Tom Moeller

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080516a.jpg" align="left" border="0" height="265" width="353">
Housing starts rose unexpectedly during April to 1,032,000
units (AR), an increase of 8.2% following the March decline of 13.8%
which was deeper than reported initially. The latest figure was firmer
than Consensus expectations for 940,000 starts.
All of the rise in starts last month was due to a 36.0% m/m
increase in starts of multi-family units. It recovered nearly all of a
March decline that was deeper than reported last month.
Single family starts last month fell 1.7% to 692,000 but the
March decline of 2.5% was roughly half the drop reported initially.
Nevertheless, single family starts in April were at the lowest level
since January of 1991. They have fallen 62.0% since their January 2006
peak. Starts began this quarter 4.6% below the 1Q average.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080516b.jpg" align="right" border="0" height="265" width="353">
By region, declines in April starts were spread evenly across
the country. In the Northeast single family starts fell 7.2%
(-38.5% y/y) to a record low. In the South, single family
starts fell 6.6% (-42.9% y/y) to the lowest level since 1991 but in the
West single family starts reversed the March decline. Starts rose 8.3%
(-43.3% y/y) although they remained down by nearly two-thirds from the
August 2005 peak. In the Midwest single family starts rose 5.0% (-40.1%
y/y) and they were down 71.0% from the February 2005 peak.
Building permits reversed the March decline. The total rose
4.9% paced by a 4.0% (-40.1% y/y) increase in single-family permits.
Boom and Gloom in the Housing Markets: The Sequel
from the Reserve Bank of St. Louis can be found <a href="http://research.stlouisfed.org/publications/net/20080501/cover.pdf">here</a>.
The Federal Response to Home Mortgage Distress:
Lessons from the Great Depression, also from the Federal
Reserve Bank of St. Louis, is available <a href="http://research.stlouisfed.org/publications/review/08/05/Wheelock.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/@E9/@E901/@E90101/@E90101.HTM">Housing
Starts (000s, AR)</a></th>
<th scope="col">April</th>
<th scope="col">March</th>
<th scope="col">Y/Y</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>1,032</td>
<td>954</td>
<td>-30.6%</td>
<td>1,344</td>
<td>1,812</td>
<td>2,073</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Single-Family</td>
<td>692</td>
<td>704</td>
<td>-42.2%</td>
<td>1,039</td>
<td>1,474</td>
<td>1,719</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Multi-Family</td>
<td>340</td>
<td>250</td>
<td>17.6%</td>
<td>304</td>
<td>338</td>
<td>354</td>
</tr>
<tr>
<td class="firstcol">Building Permits</td>
<td>978</td>
<td>932</td>
<td>-34.3%</td>
<td>1,371</td>
<td>1,842</td>
<td>2,159</td>
</tr>
</tbody>
</table>
Michigan Consumer Sentiment Lowest
Since 1980 
by <a href="/comment/Moeller.html">Tom
Moeller</a> May 16, 2008


