Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040706a.jpg" width="353">
The Business Activity Index for the Non-manufacturing Sector, reported by the Institute for Supply Management, fell last month to 59.9 from 65.2 in May. Consensus expectations had been for little change at 64.0.
Since the series&#39; inception in 1997 there has been a 60% correlation between the Business Activity Index and the q/q change in GDP services plus construction.
The employment index added to prior gains and rose to 57.4, a record high. Higher employment was reported by 27% of firms versus 17% last year and 12% in 2002.
Since the series&#39; inception in 1997 there has been a 60% correlation between the level of the ISM non-manufacturing employment index and the m/m change in payroll employment in the service producing and construction industries.
The new orders index rose to 62.4 from 61.3 in May.
Business activity for the non-manufacturing sector is a question separate from the subgroups mentioned above. In contrast, the NAPM manufacturing sector composite index is a weighted average five components.
The seasonally adjusted prices index ticked higher to another record high of 74.6.
ISM surveys more than 370 purchasing managers in more than 62 industries including construction, law firms, hospitals, government and retailers. The non-manufacturing survey dates only to July 1997, therefore its seasonal adjustment should be viewed tentatively. 

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"> <a href="http://www.haverselect.com/dlx/USECON/@EF/@EF03/@EF03.HTM">ISM Non-manufacturing Survey</a></th>
<th scope="col">June</th>
<th scope="col">May</th>
<th scope="col">June &#39;03</th>
<th scope="col"> 2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Business Activity Index</td>
<td>59.9</td>
<td>65.2</td>
<td>59.5</td>
<td>58.1</td>
<td>55.1</td>
<td>48.9</td>
</tr>
<tr>
<td class="firstcol">Prices Index</td>
<td>74.6</td>
<td>74.4</td>
<td>52.7</td>
<td>56.7</td>
<td>53.9</td>
<td>51.5</td>
</tr>
</tbody>
</table>
Challenger Layoffs Lowest In A Year 
by <a href="/comment/Moeller.html">Tom Moeller</a> July 6, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040706b.jpg" width="353">
Challenger, Gray &amp; Christmas reported that announced job cuts in June fell 12.3% m/m to 64,343, the lowest level in a year.
The three month moving average of job cut announcements fell to its lowest level since late 2000 (-23.6% y/y).
During the last ten years there has been an 86% (inverse) correlation between the three month moving average of announced job cuts and the three month change payroll employment.
Job cut announcements differ from layoffs. Many are achieved through attrition, early retirement or just never occur.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S3/@S301/@S301.HTM"> Challenger, Gray &amp; Christmas</a></th>
<th scope="col">June</th>
<th scope="col">May</th>
<th scope="col">Y/Y</th>
<th scope="col"> 2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Announced Job Cuts</td>
<td>64,343</td>
<td>73,368</td>
<td>7.8%</td>
<td>1,236,426</td>
<td>1,431,052</td>
<td>1,956,876</td>
</tr>
</tbody>
</table>


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The Business Activity Index for the Non-manufacturing Sector, reported by the Institute for Supply Management, fell last month to 59.9 from 65.2 in May. Consensus expectations had been for little change at 64.0. Since the series' [...]

ISM Non-Manufacturing Index Down, Employment At Record High

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/040702d.jpg" width="353">
After a sharp acceleration during much of 2003, manufacturing growth around the [statistically known] world seems to be stabilizing. In the purchasing managers surveys compiled by NTC Research in London in collaboration with JPMorgan, growth eased in June to a 56.5% reading from May&#39;s 57.6% level. These data begin in 1998. The May level was a record high; the lowest was 41.6 in October 2001. In this most recent few months, the European region has had the greatest acceleration, but the US has the strongest readings, i.e., the strongest sustained growth pace.
The consolidation process is possibly fostered by high energy prices. Their impact is seen in the accompanying graph series on &quot;input prices&quot;. Last time those prices ran up, in early 2000, world manufacturing entered a marked slump. It&#39;s clearly too soon to tell what the response will be in the current episode, and with such a short data history, it&#39;s also premature to assert a hard and fast conclusion about whether another slump would follow now, on the basis of just one previous example. Various regions also behave differently, as noted in the table below. Russia&#39;s slump, for instance, had occurred in the late 1990s, and it did not participate in the 2001 recession. Japan, by contrast, was weaker than other regions during that recession, so its recent rebound looks quite optimistic. So perhaps the present manufacturing consolidation will lead, not to renewed slump, but to a more sustained expansion.

<table border="0" cellspacing="0" width="100%">
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<th scope="col" class="firstcol">%, &gt;50 = Expansion,&nbsp; &nbsp;&nbsp;&nbsp; &lt;50 = Contraction</th>
<th scope="col">June 2004</th>
<th scope="col">May 2004</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Global Overall Index</td>
<td>56.5</td>
<td>57.6</td>
</tr>
<tr>
<td class="firstcol">Japan Overall Index</td>
<td>54.3</td>
<td>56.0</td>
</tr>
<tr class="odd">
<td class="firstcol">Euro-Zone Overall Index</td>
<td>54.4</td>
<td>54.7</td>
</tr>
<tr>
<td class="firstcol">Russia Overall Index</td>
<td>54.2</td>
<td>54.1</td>
</tr>
<tr class="odd">
<td class="firstcol">US ISM Index</td>
<td>61.1</td>
<td>62.8</td>
</tr>
</tbody>
</table>
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After a sharp acceleration during much of 2003, manufacturing growth around the [statistically known] world seems to be stabilizing. In the purchasing managers surveys compiled by NTC Research in London in collaboration with JPMorgan, [...]

Global Manufacturing Growth Plateaus in June

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040702a.jpg" width="353">
Non-farm payrolls rose just 112,000 last month, half the downwardly revised May gain of 235,000. Job growth also fell short of Consensus expectations for a 240,000 rise.
Renewed decline in factory sector payrolls accounted for some of last month&#39;s weakness as they fell 11,000 for the first m/m decline in five. Prior month&#39;s gains were downwardly revised. The breadth of hiring in the factory sector fell sharply as indicated by a one-month diffusion index of 45.8% versus readings over 50% during the prior four months.
Hiring in the construction sector also cooled, showing no increase after three months of solid increase (2.9% y/y).
Private service producing payrolls increased just 127,000 (0.1% m/m, 1.6% y/y) following three months of gain between 0.2% and 0.3%. Outright m/m declines were widespread, offset by firm growth in the transportation sector. Temporary help services employment rose 12,100 (0.5% m/m, 10.3% y/y), down sharply from recent rates of gain.
The breadth of increase amongst private non-farm payrolls fell to 57.0% versus 64.6% in May. That pulled the three-month diffusion index down to 66.4% from 74.8%.
The index of aggregate hours worked (employment times hours worked) fell 0.6% following an upwardly revised 0.7% May gain. For 2Q, aggregate hours rose at a 2.0% annual rate versus 1Q which rose at a 2.3% rate from 4Q03.
Average hourly earnings rose just 0.1% following 0.3% increases in the prior two months. The slowdown reflected slower gains in service industries. Factory sector earnings rose 0.2% (2.5% y/y) following an upwardly revised no-change in May.
From the separate household survey the unemployment rate held steady at an expected 5.6%. Employment rose for the third consecutive month, up 259,000 (1.0% y/y). The labor force grew 305,000 (+0.2% y/y). The labor force participation rate ticked slightly higher to 66.0% following four months at 5.9%.

