Gerald D. Cohen

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Industrial production jumped a greater-than-expected 0.6% (3.9% year-on-year) during November following a downwardly revised 0.2% decline in October (was +0.1%). The 0.1% gain in September output was revised from 0.2%. The Action Economics Survey forecast 0.3% growth in November. Manufacturing activity was unchanged (1.9% y/y) during November, while the two prior months were revised lower. Utilities output generated 3.3% (4.4% y/y) while mining production fired up 1.7% (13.2% y/y).

The flat reading in manufacturing belied offsets between durable goods (+0.2%; 3.7% y/y) and nondurables (-0.2%; +0.7% y/y). Durable goods production was bolstered by gains in machinery (0.5%; 6.2% y/y), motor vehicles (0.3%; 3.5% y/y), and computer output (0.2%; 5.1% y/y). Meanwhile, aerospace edged down 0.1% (+2.8% y/y). In the nondurable sector the 0.6% (+2.0% y/y) growth in chemical production was more than counterbalanced by declines in food (-0.5%; +1.1% y/y), petroleum and coal (-1.7%;
-2.5% y/y), as well as printing (-1.0%; -1.7% y/y).

By market group, consumer goods output edged up 0.1% (1.5% y/y) in November. Meanwhile, business equipment declined 0.2% (+4.1% y/y) after strong gains in the previous three months. Construction supplies weakened 0.2% (+1.3% y/y), the third consecutive monthly decline. Production of materials jumped 1.2% (+6.1% y/y) as energy materials sizzled 2.3% (11.6% y/y).

In the special aggregate groupings, production of high technology products rebounded 1.6% (7.6% y/y) after two monthly declines. This was the result of strong gains in semiconductor & electronic components (2.1%; 10.1% y/y) and computer & office equipment (2.8%; 4.4 y/y). Factory sector production excluding the motor vehicle and high tech sectors edged down 0.1% (+1.6% y/y).

Capacity utilization increased to 78.5% in November, in line with the expectations from Action Economics Survey. Factory sector use edged down to 75.7%. Mining rebounded to 94.1%, near September’s business cycle high of 94.2%. Growth in capacity in the manufacturing sector continues to accelerate, up a cyclical high 1.3% y/y in November.

Industrial production and capacity data are included in Haver's
USECON database, with additional detail in the IP database. The expectations
figures come from 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" >Industrial Production (SA, %
 Change)</th>
 <th scope="col" >Nov</th>
 <th scope="col" >Oct</th>
 <th scope="col" >Sep</th>
 <th scope="col" >Nov Y/Y</th>
 <th scope="col" >2017</th>
 <th scope="col" >2016</th>
 <th scope="col" >2015</th>
 </tr>
 </thead>
 <tbody>
 <tr>
 <td class="firstcol" >Total Output</td>
 <td >0.6</td>
 <td >-0.2</td>
 <td >0.1</td>
 <td >3.9</td>
 <td >1.6</td>
 <td >-2.0</td>
 <td >-1.0</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >Manufacturing</td>
 <td >0.0</td>
 <td >-0.1</td>
 <td >0.2</td>
 <td >1.9</td>
 <td >1.2</td>
 <td >-0.8</td>
 <td >-0.6</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp;&nbsp;&nbsp; Consumer Goods</td>
 <td >0.1</td>
 <td >0.0</td>
 <td >0.2</td>
 <td >1.5</td>
 <td >0.0</td>
 <td >0.7</td>
 <td >1.5</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp;&nbsp;&nbsp; Business Equipment</td>
 <td >-0.2</td>
 <td >0.6</td>
 <td >1.1</td>
 <td >4.1</td>
 <td >3.2</td>
 <td >-5.3</td>
 <td >-2.0</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp;&nbsp;&nbsp; Construction Supplies</td>
 <td >-0.2</td>
 <td >-0.3</td>
 <td >-0.6</td>
 <td >1.3</td>
 <td >2.5</td>
 <td >0.9</td>
 <td >0.6</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp; Materials</td>
 <td >1.2</td>
 <td >-0.4</td>
 <td >0.0</td>
 <td >6.1</td>
 <td >2.0</td>
 <td >-3.0</td>
 <td >-1.5</td>
 </tr>
 <tr>
 <td class="firstcol" >Utilities</td>
 <td >3.3</td>
 <td >0.2</td>
 <td >-1.2</td>
 <td >4.4</td>
 <td >-1.3</td>
 <td >-0.4</td>
 <td >-0.8</td>
 </tr>
 <tr>
 <td class="firstcol" >Mining</td>
 <td >1.7</td>
 <td >-0.7</td>
 <td >0.6</td>
 <td >13.2</td>
 <td >6.4</td>
 <td >-9.7</td>
 <td >-3.4</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >Capacity Utilization (%)</td>
 <td >78.5</td>
 <td >78.1</td>
 <td >78.4</td>
 <td >77.1</td>
 <td >76.1</td>
 <td >75.4</td>
 <td >77.3</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp;Manufacturing</td>
 <td >75.7</td>
 <td >75.8</td>
 <td >76.0</td>
 <td >75.3</td>
 <td >74.8</td>
 <td >74.6</td>
 <td >75.8</td>
 </tr>
 </tbody>
 </table>
 
</body></html>

Industrial production jumped a greater-than-expected 0.6% (3.9% year-on-year) during November following a downwardly revised 0.2% decline in October (was +0.1%). The 0.1% gain in September output was revised from 0.2%. The Action [...]

U.S. Industrial Production Rebounds

Tom Moeller

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Consumers continued to exhibit their inclination to spend as
holiday shopping got underway. Total retail sales rose 0.2% during November
(4.9% y/y) following a 1.1% October jump, revised from 0.8%. The latest increase
matched expectations in the Action Economics Forecast Survey. Excluding motor
vehicles and parts, retail sales gained 0.2% (5.7% y/y) after a 1.0% increase,
revised from 0.7%. A 0.3% improvement had been expected.

 A measure of the underlying pace of retail
spending is nonauto sales growth excluding gasoline and building materials.
These sales surged 0.9% (5.2% y/y) and built on a 0.7% October gain, revised from 0.3%.