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080516d.jpg" align="left" border="0" height="265" width="353">
The preliminary May reading of consumer sentiment from the
University of Michigan fell another 5.0% m/m to a level of 59.5. The
decline was larger than Consensus expectations for a reading of 62.0.
The latest level was the lowest since the brief "credit
crunch" recession during 1980. 
During the last ten years there has been a 47% correlation
between the level of sentiment and the three month change in real
consumer spending.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080516f.jpg" align="right" border="0" height="265" width="353">
The current conditions index nearly matched its April decline
and fell 6.9% to the lowest level since 1981. The view of current
conditions for buying large household goods dropped hard again, this
month by 6.3% (-34.4% y/y) and the view of current personal finances
fell 8.1% (-30.1% y/y).Far fewer respondents indicated that their
income was higher.
The expectations component of overall sentiment fell 3.0%
after its 11.3% April dive. The index fell to its lowest level since
late 1990. Expectations for personal finances fell slightly after a
sharp April decline. Expectations for business conditions during the
next year fell much more strongly by 12.5% (-63.9% y/y), about the same
as during April. Expectations for conditions over the next five years
just dipped m/m (-21.3% y/y).
Opinions about government policy, which apparently influence
economic expectations, cratered 21.9% m/m (-43.2% y/y). The percentage
of those surveyed who indicated that they thought government was doing
a good job was stable at 6% but those who thought a poor job was being
done shot up to a record 56% from 43% in April.
The mean expected rate of inflation during the next twelve
months surged to 7.0% from 5.7% in April, the highest level since 1981.Has
the Behavior of Inflation and Long-Term Inflation Expectations Changed?
from the Federal Reserve Bank of Kansas City can be found <a href="http://www.kansascityfed.org/PUBLICAT/ECONREV/PDF/1q08Clark.pdf">here</a>. 
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080516e.jpg" align="left" border="0" height="265" width="353">
The University of Michigan survey is not seasonally
adjusted.The reading is based on telephone interviews with about 500
households at month-end; the mid-month results are based on about 300
interviews. The summary indexes are in Haver's USECON database,
with details in the proprietary UMSCA database.
Yesterday's speech by Fed GovernorFrederic S. Mishkin How
Should We Respond to Asset Price Bubbles? can be found <a href="http://www.federalreserve.gov/newsevents/speech/mishkin20080515a.htm">
here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EF/@EF14/@EF1402/@EF1402.HTM">University
of Michigan</a></th>
<th scope="col">May (Prelim.)</th>
<th scope="col">April</th>
<th scope="col">March</th>
<th scope="col">May y/y</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Consumer Sentiment</td>
<td>59.5</td>
<td>62.6</td>
<td>&nbsp;69.5</td>
<td>-32.6% </td>
<td>85.6</td>
<td>87.3</td>
<td>88.5</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Current Conditions</td>
<td>71.7</td>
<td>77.0</td>
<td>84.2</td>
<td>-31.8%</td>
<td>101.2</td>
<td>105.1</td>
<td>105.9</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Expectations</td>
<td>51.7</td>
<td>53.3</td>
<td>60.1</td>
<td>-33.4%</td>
<td>75.6</td>
<td>75.9</td>
<td>77.4</td>
</tr>
</tbody>
</table>
Export Trends Are Faltering inEurope As Imports Sustain 
by <a href="/comment/Brusca.html">Robert
Brusca</a> May 16, 2008


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080516c.jpg" align="left" border="0" height="265" width="353">
European exports fell across the board in March as imports
were steady. This plunged the trade balance back into deficit.
Sequential growth rates are still upbeat with exports accelerating over
12-mo to 6-mo to 3-mo. But imports are accelerating even faster on this
sequence. Over a broader swath of time the Yr/Yr trends show that
imports are outpacing exports and that import growth has been firmer
while export growth is fading (see chart). Indeed, there is no reason
to believe the message in the short-term sequential growth rates since
the euro keeps climbing and undermining export growth prospects. Also
growth surveys in Europe are getting progressively weaker. We did get a
surprise pop in GDP growth in 2008-Q1 &#8211; but would you want to take that
one to the bank? 
 

Euro- Japan growth figures are less prone to adjust for the
extra leap day that we had in the first quarter. Moreover, GDP&#8217;s
&#8216;resilience only implies that the effects of the slowdown are being
gradually phased in. Weakness in orders and in consumer confidence will
lead to weaker economic growth overall in Europe. Sometimes the lag
between what the surveys predict and what happens is longer than
expected, but the survey message is clear and so widespread it is
unlikely to be wrong. 
 

While Germany&#8217;s DIW has hiked its growth outlook for German
growth in Q2, maybe it should be cutting it instead... Often unexpected
strong growth turns out to have borrowed growth from subsequent
quarters. One thing it does is to RAISE the level of spending to a
point that if spending goes back to trend a downside growth number will
emerge in the next quarter &#8211; that&#8217;s the arithmetic of it. In the case
of Germany and Europe I think that sort of a setback &#8211; or something
even more dramatic-- is a likely outcome in 2008-Q2. 