<table border="0" cellspacing="0" width="100%">
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EB/@EB01/@EB01.HTM"> Employment</a></th>
<th scope="col"> June</th>
<th scope="col">May</th>
<th scope="col">Y/Y</th>
<th scope="col"> 2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Payroll Employment</td>
<td>112,000</td>
<td>235,000</td>
<td>1.1%</td>
<td>-0.3%</td>
<td>-1.1%</td>
<td>0.0%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Manufacturing</td>
<td>-11,000</td>
<td>24,000</td>
<td>-0.9%</td>
<td>-4.8%</td>
<td>-7.2%</td>
<td>-4.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">Average Weekly Hours</td>
<td>33.6</td>
<td>33.8</td>
<td>33.7</td>
<td>33.7</td>
<td>33.8</td>
<td>34.0</td>
</tr>
<tr>
<td class="firstcol">Average Hourly Earnings</td>
<td>0.1%</td>
<td>0.3%</td>
<td>2.0%</td>
<td>2.7%</td>
<td>2.9%</td>
<td>3.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">Unemployment Rate</td>
<td>5.6%</td>
<td>5.6%</td>
<td>6.3%</td>
<td>6.0%</td>
<td>5.8%</td>
<td>4.8%</td>
</tr>
</tbody>
</table>
U.S. Light Vehicle Sales Weak Last Month 
by <a href="/comment/Moeller.html">Tom Moeller</a> July 2, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040702c.jpg" width="353">
Unit sales of light vehicles gave back all of the gain in May and fell 13.4% last month to the lowest level since December 2000. Sales of 15.44M (-6.5% y/y) compared to Consensus expectations for sales of 16.8M.
Sales of light trucks flopped 14.8% to 8.37M. Car sales fell 11.7% to 7.08M.
The weakness in truck sales pulled sales of domestic light vehicles 15.0% lower to 12.13M (-8.0% y/y). Imported vehicle sales faired somewhat better with only a 7.1% m/m decline to 3.31M (-0.1% y/y). (US sales of light trucks totaled 7.84M last year while imported truck sales totaled 1.20M.)
Imports&#39; share of the US market for new vehicles in June surged to 21.5%, the highest since 1991.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@ED/@ED09/@ED0901/@ED0901.HTM"> Light Vehicle Sales (SAAR, Mil.Units)</a></th>
<th scope="col"> June</th>
<th scope="col">May</th>
<th scope="col">Y/Y</th>
<th scope="col"> 2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>15.44</td>
<td>17.84</td>
<td>-6.5%</td>
<td>16.69</td>
<td>16.81</td>
<td>17.26</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Autos</td>
<td>7.08</td>
<td>8.01</td>
<td>-6.9%</td>
<td>7.63</td>
<td>8.07</td>
<td>8.48</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Trucks</td>
<td>8.37</td>
<td>9.82</td>
<td>-6.1%</td>
<td>9.06</td>
<td>8.74</td>
<td>8.78</td>
</tr>
</tbody>
</table>
Factory Inventory Accumulation Hitting a Stride 
by <a href="/comment/Moeller.html">Tom Moeller</a> July 2, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040702b.jpg" width="353">
Factory inventories rose 0.5% last month and the increase pulled the y/y comparison to its strongest in three years.
Factory orders slipped a less than expected 0.3% following a 1.1% drop in April. Durable goods orders fell 1.8%, revised from the advance report of a 1.6% drop.
Non-durable goods orders (which equal shipments) rose 1.5% (13.0% y/y) due to across the board strength.
Factory shipments rose 0.3%. Excluding the transportation sector shipments rose 0.4% (13.0% y/y).

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
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<th scope="col" class="firstcol"> <a href="http://www.haverselect.com/dlx/USECON/@ED/@ED01/@ED0101/@ED01016/@ED01016.HTM"> Factory Survey</a> (NAICS)</th>
<th scope="col">May</th>
<th scope="col">April</th>
<th scope="col">Y/Y</th>
<th scope="col"> 2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Inventories</td>
<td>0.5%</td>
<td>0.5%</td>
<td>1.1%</td>
<td>-1.3%</td>
<td>-1.8%</td>
<td>-6.1%</td>
</tr>
<tr>
<td class="firstcol">New Orders</td>
<td>-0.3%</td>
<td>-1.1%</td>
<td>12.6%</td>
<td>3.7%</td>
<td>-1.9%</td>
<td>-6.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">Shipments</td>
<td>0.3%</td>
<td>-0.1%</td>
<td>12.2%</td>
<td>2.6%</td>
<td>-2.0%</td>
<td>-5.4%</td>
</tr>
<tr>
<td class="firstcol">Unfilled Orders</td>
<td>0.4%</td>
<td>0.7%</td>
<td>7.7%</td>
<td>4.2%</td>
<td>-6.1%</td>
<td>-5.9%</td>
</tr>
</tbody>
</table>
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Non-farm payrolls rose just 112,000 last month, half the downwardly revised May gain of 235,000. Job growth also fell short of Consensus expectations for a 240,000 rise. Renewed decline in factory sector payrolls accounted for some of [...]