Strength in sales was notable for online retailers whose
sales increased 2.3% (12.1% y/y) following two months of strong gain. Purchases at electronics &amp;
appliance stores similarly were firm as they rose 1.4% (5.0% y/y), about as they
did during the prior month. Furniture &amp; home furnishings store sales grew
1.2% (2.9% y/y) after a moderate decline. General
merchandise store sales gained 0.4% (4.2% y/y) after a 0.8% rise.
Sporting goods, hobby shop, book &amp; music store sales also improved 0.4%
(-7.8% y/y) following a 1.1% increase. Motor vehicle &amp; parts dealership
sales gained 0.2% (1.4% y/y) even as unit motor vehicle sales eased 0.2% m/m.

Reflecting lower prices, gasoline service station sales
declined 2.3% (+8.7% y/y) after a 3.2% jump. Also working lower were
clothing &amp; accessory store sales by 0.2% (+4.1% y/y) after two months of
firm increase. Building materials &amp; garden equipment store sales also were
weak. They fell 0.3% (+3.5% y/y) on the heels of a 1.5% strengthening.

Sales of nondiscretionary items were firm last month. Health
&amp; personal care product store sales increased 0.9% (3.6% y/y) after falling
for three straight months. Food &amp; beverage store sales gained 0.4% (3.3% y/y)
after a 0.3% rise.

Eating out was less in vogue during November as restaurant &amp; drinking
establishment sales declined 0.5% after a 0.6% increase, revised up from a
moderate decline. Sales have lost forward momentum, however, as the 6.9% y/y
increase moderated from 10.9% y/y growth just three months earlier.

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" >Nov</th>
 <th scope="col" >Oct</th>
 <th scope="col" >Sep</th>
 <th scope="col" >Nov Y/Y</th>
 <th scope="col" >2017</th>
 <th scope="col" >2016</th>
 <th scope="col" >2015</th>
 </tr>
 </thead>
 <tbody>
 <tr class="grey2">
 <td class="firstcol" >Total Retail Sales &amp; Food Services</td>
 <td >0.2</td>
 <td >1.1</td>
 <td >-0.2</td>
 <td >4.9</td>
 <td >4.3</td>
 <td >3.1</td>
 <td >2.6</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp;&nbsp;Excluding Autos</td>
 <td >0.2</td>
 <td >1.0</td>
 <td >-0.3</td>
 <td >5.7</td>
 <td >4.3</td>
 <td >2.7</td>
 <td >1.4</td>
 </tr>
 <tr class="grey2">
 <td class="firstcol" >Retail Sales</td>
 <td >0.3</td>
 <td >1.2</td>
 <td >-0.0</td>
 <td >4.6</td>
 <td >4.5</td>
 <td >2.8</td>
 <td >1.9</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp;&nbsp;Motor Vehicle &amp; Parts</td>
 <td >0.2</td>
 <td >1.5</td>
 <td >-0.0</td>
 <td >1.4</td>
 <td >4.3</td>
 <td >4.6</td>
 <td >7.2</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp;Retail Less Autos</td>
 <td >0.4</td>
 <td >1.1</td>
 <td >-0.0</td>
 <td >5.5</td>
 <td >4.5</td>
 <td >2.2</td>
 <td >0.4</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp;&nbsp;Gasoline Stations</td>
 <td >-2.3</td>
 <td >3.2</td>
 <td >-1.3</td>
 <td >8.7</td>
 <td >8.8</td>
 <td >-5.7</td>
 <td >-17.6</td>
 </tr>
 <tr class="grey2">
 <td class="firstcol" >Food Service &amp; Drinking Places
 Sales</td>
 <td >-0.5</td>
 <td >0.6</td>
 <td >-1.6</td>
 <td >6.9</td>
 <td >2.7</td>
 <td >5.6</td>
 <td >8.2</td>
 </tr>
 </tbody>
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Consumers continued to exhibit their inclination to spend as holiday shopping got underway. Total retail sales rose 0.2% during November (4.9% y/y) following a 1.1% October jump, revised from 0.8%. The latest increase matched [...]

U.S. Retail Sales Start Holiday Season on Solid Ground

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The U.S. Treasury Department reported that the federal
government ran a $204.9 billion budget deficit during November. The deficit compared to a shortfall of
$138.5 billion during November 2017. A $165 billion deficit had been expected in the Action
Economics Forecast Survey. So far this fiscal year, the federal government ran a
$305.4 billion budget deficit compared to a $201.8 billion deficit in the first
two months of last fiscal year.

Net revenues increased 3.4% y/y so far this fiscal year. Individual income taxes
declined 1.9% y/y, compared to a 6.1% rise during all of FY'17. Social insurance receipts rose 3.0% y/y following
last year's 0.8% gain, and excise taxes rose by roughly one-half y/y after last year's
13.3% increase. Corporate income taxes declined 23.0% due to the tax cut.

Government spending increased 18.4% y/y so far this fiscal
year. National defense spending rose 16.8% y/y after a 5.3% gain last
year. Health insurance spending increased 4.0% y/y while Medicare outlays rose
by nearly two-thirds y/y. Growth in income security payments surged 29.7% y/y. Social Security
payments increased a steady 5.1% y/y. Interest payments rose 9.0% y/y with
the larger budget deficit.

Receipt &amp; outlay figures often are quite variable y/y
near the start of a new fiscal 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" >Nov</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 >$-204.9</td>
 <td >$-779.0</td>
 <td >$-665.8</td>
 <td >$-585.6</td>
 <td >$-439.1</td>
 </tr>
 <tr class="odd">
 <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 >3.4%</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 >-1.9</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 >-23.0</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 >3.0</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 >51.3</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 >18.4</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 >16.8</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 >4.0</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 >60.1</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 >29.7</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 >5.1</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 >84.5</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 >13.7</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 >9.0</td>
 <td >23.6</td>
 <td >9.1</td>
 <td >7.8</td>
 <td >-1.8</td>
 </tr>
 </tbody>
 </table>
 
</body></html>

The U.S. Treasury Department reported that the federal government ran a $204.9 billion budget deficit during November. The deficit compared to a shortfall of $138.5 billion during November 2017. A $165 billion deficit had been [...]

