Carol Stone, CBE

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061115f.jpg" width="353">
Employment in the UK fell 29,000 in the August period, reversing more than half of July&#39;s 51,000 increase. This move accompanied a 0.1% uptick in the unemployment rate to 5.6% from 5.5%. Both figures are three-month centered moving averages, so they cover July, August and September. Compared with three months before, the style of comparison that the UK&#39;s Office of National Statistics (ONS) generally emphasizes, the August number was up 56,000 from May, which in turn had been up 43,000 from February. So their longer horizon still highlights gains in the late spring/early summer.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061115g.jpg" width="353">
By demographic category, employment among men continued to increase modestly, while women&#39;s employment fell 39,000 from the July period to August. Interestingly, the increase in the unemployment rate occurred among men, from 5.9% to 6.0%, while the rate for women remained steady at 5.1%. A sizable rise in the number of women deciding to leave the labor force -- becoming &quot;economically inactive&quot; in the ONS terminology -- to maintain their homes kept their unemployment rate from going up. Even so, the overall 5.6% unemployment rate is the highest since the April period in 2000.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061115h.jpg" width="353">
Another sign of softness in the UK labor situation came in the average earnings index, or AEI. This is an index of average earnings over the last three months relative to the same period a year ago. It slowed to 3.9% in the latest three-month period from 4.2% the period before. This effectively closed off a firming trend that had been running since February. This measure is seen in the UK as a major determinant of inflation pressure, and it is watched closely by financial markets and the Bank of England. Indeed, press reports highlighted the slowdown this morning. Additionally, the so-called claimant count rose in the month of October, reaching 961,300, up almost 10,000 from just two months ago and 70,000 from a year ago (7.9%). Two months ago here, we took note of politicians&#39; pleasure in a &quot;welcome fall&quot; in claimants for unemployment benefits, but the mild reduction back in the summer has been more than counterbalanced. In contrast, a more favorable labor market development is a gain of 30,000 in the number of reported job vacancies, which reached 620,600, the highest in 17 months.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/UK/@U7/@U7.HTM">UK Labor Force Survey &amp; Related Labor Data</a></th>
<th scope="col">Oct 2006</th>
<th scope="col">Sept 2006</th>
<th scope="col">Aug 2006</th>
<th scope="col">July 2006</th>
<th scope="col">Year Ago</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Employment &nbsp; (3Mo Avg, SA, Thous)</td>
<td>--</td>
<td>--</td>
<td>28,986</td>
<td>29,015</td>
<td>28,794</td>
<td>28,730</td>
<td>28,465</td>
<td>28,183</td>
</tr>
<tr>
<td class="firstcol">Chg from 1 &amp; 3 Months Ago</td>
<td>--</td>
<td>--</td>
<td>-29/56</td>
<td>51/120</td>
<td>+16(MoAvg)</td>
<td>0.9%</td>
<td>1.0%</td>
<td>1.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">Unemployment Rate &nbsp; (3Mo Avg, SA, %)</td>
<td>--</td>
<td>--</td>
<td>5.6%</td>
<td>5.5%</td>
<td>4.8%</td>
<td>4.8%</td>
<td>4.8%</td>
<td>5.0%</td>
</tr>
<tr>
<td class="firstcol">Claimant Count &nbsp; (Monthly, Thous)</td>
<td>963.1</td>
<td>960.1</td>
<td>951.8</td>
<td>954.0</td>
<td>891.2</td>
<td>874.4</td>
<td>866.1</td>
<td>945.9</td>
</tr>
<tr class="odd">
<td class="firstcol">Vacancies (Monthly, Thous)</td>
<td>620.6</td>
<td>590.0</td>
<td>600.7</td>
<td>617.6</td>
<td>588.4</td>
<td>619.0</td>
<td>631.9</td>
<td>582.0</td>
</tr>
<tr>
<td class="firstcol">Average Earnings Index inc Bonus (Headline Rate*)</td>
<td>--</td>
<td>3.9%</td>
<td>4.2%</td>
<td>4.4%</td>
<td>4.2%</td>
<td>4.0%</td>
<td>4.5%</td>
<td>3.4%</td>
</tr>
</tbody>
</table>
</body>
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Employment in the UK fell 29,000 in the August period, reversing more than half of July's 51,000 increase. This move accompanied a 0.1% uptick in the unemployment rate to 5.6% from 5.5%. Both figures are three-month centered moving [...]

UK Labor Market Stalls; Unemployment Rate Highest since Spring 2000

Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061115d.jpg" width="353">
Total business inventories rose just 0.4% in September following an unrevised 0.6% rise during August. Consensus expectations had been for a 0.5% increase but together the increases during the last three months which averaged 0.6% were the slowest since April and the one month gain was the slowest since February.
During the last ten years there has been a 57% correlation between the y/y change in business inventories and the change in factory sector industrial production. Using quarterly figures, there has been an 84% correlation between the change in real private nonfarm inventories and production.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061115e.jpg" width="353">
Business sales fell 2.0% (+4.9% y/y) due to the 3.5% m/m slide in factory shipments. In addition, retail sales fell 0.8% (+5.2% y/y) and wholesale sales fell 1.2% (+8.1% y/y). As a result the inventory to sales ratio surged to 1.30, the highest since March 2003. 
Retail inventories fell 0.1% but excluding autos they rose 0.1%. That latter gain compared to monthly increases between 0.2% and 0.7% since March. General merchandise inventories increased 0.3% (0.9% y/y) after a 0.7% gain but accumulation of clothing store inventories accelerated to 0.7% (6.2% y/y). Furniture inventories rose 0.2% (4.9% y/y) after a 0.3% August decline.
Production and Inventory Behavior of Capital from the Federal Reserve Bank of St. Louis is available <a href="http://research.stlouisfed.org/wp/2005/2005-044.pdf"> here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@ED/@ED06/@ED0601/@ED0601.HTM">Business Inventories</a></th>
<th scope="col">September</th>
<th scope="col">August</th>
<th scope="col">Y/Y</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>0.4%</td>
<td>0.6%</td>
<td>7.6%</td>
<td>4.4%</td>
<td>7.6%</td>
<td>-1.0%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Retail</td>
<td>-0.1%</td>
<td>0.3%</td>
<td>6.1%</td>
<td>2.7%</td>
<td>6.7%</td>
<td>3.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp; Retail excl. Autos</td>
<td>0.1%</td>
<td>0.6%</td>
<td>4.3%</td>
<td>4.5%</td>
<td>7.1%</td>
<td>1.9%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Wholesale</td>
<td>0.8%</td>
<td>1.2%</td>
<td>9.9%</td>
<td>7.1%</td>
<td>9.8%</td>
<td>1.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Manufacturing</td>
<td>0.6%</td>
<td>0.6%</td>
<td>7.4%</td>
<td>4.0%</td>
<td>6.9%</td>
<td>-7.4%</td>
</tr>
</tbody>
</table>
</body>
</html>

