/newsevents/press/monetary/20080730a.htm"> here</a>.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EB/@EB08/@EB08.HTM">ECI - Private Industry Workers</a></th>
<th scope="col">2Q &#39;08</th>
<th scope="col">1Q &#39;08</th>
<th scope="col">4Q &#39;07</th>
<th scope="col">2Q Y/Y</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
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<td class="firstcol">Compensation</td>
<td>0.6%</td>
<td>0.8%</td>
<td>0.9%</td>
<td>3.0%</td>
<td>3.1%</td>
<td>2.9%</td>
<td>3.1%</td>
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<tr>
<td class="firstcol">&nbsp; Wages &amp; Salaries</td>
<td>0.7%</td>
<td>0.8%</td>
<td>0.8%</td>
<td>3.1%</td>
<td>3.4%</td>
<td>2.9%</td>
<td>2.5%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Benefit Costs</td>
<td>0.5%</td>
<td>0.6%</td>
<td>0.8%</td>
<td>2.6%</td>
<td>2.4%</td>
<td>2.9%</td>
<td>4.6%</td>
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</tbody>
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The employment cost index for private industry workers increased by 0.6% last quarter and that was the weakest rate of gain since 1Q 2006. It fell short of Consensus expectations for a 0.7% rise. The rise held roughly steady the y/y [...]

U.S. Employment Cost Index Increase Eased in 2Q

Robert Brusca

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080731c.jpg" align="left" border="0" height="265" width="353">
The EMU HICP did slow from its m/m pace of last month but the
headline is still moving higher. The 12-mo to 6-mo to 3-mo growth rates
how that the speed of the rise is accelerating. German price trends are
up-to-date and they show the same steady accelerating as for the EMU
headline. Italy also with inflation updated for July shows the pace
steady at just above 4% across theses same horizons.

We have no details to look at yet in the HICP. But as of last
month goods prices (oil and food) were carrying trends higher whiles
services prices remained subdued. At a 2.2% over three months services
sector inflation actually stepped down in the last three months
compared to 6-mos and 12-mos.

Through June month Core inflation was relatively well behaved
at 1.3% over three months for all of EMU but still an unruly 2.5%
Yr/Yr. German core inflation through June reached only 1.8% Yr/Yr and
shorter time spans show it has been decelerating. Italian and Spanish
Core inflation rates are above 2% for 12 months but in each case
inflation has fallen over shorter horizons. For Italy core 3-Mo
inflation is running at a pace below 2%; for Spain it is a slightly
excessive 2.2%.

The news that the ECB says it watches the most closely is the
worst (headline inflation). But the core shows some progress even if
its 12-mo growth rate remains something to give the ECB pause.


