Gerald D. Cohen

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Total business inventories increased 0.5% (5.3% year-on-year) during April, after being unchanged in March (unrevised). Total business sales decreased 0.2% (+2.8% y/y) following a 1.3% gain (revised down from 1.6%). The inventory-to-sales (I/S) ratio ticked up to 1.39 from an upwardly-revised 1.38. Business inventory swings can have a meaningful impact on GDP. In the first quarter inventories added 0.6 percentage point to GDP growth.

Retail inventories increased 0.5% (4.6% y/y) in April after declining 0.3%. Auto inventories, which comprise roughly 35% of retail inventories, grew 0.8% (8.2% y/y). Non-auto retail inventories rose 0.4% (2.6% y/y). General merchandise inventories, the second largest sector were unchanged (+0.1% y/y). The troubled department store sector – a subset of general merchandise – saw inventories down 1.4% (-7.7% y/y). Factory sector inventories gained 0.3% (3.8% y/y). As reported last week, wholesale inventories were up 0.8% (7.6% y/y).

Retail sales increased an upwardly-revised 0.3% in April (was -0.2%) and 3.5% y/y, with non-auto sales growing 0.5% (3.6% y/y). Note: the advanced retail sales data for May was released today showing a 0.5% gain (3.1% y/y). Wholesale sector sales declined 0.4% in April (+2.7% y/y), while shipments from the factory sector were down 0.5% (+2.2% y/y).

The inventory-to-sales ratio in the retail sector was unchanged at 1.45. The non-auto I/S ratio ticked up down to 1.19, slightly above the historic low of 1.17 reached in November 2018 (data goes back to 1967). The wholesale and factory sector I/S ratios edged up to 1.34 and 1.37 respectively.

The manufacturing and trade data are in Haver's USECON database.


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<table class="centered" width="100%" border="0" cellspacing="0">
	<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead>
 <tr>
<th class="firstcol" scope="col" >Manufacturing & Trade</th>
<th>Apr</th>
<th>Mar</th>
<th>Feb</th>
<th>Y/Y</th>
<th>2018</th>
<th>2017</th>
<th>2016</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol" >Business Inventories (% chg)</td>
<td >0.53</td>
<td >0.05</td>
<td >0.29</td>
<td >5.30</td>
<td >4.92</td>
<td >3.37</td>
<td >1.70</td>
</tr>
<tr>
<td class="firstcol" >&nbsp; Retail</td>
<td >0.53</td>
<td >-0.26</td>
<td >0.16</td>
<td >4.61</td>
<td >4.22</td>
<td >2.36</td>
<td >4.10</td>
</tr>
<tr class="odd">
<td class="firstcol" >&nbsp;&nbsp;  Retail excl. Motor Vehicles</td>
<td >0.39</td>
<td >-0.05</td>
<td >0.38</td>
<td >2.60</td>
<td >1.25</td>
<td >2.16</td>
<td >1.95</td>
</tr>
<tr>
<td class="firstcol" >&nbsp; Merchant Wholesalers</td>
<td >0.82</td>
<td >-0.02</td>
<td >0.41</td>
<td >7.63</td>
<td >7.14</td>
<td >3.26</td>
<td >1.90</td>
</tr>
<tr class="odd">
<td class="firstcol" >&nbsp; Manufacturing</td>
<td >0.26</td>
<td >0.41</td>
<td >0.31</td>
<td >3.78</td>
<td >3.52</td>
<td >4.46</td>
<td >-0.71</td>
</tr>
 <tr class="grey3">
 <td class="firstcol" colSpan="8" >Business Sales (% chg)</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >Total</td>
<td >-0.23</td>
<td >1.27</td>
<td >0.11</td>
<td >2.77</td>
<td >6.09</td>
<td >5.57</td>
<td >-0.80</td>
</tr>
<tr>
<td class="firstcol" >&nbsp; Retail</td>
<td >0.29</td>
<td >1.87</td>
<td >-0.36</td>
<td >3.49</td>
<td >4.72</td>
<td >4.96</td>
<td >2.55</td>
</tr>
<tr class="odd">
<td class="firstcol" >&nbsp;&nbsp;  Retail excl. Motor Vehicles</td>
<td >0.52</td>
<td >1.46</td>
<td >-0.41</td>
<td >3.64</td>
<td >5.35</td>
<td >4.97</td>
<td >2.01</td>
</tr>
<tr>
<td class="firstcol" >&nbsp; Merchant Wholesalers</td>
<td >-0.40</td>
<td >1.82</td>
<td >0.31</td>
<td >2.73</td>
<td >6.54</td>
<td >6.72</td>
<td >-1.30</td>
</tr>
<tr class="odd">
<td class="firstcol" >&nbsp; Manufacturing</td>
<td >-0.53</td>
<td >0.19</td>
<td >0.34</td>
<td >2.18</td>
<td >6.89</td>
<td >4.98</td>
<td >-3.17</td>
</tr>
 <tr class="grey3">
 <td class="firstcol" colSpan="8" >I/S Ratio</td>
 </tr>
<tr class="odd">
<td class="firstcol" >Total</td>
<td >1.39</td>
<td >1.38</td>
<td >1.39</td>
<td >1.36</td>
<td >1.36</td>
<td >1.38</td>
<td >1.42</td>
</tr>
<tr>
<td class="firstcol" >&nbsp; Retail</td>
<td >1.45</td>
<td >1.45</td>
<td >1.48</td>
<td >1.44</td>
<td >1.44</td>
<td >1.47</td>
<td >1.49</td>
</tr>
<tr class="odd">
<td class="firstcol" >&nbsp;&nbsp;  Retail excl. Motor Vehicles</td>
<td >1.19</td>
<td >1.20</td>
<td >1.21</td>
<td >1.21</td>
<td >1.20</td>
<td >1.24</td>
<td >1.28</td>
</tr>
<tr>
<td class="firstcol" >&nbsp; Merchant Wholesalers</td>
<td >1.34</td>
<td >1.33</td>
<td >1.35</td>
<td >1.28</td>
<td >1.29</td>
<td >1.30</td>
<td >1.35</td>
</tr>
<tr class="odd">
<td class="firstcol" >&nbsp; Manufacturing</td>
<td >1.37</td>
<td >1.36</td>
<td >1.36</td>
<td >1.35</td>
<td >1.35</td>
<td >1.37</td>
<td >1.41</td>
</tr>
 </tbody>
 </table>
 
 </body></html>

Total business inventories increased 0.5% (5.3% year-on-year) during April, after being unchanged in March (unrevised). Total business sales decreased 0.2% (+2.8% y/y) following a 1.3% gain (revised down from 1.6%). The inventory-to- [...]