Total business inventories rose just 0.4% in September following an unrevised 0.6% rise during August. Consensus expectations had been for a 0.5% increase but together the increases during the last three months which averaged 0.6% [...]

Slower U.S. Sales Require Slower Inventory Accumulation

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061115a.jpg" width="353">
The total number of mortgage applications surged another 4.3% last week on the heels of the 8.8% recovery at the beginning of November, according to the Mortgage Bankers Association. The gains lifted total applications this month 8.2% above the October average which fell 0.6% from September.
Applications to refinance increased 6.5% after the prior week&#39;s 11.0% jump to the highest level in over one year and are up 10.2% from the October average which rose 3.5% from September.
Purchase applications also rose a firm 2.7% after the prior week&#39;s 7.1% lift. The increase to the highest level since July raised November purchase applications 6.8% ahead of the October average level. Purchase applications fell 3.6% last month from September on average.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061115b.jpg" width="353">
During the last ten years there has been a 58% correlation between the y/y change in purchase applications and the change in new plus existing single family home sales.
The effective interest rate on a conventional 30-year mortgage fell eleven basis points w/w to 6.35% and was down from a high last month of 6.57%. The peak for 30 year financing was 7.08% late in June. The rate for 15-year financing fell ten points to 6.10%. The peak for 15 year financing was 6.75% during June. Interest rates on 15 and 30 year mortgages are closely correlated (&gt;90%) with the rate on 10 year Treasury securities.
During the last ten years there has been a (negative) 79% correlation between the level of applications for purchase and the effective interest rate on a 30-year mortgage.
The Mortgage Bankers Association surveys between 20 to 35 of the top lenders in the U.S. housing industry to derive its refinance, purchase and market indexes. The weekly survey accounts for more than 40% of all applications processed each week by mortgage lenders. Visit the Mortgage Bankers Association site <a href="http://www.mbaa.org">here</a>.
U.S. Labor Input in Coming Years is yesterday&#39;s speech by St. Louis Fed President William Poole and it is available <a href="http://www.stlouisfed.org/news/speeches/2006/11_14_06.html"> here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYW/@S5/@S5.HTM">MBA Mortgage Applications (3/16/90=100)</a></th>
<th scope="col">11/10/06</th>
<th scope="col">11/03/06</th>
<th scope="col">Y/Y</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total Market Index</td>
<td>647.5</td>
<td>620.9</td>
<td>-1.5%</td>
<td>708.6</td>
<td>735.1</td>
<td>1,067.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Purchase</td>
<td>412.9</td>
<td>402.2</td>
<td>-13.6%</td>
<td>470.9</td>
<td>454.5</td>
<td>395.1</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Refinancing</td>
<td>2,022.2</td>
<td>1,897.9</td>
<td>18.8%</td>
<td>2,092.3</td>
<td>2,366.8</td>
<td>4,981.8</td>
</tr>
</tbody>
</table>
</body>
</html>

The total number of mortgage applications surged another 4.3% last week on the heels of the 8.8% recovery at the beginning of November, according to the Mortgage Bankers Association. The gains lifted total applications this month 8.2% [...]

Mortgage Applications Surged Again

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061115c.jpg" width="353">
The November index of manufacturing activity in New York State firmed again. The Index of General Business Conditions rose 3.74 points to 26.66 on top of the nearly twelve point advance during the prior two months. Consensus expectations for the Empire State index had been for a decline to 15.0. The figures are reported by the Federal Reserve Bank of New York.
Since the series&#39; inception in 2001 there has been a 75% correlation between the index level and the three month change in U.S. factory sector industrial production.
The indexes for new orders, employment and shipments led the m/m improvement. Each of the other component series rose as well with the exception of work hours which fell for the second month.
Like the Philadelphia Fed Index of General Business Conditions, the Empire State Business Conditions Index reflects answers to an independent survey question; it is not a weighted combination of the components.
Pricing pressure also improved moderately. The 4.07 rise in the prices paid index came after a ten point decline during October. Since 2001 there has been an 88% correlation between the index of prices paid and the three month change in the core intermediate materials PPI.
The Empire State index of expected business conditions in six months made up for all of the weakness in recent months with a 7.59 point rise.
The Empire State Manufacturing Survey is a monthly survey of manufacturers in New York State conducted by the Federal Reserve Bank of New York. Participants from across the state in a variety of industries respond to a questionnaire and report the change in a variety of indicators from the previous month. Respondents also state the likely direction of these same indicators six months ahead. April 2002 is the first report, although survey data date back to July 2001.
For more on the Empire State Manufacturing Survey, including methodologies and the latest report, click <a href="http://www.newyorkfed.org/research/regional_economy/empiresurvey_overview.html">here</a>.
What Are the Risks to the United States of a Current Account Reversal? from the Federal Reserve Bank of San Francisco can be found <a href="http://www.frbsf.org/publications/economics/letter/2006/el2006-29.pdf"> here</a>