U.S. Government Budget Deficit Surges Unexpectedly

Robert Brusca

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	 Then What? The Role of Trade...
 
 
 
 

<a href="/comment/181213e.png" name="modal"><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/181213e.png" align="left"></a>
The ECB targets inflation of just under 2%. The ECB claims (without any proof that I am sure of…) that inflation that is below but close to 2% allows the economy to reap maximum benefits. This month the HICP is up at 2% or 1.96% if we split hairs and carry more decimal places. And splitting hairs drops the HICP back down into the ECBs' sweet spot.

Headline inflation had been ‘too high' for four months running. Prior to that, from June 2018 through February 2013, it had been constantly ‘too low' much farther below 2% than ‘just a bit.' The core rate on the other hand has been running at a pace below 2% since January 2009. The core (the HICP excluding energy and unprocessed foods) has no official standing. But with the economy having underperformed and with Mario Draghi as the ECB head, the bank has been emphasizing the core gauge over the headline rate especially since oil prices have been gyrating and have been the main reason that headline inflation has come close to or exceeded its mandated profile in its recent oscillations.

Still, the ECB has its stalwarts. There is a important cadre of board members that views inflation as relative to target on the headline gauge month-to-month with no institutional memory of the past.

Germany continues to overshoot the ECB's global gauge of 2% although the German ex-energy rate is still running below 2%. The German headline pace is accelerating from 12-months to six-months to three-months although the ex-energy profile is not as clear cut at that. Of course, German inflation is simply inflation in Germany and has no official policy standing at the ECB.

Bon voyage ECB 
Needless to say, a split view on policy continues under the surface at the ECB, with inflation hawks looking to a return of policy to normalcy. The ECB did take that step today by agreeing to end its program of QE. The ECB will end this program in December in line with what it had tentatively agreed to previously. The ECB joins the Fed on is voyage to normalcy.


<img border="0" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/181213.png" width="660" height="290">


It does so in an environment in which headline inflation is back in line and has been consistently well contained over the past five years, in an environment with falling global oil prices and at a time when growth in the euro area has been withering.

The ECB has no growth mandate and only has an inflation mandate. With the special QE program ended, the ECB can look ahead to normalizing its functioning and eventually to raising interest rates back to more normal levels...conditions permitting.

Yesterday European industrial production rose after a sharp drop prompting headlines saying that European growth is back on track. I think that assessment is premature.

The Markit indexes for manufacturing and services for the EMU are still weak and withering. Trade conflicts endure and that is a major element of risk to any outlook.

What activity on the trade front means for growth 
China's recent grab of a former Canadian diplomat and its action to probe a second Canadian for security violations are ample evidence that China is not and may never be Free Trader simply because it cannot be trusted to separate political from economic matters. For China, everything is political. Free trade works best in an environment with capitalism and freedom… while China is a communist country. China seems to treat its corporate executives as though they are important party members first.

China owns companies. It directs bank lending. It has a national policy to steal and transfer technology. It does not recognize trademarks. It grabbed the South China Sea and thumbed its nose at the World Court when it said essentially ‘give it back.' How does one trade ‘freely' with an entity like that that does not respect the rule of law? China also controls its exchange rate, another clear free trade no-no.

The risk of a trade war remains high. I would judge the probability of emerging from this episode with anything that even mimics free trade as being extremely low. People who thought we were ‘close enough to free trade before' probably think that baseball with 2 strikes and you're out and a walk on three balls is close enough to being real baseball too. In fact, I have no idea what a trade system would like or how it might imitate free trade given all the issues involved in integrating China as ‘trusted' partner is such a process.

Having said that, I will say also I am not sure what that means for the future. China and other Asian counties have co-opted the international trading system to become the low cost suppliers to the world fulfilling demand in the West and achieving the nirvana of export-led growth. They keep costs down in part by controlling their exchanger rates- something that is forbidden if there is real free trade. Of course, free trade is not really ever about having specialist consumer and producer countries. And when that happens, the sustainability of the trading system built on such a shaky base is called into question. No country can run deficits forever. Still, a system like that might endure for a substantial period of time before it blew itself up, especially if the persistent deficit country were rich enough to start. You can compare such a trading system to a hot air balloon with a slow leak. It will keep you up for a while and you may or may not have enough hot air to get to your destination depending on the size of the hole.

For now globally inflation – what little there is- is being stuffed back in the tube by falling oil prices. The Fed continues to shrink its balance sheet and may slow the procession of rates to their historic norms. The ECB is stopping its QE program. The BOE is still in a wait and see mode over Brexit where the odds increasingly are dicey and looking slanted toward a ‘bad' outcome.

While I am one of the few who is ‘happy' that the U.S. is finally pressuring China and others over unfair trade and trying to right unfair trade deals, there is a lot in the arena of international trade and finance that is broken and in dire need for fixing. Little enough of it is on the agenda. Chief among the broken parts is the exchange rate system. There is no surveillance of exchange rates and all too many countries (AKA governments) guide their rates according to some official policy goal. As long as that happens, Free Trade will remain elusive. That means the gains expected from Free Trade will not flow.

China is just too big and still has too many parts of it that are undeveloped to allow it to continue to develop as it has in the past. The cost of lost of jobs in the U.S. and elsewhere has been too high and already has become economically and politically destabilizing in the West. China must become a better consumer nation and must cut its relentless pursuit of domination through trade. Trade is supposed to be mutually beneficial –not warfare. Even the most cursory glimpse of trade patterns show that it is not and has not been that.

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The ECB targets inflation of just under 2%. The ECB claims (without any proof that I am sure of…) that inflation that is below but close to 2% allows the economy to reap maximum benefits. This month the HICP is up at 2% or 1.96% if we [...]

EMU Inflation Falls Back into Place

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 Import prices fell 1.6% (+0.7% y/y) during November following an
 unrevised 0.5% October rise. A 0.1% uptick had been expected in the Action Economics
 Forecast Survey. These figures are not seasonally adjusted.