U.S. Business Inventories Rise in April as Sales Decline

Robert Brusca

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Italy had a long legacy as a high-inflation weak-currency country when EMU was formed. There were always questions about how the high-inflation countries would evolve. How quickly would they adapt... would they adapt? Wrapping them up in a currency area with low inflation- traditionally hard-currency Germany was a bold real-world experiment. The ECB gave the region a single currency. While they adopted no fiscal union the EU/EMU adopted fiscal rules concerning debt-to-GDP and deficit-to-GDP parameters. Germany and France were the first two countries to run afoul of these strictures. What happened? They wriggled out of it without remedial actions ordered. But since then violators have been persecuted.


Italy underwent a horrific program of economic pressure that resulted in it getting its inflation rate in line as the exhibits in this report clearly memorialize. But for the last 10-years Italy has been unable to grow real GDP; Italy's real GDP is LOWER on balance over the last decade. That is a horrific cost.

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Italy has an excess debt-to-GDP ratio. What else is new? Over the last decade when real GDP was being suppressed it would have been very hard to reduce that debt to GDP ratio. The chart below shows that from 2008 to 2014 the debt ratio rose strongly but since then it has been flat and high.



Italy has achieved low inflation; its inflation rate now is below the German pace and has been lower than Germany on average for the last five years.

Whatever codes were written into Maastricht, Italy certainly has to be looked upon as a special case or its economy is headed for devastating ruin. Italy's banks are in bad shape and there are no federal resources to help address that problem either.



EU policies crushed Greece. While Greek inflation is also under control, Greece is still trying to establish a viable economy.


Italy is a large country one the four largest EMU economies and EU/EMU debt rules are trying to batter it further while stuffing Italy full of the migrants no one else wants using rules that maroon migrants in their country of first entry. Is it any wonder that a contrary and defiant political movement took root in Italy?
<img border="0" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/190614.png" width="645" height="340">

There is no surprise that there have been populist uprisings in Greece and Spain and Portugal and Italy in the wake of the imposed austerity programs. The question after some upsetting but not transformative European elections is whether Europe can find a new way forward that is less heavy handed. One might think that the UK leaving sent a message. But apparently it did not.


The question of what is next for Europe for the EU for EMU are just as big a set of questions as what is next for Italy. Will the EU Commission really impose more austerity and fines on Italy after all it has gone through? The EU Commission has just agreed that Italy should face debt action for its economic plan. And the Italian cabinet has just rejected calls to revise its budget. It has been said that the EU is a rules based organization and that is because rules are all that it is, and all it has. And as we acknowledge that, we should also acknowledge that it is an organization that makes the rules up and changes them as it goes along and that the elite that run the EU design those rules to cut slack for the anointed counties of their EU hierarchy. The EU has played favorites. But what has marked recent history is the willingness of members to leave or to butt heads over rules they find unacceptable or anti-cultural. That is a challenge to EU authority and the EU is fighting it wherever it crops up. So far countries have their opposition set on idiosyncratic differences with the EU. But, in time, this could morph into a more coordinated opposition. Despite Germanys attempt to push all of the square pegs of Southern Europe though the round hole of the North to make them all in the likeness of Germany there is resistance to such draconian demands. And Europe is beginning to show the strain and to realize the cost of this internal antagonism.

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Italy had a long legacy as a high-inflation weak-currency country when EMU was formed. There were always questions about how the high-inflation countries would evolve. How quickly would they adapt... would they adapt? Wrapping them up [...]

Italian Inflation Stays Under Wraps...but Other Pressures Don't

Tom Moeller

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Total retail sales increased 0.5% (3.2% y/y) during May
following a 0.3% April increase, revised from a 0.2% slip reported initially. A
0.6% gain had been
expected in the Action Economics Forecast Survey. Retail sales excluding motor vehicles and
parts rose 0.5% (3.2% y/y), the same as during April, revised from 0.1%. A 0.4% gain had
been expected.
Last month, sales of motor
vehicle &amp; parts increased 0.7% (3.1% y/y) after a 0.5% fall during April.
This compared to a 6.2% gain in unit sales of motor vehicles during May.
A measure of the underlying pace of retail spending is
nonauto sales growth excluding gasoline and building materials. These sales rose
0.5% (3.4% y/y) after a 0.4% rise, revised from unchanged.
Sales strength was broad-based last month. Purchases via the
internet surged 1.4% (11.4% y/y), following a 0.5% rise. Purchases at sporting
goods, hobby, book and music stores rose 1.1% (-4.2% y/y) and repeated April's
strength. Sales of electronics &amp; appliance store also rose 1.1% (-2.4% y/y)
and reversed April's 1.3% decline. General merchandise store sales increased
0.7% (3.3% y/y), extending the strength during the prior two months. Elsewhere,
goods spending was tepid. Furniture &amp; home furnishings store sales gained
0.1% (0.6% y/y) following a 0.6% rise. Sales of building materials and garden
equipment were little changed (0.2% y/y) following a 0.6% decline. Clothing &amp; accessory store sales
also held steady (-2.3% y/y)&nbsp; after a 0.2% dip.&nbsp;
Gasoline service station sales improved 0.3% (3.2% y/y) as
prices continued to increase.
Sales of nondiscretionary items were mixed last month. Food
&amp; beverage store sales slipped 0.1% (+1.6% y/y) after a 0.2% rise.
Health &amp; personal care product store sales improved 0.6% (3.4% y/y) following
a 0.2% increase.
Restaurant &amp; drinking establishment sales&nbsp; increased
0.7% (3.7% y/y) after a 0.3% rise.
The retail sales data can be found in Haver's USECON
database. The Action Economics forecast is in the AS1REPNA database.

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<table class="centered" width="100%" border="0" cellspacing="0">
	<colgroup><col><col><col><col><col><col><col><col></colgroup>
 <thead>
 <tr>
 <th class="firstcol" scope="col" >Retail Spending (% chg)</th>
 <th scope="col" >May</th>
 <th scope="col" >Apr</th>
 <th scope="col" >Mar</th>
 <th scope="col" >May Y/Y</th>
 <th scope="col" >2018</th>
 <th scope="col" >2017</th>
 <th scope="col" >2016</th>
 </tr>
 </thead>
 <tbody>
 <tr class="grey2">
 <td class="firstcol" >Total Retail Sales &amp; Food Services</td>
 <td >0.5</td>
 <td >0.3</td>
 <td >1.8</td>
 <td >3.2</td>
 <td >4.9</td>
 <td >4.7</td>
 <td >2.9</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp;&nbsp;Excluding Autos</td>
 <td >0.5</td>
 <td >0.5</td>
 <td >1.4</td>
 <td >3.2</td>
 <td >5.5</td>
 <td >4.7</td>
 <td >2.5</td>
 </tr>
 <tr class="grey2">
 <td class="firstcol" >Retail Sales</td>
 <td >0.5</td>
 <td >0.3</td>
 <td >1.9</td>
 <td >3.1</td>
 <td >4.7</td>
 <td >5.0</td>
 <td >2.5</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp;&nbsp;Motor Vehicle &amp; Parts</td>
 <td >0.7</td>
 <td >-0.5</td>
 <td >3.2</td>
 <td >3.1</td>
 <td >2.7</td>
 <td >4.9</td>
 <td >4.3</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp;Retail Less Autos</td>
 <td >0.5</td>
 <td >0.5</td>
 <td >1.5</td>
 <td >3.1</td>
 <td >5.4</td>
 <td >5.0</td>
 <td >2.0</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp;&nbsp;Gasoline Stations</td>
 <td >0.3</td>
 <td >2.1</td>
 <td >3.6</td>
 <td >3.2</td>
 <td >12.9</td>
 <td >9.4</td>
 <td >-5.8</td>
 </tr>
 <tr class="grey2">
 <td class="firstcol" >Food Service &amp; Drinking Places
 Sales</td>
 <td >0.7</td>
 <td >0.3</td>
 <td >0.9</td>
 <td >3s.7</td>
 <td >6.1</td>
 <td >3.1</td>
 <td >5.2</td>
 </tr>
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Total retail sales increased 0.5% (3.2% y/y) during May following a 0.3% April increase, revised from a 0.2% slip reported initially. A 0.6% gain had been expected in the Action Economics Forecast Survey. Retail sales excluding motor [...]