<table border="0" cellspacing="0" width="100%">

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<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S5/@S511/@S511.HTM">Empire State Manufacturing Survey</a> </th>
<th scope="col">November</th>
<th scope="col">October</th>
<th scope="col">Nov. &#39;05 </th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">General Business Conditions (diffusion index)</td>
<td>26.66</td>
<td>22.92</td>
<td>21.88</td>
<td>15.56</td>
<td>28.79</td>
<td>15.98</td>
</tr>
</tbody>
</table>
</body>
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The November index of manufacturing activity in New York State firmed again. The Index of General Business Conditions rose 3.74 points to 26.66 on top of the nearly twelve point advance during the prior two months. Consensus [...]

Empire State Index Unexpectedly Firm

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061115c.jpg" width="353">
The November index of manufacturing activity in New York State firmed again. The Index of General Business Conditions rose 3.74 points to 26.66 on top of the nearly twelve point advance during the prior two months. Consensus expectations for the Empire State index had been for a decline to 15.0. The figures are reported by the Federal Reserve Bank of New York.
Since the series&#39; inception in 2001 there has been a 75% correlation between the index level and the three month change in U.S. factory sector industrial production.
The indexes for new orders, employment and shipments led the m/m improvement. Each of the other component series rose as well with the exception of work hours which fell for the second month.
Like the Philadelphia Fed Index of General Business Conditions, the Empire State Business Conditions Index reflects answers to an independent survey question; it is not a weighted combination of the components.
Pricing pressure also improved moderately. The 4.07 rise in the prices paid index came after a ten point decline during October. Since 2001 there has been an 88% correlation between the index of prices paid and the three month change in the core intermediate materials PPI.
The Empire State index of expected business conditions in six months made up for all of the weakness in recent months with a 7.59 point rise.
The Empire State Manufacturing Survey is a monthly survey of manufacturers in New York State conducted by the Federal Reserve Bank of New York. Participants from across the state in a variety of industries respond to a questionnaire and report the change in a variety of indicators from the previous month. Respondents also state the likely direction of these same indicators six months ahead. April 2002 is the first report, although survey data date back to July 2001.
For more on the Empire State Manufacturing Survey, including methodologies and the latest report, click <a href="http://www.newyorkfed.org/research/regional_economy/empiresurvey_overview.html">here</a>.
What Are the Risks to the United States of a Current Account Reversal? from the Federal Reserve Bank of San Francisco can be found <a href="http://www.frbsf.org/publications/economics/letter/2006/el2006-29.pdf"> here</a>