U.S. Job Growth Took A Breather In June

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040701b.jpg" width="353">
The Bank of Japan today released the TANKAN Survey for the second quarter, and once again, conditions came out better than forecast three months ago. The actual result for large manufacturing firms was, at +22, a full 10 points higher than the forecast of +12. Favorable readings were widespread across all parts of the survey, with every major sector showing improvement from March, even if just to a smaller negative reading. Most notably perhaps, &quot;small&quot; manufacturers shifted from negative to positive readings.
Among individual industries, iron and steel and machinery had substantial gains in the manufacturing sector for all three size categories of firms. There was more variation in non-manufacturing firms. Information services, business and personal services showed visible improvements at medium-size firms, but only modest gains at large companies. And the retailing industry actually deteriorated, in all size groups, weakening from the first quarter&#39;s result, missing the second quarter forecast and even dropping back into negative territory.
In the Haver databases, we present the TANKAN data two ways. Owing to the restructuring of the survey classification scheme and new sampling in March, we have segregated the recent detail data into new series in the &quot;Japan&quot; database. In summary data in the &quot;G10&quot; database, we link the all industry-all enterprise data with the history that uses the old methodology. This broad aggregate is less affected by the Bank of Japan&#39;s reorganization of the categories. By this special, linked measure, the actual result for the second quarter came in at zero, its first non-negative reading since 1997.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">Business Conditions:&nbsp; % Favorable minus % Unfavorable</th>
June 2004
March 2004
December 2003
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Actual</td>
<td>Forecast for Sept</td>
<td>Actual</td>
<td>Forecast for June</td>
<td>Actual</td>
<td>Forecast for March</td>
</tr>
<tr>
<td class="firstcol">All Firms</td>
<td>0</td>
<td>-1</td>
<td>-5</td>
<td>-6</td>
<td>-11</td>
<td>-12</td>
</tr>
<tr class="odd">
<td class="firstcol">Large Firms*</td>
<td>16</td>
<td>16</td>
<td>9</td>
<td>9</td>
<td>4</td>
<td>5</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Manufacturing</td>
<td>22</td>
<td>21</td>
<td>12</td>
<td>12</td>
<td>7</td>
<td>6</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Non-manufacturing</td>
<td>9</td>
<td>11</td>
<td>5</td>
<td>7</td>
<td>0</td>
<td>4</td>
</tr>
<tr>
<td class="firstcol">Medium-sized Firms**</td>
<td>3</td>
<td>1</td>
<td>-2</td>
<td>-2</td>
<td>-8</td>
<td>-9</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Manufacturing</td>
<td>11</td>
<td>7</td>
<td>5</td>
<td>1</td>
<td>-3</td>
<td>-4</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Non-manufacturing</td>
<td>-1</td>
<td>-3</td>
<td>-7</td>
<td>-6</td>
<td>-12</td>
<td>-11</td>
</tr>
<tr class="odd">
<td class="firstcol">Small Firms***</td>
<td>-10</td>
<td>-10</td>
<td>-13</td>
<td>-15</td>
<td>-19</td>
<td>-20</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Manufacturing</td>
<td>2</td>
<td>2</td>
<td>-3</td>
<td>-3</td>
<td>-10</td>
<td>-11</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Non-manufacturing</td>
<td>-18</td>
<td>-18</td>
<td>-20</td>
<td>-21</td>
<td>-25</td>
<td>-27</td>
</tr>
</tbody>
</table>
</body>
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The Bank of Japan today released the TANKAN Survey for the second quarter, and once again, conditions came out better than forecast three months ago. The actual result for large manufacturing firms was, at +22, a full 10 points higher [...]

Japanese Industry Improves Further in Q2

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040701a.jpg" width="353">
Initial claims for jobless insurance were about stable last week at 351,000. The prior week&#39;s level was revised up slightly. Consensus expectations had been for 344,000 claims.
The 4-week moving average of initial claims rose to 347,000 (-17.2% y/y).
Continuing claims for unemployment insurance rose 13,000 following a 61,000 increase the prior week which was revised down slightly.
The insured rate of unemployment rose slightly to 2.4% from the prior week that was revised down.
&quot;Wage and Employer Changes Over the Life Cycle&quot; from the Federal Reserve Bank of Cleveland can be found <a href="http://www.clevelandfed.org/Research/Com2004/04-15.pdf"> here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
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<th scope="col" class="firstcol"> <a href="http://www.haverselect.com/dlx/WEEKLY/@W5/@W507/@W507.HTM"> Unemployment Insurance (000s)</a></th>
<th scope="col">6/26/04</th>
<th scope="col">6/19/04</th>
<th scope="col">Y/Y</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Initial Claims</td>
<td>&nbsp;&nbsp; 351</td>
<td>350</td>
<td>-17.8%</td>
<td>403</td>
<td>404</td>
<td>406</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>&nbsp;&nbsp; --</td>
<td>2,966</td>
<td>-19.6%</td>
<td>3,533</td>
<td>3,573</td>
<td>3,023</td>
</tr>
</tbody>
</table>
ISM Factory Index Eased 
by <a href="/comment/Moeller.html">Tom Moeller</a> July 1, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040701d.jpg" width="353">
The Institute of Supply Management reported that the Purchasing Managers&#146; Composite Index (PMI) for June fell to 61.1 from 62.8 in May. The decline about matched Consensus expectations for a decline to 61.5.
During the last twenty years there has been a 71% correlation between the level of the Composite Index and the three month growth in factory sector industrial production.
Each of the component series fell m/m with the exception of inventories which broached the breakeven line of 50 for the first month since January 2000. New orders fell three points to the lowest level in nearly a year. New export orders similarly fell to the lowest level since February. Employment eased just moderately, down 2.2 points to 59.7.
The separate index of prices paid fell for the second month from an April high.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EF/@EF02/@EF02.HTM"> ISM Manufacturing Survey</a></th>
<th scope="col"> June</th>
<th scope="col">May</th>
<th scope="col">June &#39;03</th>
<th scope="col"> 2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Composite Index</td>
<td>61.1</td>
<td>62.8</td>
<td>50.4</td>
<td>53.3</td>
<td>52.4</td>
<td>43.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp; New Orders Index</td>
<td>60.0</td>
<td>62.8</td>
<td>52.9</td>
<td>58.1</td>
<td>56.6</td>
<td>46.1</td>
</tr>
<tr class="odd">
<td class="firstcol">Prices Paid Index (NSA)</td>
<td>81.0</td>
<td>86.0</td>
<td>56.5</td>
<td>59.6</td>
<td>57.6</td>
<td>42.9</td>
</tr>
</tbody>
</table>
U.S. Construction Spending Up 
by <a href="/comment/Moeller.html">Tom Moeller</a> July 1, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040701c.jpg" width="353">
The total value of construction put in place rose 0.3% in May following a little revised 1.2% surge in April. Past figures were revised, mostly due to additional gains last year in residential construction. A 0.7% rise in May had been the Consensus expectation.
Private residential building activity rose another 0.8% following a 1.2% jump in April and a 1.1% March gain. Single family building surged 1.3% (23.7% y/y) following 1.9% and 1.6% gains the prior two months.
Nonresidential building slipped 0.4% following three months of gain. Spending on health care facilities rose 0.5% (9.9% y/y) following huge gains during the prior three months.
Public construction fell 0.2% led by a second monthly decline in the power category (+36.5% y/y). Spending on highways &amp; streets (nearly one third of the value of public construction spending) edged up 0.1% (15.2% y/y).
These more detailed categories represent the Census Bureau&#146;s reclassification of construction activity into end-use groups. Finer detail is available for many of the categories; for instance, commercial construction is shown for Automotive sales and parking facilities, drugstores, building supply stores, and both commercial warehouses and mini-storage facilities. Note that start dates vary for some seasonally adjusted line items in 2000 and 2002 and that constant-dollar data are no longer computed.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E9/@E907/@E90701/@E90701.HTM"> Construction Put-in-place</a></th>
<th scope="col"> May</th>
<th scope="col">April</th>
<th scope="col">Y/Y</th>
<th scope="col"> 2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>0.3%</td>
<td>1.2%</td>
<td>9.7%</td>
<td>5.1%</td>
<td>1.5%</td>
<td>3.2%</td>
</tr>
<tr>
<td class="firstcol">Private</td>
<td>0.4%</td>
<td>1.2%</td>
<td>10.7%</td>
<td>6.0%</td>
<td>-0.2%</td>
<td>1.4%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Residential</td>
<td>0.8%</td>
<td>1.2%</td>
<td>15.3%</td>
<td>13.1%</td>
<td>8.4%</td>
<td>3.3%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Nonresidential</td>
<td>1.3%</td>
<td>0.7%</td>
<td>0.1%</td>
<td>-5.5%</td>
<td>-13.0%</td>
<td>-1.3%</td>
</tr>
<tr class="odd">
<td class="firstcol">Public</td>
<td>-0.2%</td>
<td>1.1%</td>
<td>6.6%</td>
<td>2.6%</td>
<td>7.0%</td>
<td>10.7%</td>
</tr>
</tbody>
</table>
</body>
</html>