U.S. Retail Sales Firm Broadly; Revisions Show Improvement

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Import prices fell 0.3% (-1.5% y/y) during May following a
0.1% April improvement, revised from 0.2%. The decline matched expectations in
the Action Economics Forecast Survey. These figures are not seasonally adjusted
and do not include import duties.
The weakening in import prices last month reflected a 0.9%
decline (-1.9% y/y) in petroleum import costs, following a 4.7% April rise.
Nonpetroleum import prices eased 0.3% (-1.4% y/y), the third consecutive month
of weakness. Among end-use categories, industrial supplies &amp; materials costs
excluding petroleum fell 1.1% (-4.1% y/y) after a 2.8% decline. Capital goods
prices eased 0.1% (-1.3% y/y) and have been declining since early last year. The
decline reflects lower prices (-4.7% y/y) for computers, peripherals and
semiconductors. Capital goods prices excluding these products were little
changed y/y. Motor vehicle &amp; parts prices edged 0.1% lower (-0.6% y/y) for
the fourth straight month. Nonauto consumer goods prices held steady (-0.7% y/y)
after falling 0.3% for two straight months. Meanwhile, foods, feed and beverage
prices fell 0.8% (-0.2% y/y) following a 2.7% strengthening.
Export prices declined 0.2% last month (-0.7% y/y) following
a 0.1% uptick during April revised from 0.1%. A 0.1% easing had been expected. 
Agricultural commodities prices dropped 1.0% last month
(-5.3% y/y), adding to the 1.5% decline in April. Nonagricultural export costs
slipped 0.2% (-0.2% y/y) after three consecutive monthly increases. The cost of
industrial supplies &amp; materials fell 0.5% (-2.3% y/y) with lower petroleum
prices. Prices excluding oil fell 0.3% (-1.8% y/y) after a 0.1% rise (-1.8%
y/y). Motor vehicle &amp; parts prices eased 0.1% (+0.4% y/y) after a 0.2% rise.
Consumer goods prices excluding autos slipped 0.2% (+0.2% y/y) after a 0.3%
gain. Capital goods improved 0.1% (1.1% y/y) but high-tech product prices fell
3.3% y/y. Capital goods prices excluding high-tech rose 0.2% (2.0% y/y).
Meanwhile, foods, feeds &amp; beverage prices fell 1.1% (-4.4% y/y) after
declining 1.8%.
The import and export price series can be found in Haver's USECON
database. Detailed figures are available in the USINT database. The
expectations figure from the Action Economics Forecast Survey is in the AS1REPNA
database.

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<table class="centered" width="100%" border="0" cellspacing="0">
	<colgroup><col><col><col><col><col><col><col><col></colgroup>
 <thead>
 <tr>
 <th class="firstcol" scope="col" ><a href="http://www.haverselect.com/dlx/USARC04/@E8/@E807/@E807.HTM">Import/Export
 Prices (NSA, %)</a></th>
 <th scope="col" >May</th>
 <th scope="col" >Apr</th>
 <th scope="col" >Mar</th>
 <th scope="col" >May Y/Y</th>
 <th scope="col" >2018</th>
 <th scope="col" >2017</th>
 <th scope="col" >2016</th>
 </tr>
 </thead>
 <tbody>
 <tr>
 <td class="firstcol" >Imports - All Commodities</td>
 <td >-0.3</td>
 <td >0.1</td>
 <td >0.6</td>
 <td >-1.5</td>
 <td >3.1</td>
 <td >2.9</td>
 <td >-3.3</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp;&nbsp;Petroleum &amp; Petroleum
 Products</td>
 <td >-0.9</td>
 <td >4.7</td>
 <td >6.2</td>
 <td >-1.9</td>
 <td >22.0</td>
 <td >26.6</td>
 <td >-19.7</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp;&nbsp;Nonpetroleum</td>
 <td >-0.3</td>
 <td >-0.5</td>
 <td >0.0</td>
 <td >-1.4</td>
 <td >1.3</td>
 <td >1.1</td>
 <td >-1.5</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >Exports - All Commodities</td>
 <td >-0.2</td>
 <td >0.1</td>
 <td >0.8</td>
 <td >-0.7</td>
 <td >3.4</td>
 <td >2.4</td>
 <td >-3.2</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp;&nbsp;Agricultural</td>
 <td >-1.0</td>
 <td >-1.5</td>
 <td >1.0</td>
 <td >-5.3</td>
 <td >0.6</td>
 <td >1.5</td>
 <td >-5.4</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp;&nbsp;Nonagricultural</td>
 <td >-0.2</td>
 <td >0.2</td>
 <td >0.7</td>
 <td >-0.2</td>
 <td >3.7</td>
 <td >2.5</td>
 <td >-3.0</td>
 </tr>
 </tbody>
</table>

&nbsp;

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Import prices fell 0.3% (-1.5% y/y) during May following a 0.1% April improvement, revised from 0.2%. The decline matched expectations in the Action Economics Forecast Survey. These figures are not seasonally adjusted and do not [...]

U.S. Import and Export Prices Decline

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Sectors show some mixed consolidation after a long downward slide form early 2018.

Weakness: In EMU Industrial production (IP) excluding construction (the headline series) has fallen for two months in a row and has not risen in three-months. Month-to-month change in IP have been negative or flat in seven of the last eight months. That is quite a legacy of weakness. Manufacturing has seen two month-to-month increases in the last eight months against six declines.

EMU production clearly is weak.

Progressive weakness by sector
There is sequential or progressive weakness from 12-months to 6-months to 3-months for the headline series, for manufacturing, for consumer goods overall, for consumer goods durables, for consumer goods nondurables and for intermediate goods. The sole exception is capital goods that in any event show declines on all horizons and show a deeper decline over three months (annualized) that over 12-months.