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="8" scope="col">Trends in
EMU HICP; Flash Index </th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td colspan="3">% mo/mo</td>
<td colspan="4">% saar</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>Jul-08</td>
<td>Jun-08</td>
<td>May-08</td>
<td>3-Mo</td>
<td>6-Mo</td>
<td>12-Mo</td>
<td>Yr Ago</td>
</tr>
<tr>
<td class="firstcol">EMU-13</td>
<td>0.2%</td>
<td>0.5%</td>
<td>0.6%</td>
<td>5.1%</td>
<td>4.0%</td>
<td>4.1%</td>
<td>1.8%</td>
</tr>
<tr>
<td class="firstcol">Core</td>
<td>#N/A</td>
<td>0.2%</td>
<td>0.2%</td>
<td>1.3%</td>
<td>2.3%</td>
<td>2.5%</td>
<td>1.9%</td>
</tr>
<tr>
<td class="firstcol">Goods</td>
<td>#N/A</td>
<td>0.4%</td>
<td>0.8%</td>
<td>7.6%</td>
<td>6.0%</td>
<td>4.9%</td>
<td>1.5%</td>
</tr>
<tr>
<td class="firstcol">Services</td>
<td>#N/A</td>
<td>0.3%</td>
<td>0.4%</td>
<td>2.2%</td>
<td>2.5%</td>
<td>2.5%</td>
<td>2.6%</td>
</tr>
<tr>
<td class="firstcol" colspan="8">&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol" colspan="8">HICP</td>
</tr>
<tr>
<td class="firstcol">Germany</td>
<td>0.3%</td>
<td>0.5%</td>
<td>0.6%</td>
<td>5.4%</td>
<td>3.2%</td>
<td>3.5%</td>
<td>2.0%</td>
</tr>
<tr>
<td class="firstcol">France</td>
<td>#N/A</td>
<td>0.5%</td>
<td>0.5%</td>
<td>4.5%</td>
<td>4.0%</td>
<td>4.0%</td>
<td>1.3%</td>
</tr>
<tr>
<td class="firstcol">Italy</td>
<td>0.0%</td>
<td>0.6%</td>
<td>0.4%</td>
<td>4.2%</td>
<td>4.4%</td>
<td>4.1%</td>
<td>1.7%</td>
</tr>
<tr>
<td class="firstcol">Spain</td>
<td>#N/A</td>
<td>0.6%</td>
<td>0.7%</td>
<td>4.9%</td>
<td>4.5%</td>
<td>5.0%</td>
<td>2.4%</td>
</tr>
<tr class="odd">
<td colspan="8" class="firstcol">Core excl Food Energy
&amp; Alcohol</td>
</tr>
<tr>
<td class="firstcol">Germany</td>
<td>#N/A</td>
<td>0.1%</td>
<td>0.3%</td>
<td>-0.4%</td>
<td>0.8%</td>
<td>1.8%</td>
<td>2.1%</td>
</tr>
<tr>
<td class="firstcol">France</td>
<td>#N/A</td>
<td>#N/A</td>
<td>0.1%</td>
<td>#N/A</td>
<td>#N/A</td>
<td>#N/A</td>
<td>1.4%</td>
</tr>
<tr>
<td class="firstcol">Italy</td>
<td>#N/A</td>
<td>0.4%</td>
<td>0.2%</td>
<td>1.9%</td>
<td>3.1%</td>
<td>3.0%</td>
<td>1.9%</td>
</tr>
<tr>
<td class="firstcol">Spain</td>
<td>#N/A</td>
<td>0.3%</td>
<td>0.3%</td>
<td>2.2%</td>
<td>2.6%</td>
<td>3.4%</td>
<td>2.5%</td>
</tr>
<tr>
<td colspan="4" class="firstcol">Blue shaded
area data trail by one
month</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
</tbody>
</table>
</body></html>

The EMU HICP did slow from its m/m pace of last month but the headline is still moving higher. The 12-mo to 6-mo to 3-mo growth rates how that the speed of the rise is accelerating. German price trends are up-to-date and they show the [...]

HICP Continues to Shoot the Moon

US production rebounded in Q2, but demand continued to slow

US leader, Germany trailer for real GDP growth over past 3 years

Negative US inflation surprises leading G10 down

Deflation continues in China

Incoming data surprising on downside in US; positive surprises elsewhere

FOMC expects more inflation and less growth than in March

With escalation of Israel/Iran conflict, geopolitical risk has recently surged while US trade policy uncertainty has ebbed

Renewed supply chain pressures point to a rebound in global inflation ahead

Apart from Japan, Blue Chip forecasters look for further significant monetary policy easing

Apart from the US, productivity is moribund

Financial market concerns ebb even though policy uncertainty continues to soar

US tariff revenues nearly doubled in April

Even with expected tariff-induced increases in inflation, BCFF forecasters look for a more aggressive round of monetary easing

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?

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Nonfarm payrolls increased 73,000 during July after rising 14,000 in June, revised from 147,000, and 19,000 in May, revised from 144,000. Expectations had been for a 102,000 rise in the Action Economics Forecast Survey. The three-month average change in payrolls of 35,000 compared to 64,000 in June. The Bureau of Labor Statistics indicates that monthly revisions result from additional reports received from businesses and government agencies since the last published estimates.

Average hourly earnings rose an expected 0.3% during July after unrevised gains of 0.2% and 0.4% in June & May. Earnings growth of 3.9% y/y is little changed over twelve months, but has been trending lower from its 5.9% high in March 2022.

The unemployment rate, measured in the household survey, edged up m/m to an expected 4.2% from 4.1% and compared to 4.2% in the previous three months. It reached a low of 3.4% in April 2023. The unemployment rate, including employees working part-time for economic reasons plus all marginally-attached workers, rose to 7.9% last month from 7.7% In June. It was 6.6% in April 2023.

In the **establishment survey**, private-sector employment in July rose 83,000, factory sector jobs declined 11,000, off for the third straight month. Construction sector employment increased 2,000, after rising 3,000 in June. The number of mining & logging industry jobs declined 4,000 after falling in both of the prior two months. 

Private service sector employment increased 96,000 July after improving 16,000 in June. Increases varied greatly amongst service sector categories. Private education & health sector employment rose 79,000 last month, following a 52,000 increase in June. The number of trade, transportation & utilities jobs gained 11,000, following a 22,000 decline and financial activities employment improved 15,000 after a 2,000 drop, while leisure & hospitality employment rose just 5,000 after a 4,000 gain. The number of professional & business services jobs fell 14,000, down for the third straight month.  Information sector employment fell 2,000, after holding steady in June.