Initial claims for jobless insurance were about stable last week at 351,000. The prior week's level was revised up slightly. Consensus expectations had been for 344,000 claims. The 4-week moving average of initial claims rose to [...]

Initial Claims Unemployment Insurance Stable

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040630c.jpg" width="353">
Consumer confidence improved somewhat in Europe in June, as shown in the monthly Euro-Zone survey. The move is not substantial, just reversing May&#39;s 2-point deterioration, but it brought the Indicator back to -14, its lowest since November 2002. This move was driven by 2-point improvements in the components for &quot;General Economic Situation&quot; over both the last 12 months and the next 12 months and in the item, &quot;Unemployment Expectations over the next 12 months&quot;.
This last item is particularly noteworthy for its close correlation with a similar series in the US consumer confidence data. As colleague Tom Moeller pointed out yesterday, a major factor in the jump in the Conference Board&#39;s confidence index for June was the decline in &quot;jobs hard to get&quot; to its lowest reading since September 2002.
It would be no surprise that within the European survey, unemployment expectations have a 99% correlation with overall confidence. But it is remarkable that overall consumer confidence in Europe has a 79% correlation with &quot;jobs hard to get&quot; in the US survey. The two total confidence series have an 87% correlation, as suggested in the accompanying graph, and the two employment series, 81%. World markets are intertwined, and the various regions&#39; populations appear to view those market developments with so much the same perspective that it can be affirmed in simple statistical analysis.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">&nbsp;</th>
<th scope="col">June 2004</th>
<th scope="col">May 2004</th>
<th scope="col">Apr 2004</th>
<th scope="col">June 2003</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Euro-Zone 12 Consumer Confidence Indicator, % Balance</td>
<td>-14</td>
<td>-16</td>
<td>-14</td>
<td>-19</td>
<td>-18</td>
<td>-11</td>
<td>-5</td>
</tr>
<tr>
<td class="firstcol">Unemployment Expectations Next 12 Months, % Balance</td>
<td>31</td>
<td>33</td>
<td>31</td>
<td>40</td>
<td>38</td>
<td>26</td>
<td>14</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol">US Conference Board Consumer Confidence, Index, 1985 =100</td>
<td>101.9</td>
<td>93.1</td>
<td>93.0</td>
<td>83.5</td>
<td>79.8</td>
<td>96.6</td>
<td>106.6</td>
</tr>
<tr class="odd">
<td class="firstcol">Jobs Hard to Get, % Replying</td>
<td>26.5</td>
<td>30.3</td>
<td>28.0</td>
<td>31.9</td>
<td>31.8</td>
<td>24.3</td>
<td>16.2</td>
</tr>
</tbody>
</table>
</body>
</html>

Consumer confidence improved somewhat in Europe in June, as shown in the monthly Euro-Zone survey. The move is not substantial, just reversing May's 2-point deterioration, but it brought the Indicator back to -14, its lowest since [...]

Interconnected Global Labor Trends Impact Consumer Confidence

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040630d.jpg" width="353">
As expected, the Federal Reserve raised the target rate for federal funds by 25 basis points to 1.25%. The discount rate also was raised to 2.25%.
The decision was unanimous.
The press release which accompanied the Fed&#39;s action indicated that &quot;The evidence accumulated over the intermeeting period indicates that output is continuing to expand at a solid pace and labor market conditions have improved. Although incoming inflation data are somewhat elevated, a portion of the increase in recent months appears to have been due to transitory factors.&quot;
The Fed statement continued to indicate that &quot;policy accommodation can be removed at a pace that is likely to be measured.&quot;
<a href="http://www.federalreserve.gov/boarddocs/press/monetary/2004/20040630/default.htm">Here</a> is the complete text of the Fed&#39;s latest press release.
&quot;The Rates They Are A-changin&#39; &quot; from the Federal Reserve Bank of Cleveland is available <a href="http://www.clevelandfed.org/Research/ET2004/0604/trends.pdf">here</a>.
&quot;Interest Rates and Monetary Policy: Conference Summary&quot; from the Federal Reserve Bank of San Francisco can be found <a href="http://www.frbsf.org/publications/economics/letter/2004/el2004-13.html">here</a>.

Mortgage Applications Slide 
by <a href="/comment/Moeller.html">Tom Moeller</a> June 30, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040630b.jpg" width="353">
The index of mortgage applications compiled by the Mortgage Bankers Association slid 4.4% (-64.8% y/y) last week. With a few days remaining to tally, applications in June are running 11.6% below the May average which fell 18.9% from April.
Purchase applications fell 4.2% (-0.7% y/y). For the month purchase applications are down 4.7% from May, the second m/m decline this year.
During the last ten years there has been a 63% correlation between the y/y change in purchase applications and the change in new plus existing home sales.
Applications to refinance mortgages fell 4.7% last week (-83.9% y/y) .
The effective interest rate on a conventional 30-Year mortgage was about unchanged at 6.47%. The effective rate on a 15-year mortgage also was roughly stable at 5.96%.
The Mortgage Bankers Association surveys between 20 to 35 of the top lenders in the U.S. housing industry to derive its refinance, purchase and market indexes. The weekly survey accounts for more than 40% of all applications processed each week by mortgage lenders. Visit the Mortgage Bankers Association site <a href="http://www.mbaa.org"> here</a>.