The manufacturing weakness is deep seated and broadly affects all sectors.

Quarter-to-date weakness
The quarter-to-date declines are deep and their annualized drop also exceeds their year-over year drop for all categories. The percent of last peak calculations seem to show the most slack in consumer durables and in intermediate goods.

The manufacturing PMI diffusion index from Markit tracks IP (Yr/Yr percent changes) quite well on the way up and on the way down. While IP plunged and recouped and has weakened again the PMI gauge has continued to show straight-line ongoing weakness for EMU until this last month when it steadied.

Country by country weakness
The data in the table by country are colored coded with the red countries in the table’s stub all being IP results showing trends as sequentially deteriorating 12-months to 6-months to 3-month. Among the 14 countries in the table, eight show sequential deterioration in progress. Finland and Norway come close to showing sequential acceleration, but no country really does that. The median for EMU shows sequential deterioration. Over three-months ten of 14 countries in the table log output declines. That compares to eight over six-months and 6 over 12-months. .


While there has been ongoing declines in IP and although weakness is widespread five countries in the table still have output at 90% or better of their past cycle peak. Four more are 84 percent of their past cycle peak or better and the rest of them are no weaker than 25% below their past cycle output peaks. The weak group includes Greece, Malta, Luxembourg, Spain and Italy. The strong group includes Norway, The UK, Portugal, The Netherlands and Germany. Looking at the relation to past peaks by sector consumer durables are the weakest at 77% of their past peak. That is something to watch since durables consumption/output is highly cyclical. However, capital goods output is still strong within 5% of its last cycle peak, despite the recent slowdown

On balance Europe remains in a slowing mode. The PMI data show a more worrisome profile that the IP data by itself. And while the results for the recent 3-months seem quite grim the performance in the most recent month is not despite the decline for IP overall (which is mostly on the back of weakness in Germany).

Europe is still trying to see how it has re-invented itself in the wake of European elections. The UK is selecting a new PM and looking to renegotiate a Brexit deal with a cast that is looking much more friendly at the prospect of a hard Brexit with Mr. Boris Johnson in the lead, in better physical shape, but still without a comb… no wonder the prospect of a disorderly exit does not seem to bother him.

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Sectors show some mixed consolidation after a long downward slide form early 2018. Weakness: In EMU Industrial production (IP) excluding construction (the headline series) has fallen for two months in a row and has not risen in three- [...]

EMU IP Continues to Erode

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Initial unemployment insurance claims rose to 222,000 in the
week ending June 8 from 219,000 during the prior week, revised from 218,000.
Claims remained near their lowest level since December 1969. The latest reading
compared to expectations for 217,000 claims in the Action Economics Forecast Survey. The
four-week moving average of initial claims rose to 217,750 from 215,250 in the
previous week. During the last 20 years, there has been a 70% correlation
between the level of initial claims and the m/m change in nonfarm payrolls.
Continuing claims for unemployment insurance gained to 1.695
million from 1.693 million in the week ending June 1. The four-week moving average of
claimants declined 1,000 to 1.673 million, the lowest level since November 1973.
The insured rate of unemployment remained at the record low
of 1.2% in the week ending June 1, where it's been for twelve months. The series
dates back to 1970.
Insured rates of unemployment vary widely by state. In the
week ending May 25, the lowest rates were in South Dakota (0.27%), Nebraska
(0.35%), Florida (0.41%), North Carolina (0.44%), Indiana (0.44%) and North
Dakota (0.44%). The highest rates were in Massachusetts (1.41%), Pennsylvania
(1.60%), Connecticut
(1.72%), California (1.86%), New Jersey (1.90%) and Alaska (2.04%). Among the
other largest states by population, the rate was 0.95% in Texas, 1.21% in New
York and 1.42% in Illinois. These state data are not seasonally adjusted.
Data on weekly unemployment claims going back to 1967 are
contained in Haver's WEEKLY database, and they are summarized monthly in USECON.
Data for individual states are in REGIONW. The expectations figure is in
the AS1REPNA database.

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<table class="centered" width="100%" border="0" cellspacing="0">
	<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead>
 <tr>
 <th class="firstcol" >Unemployment Insurance (SA, 000s)</th>
 <th>06/08/19</th>
 <th>06/01/19</th>
 <th>05/25/19</th>
 <th>Y/Y %</th>
 <th>2018</th>
 <th>2017</th>
 <th>2016</th>
 </tr>
 </thead>
 <tbody>
 <tr>
 <td class="firstcol" >Initial Claims</td>
 <td >222</td>
 <td >219</td>
 <td >218</td>
 <td >1.4</td>
 <td >220</td>
 <td >244</td>
 <td >262</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >Continuing Claims&nbsp;</td>
 <td >--</td>
 <td >1,695</td>
 <td >1,693</td>
 <td >-1.6</td>
 <td >1,756</td>
 <td >1,961</td>
 <td >2,135</td>
 </tr>
 <tr>
 <td class="firstcol" >Insured Unemployment Rate (%)</td>
 <td >--</td>
 <td >1.2</td>
 <td >1.2</td>
 <td >
 1.2 
 (Jun 2018)
 </td>
 <td >1.2</td>
 <td >1.4</td>
 <td >1.6</td>
 </tr>
 </tbody>
</table>
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Initial unemployment insurance claims rose to 222,000 in the week ending June 8 from 219,000 during the prior week, revised from 218,000. Claims remained near their lowest level since December 1969. The latest reading compared to [...]

U.S. Initial Claims for Unemployment Insurance Rise

http://192.168.1.61:82/comment/comment.html?c=190612a.html
file://N:\winnie\Commentory_HTML_2_decimal points.xlsm
can be found <a href="https://www.federalreserve.gov/newsevents/speech/files/brainard20190612a.pdf" >here</a>.