<table border="0" cellspacing="0" width="100%">
</table>
<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="7" scope="col">Euro Area
13-Trade trends for goods </th>
</tr>
</thead>
<tbody>
<tr class="grey4">
<td class="firstcol">&nbsp;</td>
<td colspan="2">m/m%</td>
<td colspan="4">% Saar</td>
</tr>
<tr class="grey3">
<td class="firstcol">&nbsp;</td>
<td>Mar-08</td>
<td>Feb-08</td>
<td>3-Mo</td>
<td>6-Mo</td>
<td>12-Mo</td>
<td>12-Mo Ago</td>
</tr>
<tr class="grey4">
<td class="firstcol">Balance*</td>
<td>&#8364;&#8364; (2,382)</td>
<td>&#8364;&#8364; 1,567</td>
<td>&#8364;&#8364; (714)</td>
<td>&#8364;&#8364; (236)</td>
<td>&#8364;&#8364; 1,144</td>
<td>&#8364;&#8364; 50</td>
</tr>
<tr class="grey2">
<td class="firstcol" colspan="7">Exports</td>
</tr>
<tr class="grey1">
<td class="firstcol">All Exports</td>
<td>-2.9%</td>
<td>0.6%</td>
<td>18.2%</td>
<td>3.2%</td>
<td>4.6%</td>
<td>9.1%</td>
</tr>
<tr class="grey1">
<td class="firstcol">Food and Drinks</td>
<td>-1.4%</td>
<td>0.6%</td>
<td>10.9%</td>
<td>4.2%</td>
<td>7.4%</td>
<td>9.3%</td>
</tr>
<tr class="grey1">
<td class="firstcol">Raw materials</td>
<td>-0.4%</td>
<td>1.2%</td>
<td>35.4%</td>
<td>10.0%</td>
<td>8.4%</td>
<td>11.6%</td>
</tr>
<tr class="grey1">
<td class="firstcol">Other</td>
<td>-3.1%</td>
<td>0.6%</td>
<td>18.3%</td>
<td>3.0%</td>
<td>4.3%</td>
<td>9.0%</td>
</tr>
<tr class="grey1">
<td class="firstcol">MFG</td>
<td>-4.8%</td>
<td>1.4%</td>
<td>11.9%</td>
<td>-4.8%</td>
<td>-0.1%</td>
<td>11.2%</td>
</tr>
<tr class="grey2">
<td class="firstcol" colspan="7">Imports</td>
</tr>
<tr class="grey1">
<td class="firstcol">All Imports</td>
<td>0.0%</td>
<td>-1.5%</td>
<td>20.3%</td>
<td>12.2%</td>
<td>11.6%</td>
<td>2.4%</td>
</tr>
<tr class="grey1">
<td class="firstcol">Food and Drinks</td>
<td>-3.3%</td>
<td>-2.0%</td>
<td>-11.7%</td>
<td>-6.3%</td>
<td>7.0%</td>
<td>7.5%</td>
</tr>
<tr class="grey1">
<td class="firstcol">Raw materials</td>
<td>0.4%</td>
<td>0.6%</td>
<td>10.5%</td>
<td>6.2%</td>
<td>5.2%</td>
<td>14.4%</td>
</tr>
<tr class="grey1">
<td class="firstcol">Other</td>
<td>0.2%</td>
<td>-1.6%</td>
<td>23.1%</td>
<td>13.7%</td>
<td>12.2%</td>
<td>1.5%</td>
</tr>
<tr class="grey1">
<td class="firstcol">MFG</td>
<td>-3.2%</td>
<td>-0.4%</td>
<td>4.0%</td>
<td>-7.6%</td>
<td>-0.9%</td>
<td>9.8%</td>
</tr>
<tr class="grey1">
<td colspan="7" class="firstcol">*Eur mlns;
mo or period average</td>
</tr>
</tbody>
</table>
</body></html>

Housing starts rose unexpectedly during April to 1,032,000 units (AR), an increase of 8.2% following the March decline of 13.8% which was deeper than reported initially. The latest figure was firmer than Consensus expectations for [...]

U.S. Housing Starts April Rise Due to Multi-Family, Single-Family at 27 Year Low

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080515d.jpg" width="353">
The May Index of General Business conditions in the manufacturing sector, from the Philadelphia Federal Reserve Bank, rose to -15.6 and reversed all of its deterioration in April. The latest was the highest level this year.
The Philadelphia Fed constructs a diffusion index for total business activity and each of the sub indexes. The business conditions index reflects a separate survey question, not the sub indexes listed below.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080515e.jpg" width="353">
During the last ten years there has been a 59% correlation between the level of the Philadelphia Fed Business Conditions Index and the three-month growth in factory sector industrial production. There has been a 42% correlation with q/q growth in real GDP.
The new orders sub-index improved the most during May while shipments, inventories and employment also rose.
The prices paid index advanced sharply to its highest level since January 2005. During the last ten years there has been a 76% correlation between the prices paid index and the three-month growth in the intermediate goods PPI. There has been an 85% correlation with the change in core intermediate goods prices.
The separate index of expected business conditions in six months again rose sharply this month to a level of 28.2 from 13.7 in April. Expectations for each sub-component rose sharply and the overall series was at it&#39;s highest since last October.
The latest Business Outlook Survey from the Federal Reserve Bank of Philadelphia can be found <a href="http://www.philadelphiafed.org/files/bos/bos0508.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">Philadelphia Fed (%)</th>
<th scope="col">May</th>
<th scope="col">April</th>
<th scope="col">May &#39;07</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">General Activity Index</td>
<td>-15.6</td>
<td>-24.9</td>
<td>4.1</td>
<td>5.1</td>
<td>8.1</td>
<td>11.5</td>
</tr>
<tr>
<td class="firstcol">Prices Paid Index</td>
<td>53.8</td>
<td>&nbsp;51.6</td>
<td>&nbsp;29.6</td>
<td>26.4</td>
<td>36.6</td>
<td>40.1</td>
</tr>
</tbody>
</table>
</body>
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The May Index of General Business conditions in the manufacturing sector, from the Philadelphia Federal Reserve Bank, rose to -15.6 and reversed all of its deterioration in April. The latest was the highest level this year. The [...]