<table border="0" cellspacing="0" width="100%">

</table>
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S5/@S511/@S511.HTM">Empire State Manufacturing Survey</a> </th>
<th scope="col">November</th>
<th scope="col">October</th>
<th scope="col">Nov. &#39;05 </th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">General Business Conditions (diffusion index)</td>
<td>26.66</td>
<td>22.92</td>
<td>21.88</td>
<td>15.56</td>
<td>28.79</td>
<td>15.98</td>
</tr>
</tbody>
</table>
Slower U.S. Sales Require Slower Inventory Accumulation 
by <a href="/comment/Moeller.html">Tom Moeller</a> November 15, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061115d.jpg" width="353">
Total business inventories rose just 0.4% in September following an unrevised 0.6% rise during August. Consensus expectations had been for a 0.5% increase but together the increases during the last three months which averaged 0.6% were the slowest since April and the one month gain was the slowest since February.
During the last ten years there has been a 57% correlation between the y/y change in business inventories and the change in factory sector industrial production. Using quarterly figures, there has been an 84% correlation between the change in real private nonfarm inventories and production.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061115e.jpg" width="353">
Business sales fell 2.0% (+4.9% y/y) due to the 3.5% m/m slide in factory shipments. In addition, retail sales fell 0.8% (+5.2% y/y) and wholesale sales fell 1.2% (+8.1% y/y). As a result the inventory to sales ratio surged to 1.30, the highest since March 2003. 
Retail inventories fell 0.1% but excluding autos they rose 0.1%. That latter gain compared to monthly increases between 0.2% and 0.7% since March. General merchandise inventories increased 0.3% (0.9% y/y) after a 0.7% gain but accumulation of clothing store inventories accelerated to 0.7% (6.2% y/y). Furniture inventories rose 0.2% (4.9% y/y) after a 0.3% August decline.
Production and Inventory Behavior of Capital from the Federal Reserve Bank of St. Louis is available <a href="http://research.stlouisfed.org/wp/2005/2005-044.pdf"> here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@ED/@ED06/@ED0601/@ED0601.HTM">Business Inventories</a></th>
<th scope="col">September</th>
<th scope="col">August</th>
<th scope="col">Y/Y</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>0.4%</td>
<td>0.6%</td>
<td>7.6%</td>
<td>4.4%</td>
<td>7.6%</td>
<td>-1.0%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Retail</td>
<td>-0.1%</td>
<td>0.3%</td>
<td>6.1%</td>
<td>2.7%</td>
<td>6.7%</td>
<td>3.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp; Retail excl. Autos</td>
<td>0.1%</td>
<td>0.6%</td>
<td>4.3%</td>
<td>4.5%</td>
<td>7.1%</td>
<td>1.9%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Wholesale</td>
<td>0.8%</td>
<td>1.2%</td>
<td>9.9%</td>
<td>7.1%</td>
<td>9.8%</td>
<td>1.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Manufacturing</td>
<td>0.6%</td>
<td>0.6%</td>
<td>7.4%</td>
<td>4.0%</td>
<td>6.9%</td>
<td>-7.4%</td>
</tr>
</tbody>
</table>
Mortgage Applications Surged Again 
by <a href="/comment/Moeller.html">Tom Moeller</a> November 15, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061115a.jpg" width="353">
The total number of mortgage applications surged another 4.3% last week on the heels of the 8.8% recovery at the beginning of November, according to the Mortgage Bankers Association. The gains lifted total applications this month 8.2% above the October average which fell 0.6% from September.
Applications to refinance increased 6.5% after the prior week&#39;s 11.0% jump to the highest level in over one year and are up 10.2% from the October average which rose 3.5% from September.
Purchase applications also rose a firm 2.7% after the prior week&#39;s 7.1% lift. The increase to the highest level since July raised November purchase applications 6.8% ahead of the October average level. Purchase applications fell 3.6% last month from September on average.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061115b.jpg" width="353">
During the last ten years there has been a 58% correlation between the y/y change in purchase applications and the change in new plus existing single family home sales.
The effective interest rate on a conventional 30-year mortgage fell eleven basis points w/w to 6.35% and was down from a high last month of 6.57%. The peak for 30 year financing was 7.08% late in June. The rate for 15-year financing fell ten points to 6.10%. The peak for 15 year financing was 6.75% during June. Interest rates on 15 and 30 year mortgages are closely correlated (&gt;90%) with the rate on 10 year Treasury securities.
During the last ten years there has been a (negative) 79% correlation between the level of applications for purchase and the effective interest rate on a 30-year mortgage.
The Mortgage Bankers Association surveys between 20 to 35 of the top lenders in the U.S. housing industry to derive its refinance, purchase and market indexes. The weekly survey accounts for more than 40% of all applications processed each week by mortgage lenders. Visit the Mortgage Bankers Association site <a href="http://www.mbaa.org">here</a>.
U.S. Labor Input in Coming Years is yesterday&#39;s speech by St. Louis Fed President William Poole and it is available <a href="http://www.stlouisfed.org/news/speeches/2006/11_14_06.html"> here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYW/@S5/@S5.HTM">MBA Mortgage Applications (3/16/90=100)</a></th>
<th scope="col">11/10/06</th>
<th scope="col">11/03/06</th>
<th scope="col">Y/Y</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total Market Index</td>
<td>647.5</td>
<td>620.9</td>
<td>-1.5%</td>
<td>708.6</td>
<td>735.1</td>
<td>1,067.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Purchase</td>
<td>412.9</td>
<td>402.2</td>
<td>-13.6%</td>
<td>470.9</td>
<td>454.5</td>
<td>395.1</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Refinancing</td>
<td>2,022.2</td>
<td>1,897.9</td>
<td>18.8%</td>
<td>2,092.3</td>
<td>2,366.8</td>
<td>4,981.8</td>
</tr>
</tbody>
</table>
UK Labor Market Stalls; Unemployment Rate Highest since Spring 2000 
by <a href="/comment/Stone.html">Carol Stone</a> November 15, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061115f.jpg" width="353">
Employment in the UK fell 29,000 in the August period, reversing more than half of July&#39;s 51,000 increase. This move accompanied a 0.1% uptick in the unemployment rate to 5.6% from 5.5%. Both figures are three-month centered moving averages, so they cover July, August and September. Compared with three months before, the style of comparison that the UK&#39;s Office of National Statistics (ONS) generally emphasizes, the August number was up 56,000 from May, which in turn had been up 43,000 from February. So their longer horizon still highlights gains in the late spring/early summer.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061115g.jpg" width="353">
By demographic category, employment among men continued to increase modestly, while women&#39;s employment fell 39,000 from the July period to August. Interestingly, the increase in the unemployment rate occurred among men, from 5.9% to 6.0%, while the rate for women remained steady at 5.1%. A sizable rise in the number of women deciding to leave the labor force -- becoming &quot;economically inactive&quot; in the ONS terminology -- to maintain their homes kept their unemployment rate from going up. Even so, the overall 5.6% unemployment rate is the highest since the April period in 2000.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061115h.jpg" width="353">
Another sign of softness in the UK labor situation came in the average earnings index, or AEI. This is an index of average earnings over the last three months relative to the same period a year ago. It slowed to 3.9% in the latest three-month period from 4.2% the period before. This effectively closed off a firming trend that had been running since February. This measure is seen in the UK as a major determinant of inflation pressure, and it is watched closely by financial markets and the Bank of England. Indeed, press reports highlighted the slowdown this morning. Additionally, the so-called claimant count rose in the month of October, reaching 961,300, up almost 10,000 from just two months ago and 70,000 from a year ago (7.9%). Two months ago here, we took note of politicians&#39; pleasure in a &quot;welcome fall&quot; in claimants for unemployment benefits, but the mild reduction back in the summer has been more than counterbalanced. In contrast, a more favorable labor market development is a gain of 30,000 in the number of reported job vacancies, which reached 620,600, the highest in 17 months.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/UK/@U7/@U7.HTM">UK Labor Force Survey &amp; Related Labor Data</a></th>
<th scope="col">Oct 2006</th>
<th scope="col">Sept 2006</th>
<th scope="col">Aug 2006</th>
<th scope="col">July 2006</th>
<th scope="col">Year Ago</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Employment &nbsp; (3Mo Avg, SA, Thous)</td>
<td>--</td>
<td>--</td>
<td>28,986</td>
<td>29,015</td>
<td>28,794</td>
<td>28,730</td>
<td>28,465</td>
<td>28,183</td>
</tr>
<tr>
<td class="firstcol">Chg from 1 &amp; 3 Months Ago</td>
<td>--</td>
<td>--</td>
<td>-29/56</td>
<td>51/120</td>
<td>+16(MoAvg)</td>
<td>0.9%</td>
<td>1.0%</td>
<td>1.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">Unemployment Rate &nbsp; (3Mo Avg, SA, %)</td>
<td>--</td>
<td>--</td>
<td>5.6%</td>
<td>5.5%</td>
<td>4.8%</td>
<td>4.8%</td>
<td>4.8%</td>
<td>5.0%</td>
</tr>
<tr>
<td class="firstcol">Claimant Count &nbsp; (Monthly, Thous)</td>
<td>963.1</td>
<td>960.1</td>
<td>951.8</td>
<td>954.0</td>
<td>891.2</td>
<td>874.4</td>
<td>866.1</td>
<td>945.9</td>
</tr>
<tr class="odd">
<td class="firstcol">Vacancies (Monthly, Thous)</td>
<td>620.6</td>
<td>590.0</td>
<td>600.7</td>
<td>617.6</td>
<td>588.4</td>
<td>619.0</td>
<td>631.9</td>
<td>582.0</td>
</tr>
<tr>
<td class="firstcol">Average Earnings Index inc Bonus (Headline Rate*)</td>
<td>--</td>
<td>3.9%</td>
<td>4.2%</td>
<td>4.4%</td>
<td>4.2%</td>
<td>4.0%</td>
<td>4.5%</td>
<td>3.4%</td>
</tr>
</tbody>
</table>
</body>
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Louise Curley