 The decline in import prices last month was led by a
 12.1% drop (+4.4% y/y) in petroleum import costs which followed a 2.7%
 rise. Nonpetroleum import prices eased 0.3% during November (+0.4% y/y)
 and reversed October's 0.2% increase. Industrial supplies &amp; materials costs
 declined 5.3%% (+3.2% y/y), with lower oil prices, as it followed a 1.4% rise.
 Industrial materials prices excluding petroleum ticked 0.1% higher (2.5% y/y)
 after a 0.5% increase. Capital goods prices eased 0.1% (-0.2% y/y) following
 stability during the prior month. Motor vehicle &amp; parts prices held steady
 (+0.3% y/y) for the fourth month in the last five. Nonauto consumer goods
 prices also were unchanged (0.4% y/y) following a 0.3% decline.

 Export prices declined 0.9% during November (+1.8% y/y)
 after a 0.5% gain, revised from 0.4%. A 0.4% decline in prices had been expected.

 Agricultural commodities prices increased 1.8% last month
 (-1.7% y/y) after easing 0.2% in October. Nonagricultural costs declined
 1.0% (+2.2% y/y) after a 0.5% rise. Foods, feeds &amp; beverage prices improved 1.9% (-1.4% y/y)
 following a 0.2% gain. The cost of industrial supplies &amp; materials
 weakened 3.0% (+4.0% y/y) after rising 1.4%. Excluding fuels &amp; building materials,
 these prices slipped 0.2% (+2.5% y/y). Capital goods prices held steady (1.5% y/y) for the third straight
 month. Motor vehicle &amp; parts prices eased 0.1% (+0.7% y/y) and have
 been little-changed for four consecutive months. Nonauto consumer goods prices
 also slipped 0.1% (+0.4% y/y) after holding steady for four straight months.

 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/USECON/@E8/@E807/@E807.HTM">Import/Export
 Prices (NSA, %)</a></th>
 <th scope="col" >Nov</th>
 <th scope="col" >Oct</th>
 <th scope="col" >Sep</th>
 <th scope="col" >Nov Y/Y</th>
 <th scope="col" >2017</th>
 <th scope="col" >2016</th>
 <th scope="col" >2015</th>
 </tr>
 </thead>
 <tbody>
 <tr>
 <td class="firstcol" >Imports - All Commodities</td>
 <td >-1.6</td>
 <td >0.5</td>
 <td >0.0</td>
 <td >0.7</td>
 <td >2.9</td>
 <td >-3.3</td>
 <td >-10.2</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp;&nbsp;Petroleum &amp;
 Petroleum Products</td>
 <td >-12.1</td>
 <td >2.7</td>
 <td >0.0</td>
 <td >4.4</td>
 <td >26.6</td>
 <td >-19.7</td>
 <td >-46.0</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp;&nbsp;Nonpetroleum</td>
 <td >-0.3</td>
 <td >0.2</td>
 <td >0.1</td>
 <td >0.4</td>
 <td >1.1</td>
 <td >-1.5</td>
 <td >-2.8</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >Exports - All Commodities</td>
 <td >-0.9</td>
 <td >0.5</td>
 <td >0.0</td>
 <td >1.8</td>
 <td >2.4</td>
 <td >-3.2</td>
 <td >-6.3</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp;&nbsp;Agricultural</td>
 <td >1.8</td>
 <td >-0.2</td>
 <td >-1.2</td>
 <td >-1.7</td>
 <td >1.5</td>
 <td >-5.4</td>
 <td >-13.3</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp;&nbsp;Nonagricultural</td>
 <td >-1.0</td>
 <td >0.5</td>
 <td >0.2</td>
 <td >2.2</td>
 <td >2.5</td>
 <td >-3.0</td>
 <td >-5.5</td>
 </tr>
		 </tbody>
		 </table>
		 
</body></html>

Import prices fell 1.6% (+0.7% y/y) during November following an unrevised 0.5% October rise. A 0.1% uptick had been expected in the Action Economics Forecast Survey. These figures are not seasonally adjusted. The decline in import [...]

U.S. Import Prices Weaken As Petroleum Prices Fall; Export Prices Also Decline

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Initial claims for unemployment insurance fell to 206,000
(-7.6% y/y) during the week ended December 8 from 233,000 during the prior week,
revised from 231,000. Initial claims were near the lowest level since 1969.
The Action Economics Forecast Survey expected 227,000
initial claims. The four-week moving average of initial claims
eased to 224,750. During the last ten years there has been a 73% between the
level of initial claims and the m/m change in nonfarm payrolls.

Continuing claims for unemployment insurance fell to 1.661 million
(-11.7% y/y) in the week ending December 1, from a little-revised 1.636 million in the
prior week. The four-week moving average of continuing claims slipped to 1.666 million.

The insured unemployment rate ticked higher to 1.2% but remained near
the record low. The insured unemployment figures date back to 1971.

Insured rates of unemployment vary widely by state. During
the week ending November 24, the lowest rates were in South Dakota (0.35%),
Nebraska (0.41%), North Carolina (0.44%), Indiana (0.49%) and Florida (0.51%).
The highest rates were in Illinois (1.53%), Pennsylvania (1.71%),
Connecticut (1.82%), California (1.85%), New Jersey (2.16%) and Alaska (3.13%). Among the other
largest states by population, the rate was 0.91% in Ohio, 1.01% in Texas, 1.50%
in New York, 0.69% in Georgia and 0.54% in Virginia.
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
from the Action Economics Forecast Survey, carried 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>12/08/18</th>
 <th>12/01/18</th>
 <th>11/24/18</th>
 <th>Y/Y %</th>
 <th>2017</th>
 <th>2016</th>
 <th>2015</th>
 </tr>
 </thead>
 <tbody>
 <tr>
 <td class="firstcol" >Initial Claims</td>
 <td >206</td>
 <td >233</td>
 <td >235</td>
 <td >-7.6</td>
 <td >245</td>
 <td >263</td>
 <td >278</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >Continuing Claims</td>
 <td >--</td>
 <td >1,661</td>
 <td >1,636</td>
 <td >-11.7</td>
 <td >1,961</td>
 <td >2,136</td>
 <td >2,267</td>
 </tr>
 <tr>
 <td class="firstcol" >Insured Unemployment Rate (%)</td>
 <td >--</td>
 <td >1.2</td>
 <td >1.1</td>
 <td >
 1.3 
 (Dec. 2017)
 </td>
 <td >1.4</td>
 <td >1.6</td>
 <td >1.7</td>
 </tr>
 </tbody>
 </table>
 
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Initial claims for unemployment insurance fell to 206,000 (-7.6% y/y) during the week ended December 8 from 233,000 during the prior week, revised from 231,000. Initial claims were near the lowest level since 1969. The Action [...]