Government sector payrolls declined 10,000 last month and revered June’s 11,000 rise. Federal government employment weakened 12,000 and has fallen for six straight months. Local government employment eased 3,000 after rising 10,000 in June while state government payrolls rose 5,000 after increasing 10,000.

Private-sector average hourly earnings rose 0.3% (3.9% y/y) in July. Earnings in the goods-producing sector edged up 0.1% (3.6% y/y). In construction, earnings rose 0.2% (3.7% y/y) following a 0.4% rise, but factory sector earnings eased 0.1% (+3.6% y/y). In the service sector, earnings rose 0.4% (4.0% y/y) in July after increasing 0.2% in June.

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The length of the average workweek rose to 34.3 hours in July from 34.2 hours in June. The workweek in the goods-producing sector lengthened to 39.9 hours from 39.7 hours. The construction sector average workweek rose to 39.1 hours from 38.9 while the factory sector workweek held steady at 40.1 hours. The average workweek in the private service sector edged up to 33.2 hours from 33.1 hours.

In the **household survey**, the unemployment rate increased to 4.2% in July after falling to 4.1% as employment fell 260,000 after rising 93,000 in June and the size of the labor force declined 38,000, off for the third straight month. The labor force participation rate eased to 62.2% last month from 62.3% and remained below the high of 63.3% early in 2020. The rate for teenagers declined to 35.0%, after plunging to 35.1%. For workers aged 20-24, the rate declined to 70.9%. For workers aged 25-54, the participation rate eased to 83.4%. For individuals 55 and over, the rate improved slightly to 38.1% but remained near a 20-year low of 38.0% in June.

The employment/population ratio for all workers slipped to 59.6% last month. It remained below the peak reading of 61.1% in February, 2020 just prior to the pandemic. For men, the rate fell to 64.7% in July from 64.9% and for women, the rate eased to 54.7% from 54.8% in June.

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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- Recent job growth reduced by fewer factory & government jobs.
- Earnings gain remains steady y/y.
- Jobless rate reverses June decline.

U.S. Employment Report Shows Weakness in July, While Revisions Reduce Earlier Gains; Jobless Rate Picks Up

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U.S. light vehicle sales increased 7.6% (6.0% y/y) to 16.87 million units (SAAR) in July after falling 0.3% to 15.68 million units in June. The gain followed three straight months of decline. The improvement in July vehicle sales accompanied a 1.7% y/y rise in real disposable income through June, which compared to 2.1% growth last year.

Increases in sales were broad-based last month. Light truck sales rose 7.7% (10.0% y/y) in July to 14.02 million units, after easing 0.2% to 13.02 million in June and weakening 8.7% in May to 13.04 million. Purchases of domestically-made light trucks improved 7.1% (12.0% y/y) to 10.79 million units, after falling 1.0% in June to 10.07 million. Sales of imported light trucks rose 9.8% (3.8% y/y) to 3.24 million units, following a 3.9% rise in June.

Trucks’ record 83.1% share of the light vehicle market last month compared to 83.0% in June and 80.1% in July of last year. The share averaged 80.3% during all of 2024 versus 53.3% ten years earlier.

Auto sales rose 6.4% last month, down 9.8% y/y, to 2.84 million units (SAAR) following a 0.4% June decline. Purchases of domestically-produced cars rebounded 10.1% (-6.4% y/y) last month to 2.18 million units, after declining 2.5% in June. Sales of imported autos fell 2.9% (-20.5% y/y) to 0.66 million units, after a 4.6% June gain.

Imports' 23.1% share of the U.S. light vehicle market edged down from 23.2% in June. These compare to a May 2023 low of 22.9% and a high of 26.3% in November of 2023. Imports' share of the passenger car market fell to 23.2% last month and compared to 26.4% in July of last year. It reached a high of 38.7% in September 2021. Imports' share of the light truck market rose to 23.1% last month after rising to 22.7% in June.

U.S. vehicle sales figures can be found in Haver's **USECON** database. Additional detail by manufacturer is in the **INDUSTRY** database.

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- Both light truck and auto sales recover.
- Domestic and imports each increase.
- Imports' market share steadies.