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061114f.jpg" width="353">
The third quarter preliminary estimate of Gross Domestic Product for Japan was twice as high as consensus expectations. On a seasonally adjusted annual rate, Japan&#39;s GDP rose 2.03% while the expected increase was 1.0%. The rise took place in spite of a 2.98% decline in consumer expenditures. This decline was, however, outweighed by a 2.92% increase in business fixed investment, an 11.18% increase in exports, a 0.57% decline in imports and a 2.0 trillion 2000 chained yen increase in inventories, the result, in part perhaps, of the decline in consumer spending.
For the Euro Zone as a whole, the preliminary 3rd quarter GDP rose 0.5% from the second quarter, slightly below the expectation of a 0.6% rise. On a seasonally adjusted annual rate basis, the rise was 2.1%, slightly higher than the rise in Japan. The first chart compares the annual rates of changes in GDP in Japan and the Euro Zone. (In the United States GDP rose 1.6% at an annual rate, in the third quarter.)<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061114h.jpg" width="353">
The performance among the Euro Zone countries was mixed. France, which reported its flash estimate earlier, showed no change in the third quarter after a 4.9% annual rate increase in the second quarter. Part of the poor performance was explained by working day effects. Apparently, INSEE over estimated the effects of a newly introduced June public holiday in the second quarter. Since not all workers took advantage of the holiday, the second quarter estimate was probably overstated and the third quarter understated.
Of the other Euro Zone countries reporting, Italy, the Netherlands, Spain and Germany, GDP growth decelerated in the third quarter. The deceleration was most marked in the Netherlands, Italy and Germany. The growth rate in the Netherlands fell to 2.57% in the third quarter from 5.15%in the second quarter. Comparable figures for Italy were 1.31% and 2.58%. and for Germany, 2.57% and 4.35%. The least deceleration was in Spain where the rise in the third quarter was 3.49% compared with 3.79% in the second quarter. The second chart compares the annual rates of change in GDP in Spain and the Netherlands. The relative stability in growth Spain contrasts with the more volatile growth in the Netherlands.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061114g.jpg" width="353">
The German ZEW survey of institutional investors and financial analysts for November was released today. The participants continue to be pleased with the current situation. The excess of optimists over pessimists regarding the current situation rose to 53% in November, the highest percent balance in the history of the survey which was begun in December 1991. But the pessimists continue to dominate the expectations six months ahead. In November the excess of pessimists over optimists increased slightly to 28.5% from 27.4% in October. One has to go back to 1991 and 1993 to find larger excesses of pessimists. The third chart shows the opinions of the participants regarding the current situation and the expectations for six months ahead during the entire history of the ZEW survey.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">GROSS DOMESTIC PRODUCT (Percent change Q/Q AR)</th>
<th scope="col">Q3 06</th>
<th scope="col">Q2 06</th>
<th scope="col">Q1 06</th>
<th scope="col">Q4 05</th>
<th scope="col">Q3 05</th>
<th scope="col">2005 %</th>
<th scope="col">2004 %</th>
<th scope="col">2003 %</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">&nbsp; Japan</td>
<td>2.03</td>
<td>1.51</td>
<td>3.17</td>
<td>4.09</td>
<td>2.03</td>
<td>2.69</td>
<td>2.13</td>
<td>1.96</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Euro Zone</td>
<td>2.10</td>
<td>3.78</td>
<td>3.13</td>
<td>1.51</td>
<td>2.52</td>
<td>1.48</td>
<td>1.69</td>
<td>0.79</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;United States</td>
<td>1.58</td>
<td>2.56</td>
<td>5.55</td>
<td>1.76</td>
<td>4.18</td>
<td>3.22</td>
<td>3.91</td>
<td>2.51</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Germany</td>
<td>2.57</td>
<td>4.35</td>
<td>3.24</td>
<td>1.09</td>
<td>2.08</td>
<td>1.10</td>
<td>0.77</td>
<td>-0.20</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; France</td>
<td>0.00</td>
<td>4.91</td>
<td>1.79</td>
<td>1.11</td>
<td>2.78</td>
<td>1.19</td>
<td>2.03</td>
<td>1.19</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Italy</td>
<td>1.31</td>
<td>2.58</td>
<td>3.13</td>
<td>-0.07</td>
<td>1.28</td>
<td>0.11</td>
<td>0.88</td>
<td>0.11</td>
</tr>
<tr class="odd">
<td class="firstcol"> &nbsp; Netherlands</td>
<td>2.57</td>
<td>5.15</td>
<td>1.23</td>
<td>2.51</td>
<td>3.11</td>
<td>1.53</td>
<td>1.95</td>
<td>0.34</td>
</tr>
<tr>
<td class="firstcol"> &nbsp; Spain</td>
<td>3.49</td>
<td>3.79</td>
<td>3.86</td>
<td>3.90</td>
<td>3.36</td>
<td>3.53</td>
<td>3.45</td>
<td>2.96</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;GERMANY ZEW INDICATOR &nbsp;(% BALANCE)</td>
<td>Nov 06</td>
<td>Oct&nbsp; 06</td>
<td>Sep 06</td>
<td>Aug 05</td>
<td>Jul 05</td>
<td>2005 %</td>
<td>2004 %</td>
<td>2003 %&nbsp;</td>
</tr>
<tr>
<td class="firstcol"> &nbsp;Current Conditions</td>
<td>53.0</td>
<td>42.9</td>
<td>38.9</td>
<td>33.6</td>
<td>23.3</td>
<td>-61.8</td>
<td>-67.7</td>
<td>-93.6</td>
</tr>
<tr class="odd">
<td class="firstcol"> &nbsp;Expectations 6 Months&nbsp; Ahead</td>
<td>-28.5</td>
<td>-27.4</td>
<td>-22.2</td>
<td>-5.6</td>
<td>15.1</td>
<td>34.8</td>
<td>44.6</td>
<td>38.4</td>
</tr>
</tbody>
</table>
</body>
</html>