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 <desc>...</desc>
 <link>190612A.html
</browseitem>
<browseitem>
 <period>2019-06-12</period>
 <title>U.S. Small Business Optimism Strengthens Significantly</title>
 <link>190612A.html
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The National Federation of Independent Business (NFIB)
reported that its Small Business Optimism Index increased to 105.0 during May,
up for the fourth straight month. It was the highest reading since October. The
index gained 1.4% m/m, but was down 2.6% y/y.
A sharply higher 30% of firms thought that now was a good
time to expand the business, up from a 20% low in January. The percentage
expecting higher real sales rose to 23%, its highest percentage since December.
An improved 16% of respondents expected the economy to improve, but that
remained down from a high of 48% in January 2017. A strengthened 30% of firms
expected to make capital outlays, above the December low of 25%, but below the
high of 33% last August.
Expected pricing power continued to deteriorate last month as
a lessened 20% of firms were planning to raise prices. It continued to slip
below November's ten-year high of 29%. Current pricing pressure also fell. A net
10% of firms were raising average selling prices, still below the 19% high last
May.
Labor market readings showed modest m/m improvement. The 21%
of respondents planning to increase employment was the most this year.
Nevertheless, that remained below the record 26% in August. The 54% of firms
that were finding few or no qualified candidates for job openings rose m/m to
the highest since December.
Pressure to raise worker compensation stabilized m/m as a
steady 34% of firms were raising worker pay. It equaled the highest percentage
in January. The percentage of firms that were planning to raise compensation
surged m/m to 24% m/m, up from 18% three months earlier.
Credit remained easy to get. Only four percent of firms
reported trouble obtaining financing, roughly equaling the percentage of the
last four years.
The small business survey inquires about additional issues
facing small business. A sharply increased 25% reported problems with the
quality of labor. That equaled November's record high. A low 16% indicated that
taxes were the largest problem, down from a December 2014 high of 27%.
Government requirements were worrisome to a lessened 12% of respondents, below
the September 2013 high of 24%. A steady eight percent of firms reported the
cost of labor as the most significant problem, down from February's increased
ten percent. Poor sales eased to eight percent of firms as the biggest problem.
Competition from large businesses rose to ten percent as the biggest problem.
Insurance costs/availability concerned a low ten percent of respondents.
Financial &amp; interest rate problems worried two percent of respondents. Inflation
worried&nbsp; two percent of respondents as the biggest problem, about where its
been since 2015.
Roughly 24 million small businesses exist in the U.S. and
they create 80% of all new jobs. The index is based 1986=100. The typical NFIB
member employs 10 people and reports gross sales of about $500,000 a year.
The NFIB figures can be found in Haver's SURVEYS
database.


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<table class="centered" width="100%" border="0" cellspacing="0">
	<colgroup><col><col><col><col><col><col><col><col></colgroup>
 <thead>
 <tr>
 <th class="firstcol" scope="col" >National Federation of
 Independent Business (SA, Net % of Firms)</th>
 <th scope="col" >May</th>
 <th scope="col" >Apr</th>
 <th scope="col" >Mar</th>
 <th scope="col" >May'18</th>
 <th scope="col" >2018</th>
 <th scope="col" >2017</th>
 <th scope="col" >2016</th>
 </tr>
 </thead>
 <tbody>
 <tr>
 <td class="firstcol" >Small Business Optimism Index (1986=100)</td>
 <td >105.0</td>
 <td >103.5</td>
 <td >101.8</td>
 <td >107.8</td>
 <td >106.7</td>
 <td >104.9</td>
 <td >95.3</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >Firms Expecting Economy to Improve</td>
 <td >16</td>
 <td >13</td>
 <td >11</td>
 <td >37</td>
 <td >32</td>
 <td >39</td>
 <td >-5</td>
 </tr>
 <tr>
 <td class="firstcol" >Firms Expecting Higher Real Sales</td>
 <td >23</td>
 <td >20</td>
 <td >19</td>
 <td >31</td>
 <td >26</td>
 <td >23</td>
 <td >5</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >Firms Reporting Now Is a Good Time to
 Expand the Business</td>
 <td >30</td>
 <td >25</td>
 <td >23</td>
 <td >34</td>
 <td >30</td>
 <td >23</td>
 <td >10</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >Firms Planning to Increase Employment</td>
 <td >21</td>
 <td >20</td>
 <td >18</td>
 <td >18</td>
 <td >21</td>
 <td >18</td>
 <td >11</td>
 </tr>
 <tr>
 <td class="firstcol" >Firms With Few or No Qualified
 Applicants for Job Openings (%)</td>
 <td >54</td>
 <td >49</td>
 <td >54</td>
 <td >48</td>
 <td >51</td>
 <td >49</td>
 <td >46</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >Firms Expecting to Make Capital Outlays</td>
 <td >30</td>
 <td >27</td>
 <td >27</td>
 <td >30</td>
 <td >29</td>
 <td >28</td>
 <td >26</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >Firms Reporting That Credit Was Harder
 to Get</td>
 <td >4</td>
 <td >4</td>
 <td >6</td>
 <td >5</td>
 <td >4</td>
 <td >4</td>
 <td >5</td>
 </tr>
 <tr>
 <td class="firstcol" >Firms Raising Average Selling Prices</td>
 <td >10</td>
 <td >13</td>
 <td >12</td>
 <td >19</td>
 <td >15</td>
 <td >7</td>
 <td >0</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >Firms Raising Worker Compensation</td>
 <td >34</td>
 <td >34</td>
 <td >33</td>
 <td >35</td>
 <td >33</td>
 <td >27</td>
 <td >24</td>
 </tr>
 </tbody>
</table>


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The National Federation of Independent Business (NFIB) reported that its Small Business Optimism Index increased to 105.0 during May, up for the fourth straight month. It was the highest reading since October. The index gained 1.4% [...]

U.S. Small Business Optimism Strengthens Significantly

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The U.S. Treasury Department reported that the federal
government ran a $207.8 billion budget deficit during May compared to a $146.8
billion deficit one year earlier. A $198.2 billion deficit had been expected in
the Action Economics Forecast Survey. During the first eight months of FY'19,
the budget deficit deepened to $738.6 billion compared to a deficit of $532.2
billion during the first eight months of FY'18.
Net revenues rose 2.3% y/y so far this fiscal year compared
to a 2.6% y/y gain during in first eight months of FY'18. Individual income
receipts rose 1.5% y/y so far in FY'19, compared to a 9.0% y/y rise in the first
eight months of FY'18. Corporate tax receipts fell by 8.6% y/y so far this year
after a 25.4% eight-month y/y drop last year. Social insurance receipts rose
4.5% y/y following a 2.1% gain early in FY'18, and excise taxes rose by 15.1%
y/y after last year's 11.5% increase.
Government spending increased 9.3% y/y so far in FY'19 after
a 5.9% y/y rise last year over the same eight-month period. National defense
spending strengthened 12.4% y/y following no change y/y in the first eight
months last year. Spending on health programs increased 5.3% y/y, half the gain
last year while Medicare outlays rose by roughly one-quarter y/y following a
2.5% eight-month rise last year. Growth in income security payments have
increased 7.6% y/y so far in FY'19 after a slight decline in the first eight
months of FY'18. Social Security payments gained 5.7% y/y after rising 4.3% in
the first eight months of FY'18. Interest payments rose by 15.6% y/y, about the
same as last year. 
Haver's data on Federal Government outlays and receipts are
contained in USECON. Considerable detail is given in the separate GOVFIN
database. The Action Economics Forecast Survey numbers are in the AS1REPNA
database.