<table border="0" cellspacing="0" width="100%">

</table>
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYW/@S5/@S5.HTM"> MBA Mortgage Applications (3/16/90=100)</a></th>
<th scope="col">06/25/04</th>
<th scope="col">06/18/04</th>
<th scope="col"> 2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total Market Index</td>
<td>575.0</td>
<td>601.2</td>
<td>1,067.9</td>
<td>799.7</td>
<td>625.6</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Purchase</td>
<td>435.4</td>
<td>454.5</td>
<td>395.1</td>
<td>354.7</td>
<td>304.9</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Refinancing</td>
<td>1,386.9</td>
<td>1,454.6</td>
<td>4,981.8</td>
<td>3,388.0</td>
<td>2,491.0</td>
</tr>
</tbody>
</table>
Chicago Purchasing Agents' Index Backpedaled 
by <a href="/comment/Moeller.html">Tom Moeller</a> June 30, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040630a.jpg" width="353">
The Chicago Purchasing Managers Business Barometer for June gave back its gains in May &amp; April with an 11.6 point decline to 56.4. Consensus expectations had been for a more moderate decline to 64.0.
During the last ten years there has been a 73% correlation between the level of the Chicago Business Barometer and three month growth in factory sector industrial output.
The new orders index declined sharply 56.8, its lowest level since September. Production also fell sharply to 53.9, its lowest since April of last year.
The employment index fell just moderately to 53.6. During the last twenty years there has been an 81% correlation between the level of this employment index and the three month change in factory sector employment.
The index of prices paid rose even further to 84.5 and slightly surpassed the 1995 high.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EF/@EF05/@EF05.HTM"> Chicago Purchasing Managers Index, SA</a></th>
<th scope="col"> June</th>
<th scope="col">May</th>
<th scope="col">June&nbsp; &#39;03</th>
<th scope="col"> 2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Business Barometer</td>
<td>56.4</td>
<td>68.0</td>
<td>52.4</td>
<td>54.7</td>
<td>52.7</td>
<td>41.4</td>
</tr>
<tr>
<td class="firstcol">&nbsp; New Orders</td>
<td>56.8</td>
<td>74.4</td>
<td>55.6</td>
<td>58.0</td>
<td>56.2</td>
<td>42.3</td>
</tr>
<tr class="odd">
<td class="firstcol">Prices Paid</td>
<td>84.5</td>
<td>80.0</td>
<td>49.6</td>
<td>55.8</td>
<td>56.9</td>
<td>50.4</td>
</tr>
</tbody>
</table>
</body>
</html>

As expected, the Federal Reserve raised the target rate for federal funds by 25 basis points to 1.25%. The discount rate also was raised to 2.25%. The decision was unanimous. The press release which accompanied the Fed's action [...]

FOMC Raised Interest Rates; 1st Time Since May 2000

Louise Curley

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040629e.jpg" width="353">
INSEE&#39;s (Institute Nationale de la Statistiques et les Etudes Economique) composite indicator of French business confidence for June rose to April&#39;s three year high of 105 after having declined to 104 in May.
Although the overall measure of confidence has risen almost steadily since June of 2003, expectations of improving production trends for business in general and business in manufacturing in particular faltered in February, March and April of this year and have only improved in May and June. Even with the improvement, the balance of those expecting improved production trends is still negative, although only slightly so.
Expectations regarding the inflation outlook have changed significantly . Those expecting prices to decline outweighed those expecting prices to increase for much of 2003. The reverse has been true since December of last year. In June, the balance of businessmen in manufacturing expecting prices to rise over those expecting a decline was up to 23, compared with -3 in December.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">Indicators of Business Confidence and Expectations</th>
<th scope="col">Jun 04</th>
<th scope="col">May 04</th>
<th scope="col">Jun&nbsp; 03</th>
<th scope="col">M/M &nbsp;Point Chg.</th>
<th scope="col">Y/Y&nbsp; Point Chg.&nbsp;</th>
<th scope="col">2003&nbsp;</th>
<th scope="col">2002&nbsp;&nbsp;</th>
<th scope="col">&nbsp;2001&nbsp;</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Composite</td>
<td>105</td>
<td>104</td>
<td>90</td>
<td>1</td>
<td>15</td>
<td>95</td>
<td>97</td>
<td>102</td>
</tr>
<tr>
<td class="firstcol">Percent Balance</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">Total Industry</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Production Trend</td>
<td>-2</td>
<td>-5</td>
<td>-34</td>
<td>3</td>
<td>32</td>
<td>-29</td>
<td>-22</td>
<td>-23</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Price Trend</td>
<td>22</td>
<td>19</td>
<td>-17</td>
<td>3</td>
<td>39</td>
<td>-7</td>
<td>3</td>
<td>12</td>
</tr>
<tr>
<td class="firstcol">Manufacturing</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Production Trend</td>
<td>-3</td>
<td>-5</td>
<td>-35</td>
<td>2</td>
<td>38</td>
<td>-29</td>
<td>-24</td>
<td>-24</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Price Trend</td>
<td>23</td>
<td>19</td>
<td>-5</td>
<td>4</td>
<td>41</td>
<td>-8</td>
<td>2</td>
<td>11</td>
</tr>
</tbody>
</table>
</body>
</html>

INSEE's (Institute Nationale de la Statistiques et les Etudes Economique) composite indicator of French business confidence for June rose to April's three year high of 105 after having declined to 104 in May. Although the overall [...]

French Business Turns More Confident on Production Trends, but a Growing Proportion Predict Rising Prices

Job openings less than the number unemployed in July for first time since 2021

Reaccelerating goods price inflation along with sticky services inflation clouds the outlook

Falling oil prices aren't pulling down inflation expectations, pointing to a boost from increased tariffs

Equity market exuberance outpacing macroeconomic data

Apart from Japan, Blue Chip forecasters expect further sizable monetary easing

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

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The **Industrial Materials Price Index** from the Foundation for International Business and Economic Research (FIBER) declined 1.0% during the last four weeks, after weakening 1.9% in the prior four weeks. Despite these declines, prices rose 0.5% during the last twelve months. During July, factory sector production held steady but rose an improved 1.4% y/y.