U.S. Initial Unemployment Insurance Claims Decline

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The Mortgage Bankers Association reported that its total
Mortgage Applications Index rose 1.6% (-13.2% y/y) during the week ended
December 7, the third consecutive monthly gain. Applications to purchase a home
jumped 2.5% (3.3% y/y) after a 0.8% rise, while applications to refinance a mortgage
increased 1.8% (-33.5% y/y) after a 6.2% improvement during the prior week.

The effective interest rate on a 15-year fixed-rate mortgage
slipped w/w to 4.52%, down from a 4.71% high in early November. The rate
remained above the 3.01% averaged in July 2016. The effective rate on a 30-year
fixed-rate loan fell to 5.09%. The rate on a Jumbo 30-year loan eased to 4.89%, and
for adjustable 5-year mortgages, the effective interest rate was little changed at 4.37%.

The average mortgage loan size increased to $292,200 (4.7%
y/y). For purchases, the average loan size rose to $308,000 (0.8% y/y)
compared to a higher $269,900 (5.9% y/y) for refinancings.

Applications for fixed-rate loans fell 15.1% y/y while
applications for adjustable-rate loans increased 17.2% y/y.

The survey covers over 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 SURVEYW 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" >MBA Mortgage Applications (%,
 SA)</th>
 <th scope="col" >12/07/08</th>
 <th scope="col" >11/30/18</th>
 <th scope="col" >11/23/18</th>
 <th scope="col" >Y/Y</th>
 <th scope="col" >2017</th>
 <th scope="col" >2016</th>
 <th scope="col" >2015</th>
 </tr>
 </thead>
 <tbody>
 <tr class="odd">
 <td class="firstcol" >Total Market Index</td>
 <td >1.6</td>
 <td >2.0</td>
 <td >5.5</td>
 <td >-13.2</td>
 <td >-17.8</td>
 <td >15.6</td>
 <td >17.9</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp;Purchase</td>
 <td >2.5</td>
 <td >0.8</td>
 <td >8.8</td>
 <td >3.3</td>
 <td >5.6</td>
 <td >13.3</td>
 <td >15.5</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp;Refinancing</td>
 <td >1.8</td>
 <td >6.2</td>
 <td >0.5</td>
 <td >-33.5</td>
 <td >-34.0</td>
 <td >17.3</td>
 <td >19.7</td>
 </tr>
 <tr>
 <td class="firstcol" >15-Year Mortgage Effective Interest Rate
 (%)</td>
 <td >4.52</td>
 <td >4.65</td>
 <td >4.65</td>
 <td >3.72 (Dec.'17)</td>
 <td >3.59</td>
 <td >3.22</td>
 <td >3.47</td>
 </tr>
 </tbody>
 </table>
 
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The Mortgage Bankers Association reported that its total Mortgage Applications Index rose 1.6% (-13.2% y/y) during the week ended December 7, the third consecutive monthly gain. Applications to purchase a home jumped 2.5% (3.3% y/y) [...]

U.S. Mortgage Loan Applications Post Another Strong Increase

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The Consumer Price Index held steady during November (2.2%
y/y) following a 0.3% October rise. The result matched expectations in the
Action Economics Forecast Survey. The CPI excluding food &amp; energy improved
an expected 0.2% (2.2% y/y) for a second month.

The rise in the &quot;core&quot; CPI reflected the fourth
consecutive 0.2% increase in services prices. The gain was paced by a 0.5%
increase (2.3% y/y) in recreation services costs which followed stability in
October. A 0.4% rise (2.4% y/y) in medical care services prices came after two
months of 0.2% gain. A 0.3% increase (3.2% y/y) in shelter prices reflected a
0.4% strengthening (3.6% y/y) in rents of primary residences which followed two
months of 0.3% increase. The owners' equivalent rent of primary residences rose
0.3% (3.3% y/y) for a second straight month. Hotel costs improved 0.2% (-1.5%
y/y). Education &amp; communication costs declined 0.4% (+0.6% y/y), dragged
down by a 1.6% decline (-2.1% y/y) in telephone service charges. Tuition other
school fees rose 0.3% (2.7% y/y). Working 0.3% lower (-0.9% y/y) was the cost of
public transportation.

Goods prices less food &amp; energy improved 0.2% as used car
&amp; truck prices jumped 2.4% (2.3% y/y) after a 2.6% increase. Also firm were
medical care product prices as they increased 0.4% (0.6% y/y) after four
straight months of decline. New vehicle prices were roughly unchanged (0.3% y/y)
after two months of decline. Recreation goods prices also held steady (-3.0%
y/y) while video &amp; audio equipment costs fell 0.8% (-12.1% y/y). Apparel
prices also declined by 0.9% (-0.4% y/y) after a 0.1% uptick.

Food prices increased 0.2% (1.4% y/y) as cereal &amp; bakery
product prices strengthened 0.6% (1.3% y/y) and made up October's decline. Meat,
poultry &amp; fish prices rose 0.4% (0.2% y/y) while egg prices declined 0.8%
(3.6% y/y). Dairy product prices eased 0.2% (-0.5% y/y) while the cost of fruits
&amp; vegetables held steady (-0.1% y/y). Nonalcoholic beverage prices
declined 0.4% (+1.0 y/y).

Energy product prices declined 2.2% as gasoline prices
dropped 4.2% (+5.0% y/y) and reversed the October increase. Fuel oil prices also
weakened by 2.9% (+16.1% y/y) after a 3.7% rise. The price of electricity rose
0.3% (0.6% y/y) following a 2.3% jump and natural gas prices improved 0.3% (-2.1% y/y).

The gain in consumer prices caused real average hourly
earnings to rise 0.3% (0.8% y/y) and recover the decline during October.