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<table class="centered" width="100%" border="0" cellspacing="0">
	<colgroup><col><col><col><col><col><col><col><col></colgroup>
 <thead>
 <tr>
 <th class="firstcol" scope="col" >United States Government
 Finance</th>
 <th scope="col" ></th>
 <th scope="col" >May</th>
 <th scope="col" >FY'18</th>
 <th scope="col" >FY'17</th>
 <th scope="col" >FY'16</th>
 <th scope="col" >FY'15</th>
 </tr>
 </thead>
 <tbody>
 <tr>
 <td class="firstcol" >Budget Balance (Billions)</td>
 <td >--</td>
 <td >$-207.8</td>
 <td >$-779.0</td>
 <td >$-665.8</td>
 <td >$-585.6</td>
 <td >$-439.1</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >Fiscal 'YTD</td>
 <td >--</td>
 <td >$-738.6</td>
 <td >--</td>
 <td >--</td>
 <td >--</td>
 <td >--</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp;&nbsp;As a percent of GDP</td>
 <td >--</td>
 <td >--</td>
 <td >3.9%</td>
 <td >3.5%</td>
 <td >3.2%</td>
 <td >2.5%</td>
 </tr>
 <tr class="grey3">
 <td class="firstcol" ></td>
 <td >% of Total</td>
 <td ></td>
 <td ></td>
 <td ></td>
 <td ></td>
 <td ></td>
 </tr>
 <tr>
 <td class="firstcol" >Net Revenues (Fiscal Year YTD 2018, Y/Y
 Change)</td>
 <td >100</td>
 <td >2.3%</td>
 <td >0.4%</td>
 <td >1.5%</td>
 <td >0.6%</td>
 <td >7.6%</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp;&nbsp;Individual Income Taxes</td>
 <td >51</td>
 <td >1.5</td>
 <td >6.1</td>
 <td >2.7</td>
 <td >0.3</td>
 <td >10.5</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp;&nbsp;Corporate Income Taxes</td>
 <td >--</td>
 <td >-8.6</td>
 <td >-31.1</td>
 <td >-0.8</td>
 <td >-12.9</td>
 <td >7.2</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp;&nbsp;Social Insurance Taxes</td>
 <td >35</td>
 <td >4.5</td>
 <td >0.8</td>
 <td >4.2</td>
 <td >4.7</td>
 <td >4.1</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp; Excise Taxes</td>
 <td >3</td>
 <td >15.1</td>
 <td >13.3</td>
 <td >-11.8</td>
 <td >-3.3</td>
 <td >5.3</td>
 </tr>
 <tr>
 <td class="firstcol" ></td>
 <td ></td>
 <td ></td>
 <td ></td>
 <td ></td>
 <td ></td>
 <td ></td>
 </tr>
 <tr>
 <td class="firstcol" >Net Outlays&nbsp; (Fiscal Year 2017 YTD,
 Y/Y % Change)</td>
 <td >100</td>
 <td >9.3</td>
 <td >3.2</td>
 <td >3.3</td>
 <td >4.5</td>
 <td >5.3</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp;&nbsp;National Defense</td>
 <td >16</td>
 <td >12.4</td>
 <td >5.3</td>
 <td >6.1</td>
 <td >0.7</td>
 <td >-2.3</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp;&nbsp;Health</td>
 <td >13</td>
 <td >5.3</td>
 <td >3.3</td>
 <td >-1.9</td>
 <td >6.2</td>
 <td >17.8</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp;&nbsp;Medicare</td>
 <td >14</td>
 <td >22.7</td>
 <td >-1.4</td>
 <td >0.6</td>
 <td >8.7</td>
 <td >6.7</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp;&nbsp;Income Security</td>
 <td >12</td>
 <td >7.6</td>
 <td >-1.6</td>
 <td >-2.1</td>
 <td >1.0</td>
 <td >-0.9</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp;&nbsp;Social Security</td>
 <td >24</td>
 <td >5.7</td>
 <td >4.5</td>
 <td >3.1</td>
 <td >3.2</td>
 <td >4.4</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp; Veterans Benefits &amp; Services</td>
 <td >4</td>
 <td >22.8</td>
 <td >1.3</td>
 <td >1.2</td>
 <td >9.3</td>
 <td >6.8</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp; Education, Training, Employment
 &amp; Social Services</td>
 <td >2</td>
 <td >5.2</td>
 <td >-34.0</td>
 <td >31.6</td>
 <td >-10.2</td>
 <td >34.7</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp;&nbsp;Interest</td>
 <td >8</td>
 <td >15.6</td>
 <td >23.6</td>
 <td >9.1</td>
 <td >7.8</td>
 <td >-1.8</td>
 </tr>
 </tbody>
</table>


</body>
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The U.S. Treasury Department reported that the federal government ran a $207.8 billion budget deficit during May compared to a $146.8 billion deficit one year earlier. A $198.2 billion deficit had been expected in the Action Economics [...]

U.S. Government Budget Deficit Deepens

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?

Heavy US manufacturing states underperforming while Sun Belt states outperforming

Rising long-term yields a global phenomenon

US financial market concerns shifting from growth to inflation

Economic activity is picking up in the US but remains lackluster abroad

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Andrew Cates

**The Blue Chip interest rate consensus**
The latest Blue Chip Financial Forecasts survey suggests that monetary policy across most major advanced economies is expected to loosen modestly over the next six months. Central banks in the US, Canada, UK, Australia, and the euro area are all forecast to cut rates to varying degrees, with Australia expected to deliver the largest reduction. In contrast, Japan continues to stand out as the only major economy where forecasters see scope for a slight increase in rates, highlighting its unique position in the global policy cycle. Overall, the chart reflects a broad but uneven tilt towards monetary easing as policymakers respond to softer inflation and growth signals.

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**The US dollar and data surprises** 
This next chart shows that the recent bout of US dollar weakness has coincided with a period in which US economic data surprises have turned more negative relative to the euro area. The surprise index differential between the US and euro area —measuring US growth surprises minus euro surprises—has declined, pointing to a run of weaker-than-expected US data and stronger euro area outturns. Historically, this has tended to pull the euro higher relative to the dollar. However, the scale of the dollar’s recent slide appears larger than the data surprises alone would imply, suggesting that other forces are potentially weighing on the currency as well.

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**US stagflation risk**
Latest ISM manufacturing survey data highlight a worrying decoupling between input costs and underlying demand that points to potential stagflation pressures in the US economy. Historically, the ISM New Orders Index and the Prices Paid Index have tended to move broadly in sync, reflecting cycles where stronger demand drives both production and cost pressures higher. However, the chart shows that while prices paid have recently rebounded sharply, new orders have remained subdued and stuck near contractionary territory. This breakdown suggests that firms are facing rising input costs without a corresponding pickup in demand—an imbalance that could be amplified by US tariff measures, which tend to push up costs for imported materials and components while weighing on new orders through weaker trade flows.

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**US Supply Chain Risks** 
Added to this, the number of vessels queuing at the Los Angeles and Long Beach harbours has climbed to elevated levels in recent weeks, highlighting supply chain bottlenecks on the US West Coast. While various factors may be driving this congestion—including seasonal trade patterns and shifts in global shipping routes—recent tariff measures could be contributing as well. New or increased tariffs sometimes distort normal trade flows by prompting importers to front-load shipments ahead of cost increases or reroute sourcing strategies in ways that strain particular ports.