U.S. Light Vehicle Sales Rebound in July

Winnie Tapasanun

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The ISM U.S. manufacturing PMI fell to 48.0 in July from 49.0 in June and 48.5 in May, according to the Institute for Supply Management. The July manufacturing PMI, below the 50 expansion-contraction dividing line, indicated that the U.S. manufacturing sector contracted for the fifth consecutive month and to the lowest level since October 2024. The July reading, while slightly higher than a low of 46.9 in October and 47.0 in July of last year, was below its recent high of 50.9 in January and a peak of 63.8 in March 2021. A reading of 49.5 for July had been expected in the Action Economics Forecast Survey.

The production index rose to 51.4 in July after rising to 50.3 in June, suggesting production expanded for the second successive month and to the highest level since January; it was up from its most recent low of 44.0 in April but slightly below a high of 53.7 in March 2024. Twenty percent (NSA) of respondents reported higher production in July while 19.2% reported lower.

The new orders index increased to 47.1 in July after falling to 46.4 in June, indicating new orders contracted for the sixth straight month but at a slightly less severe pace. The Index, while below its recent high of 55.1 in January, was up from a low of 42.7 in January 2023. Nearly nineteen percent (NSA) of respondents reported higher new orders in July while 25.9% reported declines. The inventories index, however, fell to 48.9 in July after rising to 49.2 in June, showing inventories contracted for the third consecutive month. The index was down from its recent high of 53.4 in March and a high of 56.5 in July 2022. Meanwhile, the supplier deliveries index fell to 49.3 in July from 54.2 in June, indicating faster delivery performance following seven straight months in slower territory. An 8.7% (NSA) of respondents reported slower delivery speeds in July while an increased 10.2% reported faster speeds.

On the labor front, the employment index fell to 43.4 in July after falling to 45.0 in June, indicating employment contracted for the sixth straight month and to the lowest level since June 2020. The index was down from its recent high of 50.3 in January and a high of 56.5 in March 2022. A 12.6% (NSA) of respondents reported higher employment in July while an increased 25.0% reported less hiring.

On the pricing front, the prices paid index declined to 64.8 (NSA) in July after rising to 69.7 in June, indicating raw materials prices rose for the 10th straight month but at the slowest rising rate since February. The July index remained well above a low of 39.4 in December 2022 but meaningfully below a high of 87.1 in March 2022 and a peak of 92.1 in June 2021. A decreased 35.4% (NSA) of respondents reported higher prices in July while 5.8% reported price declines.

In other ISM series not included in the composite index, the new export orders index slipped to 46.1 in July after increasing to 46.3 in June, indicating new export orders contracted for the fifth straight month. It was down from its recent high of 52.4 in January and a high of 57.1 in February 2022. The imports index edged up to 47.6 in July after rising to 47.4 in June, remaining at a contraction level for the fourth consecutive month; it was down from its recent high of 52.6 in February and a high of 55.4 in February 2022. The order backlog index increased to 46.8 (NSA) in July after declining to 44.3 in June, indicating falling backlog levels since October 2022. It was up from a low of 37.5 in May 2023 but down from a peak of 70.6 in May 2021.

The ISM figures are based on responses from over 400 purchasing and supply executives from 18 industries, which are weighted according to each industry’s contribution to GDP. These data are diffusion indexes where a reading above 50 indicates expansion; below 50 indicates contraction. The ISM Manufacturing PMI is a composite index based on the diffusion indexes of five of the indexes (seasonally adjusted) with equal weights: New Orders, Production, Employment, Supplier Deliveries, and Inventories. The figures from the Institute for Supply Management can be found in Haver’s **USECON** database; further detail is found in the **SURVEYS** database. The expectations number is available in Haver’s **AS1REPNA** database.

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- 48.0 in July vs. 49.0 in June; the fifth consecutive month of contraction.
- Production (51.4) expands to a six-month high.
- New orders (47.1) contract for the sixth successive month.
- Employment (43.4) contracts to the lowest level since June ’20.
- Prices Index (64.8) indicates prices rise for the 10th straight month; exports & imports contracting.

U.S. ISM Manufacturing PMI Contracts in July to a Nine-Month Low

Michael J. Moran

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Total construction activity fell 0.4 percent in June, continuing a soft trend that began in the middle of last year. After peaking in May 2024, total outlays have declined 3.6%. The retreat was modest at first, but the softness began to intensify last fall. Activity has now declined in nine of the past ten months, with the drop over this span totaling 3.1%. The private sector accounts for nearly all of the softness, with both residential and nonresidential contributing; public construction has continued to advance, although gains in recent months have been modest.

Private residential construction fell 0.7% in June, marking the 12th decline in the past 13 months and leaving activity 7.3% below the peak in May 2024. Hints of softness in private residential construction first appeared in mid-2023, when multi-family construction first stalled and then moved notably downward throughout 2024. Following the swoon in 2024, multi-family activity has stabilized in recent months.