The consumer price data can be found in Haver's USECON
database with additional detail in CPIDATA. The Action Economics survey
figure is in the AS1REPNA database.

Labor Market Not Overly Tight, Demographically Adjusted
Measure Shows from the Federal Reserve Bank of Dallas can be found
<a href="https://www.dallasfed.org/~/media/documents/research/eclett/2018/el1810.pdf">here</a>.

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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" >Consumer Price Index, All
 Urban Consumers (% chg)</th>
 <th scope="col" >Nov</th>
 <th scope="col" >Oct</th>
 <th scope="col" >Sep</th>
 <th scope="col" >Nov Y/Y</th>
 <th scope="col" >2017</th>
 <th scope="col" >2016</th>
 <th scope="col" >2015</th>
 </tr>
 </thead>
 <tbody>
 <tr>
 <td class="firstcol" >Total</td>
 <td >0.0</td>
 <td >0.3</td>
 <td >0.1</td>
 <td >2.2</td>
 <td >2.1</td>
 <td >1.3</td>
 <td >0.1</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >Total less Food &amp; Energy</td>
 <td >0.2</td>
 <td >0.2</td>
 <td >0.1</td>
 <td >2.2</td>
 <td >1.8</td>
 <td >2.2</td>
 <td >1.8</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp;&nbsp;Goods less Food &amp; Energy</td>
 <td >0.2</td>
 <td >0.3</td>
 <td >-0.3</td>
 <td >0.2</td>
 <td >-0.7</td>
 <td >-0.5</td>
 <td >-0.5</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp;&nbsp;Services less Energy</td>
 <td >0.2</td>
 <td >0.2</td>
 <td >0.2</td>
 <td >2.9</td>
 <td >2.7</td>
 <td >3.1</td>
 <td >2.6</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp;Food</td>
 <td >0.2</td>
 <td >-0.1</td>
 <td >0.0</td>
 <td >1.4</td>
 <td >0.9</td>
 <td >0.3</td>
 <td >1.9</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp;Energy</td>
 <td >-2.2</td>
 <td >2.4</td>
 <td >-0.5</td>
 <td >3.1</td>
 <td >7.9</td>
 <td >-6.6</td>
 <td >-16.7</td>
 </tr>
 </tbody>
 </table>
 
</body></html>

The Consumer Price Index held steady during November (2.2% y/y) following a 0.3% October rise. The result matched expectations in the Action Economics Forecast Survey. The CPI excluding food & energy improved an expected 0.2% (2.2% [...]

U.S. CPI Is Unchanged; Core Prices Increase Steadily

USD/EUR exchange rate uncoupling from interest rate differential

Widespread downgrading of 2025 GDP outlook

Trade and fiscal policy uncertainty has exploded with the new administration

Much lower US electricity costs gives it a competitive advantage

Wage growth slowing in the US and Euro area; elevated and sticky in the UK

Stagflation-lite: Blue Chip forecasts below-trend growth and elevated inflation

US policy gyrations boosting policy uncertainty worldwide

Expected tariff hikes have boosted inflation expectations

US and Japan ended 2024 on solid ground in contrast to Europe

US economy expected to outperform other major economies in 2025

Only modest evidence of AI-related surge in US productivity growth

Previous Trump tariffs fading. A boost from new tariffs ahead?

Heavy US manufacturing states underperforming while Sun Belt states outperforming

Rising long-term yields a global phenomenon

US financial market concerns shifting from growth to inflation

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

Policy uncertainty has surged since the US national elections.

Recent turnaround in US economic surprises leading to increases in rate-cut expectations

The outlook has brightened in the US, while it has dimmed for other major economies

Headline US PCE inflation elevated by sticky services prices

US and global equity prices have recently diverged

US leading global upturn in economic surprises

Blue Chip forecasters look for further significant monetary easing apart from Japan

Recent rise in global supply chain pressures could augur a pickup in global inflation pressures

Underperforming German economy generating increased policy uncertainty relative to Europe and the US

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Real GDP eased 0.3% SAAR (+2.1% y/y) during the first quarter of 2025 after increasing 2.4% in Q4’24 and 3.1% in Q3’24. A 0.4% increase had been expected in the Action Economics Forecast Survey. It was the first decline since Q1 2022.

Foreign trade subtracted 4.83 percentage points from growth last quarter as imports surged 41.3% (13.4% y/y) ahead of tariffs, which began to come into effect in the first quarter. The rise followed a 1.9% decline in Q4’24. Exports rose 1.8% (3.0% y/y) after easing 0.2% in Q4. Inventories added 2.25 percentage points to growth after subtracting 0.84 percentage point from Q4 growth.

Real final sales to domestic purchasers grew 2.3% (2.9% y/y) in Q1 after rising 3.0% in Q4. Personal consumption expenditures rose 1.8% (3.1% y/y) following a 4.0% gain. Durable goods spending fell 3.4% (+5.3% y/y) after surging 12.4% in Q4. Motor vehicle purchases declined 11.1% (+5.5% y/y) after strengthening 19.7% in Q4. Spending on home furnishings & appliances gained 1.5% (6.1% y/y) following a 5.4% rise. Recreational goods & vehicle outlays rose 2.5% (7.0% y/y) last quarter after a 13.9% Q4 increase.

Nondurable goods outlays rose 2.7% (3.0% y/y) following 3.1% growth in Q4. Apparel spending increased 6.7% (2.5% y/y) following a 5.0% rise. Food & beverage buying gained 2.5% (2.3% y/y) after a 1.8% increase. Gasoline & fuel oil purchases increased 4.6% (3.4% y/y) after falling 2.0% in Q4.

Spending on services increased 2.4% last quarter (2.7% y/y) after a 3.0% gain. Outlays on housing & utilities increased 3.4% (1.8% y/y) after rising 1.1% in Q4. Health care expenditures rose 4.0% (4.8% y/y) following a 4.7% strengthening. Transportation outlays increased 5.3% (4.6% y/y) after a 3.7% rise while recreation spending rose 4.7% (2.8% y/y) following a 4.5% rise. Restaurant & hotel expenditures declined 2.1% (+0.5% y/y) following a 2.8% rise. Financial services expenditures rose 1.9% (2.0% y/y) after a 3.1% Q4 increase.