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**Global warming** 
Pivoting to more structural issues, the next chart highlights the persistent upward trend in global surface temperature anomalies over the past century, with both land and ocean temperatures now averaging well over one degree Celsius. This long-term warming signal continues to manifest in extreme weather events and record-breaking heat waves, including the unusually high temperatures that have swept parts of Europe in recent days, pushing June readings to historic highs in several regions.

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**Climate change and productivity** 
This final chart illustrates the projected impact of heat stress on labour productivity in Europe under current climate policy scenarios, highlighting how rising temperatures could steadily erode worker efficiency over the coming decades. As shown, the median estimates from the Climate Analytics group suggest that productivity losses could deepen from around 0.3 percentage points today to nearly 0.9 percentage points by mid-century if climate conditions remain unchanged. These figures reflect the physical limits of the human body’s capacity to perform work in increasingly hot and humid environments, a challenge that will become more acute if climate change continues on its current path. With recent record-high June temperatures across parts of Europe underscoring the reality of more frequent heat extremes, these projections serve as a clear reminder of the economic stakes involved in addressing climate risks and investing in adaptation measures to protect labour productivity and economic resilience.

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Financial markets have remained generally buoyant in recent days, with global equity indices advancing on the back of relatively upbeat global growth data, benign European inflation readings and the prospect of further policy easing from major central banks. At the same time, the US dollar has continued to weaken, reflecting a run of disappointing US economic data and rising investor concerns about the fiscal outlook, even as European growth surprises have turned more positive. This divergence, combined with the prospect of lower US policy rates relative to some (though not all) peers, has added to the dollar’s drift lower (charts 1 and 2). Supply chain strains—highlighted by elevated vessel queues at US West Coast ports—also feed into the narrative that US tariff measures may be contributing to sticky input costs and stagflation risks (charts 3 and 4). Meanwhile, record temperatures in parts of Europe this week have reinforced the climate challenge facing policymakers, with the final two charts illustrating how rising global temperatures and heat stress could increasingly weigh on productivity and growth potential if left unchecked. With trading volumes light ahead of the July 4th holiday and markets awaiting tomorrow’s US non-farm payrolls report, the interplay between softer US data, resilient equities, a weaker dollar, and climate-related risks remains firmly in focus.

Charts of the Week: Headwinds and Heatwaves

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The ADP National Employment Report reported that nonfarm private sector payrolls declined 33,000 (+1.1% y/y) during June after rising 29,000 in May, revised from 37,000 and increasing an unrevised 60,000 in April. It was the first monthly decline since March 2023. A 110,000 June rise had been expected in the in the Action Economics Forecast Survey.

Small business hiring (less than 50 employees) declined 47,000 (+0.4% y/y), after falling 13,000 in May. These were the first back-to-back monthly declines since the end of 2023. Employment at medium-sized firms (50-499,000 employees) declined 15,000 (1.1% y/y), after rising 46,000 in May, revised from 49,000. Large business hiring (500+ employees) increased 30,000 (2.7% y/y) after easing 4,000 in May.

Goods-producing employment rose 32,000 (1.4% y/y) in June after falling a minimally revised 3,000 in May. Manufacturing jobs increased 15,000, unchanged y/y, following a 6,000 decline in May. The number of construction sector jobs rose 9,000 (2.8% y/y) after increasing 6,000 in May. Natural resources & mining jobs rose 8,000 (4.3% y/y) in June after falling 3,000 in May.

The decline in payrolls overall reflected weakness in the service sector where the number of service-producing jobs declined 66,000 last month (+1.1% y/y) after increasing 32,000 in May, revised from 36,000. Professional & business services employment fell 56,000 (+0.2% y/y), after declining 13,000 in May. These weak readings came after a 1,000 April gain and a 46,000 March increase. Education & health services employment declined 52,000 (+0.8% y/y), the third consecutive month of decline. Employment in the financial industry weakened 14,000 (+1.8% y/y) last month, after rising 17,000 in May.

Offsetting these declines, leisure & hospitality employment increased 32,000 in June (3.2% y/y), following a 43,000 May gain. Monthly increases have averaged 36,000 this year. Trade, transportation & utilities employment increased 14,000 (0.3% y/y) after falling 8,000 in May. Information sector employment rose 5,000 (0.2% y/y) after a 4,000 May increase and a 10,000 April decline. Employment in “other” services sectors rose 5,000 in June (2.9% y/y), the same as in May.

Growth in median annual pay for "job stayers" slipped to 4.4% y/y in June, down from a high of 7.8% in September 2022. Manufacturing sector pay grew 4.6% y/y, steady with May. Construction sector pay also rose a steady 4.6% y/y. Natural resource & mining sector pay grew 4.5% y/y last month. Financial sector earnings rose an improved 5.2% y/y, while education & health services pay rose a lessened 4.6% y/y. Leisure & hospitality pay increased 4.7% y/y in June. Professional & business service sector pay increased a lessened 4.2% y/y as did trade, transportation & utilities pay, up 4.2% y/y. Information pay rose a lessened 4.1% y/y. Median annual pay for “job changers” rose 6.8% y/y in June, down from a high of 16.1% y/y in April 2022.

By region, employment in the Midwest declined 24,000 (+1.3% y/y) to 28,761 million after a 17,000 rise in May. Employment in the West, declined 20,000 to 31,363 million (+0.5% y/y) last month, and reversed a 31,000 rise during May. Employment in the Northeast fell 3,000 to 24,116 million (+1.4% y/y) in June, following a 23,000 decline in May. Partially offsetting these declines, in the South employment increased 13,000 to 50,092 million (1.0% y/y) in June, after rising 2,000 in May.

The ADP National Employment Report and Pay Insights data can be found in Haver's **USECON** database. Historical figures date back to January 2010 for private employment. Pay data date back to October 2020. The expectation figure is available in Haver's **AS1REPNA** database.

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- Employment declines in several service industries; factory & building industry jobs rise.
- Wage growth moderates further.
- Small- & medium-sized shed jobs.

U.S. ADP Payroll Employment Unexpectedly Declines in June

Winnie Tapasanun

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Mortgage applications rose 2.7% w/w (24.7% y/y) in the week ending June 27 after a 1.1% rise in the week ending June 20, according to the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey. The latest reading was the third w/w rise in four weeks to the index level of 257.5, the highest since the April 11 week. Applications for loans to purchase a house inched up 0.1% (15.7% y/y) in the June 27 week, the first w/w increase in three weeks, following a 0.4% decline in the June 20 week. Applications for loan refinancing advanced 6.5% (39.6% y/y) in the June 27 week, up for the third week in four, after a 3.0% rebound in the previous week.