The third quarter preliminary estimate of Gross Domestic Product for Japan was twice as high as consensus expectations. On a seasonally adjusted annual rate, Japan's GDP rose 2.03% while the expected increase was 1.0%. The rise took [...]

3rd Q GDP: Japan Surprises, Europe Disappoints Germany's ZEW Survey: More Cautious Expectations

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061114d.jpg" width="353">
The overall producer price index fell 1.6% last month, about triple Consensus expectations. Lower energy prices again lowered the total but other prices fell as well. The core PPI fell 0.9% and more than reversed the prior month&#39;s recovery. It was the third decline in the last four months. Expectations had been for a 0.1% increase.
Finished energy goods prices fell 5.0% (-10.3% y/y), led lower by a 7.9% (-18.5% y/y) drop in gasoline prices but fuel oil prices rose 1.8% (-14.8% y/y). Natural gas prices dropped 9.3% (-19.2% y/y) and residential electric power costs fell 0.9% (+4.1% y/y). <img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061114e.jpg" width="353">
Finished consumer goods prices less food &amp; energy. The 0.9% (+0.7% y/y) decline in October reversed the prior month&#39;s 0.6% rise and was the third decline in the last four months.
Capital equipment prices also reversed the prior month&#39;s increase with a 0.9% (+0.6% y/y) decline as light truck prices plunged 9.7% (-12.4% y/y). 
Intermediate goods prices dropped 1.1% and prices less food &amp; energy were unchanged. 
The crude materials PPI plunged 10.5% due to the 9.4% (NSA, -8.2% y/y) drop in crude petroleum and a 39.6% collapse in natural gas (NSA, -66.8% y/y). Less food &amp; energy crude goods prices reversed all of the prior month&#39;s strength with a 1.3% drop.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E8/@E802/@E80201/@E80201.HTM">Producer Price Index</a></th>
<th scope="col">October</th>
<th scope="col">September</th>
<th scope="col">Y/Y</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Finished Goods</td>
<td>-1.6%&nbsp;</td>
<td>-1.3%</td>
<td>&nbsp; -1.5%&nbsp;</td>
<td>&nbsp;4.9%&nbsp;</td>
<td>3.6%&nbsp;</td>
<td>3.2%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Core</td>
<td>-0.9%</td>
<td>0.6%</td>
<td>&nbsp;0.7%</td>
<td>2.4%</td>
<td>1.5%</td>
<td>0.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">Intermediate Goods</td>
<td>-1.1%</td>
<td>-1.4%</td>
<td>0.6%</td>
<td>&nbsp;8.0%</td>
<td>6.6%</td>
<td>4.7%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Core</td>
<td>0.0%</td>
<td>0.1%</td>
<td>5.9%</td>
<td>&nbsp;5.5%</td>
<td>5.7%</td>
<td>2.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">Crude Goods</td>
<td>&nbsp;-10.5%&nbsp;</td>
<td>-3.4%</td>
<td>&nbsp;-22.0%</td>
<td>14.6%</td>
<td>&nbsp;17.5%</td>
<td>25.1%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Core</td>
<td>-1.3%</td>
<td>1.0%</td>
<td>&nbsp;20.0%</td>
<td>4.8%</td>
<td>&nbsp;26.5%</td>
<td>12.4%</td>
</tr>
</tbody>
</table>
</body>
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The overall producer price index fell 1.6% last month, about triple Consensus expectations. Lower energy prices again lowered the total but other prices fell as well. The core PPI fell 0.9% and more than reversed the prior month's [...]

PPI: Total & Core Fell

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061114c.jpg" width="353">
Chain store sales last week fell 0.8% and gave back most of the prior period&#39;s 1.0% recovery, according to the International Council of Shopping Centers (ICSC)-UBS. That pulled sales in November about even with October which fell 0.7% from September.
During the last ten years there has been a 45% correlation between the y/y change in chain store sales and the change in nonauto retail sales less gasoline.
The ICSC-UBS retail chain-store sales index is constructed using the same-store sales (stores open for one year) reported by 78 stores of seven retailers: Dayton Hudson, Federated, Kmart, May, J.C. Penney, Sears and Wal-Mart.
The leading indicator of chain store sales from ICSC-UBS jumped 0.8% (0.8% y/y) last week after a 0.4% decline during the prior period.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/surveyw/@S2/@S2.HTM">ICSC-UBS (SA, 1977=100)</a></th>
<th scope="col">11/11/06</th>
<th scope="col">11/04/06</th>
<th scope="col">Y/Y</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Total Weekly Chain Store Sales</td>
<td>462.9</td>
<td>466.4</td>
<td>2.1%</td>
<td>3.6%</td>
<td>4.7%</td>
<td>2.9%</td>
</tr>
</tbody>
</table>


</html>

Chain store sales last week fell 0.8% and gave back most of the prior period's 1.0% recovery, according to the International Council of Shopping Centers (ICSC)-UBS. That pulled sales in November about even with October which fell 0.7% [...]