**Crude Oil & Benzene** group costs continued to lead the overall price weakening as they moved 1.9% lower (-10.3% y/y) in the latest four week period. The price of West Texas Intermediate crude oil declined 1.7% to $64.27 per barrel and remained 8.9% lower y/y. It had fallen to a low of $58.50 per barrel in the second week of May. The cost of the petrol-chemical benzene, used for making plastics & synthetic fibers, weakened 6.5% (-31.7% y/y). Excluding crude oil, the industrial commodity price index weakened 0.9% (+1.1% y/y) during the last four weeks.

Lower **Miscellaneous** group prices followed with a 4.0% decline in the latest four week period, but prices remained up 1.8% y/y. Lumber prices fell 21.2% (+10.2% y/y) during the last four weeks, and tallow costs (used in the soap industry) declined 3.9% (+34.4% y/y). Moving higher, the cost of rubber rose 2.8% in four weeks, but fell 18.6% y/y.

**Metals** group prices rose 1.7% (4.1% y/y) over four weeks. Copper scrap prices rose 2.3% (9.6% y/y). Aluminum prices increased 1.3% in four weeks (9.1% y/y), and the cost of zinc moved up 3.8% in four weeks, and did the same y/y. Tin prices rose 4.8% (13.1% y/y) in four weeks. Lead prices edged up 0.7% (-2.3% y/y) but steel scrap costs fell 1.9% (-6.3% y/y) over the same period.

Prices in the **Textile** group moved 0.5% higher (1.6% y/y) during the last four weeks. Burlap costs surged 6.9% (22.2% y/y), but cotton prices fell 1.3% (-3.4% y/y).

The Foundation for International Business and Economic Research (FIBER) develops economic measurement techniques as applied to business cycles and inflation in the U.S. and other market economies. The commodity price data can be found in Haver's **DAILY**, **WEEKLY**, **USECON** and **CMDTY** databases.

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- Decline extends last month’s weakness. 
- Crude oil costs & lumber costs decline.
- Metals prices improve.

FIBER: Industrial Commodity Prices Continue to Decline in Latest Four Weeks

Tian Yong Woon

This week, we review the state of play in Southeast Asia and Australia. In Thailand, political uncertainty lingers after the removal of former Prime Minister Paetongtarn, with investors now eyeing fresh elections in the coming months. The ongoing political flux has only deepened concerns over Thailand’s persistent economic underperformance relative to regional peers (chart 1). Indonesia, too, has faced recent political turmoil, as protests over lawmakers’ housing allowances turned violent. While tensions have since eased and financial markets partially recovered (chart 2), the episode highlighted the fragility of investor confidence.

Elsewhere in Southeast Asia, some economies are pressing ahead. Malaysia has made significant strides in establishing itself as a global tech hub, supported by robust direct investment flows (chart 3). Vietnam, likewise, continues to position itself as a manufacturing and electronics powerhouse. Its strong export performance has driven growth but also drawn scrutiny, particularly as the US trade deficit with Vietnam has widened alongside rising imports (chart 4).

In the Pacific, Australia has shown encouraging signs, with Q2 GDP growth outperforming expectations on the back of stronger household consumption (chart 5). This has bolstered expectations that the RBA will pause rate cuts at its month-end meeting. Even so, close attention remains on the labour market (chart 6), potential headwinds from US tariffs, and a broader productivity challenge.

**Thailand**
Thailand continues to struggle to regain its footing, weighed down by ongoing political turmoil. Former Prime Minister Paetongtarn was removed from office by the Constitutional Court in late August, following her July 1st suspension over a leaked phone call with former Cambodian leader Hun Sen. In her place, lawmakers elected former Deputy Prime Minister Anutin as the new premier. However, as part of the deal that secured his appointment, Anutin has pledged to dissolve parliament within four months and call a general election. This political upheaval compounds Thailand’s broader economic challenges. Growth has persistently lagged behind its Southeast Asian peers (chart 1), with tourism—a key revenue source—stalled and still short of pre-pandemic levels. At a time when deeper reforms are needed to unlock the country’s full potential, Thailand instead faces prolonged political flux, leaving policy clarity and direction uncertain even as neighbours forge ahead.

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**Indonesia**
Thailand is not alone in Southeast Asia in grappling with political turmoil. Indonesia has recently faced its own unrest, as initially peaceful demonstrations against housing allowances for lawmakers turned violent after a motorbike taxi driver was fatally struck by a police vehicle during an earlier rally in Jakarta. Although protests have since subsided, the turmoil comes on the heels of policy moves that have already unsettled some investors. Concerns have centred on the fiscal strain from large-scale spending programs such as Prime Minister Prabowo’s free school meals initiative. While the program is well-intentioned—aimed at reducing poverty and improving child development—its hefty cost implies spending cuts elsewhere and higher taxes, fuelling unease. Markets have reflected these concerns, with Indonesian equities and the rupiah selling off during the recent protests, though both have staged a partial rebound as tensions eased (chart 2).

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**Malaysia**
While Thailand and Indonesia have been grappling with political woes, other Southeast Asian economies have pressed ahead. Malaysia, for instance, has made notable strides in establishing itself as a global tech hub, with significant advances in semiconductors—largely centred in Penang—and, more recently, in electric vehicles, where Malacca is emerging as a key industry hub. These developments have been fuelled in part by strong foreign investment flows, which, while healthy in recent years (chart 3), slipped to a five-year low in Q2 2025 on a directional basis. Still, Malaysia’s semiconductor push remains robust: Prime Minister Anwar announced earlier this year that the country had already secured more than 63 billion ringgit ($14.9 billion) in semiconductor investments, mostly from foreign sources, under its National Semiconductor Strategy—less than a year after the scheme’s launch. More broadly, Malaysia has pressed ahead on multiple fronts in its drive toward high-income status by 2030—an ambition that is looking increasingly attainable.

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**Vietnam**
Moving to Vietnam, the economy—like Malaysia’s—has been pushing hard to establish itself as a manufacturing and electronics hub. Vietnam continues to outpace its ASEAN peers in growth and shares Malaysia’s ambition of reaching high-income status, though with a later target of 2045. Its export boom has been central to past success but has also drawn scrutiny, particularly as the US trade deficit with Vietnam has widened with rising imports (chart 4). As a result, Vietnam now faces a more constrained trade environment even as it relies on exports as a key growth driver. For now, Vietnam has avoided a worst-case scenario with the US: a recent trade deal reduced the reciprocal tariff rate from a potential 46% to 20%, though US-perceived “transshipments” will still be hit with a 40% tariff. Beyond navigating this delicate global landscape, Vietnam is also instigating deep structural reforms—such as strengthening the role of the private sector—to sustain growth and meet its long-term development goals.