Business fixed investment increased 9.8% (3.6% y/y) following a 3.0% decline in Q4. Expenditures on structures rose 0.4% (-0.4% y/y) after a 2.9% increase. Expenditures on producers’ durable equipment jumped 22.5% (8.0% y/y) after falling 8.7%.  Outlays on information processing equipment soared 69.3% (18.9% y/y) following a 7.3% decline. Industrial equipment investment fell 1.4% (-0.3% y/y) after easing 0.9%. Intellectual property product spending rose 4.1% (1.8% y/y) following a 0.5% decline. 

Residential structures investment increased 1.3% (-0.1% y/y) in Q1 after a 5.5% Q4 rise.

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Government spending fell 1.5% (+2.4% y/y) after a 3.1% Q4 rise. Federal government expenditures declined 5.1% (+2.9% y/y) after rising 4.0% in Q4. National defense expenditures declined 8.0% (+4.0% y/y) after increasing 4.8% in Q4. State & local government spending rose 0.8% (2.1% y/y) following a 2.5% rise.

The GDP price index rose 3.7% (2.6% y/y) after increasing 2.3% in Q4. It was the largest increase since Q4’22. A 2.4% increase had been expected. The PCE chain price index increased 3.6% (2.5% y/y) following a 2.4% rise. The PCE price index excluding food and energy rose 3.5% (2.8% y/y) after increasing 2.6% in Q4. The business fixed investment price index rose 0.4% (1.8% y/y) after 1.5% rise. The residential price index strengthened 3.9% (3.2% y/y) after a 1.9% rise while the government price index increased 4.7% (2.8% y/y) following a 2.1% rise.

The GDP data can be found in Haver’s **USECON** and **USNA** databases. **USNA** contains virtually all of the Bureau of Economic Analysis detail in the national accounts. The Action Economics consensus estimates can be found in **AS1REPNA**.

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- Decline in GDP is first in three years.
- Foreign trade subtracts substantially ahead of tariffs.
- Domestic final demand growth weakens.
- Price index strengthens with higher core PCE prices.

U.S. GDP Unexpectedly Declines in Q1’25; Prices Strengthen

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The Pending Home Sales Index, a forward-looking home sales measure based on contract signings, from the National Association of Realtors rose 6.1% to 76.5 (-0.6% y/y) during March after rising a little-revised 2.1% in February. These changes followed a 4.6% January decline.

The rise in March sales occurred as the rate on a 30-year mortgage eased to an average 6.65% from 6.84% in February. This rate was well above a low of 2.68% averaged in December 2020.

Pending home sales were up in most regions of the country. Sales in the Midwest rose 4.9% (1.4% y/y) last month after rising 1.8% in February. Sales in the South increased 9.8% (-0.4% y/y) following a 5.8% February rise. Sales in the West improved 4.8% (-2.0% y/y) after falling 3.0% in February. Sales in the Northeast were off 0.5% (-3.0% y/y) in March after falling 0.9% in February.

The pending home sales index measures sales at the time the contract for the purchase of an existing home is signed, similar to the Census Bureau's new home sales data. In contrast, the National Association of Realtors' existing home sales data are recorded when the sale is closed, which is usually a couple of months after the sales contract has been signed. In developing the pending home sales index, the NAR found that the level of monthly sales contract activity leads the level of closed existing home sales by about two months.

The series dates back to 2001 and are available in Haver's **PREALTOR** database. Weekly mortgage interest rates from the Mortgage Bankers Association can be found in the **WEEKLY** database.

- Sales rise to highest level in four months.
- Strength is evident throughout most of country.

U.S. Pending Home Sales Surge in March

Sandy Batten

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The employment cost index (ECI) for civilian workers, arguably the most accurate measure of labor compensation in the United States, rose 0.9% q/q (3.6% y/y) in Q1, the same quarterly increase as in last year’s Q4, according to the Bureau of Labor Statistics. The quarterly gains have fluctuated between 0.8% and 1.0% for the past six quarters. The Action Economics Forecast Survey had expected a 0.9% q/q increase and a 3.5% y/y gain.

Wages and salaries for civilian workers rose 0.8% q/q (3.5% y/y) in Q1, down from 1.0% q/q in Q4. This tied the Q3 2024 quarterly rise as the smallest increase since Q2 2021. It was also the smallest y/y increase since Q2 2021. Benefits increased by an outsized 1.2% q/q (3.9% y/y) in Q1 versus 0.8% q/q in Q4. This is the largest quarterly gain since Q2 2022. In general, employment cost gains remain above the pace observed prior to the pandemic but are slowing gradually.

Private industry workers’ compensation rose 0.8% q/q (3.4% y/y) in Q1, down from 0.9% q/q (3.6% y/y) in Q4. Wages and salaries for private industry workers increased 0.8% q/q (3.4% y/y) in Q1 versus 0.8% q/q (3.7% y/y) in Q4. The quarterly gain in Q1 tied that in Q3 2024 as the smallest increase since Q4 2020. Benefits for private industry workers jumped 1.2% q/q (3.6% y/y). the largest quarterly gain since Q2 2022. The acceleration in benefits in Q1 was primarily in service-producing industries.

Compensation in private goods-producing industries increased 1.0% q/q (3.2% y/y) in Q1, the largest quarterly gain in five quarters, versus a 0.7% q/q increase in Q4. Compensation in construction jumped 1.3% q/q, its largest quarterly increase since Q2 2022, up from a 0.6% q/q gain in Q4. Manufacturing compensation growth slowed to 0.7% q/q, its slowest quarterly advance since Q4 2020, from 0.8% q/q in Q4. Compensation in private service-producing industries increased 0.8% q/q (3.5% y/y), down slightly from a 0.9% q/q gain in Q4. Compensation in education and health services jumped 1.3% q/q, its largest quarterly gain since Q3 2023. In contrast, compensation in other services edged up 0.1% q/q in Q1, its smallest quarterly advance since before the pandemic.