However, single family building has taken the lead in pulling activity lower, declining for four consecutive months with pronounced retreats in the past three (average of -1.8%). Prospects for single-family construction do not seem bright, as the ups and downs in single-family housing starts have left little net growth in the past year; the past four months have been especially soft.

Improvements to existing structures contributed to weakness with sharp declines early in the year, but this area has posted small gains in the past three months. Home improvements (i.e. additions and renovations) should not be ignored in assessing residential construction, as they typically represent 35 to 40 percent of private activity.

Private nonresidential construction fell 0.3 percent in June, reinforcing the downward drift that has been in place since the start of 2024. This sector has posted 11 declines in the past 18 months. While activity grew in several months over this span, most of the increases were minuscule. The net effect of the ups and downs was a drop of 6.6% (annual rate of 4.4%). Total nonresidential activity has several components, and some have advanced in the past year or so, but none has posted an impressive performance. Two areas, lodging (hotel, motels, resorts) and commercial (retail and wholesale), have been notably soft.

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The public sector has started to sputter after two years of strong activity. Building was vigorous in 2023, growing 21.8% (December to December), and activity advanced an additional 2.4% in 2024. Growth so far this year has been modest on balance. Most months have registered gains, but they offset declines in the closing months of last year by only a small margin. Activity in June was 0.1% above the reading in October (the high point in 2024). Both state and Local governments and the federal sector have posted similar performances: robust in 2023, moderate in 2024, and hesitating this year.

The construction figures can be found in Haver's **USECON** database. The expectations figure is from the Action Economics Forecast Survey in **AS1REPNA**.

- Private building, both residential and nonresidential, drifting lower.
- Public construction hesitating after two strong years.

U.S. Construction: Sluggish in June

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Manufacturing PMIs in the S&P framework were mixed in July. However, the median reading edged slightly higher rising to 48.6 in July from 48.5 in June. But both of these are significantly weaker than the 49.1 reading in May. Manufacturing continues to post PMI readings that are below 50 indicating sector contraction on a fairly broad basis in July among the 17 reporting countries in the table plus the euro area. Only India and Vietnam reported PMI readings above 50 indicating sector expansion in July. In June, three of these jurisdictions showed readings above 50; in May, only three had readings above 50 as well. It remains a difficult time for manufacturing globally.

The readings for the manufacturing PMIs also show slippage in the medians from 12-months to six-months to three-months. The 12-month median is 49.2, the six-month median at 48.8, and the three-month median at 48.7. The bottom line is that most manufacturing sectors show contraction, and the contractions are generally getting slightly worse.

However, on an individual basis over three months about two-thirds of the reporters showed an improvement. Over six months just under 40% showed improvement and over a year about 44% of them showed improvement compared to the year before. Only the three-month versus six-month comparison shows a majority of reporters indicating better performance in July.

The ranked or queue standings metrics that place these individual readings for July in their queue of data over the last 4 ½ years, show standings above 50% which put the individual readings above their medians for this period. And only six of these eighteen reporting jurisdictions sported readings above 50%. Those were for the euro area, Germany, France, and India. India has a rating well above 50% at its 96th percentile; Malaysia has a reading above 50% and Vietnam has a reading well above 50% at its 74th percentile.

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The global economy has been put through the ringer with shocks from a war in Ukraine, stepped up military action in the Middle East, threats in the Straits of Hormuz, and an aggressive tariff policy from the United States, affecting global trade- a significant factor for manufacturing. These events have wrong-footed manufacturing globally. During this period, the inflation threat has dissipated; however, in most countries, inflation still slightly overshoots its target where central banks have such targets.

The U.S. has a particularly large number of policy changes afoot. Its manufacturing sector is still struggling. And recent employment data there indicate what appears to be a broader slowdown in the economy. Job growth in the U.S. has slowed and U.S. trends now show consumer spending slowing along with weaker and downwardly revised job growth. Put together, these are signals to watch closely.

Economy in Brief: 2008

Jump to:

ISM Index Roughly About Stable M/M But Still Up From Recent Lows

U.S. Payrolls Down, Jobless Rate Up

U.S. Payrolls Down, Jobless Rate Up

U.S. Help-Wanted Advertising Ticked Up

Chicago Purchasing Managers' Barometer Improved Again, Prices Surged

U.S. Initial Claims for Jobless Insurance Surged Again

U.S. Employment Cost Index Increase Eased in 2Q

HICP Continues to Shoot the Moon