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**Australia**
Moving to the Pacific, Australia is among the few economies relatively insulated from US tariffs, facing only the baseline 10% rate under the revised tariff schedule that took effect in early August. On the domestic front, Australia’s economy outperformed expectations in Q2, with real GDP growth accelerating to 1.8% y/y. The pickup was driven by stronger household consumption (chart 5), offering an encouraging signal for the outlook and easing earlier concerns about economic momentum—perhaps also suggesting that the central bank’s earlier rate cuts are beginning to take effect. 

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Turning to monetary policy, the recent upbeat data have reinforced expectations that the RBA will hold rates steady at its September meeting, after cutting a cumulative 75 bps since the start of the year. That said, markets are still pricing in further easing down the line, supported by Australia’s disinflationary trend (chart 6) and lingering downside risks from weaker global demand amid US trade tariffs. Another key dimension is the labour market, which remains tight but has shown signs of softening in recent months. A broader concern is productivity, which has stagnated in recent quarters, raising questions about the sustainability of real wage growth.

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Asia

Economic Letter from Asia: Political Woes

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Nonfarm payrolls increased 22,000 during August after rising 79,000 in July, revised from 73,000 and falling 13,000 during June, revised from a 14,000 increase. Expectations had been for an 83,000 rise in the Action Economics Forecast Survey. The three-month average change in payrolls of 29,300 compared to 28,300 in July, but stood far below its high of 231,700 in January.

Average hourly earnings rose an expected 0.3% in August after unrevised gains of 0.3% in July and 0.2% in June. Earnings growth of 3.7% y/y equals that in June which is the lowest since July 2024, 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 4.3% from 4.2% in July and 4.1% in June. 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 8.1% last month from 7.9% In July. It was 6.6% in April 2023.

In the **establishment survey**, private-sector employment in August rose 38,000 after rising 77,000 in July.  Factory sector jobs declined 12,000, off for the fourth straight month. Durable goods employment fell 19,000 after rising 5,000, as motor vehicle & parts hiring declined 7,300 after a 2,000 July gain. Nondurables employment rose 7,000, reversing a 7,000 July decline. Construction sector employment weakened 7,000, down for the third straight month. The number of mining & logging industry jobs declined 6,000, also registering the fourth consecutive month of decline.

Private service-sector employment increased 63,000 during August after improving 85,000 in July. Increases varied greatly amongst service-sector categories. Private education & health sector employment rose 46,000 last month, following a 77,000 increase in July. The number of leisure & hospitality jobs rose 28,000 after a 6,000 gain. Trade, transportation & utilities employment gained 2,000, following a 5,000 increase, but financial activities employment weakened 3,000 after increasing 9,000 in July. The number of professional & business services jobs fell 17,000, down for the fourth straight month as temporary help employment declined 9,800, also off for the fourth month in a row. Information sector employment declined 5,000, after falling 7,000 in July and 3,000 in June. Transportation & warehousing hiring weakened 3,600 last month following a 6,300 drop.

Government sector payrolls declined 16,000 last month following a 2,000 rise. Federal government employment weakened 15,000 and has fallen for seven straight months. State government payrolls declined 13,000 after falling in each of the prior three months. To the upside, local government hiring rose 12,000 following a 17,000 July increase.

Private-sector average hourly earnings rose 0.3% (3.7% y/y) in August, the same as in July. Earnings in the goods-producing sector increased 0.4% (4.0% y/y) in August, double the July rise. In construction, earnings rose 0.6% (4.2% y/y) following a 0.3% rise, while factory sector earnings improved 0.3% (3.9% y/y) after a 0.2% gain. In the service sector, earnings rose 0.3% (3.6% y/y) in August, the same as in July. Professional & business services pay increased 0.4% (5.0% y/y) for the second consecutive month while leisure & hospitality earnings also increased 0.4% (3.7% y/y) after two straight months of 0.3% increase. Information earnings rose 0.2% (4.6% y/y) for the second straight month.

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The length of the average workweek was 34.2 hours in August for the third straight month. The workweek in the goods-producing sector eased to 39.8 hours from 39.9 hours in July. The construction sector average workweek held at 39.0 hours while the factory sector workweek eased to 40.0 hours from 40.2 hours. The average workweek in the private service sector held at 33.2 hours. Information sector hours edged up to 37.0 from 36.9. Financial activities hours held at 37.6. Private education & health services hours eased to 32.7 from 32.8 in July.

In the **household survey**, the unemployment rate increased to 4.3% in August after rising to 4.2% in July from 4.1% in June as employment rose 288,000 after falling 260,000 in July and the size of the labor force increased 436,000 after three straight months of decline. The labor force participation rate rose to 62.3% last month from 62.2%, remaining well below the high of 63.3% early in 2020. The rate for teenagers eased to 34.8%, a five-year low. For workers aged 20-24, the rate plunged to 70.2%, a four year-low. For workers aged 25-54, the participation rate increased to 83.7%, an eleven-month high. For individuals 55 and over, the rate held steady at 38.1% but remained near a 20-year low of 38.0% in June.

The employment/population ratio for all workers steadied at 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 rose to 65.0% from 64.7% in July and for women, the rate eased to 54.5 % on the heels of a slip to 54.7% in July.

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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- Hiring weakens broadly; factory, construction & government jobs decline.
- Earnings gain slows y/y.
- Unemployment rate increases as job growth lags rise in labor force.

U.S. Payroll Employment Report Reveals Unexpected Weakness in August; Earnings Rise Steadily, but Jobless Rate Increases

Robert Brusca

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Germany's factory orders declined for the third straight month in July. Real new orders fell 2.9% month-on-month in July, against expectations for a small increase. The drop was sharper than a 0.2% decrease in June; foreign orders declined 3.1% in July, as orders from the euro area contracted 3.8%, and orders from outside the euro area fell by 2.8%. These metrics suggest that demand both inside and outside the euro area remains weak. Domestic orders dropped 2.5% in July, an exact offset to their gain in June. When ranked on growth rates over the last 30 years, all three sector growth rates are below their medians (below a ranking of 50%). However, when ranked on the real index number level, total orders rank at their 55.6 percentile, foreign orders rank at their 79.5 percentile and domestic orders rank at their 15.2 percentile. All-in-all it’s an unimpressive report.

**Orders sequentially and QTD:** Sequential trends are ambivalent but still clearly weak. Sequential growth rates do not show a clear acceleration/deceleration pattern. But for total, foreign and domestic real orders, both 3-month and 12-month growth rates are negative (one exception: foreign orders over 12 months). Domestic orders show negative growth over 6 months as well. Quarter-to-date growth rates are negative for all sectors.