The effective interest rate on a 30-year fixed-rate loan fell 9bps to 6.97% in the week ending June 27 after rising to 7.06% in the week ending June 20; it was up from a low of 6.29% in the September 20 week but down from a peak of 8.12% in the week of October 20, 2023. The rate on 15-year fixed-rate mortgages declined 6bps to 6.23% in the June 27 week after easing to 6.29% in the previous week; it was up from a low of 5.60% in the September 20 week but down from a high of 7.44% in the week of October 27, 2023. The rate on 30-year jumbo loans dropped 16bps to 6.89% in the June 27 week after rising to 7.05% in the prior week; it was up from a low of 6.57% in the September 13 week but below a high of 7.99% in the week of October 27, 2023. These mentioned three rates were at the lowest since the April 4 week. The rate on a 5-year ARM decreased 15bps to 6.21% in the June 27 week, the lowest since the May 2 week, after rising to 6.36% in the previous week; it was above a low of 5.84% in the September 13 week but below a high of 7.31% in the week of October 27, 2023.

The share of applications for refinancing an existing loan rose to 40.1% of total applications in the week ending June 27 from 38.4% in the week ending June 20, registering the fifth consecutive w/w rise and the highest since the April 11 week; nevertheless, that was well below a peak of 55.7% in the September 20 week. The adjustable-rate mortgage (ARM) share of activity, up for the first week in three, increased to 7.8% in the June 27 week, the highest since the May 2 week, after declining to 6.9% in the prior week; it was up from a low of 4.7% in the January 3 week but below its recent high of 9.6% in the April 11 week and a high of 10.7% in the week of October 27, 2023.

The average size of a mortgage loan, up for the first time in three weeks, rose 3.5% w/w (4.4% y/y) to $391,500 in the June 27 week, the highest level since the May 9 week, after a 0.5% decline to $378,300 in the June 20 week. The average size of a purchase loan recovered 1.7% (2.1% y/y) to $443,500 in the June 27 week, the highest level since the May 16 week, reversing a 0.6% decrease to $436,300 in the prior week. The average size of a loan to refinance a mortgage, up for the third week in four, jumped 10.0% (17.1% y/y) to $313,700 in the June 27 week, the highest level since the May 2 week, on top of a 1.2% rebound to $285,100 in the previous week.

The Mortgage Bankers Association Survey covers 75% of all U.S. retail residential mortgage applications and has been conducted weekly since 1990. Respondents include mortgage bankers, commercial banks and thrifts. The base period and value for all indexes is March 16, 1990=100. The figures for weekly mortgage applications and interest rates are available in Haver’s **SURVEYS** database.

- Purchase applications edge up 0.1% w/w; refinancing loan applications jump 6.5% w/w.
- Effective interest rate on 30-year fixed-rate loans drops to 6.97%, the lowest since the Apr. 4 week.
- Average loan size rebounds to the highest level since the May 9 week.

U.S. Mortgage Applications Rise 2.7% in the June 27 Week

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The EU unemployment rate fell to within a tick of its all-time low in April at 5.9% and stayed there in May. In the European Monetary Union (EMU), the unemployment rate in April fell from 6.4% in March to 6.2% in April, its all-time low; then in May it ticked up to 6.3%. This can hardly be construed as a weakening of the European labor market.

At the same time, the EMU HICP has registered 2% growth year-over-year in June. In May it was at 1.9% with the core up at a 2.4% rise year-over-year. In June, Italian and Spanish core readings are 2.1% and 2.2%, respectively. In Germany, ex-energy inflation is at 2.5%. The core for the EMU is not yet available but clearly inflation, broadly considered, is very close to touching all the bases the ECB wants it to touch. And at the same time, Europe’s rate of unemployment is at or near all-time lows at least since the EMU was formed. That looks almost like policy nirvana.

The Monetary Union is experiencing low inflation rates even for those countries (largely Mediterranean countries) that had stubbornly high inflation rates in the past. Interestingly, those formerly high-inflation countries have substantially reduced their rates of unemployment. In the U.S., it was the long low, extra-low, inflation span after the Great recession that brought the inflation rate down slowly but eventually to 50–60-year lows. The U.S. rate got to 3.5% under Trump and briefly to 3.4% under Biden. Now with similar inflation progress -and for the EMU, there is a long train of progress not looking just since Covid but looking at the collective progress since the EMU was formed.

Among the 12 EMU members listed in the table, only three Luxembourg, Finland, and Austria have unemployment rates above their median rate compared to data since 1994. Spain’s unemployment rate is still in double digits at 10.8% but is much lower than it used to be. The Greek unemployment rate is at 7.9%; Portugal’s is at 6.3%. Spain’s unemployment rate is in the 15th percentile of its ordered queue of rates; the Greek rate has been lower only 3% of the time; in Portugal, the current rate has been lower less than 20% of the time. Low inflation and low unemployment go hand in hand. But when they diverge, the solution is not to coddle unemployment. It is to backdown inflation to allow the economy to move forward thereafter and prosper with lower inflation and lower unemployment in the future. I don’t think this lesson has been broadly enough learned, but looking at Europe and the U.S. the lesson simply presents itself with exceptional clarity.

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Unemployment Rates Remain Low, Stable

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U.S. light vehicle sales dipped 0.5% (+2.4% y/y) to 15.65 million units (SAAR) in June after falling 8.8% to 15.73 million units in May. The retreat in June vehicle sales accompanied a 1.7% y/y rise in real disposable income through May, which compared to 2.1% growth last year.

Sales declines were mixed last month. Light truck sales fell 0.4% (+4.9% y/y) during June to 12.97 million units (SAAR), after falling 8.9% to 13.02 million in May and weakening 1.7% in April to 14.29 million. Purchases of domestically-made light trucks declined 1.8% (+4.6% y/y) to 9.99 million units, after falling 7.5% in May. Sales of imported light trucks rose 4.6% (5.7% y/y) to 2.97 million units, following a 14.5% fall during May.

Trucks’ record 83.0% share of the light vehicle market last month compared to 82.8% in May and 80.8% in June of last year. The share averaged 80.3% during all of 2024 versus 53.3% ten years earlier.

Auto sales rose a slight 0.4% last month, down 8.5% y/y, to 2.69 million units (SAAR) following an 8.8% May decline. Purchases of domestically-produced cars were off 2.5% (-9.2% y/y) last month to 1.98 million units, after declining 8.6% in May. Sales of imported autos rose 9.2% (-6.6% y/y) to 0.71 million units, following a 12.2% May decline.

Imports' 23.5% share of the U.S. light vehicle market was increased from 22.2% in May. It compared 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 rose to 26.4% last month and compared to 25.9% in June of last year. It reached a high of 38.7% in September 2021. Imports' share of the light truck market rose to 22.9% last month after falling to 21.8% in May.

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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- Light truck sales ease while auto sales improve.
- Domestic sales tumble but imports increase.
- Imports' market share recovers May decline.

Economy in Brief: June 2019

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