Chain Store Sales Off As Well

USD/EUR exchange rate uncoupling from interest rate differential

Widespread downgrading of 2025 GDP outlook

Trade and fiscal policy uncertainty has exploded with the new administration

Much lower US electricity costs gives it a competitive advantage

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

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

US policy gyrations boosting policy uncertainty worldwide

Expected tariff hikes have boosted inflation expectations

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

US economy expected to outperform other major economies in 2025

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

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

Heavy US manufacturing states underperforming while Sun Belt states outperforming

Rising long-term yields a global phenomenon

US financial market concerns shifting from growth to inflation

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

Policy uncertainty has surged since the US national elections.

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

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

Headline US PCE inflation elevated by sticky services prices

US and global equity prices have recently diverged

US leading global upturn in economic surprises

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

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

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

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Andrew Cates

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

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

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

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

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

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

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

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Charts of the Week: Tariff Truce, Tenuous Trust

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U.S. light vehicle sales dropped 2.9% (+6.5% y/y) to 17.31 million units (SAAR) in April after surging 10.8% to 17.82 million units in March. The retreat in April vehicle sales accompanied a 1.7% y/y rise in real disposable income through March, which compared to 2.0% growth last year.

Sales declines were broad-based last month. Light truck sales fell 1.3% (+9.9% y/y) during April to 14.34 million units (SAAR), after rising 12.4% in March. Purchases of domestically-made light trucks declined 1.2% (+11.9% y/y) to 11.02 million units, after jumping 12.5% in March. Sales of imported light trucks fell 1.8% (+4.4% y/y) to 3.32 million units, following an 11.6% March surge.

Trucks’ record 82.8% share of the light vehicle market last month compared to 81.5% in March and 80.3% in April of last year. The share averaged 80.3% during all of 2024 versus 53.3% ten years earlier.

Auto sales also declined last month, down 9.5% (-7.5%) to 2.97 million units (SAAR) following a 3.5% March rise. The decline reversed all of the increase over the prior two months. Purchases of domestically-produced cars fell 9.8% (-4.3% y/y) last month to 2.22 million units, after rising 3.8% in March. Sales of imported autos declined 9.6% (-15.7% y/y) to 0.75 million units, following a 2.5% March increase.

Imports' 23.5% share of the U.S. light vehicle market was little changed from 23.6% in March and 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 held steady at 25.3% last month and compared to 27.7% in April of last year. It reached a high of 38.7% in September 2021. Imports' share of the light truck market eased to 23.2% last month after falling to 23.3% in March.

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

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- Light truck sales pull back, while auto sales tumble.
- Both domestic and imported sales decline.
- Imports' market share slips further.

U.S. Light Vehicle Sales Fall in April

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The ISM Purchasing Managers Index of activity in the manufacturing sector slipped to 48.7 in April from 49.0 during March and 50.3 in February. It remained up from a low of 46.9 in October of last year. A level of 50 is the break-even point between a rising and falling level of activity. The Action Economics Forecast Survey expected a reading of 47.8 for April. The series reached a monthly high of 63.8 in March 2021.

Two of the five component indexes weakened last month. The April production index fell to 44.0 after declining to 48.3 in March. It was the lowest level since May 2020. A lessened 19.8% (NSA) of respondents reported higher production while an increased 24.2% reported lower output. The inventories index declined to 50.8 last month from 53.4 in March. The index remained up from a low of 43.2 in October of last year.

Moving higher, the new orders index rose to 47.2 last month from 45.2 in March. The index remained below a January high of 55.1. Twenty-eight percent (NSA) of respondents reported higher new orders while 26.7% reported a decline. The employment index rose to 46.5 from 44.7 in March. It was below a high of 50.3 in January. A greater 13.1% (NSA) of respondents reported more hiring while a fewer 16.2% indicated less. The supplier delivery index rose to 55.2 from 53.5 in March. A higher 16.6% (NSA) of respondents reported slower delivery speeds while a fairly steady 6.2% reported a quickening.

The prices index, which is not part of the composite series, edged up to 69.8 (NSA) in April after increasing to 69.4 in March. It was the highest level since June 2022, up from a December 2022 low of 39.4. An increased 49.2% of respondents reported higher prices last month, up from 12.2% in November, while a higher 9.7% reported lower prices.

In other series, the export orders index plummeted to 43.1 in April from 49.6 during March. It was down from the high of 52.4 in January. The imports index fell sharply to 47.1 from 50.1 in March. It was the lowest reading since December 2023. The order backlog index dropped to 43.7 (NSA) last month from 44.5 in March. It was the lowest level in five months.

The ISM figures are based on responses from over 400 purchasing executives from 18 industries, which are weighted according to each industry’s contribution to GDP. These indexes are diffusion indexes where a reading above 50 indicates expansion and a reading below 50 points to contraction. The figures from the Institute for Supply Management can be found in Haver’s **USECON** database; further detail is found in the **SURVEYS** database. The expectations number is available in Haver’s **AS1REPNA** database.

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- Declines in last three months follow earlier improvement.
- Production & inventories account for m/m shortfall.
- Prices index edges up to another three-year high.