**Sales trends:** Real sales are mixed in July, rising 0.9% overall on declines in two sectors: consumer durables and intermediate goods. Sector sales mostly maintain growth as manufacturing sales are positive based on growth rates over 12 months, 6 months, and 3 months. Consumer goods and intermediate goods sales show deceleration and ongoing contraction. Consumer durable goods and intermediate goods show QTD declines. On the manufacturing & mining to total, manufacturing and capital goods show index standings above their respective 50% on 30 years of data. That also shows above-median growth rates on annual data along with consumer goods and consumer nondurable goods.

**Industrial confidence:** Industrial confidence measures for Germany, France, Italy, and Spain, the four largest EMU members, show improved (but still net negative readings) in July compared to June. Over three months and six months, Germany and Italy show some improvement; France still shows steady deterioration. Spain shows improvement over 3 months and it is only slight improvement. The queue standings for the industrial reading over 30 years of data show Spain with an above-median reading in July. Germany and France are exceptionally weak and Italy has been weaker only 26% of the time based on the queue standing measure. Not only are German orders and demand weak and faltering but the broad EU Commission measures of industrial confidence show broadly weak readings for the largest economies in the EMU.

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Germany

German Factory Orders Plunge on Domestic Weakness

Andrew Cates

**Gold prices and trade policy uncertainty**
This week’s record-breaking surge in gold prices has coincided with renewed volatility in trade policy uncertainty, reflecting the market’s heightened sensitivity to political and legal developments in Washington. A series of legislative challenges to the administration’s latest tariff measures has raised the prospect that parts of the policy framework could be overturned or significantly diluted. That possibility has injected another layer of uncertainty into an already fragile trade environment, amplifying demand for gold as a hedge. Investors appear to be weighing not only the inflationary risks of tariffs that remain in place but also the destabilizing effects of unpredictable policy reversals, leaving gold prices at historic highs and the trade policy uncertainty index elevated.

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**US Tariffs**
Although the data in this chart extend only through June 2025, they clearly illustrate which trading partners would gain the most if US tariff policies were to be reversed. China stands out as the most heavily penalised, with effective tariff rates rising by more than 25 percentage points in just six months. Japan and South Korea have also faced significant tariff hikes, suggesting that their exporters would benefit substantially from any policy rollback. Taiwan, India, and the EU also feature prominently, though at more moderate levels. By contrast, ASEAN economies, Australia, and the UK have seen relatively smaller increases, leaving them less exposed. In aggregate, a broad reversal of tariffs would most immediately alleviate the pressure on East Asian exporters—particularly China—while also reducing costs for US importers and consumers who have been disproportionately affected by higher prices on goods from the region.

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**The Indian economy and US trade policy** 
India faces a particularly sharp squeeze from the latest wave of US tariff hikes, given that the US now absorbs nearly one-fifth of its exports. The imposition of higher barriers has dealt a direct blow to key sectors, such as textiles and jewellery, while also undermining investor confidence. That pressure is clearly visible in the sharp depreciation of India’s trade-weighted currency, which has accelerated in 2025. Rather than offering a competitiveness boost, the weaker rupee has compounded difficulties by lifting import costs and stoking inflation at home. The result is that tariffs have both curtailed India’s export earnings and strained its domestic economy, leaving policymakers with limited options beyond seeking trade diversification and targeted support measures.

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**Global monetary policy** 
The latest Blue Chip Financial Forecasts survey helps explain why equity markets have remained upbeat despite escalating geopolitical and trade tensions. The survey points to an expected sizeable policy easing over the coming year, particularly in the US and UK where forecasters anticipate close to a full percentage point of rate cuts. Australia and Canada are also projected to deliver meaningful reductions, while the euro area is expected to ease more modestly. Japan stands out as the exception, with expectations tilted toward further tightening. For equities, these projections of broad-based rate cuts provide a crucial cushion—supporting valuations, lowering discount rates, and reinforcing the sense that policymakers are prepared to offset the drag from tariffs and slowing global growth.

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**Euro area inflation** 
By contrast with the US and UK, where forecasters in the latest Blue Chip Financial Forecasts survey anticipate close to a full percentage point of rate cuts, expectations for the ECB are more restrained. This reflects the fact that the ECB has already delivered a relatively large degree of policy easing, while headline inflation has now fallen back to levels close to its target. Even so, further rate reductions remain likely if underlying price pressures continue to moderate. As the chart shows, services inflation has begun to move lower in line with a clear decline in wage growth, suggesting that disinflationary momentum is building. Should this trend persist, the ECB will have scope to add to its easing cycle, though at a slower and more cautious pace than peers such as the Fed or the Bank of England.

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**Prices and cost pressures in the US corporate sector** 
Corporate profitability has long been one of the best leading signals for US equity cycles, and the measure here (Non-financial corporate profits per unit of output – i.e. profit margins) has slipped from its late-2023 peak and moved sideways for much of the past year. That’s not a collapse, but it does raise questions about how long equities can keep rising without stronger profit momentum. The recent Q2 uptick—a 1.8% annualised gain—came despite a hefty rise in non-labour costs, with margins protected by modest pricing power and a notable 2.2% drop in unit labour costs. Whether that labour relief reflects softer wage pressures or a structural productivity boost—potentially tied to AI—will be crucial in determining if profits can remain resilient, or if this plateau is the prelude to a downturn.

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Equity markets have lost a little ground in recent days and bond markets have been more jittery, as legal challenges to US tariff policies add to a tense backdrop of geopolitical meetings between China, Russia, and India. Gold’s surge to record highs arguably captures the search for safe havens amid this uncertainty (chart 1), while the possibility of tariff reversals keeps alive the prospect of relief for the most affected exporters, notably China, Japan, and South Korea (chart 2). India’s position looks more precarious, with its reliance on the US market colliding with a weakening trade-weighted currency as tariffs bite into growth and investor confidence (chart 3). Monetary policy expectations, however, continue to offer some support, with the latest Blue Chip Financial Forecasts survey pointing to sizeable easing in the US and UK (chart 4). The ECB is expected to tread more cautiously after earlier cuts and with headline inflation now near target. Still, if inflation continues to ease, further action remains possible (chart 5). In the US, corporate resilience is also helping offset some of the gloom: despite tariff-driven spikes in non-labour costs, falling unit labour costs—possibly aided by AI productivity gains—and firmer prices allowed profits per unit of output to rise in Q2 (chart 6).

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Economy in Brief: 2004

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