The employment cost index measures the change in the cost of labor, free from the influence of employment shifts across occupations and industries. It is provided by the Bureau of Labor Statistics and is available in Haver’s **USECON** database. Consensus estimates from the Action Economics Forecast Survey are in Haver’s **AS1REPNA** database.

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- Compensation grew 0.9 q/q in Q1, the same pace as in Q4.
- Wage growth slowed to 0.8% q/q while benefits surged 1.2% q/q, their largest quarterly increase since Q2 2022.

Employment Cost Growth Steady in Q1 2025

Kathleen Stephansen, CBE

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The ADP National Employment Report indicated that nonfarm private sector payrolls rose 62,000 (1.4% y/y) during April after increasing 147,000 (1.4% y/y) during March, revised from 155,000. A 124,000 April rise in ADP employment had been expected in the Action Economics Forecast Survey.

Growth in median annual pay for "job stayers" eased to 4.5% y/y during April, from 4.6% y/y in March and from 4.7% y/y in the prior two months. Manufacturing sector pay grew 4.6% y/y during April, down from 4.8% y/y in March. Construction sector pay was unchanged at 4.7% y/y. Natural resource & mining sector pay grew 4.4% y/y. Financial sector pay rose 5.1% y/y, while education & health services pay rose 4.7% y/y. Leisure & hospitality pay also increased 4.7% y/y. Professional & business service sector pay increased 4.3% y/y as did trade, transportation & utilities pay. Information pay rose 4.1% y/y. Median annual pay for “job changers” rose 6.9% y/y after 6.7% y/y in March.

Small business hiring (less than 50 employees) rose 11,000 (0.6% y/y) after rising 18,000 (0.6% y/y) in March, revised down from 52,000. Employment at medium-sized firms (50-499,000 employees) rose 40,000 (1.1% y/y) after rising 43,000 (1.1% y/y). Large business hiring (500+ employees) rose 12,000 (3.4% y/y) in April, after rising 61,000 (3.6% y/y) in March, revised from 59,000.

Goods-producing employment rose 26,000 (1.3% y/y) in April, after rising 16,000 (1.3% y/y) during March, revised from 24,000. Manufacturing jobs rose 4,000 (-0.2% y/y) after rising 17,000 (-0.3% y/y) in March. The number of construction sector jobs rose 16,000 (3.4% y/y) in April, following a 2,000 (3.6% y/y) March increase, revised from 6,000. Natural resources & mining jobs rose 6,000 (2.8% y/y) in April after falling 3,000 (+1.9% y/y) in March.

The number of service-producing jobs rose 34,000 (1.4% y/y) during April, following a rise of 131,000 (1.4% y/y) in March. Professional & business services employment fell 2,000 (0.6% y/y) after rising 46,000 (0.7% y/y) in the prior month, revised from 57,000. Employment in the financial industry rose 20,000 (2.1% y/y) in April, after rising 38,000 (2.0% y/y) in March. Leisure and hospitality employment increased 27,000 (3.0% y/y), following a 23,000 (2.9% y/y) March increase, revised from 17,000. The number of education & health care jobs fell 23,000 (1.6% y/y) in April, following a 15,000 (1.8% y/y) rise in March, revised from 12,000. Information sector employment fell 8,000 (-0.1% y/y) after a rise of 3,000 (0.2% y/y) in March. The number of jobs in trade, transportation & utilities rose 21,000 (0.4% y/y) in April, after falling 4,000 (+0.4% y/y) in March, revised from a 6,000 fall. Employment in “other” services rose fell 1,000 (+3.2% y/y) following a 10,000 (3.4% y/y) rise in March, revised from 11,000.

By region, employment in the Northeast increased 10,000 (1.9% y/y) in April, following an increase of 95,000 (2.0% y/y) in March, revised from 89,000. Employment in the Midwest rose 42,000 (1.5% y/y) after a gain of 84,000 (1.4% y/y) in March, revised from 81,000. In the South, employment rose 3,000 (1.3% y/y) during April, after rising 10,000 (1.4% y/y) in March, revised from 27,000. In the West, employment rose 9,000 (0.6% y/y) after declining 43,000 (+0.6% y/y), revised from a 41,000 decline in March.

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 increase is modest in both services & factory sectors.
- Wage growth for “job stayers” moderates.
- Small and medium-sized business employment slows.

U.S. ADP Payrolls Rise Modestly in April

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Mortgage applications declined 4.2% (+16.4% y/y) in the week ended April 25, after dropping 12.7% (+18.7% y/y) in the week ended April 18, according to the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey. Applications to refinance an existing mortgage dropped 3.7% (+42.0% y/y) in the week ended April 25 after plunging 20.0% (+42.5% y/y) in the week ended April 18. Loan applications to purchase a home declined 4.4% (+3.5% y/y) in the latest week after falling 6.6% (+6.4% y/y) in the prior week.

The effective interest rate on a 30-year fixed rate loan edged down 1bp to 7.08% in the week ended April 25 from 7.09% in the week ended April 18. The effective rate on a 15-year fixed rate loan rose 2bps to 6.36% in the week ended April 25 from 6.34% in the week of April 18. The rate on a 30-year jumbo loan rose 3bps to 7.06% in the latest week from 7.03% in the prior week, while the rate on a 5-year ARM eased 7bps to 6.12% in the week ended April 25 from 6.19% in the week ended April 18.

The share of applications to refinance an existing mortgage remained at a 10-month low of 37.3% in the week ended April 25, unchanged from the prior week. The share of loans with an adjustable rate fell to 7.4% in the latest week from 7.5% in the week ended April 18.

The average size of a mortgage loan declined 0.7% (+1.6% y/y) to $384,100 in the week ended April 25, after dropping 6.8% (+1.3% y/y) to $386,800 in the week ended April 18. The average size of a loan to purchase a home rose to $440,100 (+0.9% y/y) in the latest week from $439,900 (+0.5% y/y) in the week prior. The average size of a loan to refinance an outstanding mortgage dropped to $289,800 (+18.5% y/y) in the week ended April 25 from $297,700 (+16.4% y/y) in the week ended April 18.

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.

- Refinancing and purchase loan applications decline.
- Effective interest rates are range-bound.
- Average loan size falls