U.S. ISM Manufacturing Index Indicates Contraction in April

Winnie Tapasanun

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The value of construction put in place unexpectedly fell 0.5% m/m in March after rises of 0.6% in February (+0.7% initially) and 0.1% in January (-0.5% previously), data from the U.S. Census Bureau showed. The March reading was the first m/m fall following five straight m/m gains. A 0.3% m/m March rise had been expected in the Action Economics Forecast Survey. The year-on-year rate of increase decelerated to 2.8% in March, the lowest since May 2019, after registering at 3.4% in February and January. The latest y/y figure was lower than 8.7% in March 2024; thus, having remained below its recent high of 9.8% in January 2024 and a peak of 18.6% in April 2022.

Private construction slid 0.6% (+2.3% y/y) in March, down for the first time since September, following increases of 0.7% in February (+0.9% initially) and 0.1% in January (-0.7% previously). Residential private construction fell 0.4% (+2.8% y/y) in March, the first m/m fall in six months, after an unrevised 1.3% gain in February. Home improvement building dropped 1.2% (+13.4% y/y), the first m/m decline since December, following a 2.3% February gain; it was 41.1% of the residential private construction. Single-family building edged up 0.1% (-0.8% y/y), the smallest of seven consecutive m/m increases, after a 0.8% February rise; it was 46.6% of the residential private construction. Meanwhile, multi-family building was essentially unchanged m/m (-12.1% y/y) in March following 15 straight m/m decreases; it was 12.3% of the residential private construction.

Nonresidential private construction fell 0.8% (+1.6% y/y) in March after a 0.1% increase in February (+0.4% initially) and a 0.1% easing in January (-0.2% previously). The March fall reflected m/m drops in the following nonresidential private constructions. These included religious (-2.9%; +16.4% y/y), health care (-2.2%; -5.2% y/y), office (-1.8%; +2.7% y/y), educational (-1.7%; -4.2% y/y), lodging (-1.6%; -1.0% y/y), commercial (-1.0%; -5.8% y/y), manufacturing (-0.4%; +3.6% y/y), communication (-0.3%; +2.2% y/y), and utilities (-0.1%; +7.0% y/y). In contrast, private constructions for amusement & recreation (1.5%; 7.0% y/y) and transportation (0.7%; 10.2% y/y) rose m/m in March.

The value of public construction declined 0.2% (+4.7% y/y) in March after holding steady in February (+0.2% initially), reflecting a 0.2% increase (-1.9% y/y) in residential public construction and a 0.2% easing (+4.8% y/y) in nonresidential public construction. The March decline reflected m/m drops in the following nonresidential public constructions. These included utilities (-4.8%; -12.8% y/y), commercial (-1.6%; +40.3% y/y), amusement & recreation (-1.0%; +19.1% y/y), educational (-0.6%; +7.6% y/y), sewage & waste disposal (-0.6%; +10.6% y/y), and health care (-0.4%; +13.0% y/y). Notably, spending on highways & streets, which made up 28.7% of public construction spending, fell 0.5% (-2.4% y/y) in March, the first m/m fall since October, following a 0.9% increase in February. To the upside, the following public constructions rose m/m in March: office (1.6%; 6.0% y/y), transportation (1.4%; 7.3% y/y), public safety (0.7%; 4.1% y/y), conservation & development (0.6%; 4.7% y/y), and water supply (0.6%; 12.2% y/y).

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

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- March construction spending -0.5% m/m; +2.8% y/y, the lowest y/y rate since May ’19.
- Residential private construction -0.4% m/m, led by a 1.2% drop in home improvement building.
- Nonresidential private construction -0.8% m/m, down for the second month in three.
- Public sector construction -0.2% m/m, reflecting a 0.2% decline in nonresidential public building.

U.S. Construction Spending Unexpectedly Drops in March, the First M/M Fall Since September

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Initial claims for unemployment insurance rose 18,000 in the week ended April 26 to 241,000, seasonally adjusted.  This is higher by 16,000 than the Action Economics Forecast Survey amount of 225,000 and is the largest amount since the week of February 22. The previous week’s actual count was revised up by 1,000 to 223,000, from 222,000 reported initially.

The total number of unemployment insurance beneficiaries – also known as “continuing claims” – in the week ended April 19 was 1.916 million, up 83,000 from the prior week’s 1.833 million; that earlier amount was revised down by 8,000.

The insured unemployment rate, that is, the number of beneficiaries as a percentage of covered employment, was 1.3% in the April 19 week, following 1.2% continuously since the week of January 6, 2024.

Economic conditions vary widely across states and territories.  In the week ended April 12, the highest unemployment rates were in New Jersey (2.39%), California (2.24%), Washington (2.19%), Rhode Island (2.17%) and Massachusetts (1.93%).  The lowest rates were in Florida (0.35%), South Dakota (0.40%), Alabama (0.41%), Virginia (0.45%) and Tennessee (0.48%).  Rates in other notable states include the Illinois (1.85%), New York (1.71%), Pennsylvania (1.54%) and Texas (1.09%). These state data are not seasonally adjusted.

Data on weekly unemployment claims are from the Department of Labor itself, not the Bureau of Labor Statistics. They begin in 1967 and are contained in Haver’s **WEEKLY** database and summarized monthly in U**SECON**. Data for individual states are in **REGIONW** back to December 1986. The expectations figure is from the Action Economics Forecast Survey in the **AS1REPNA** database.

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- Actual initial claims amount is 16,000 more than forecast.
- Total beneficiaries rose by 83,000.
- Insured unemployment rate ticked up to 1.3% after 15 months at 1.2%.

Economy in Brief: November 2006

Jump to:

UK Labor Market Stalls; Unemployment Rate Highest since Spring 2000

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Mortgage Applications Surged Again

Empire State Index Unexpectedly Firm

Empire State Index Unexpectedly Firm

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PPI: Total & Core Fell

Chain Store Sales Off As Well