Philadelphia Fed Index Recovered, Expectations Up Sharply

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080515h.jpg" width="353">
Initial claims for unemployment insurance last week ticked up a modest 6,000 to 371,000 following the prior week&#39;s little revised 17,000 rise. Consensus expectations had been for claims to total 370,000 last week.
The four week moving average of initial claims fell very slightly week-to-week to 365,750 (19.5% y/y). Claims averaged 365,000 during April.
A claims level below 400,000 typically has been associated with growth in nonfarm payrolls. During the last ten years there has been a (negative) 76% correlation between the level of initial claims and the m/m change in nonfarm payroll employment.
Continuing claims for unemployment insurance rose 28,000 after a gain of 2,000 during the prior week. That was revised from the initial report of a moderate decline. The latest level was the highest since March 2004. It provides some indication of workers&#39; ability to find employment.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080515i.jpg" width="353">
The continuing claims numbers lag the initial claims figures by one week.
The insured rate of unemployment held steady at 2.3% for the third week. That was the highest since 2004.
Yesterday&#39;s speech by Fed Governor Randall S. Kroszner titled Risk Management and Basel II can be found <a href="http://www.federalreserve.gov/newsevents/speech/kroszner20080514a.htm"> 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/WEEKLY/@W5/@W507/@W507.HTM">Unemployment Insurance (000s)</a>&nbsp;</th>
<th scope="col">05/10/08</th>
<th scope="col">05/03/08</th>
<th scope="col">Y/Y</th>
<th scope="col">2007</th>
<th scope="col">2006&nbsp;</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Initial Claims</td>
<td>&nbsp;371</td>
<td>365</td>
<td>22.8%</td>
<td>322</td>
<td>313</td>
<td>331</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>--</td>
<td>3,060</td>
<td>22.9%</td>
<td>2,552</td>
<td>2,459</td>
<td>2,662</td>
</tr>
</tbody>
</table>
</body>
</html>

Initial claims for unemployment insurance last week ticked up a modest 6,000 to 371,000 following the prior week's little revised 17,000 rise. Consensus expectations had been for claims to total 370,000 last week. The four week moving [...]

U.S. Initial Claims for Unemployment Insurance Ticked Up

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080515a.jpg" width="353">
Industrial production fell a sharp 0.7% last month after a little revised increase of 0.2% during March. The decline was close to the largest since September 2005 and it was more than double Consensus expectations for a 0.3% drop.
Factory output fell a slightly sharper 0.8% after no change during March. Output has now fallen 1.8% since its peak in July of 2007 and the three month rate change was a negative 5.8% (AR).<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080515b.jpg" width="353">
Production in the high tech sector continued strong and rose 1.0% (24.5% y/y) while the three month rate of change amounted to 23.5%. Production of computers &amp; office equipment rose a lesser 0.5% and three month growth totaled 9.8% (AR). Output of communications equipment rose an even stronger 2.1%. The three month rate of growth was 27.5%.
The trend in output outside the high tech sector has been decidedly different and one of weakness. Less high tech, factory output fell 0.9% last month and three month output growth fell to -7.6% (AR). Output of motor vehicles &amp; parts has been notably weak and fell 8.2% last month, at a -43.5% annual rate during the last three months. Furniture output also fell 0.7% last month and at a hard 10.2% rate during the last three. Electrical equipment fell 0.8% during April and at a 2.6% rate during the last three months. Machinery output also was quite weak and fell 1.7% and at a three month rate of -9.1% <img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080515c.jpg" width="353">
In the nondurables area the picture is little better. Output ticked down 0.1% last month and at a 3.3% rate during the last three. Though apparel output rose 0.1% last month it followed sharp declines during the prior three. Three month annual growth was -7.0%. Paper output has been falling at an 8.9% rate during the last three months and chemical output is off at a 3.4% rate.
Capacity utilization fell sharply to 79.7% during April but utilization in the factory sector slipped even further to 77.5%, its lowest also since late 2004. Utilization rates in the durables industries outside of high tech were notably weak, exemplified by the machinery industry where utilization fell to 74.6% versus 81% nearly two years ago. Overall capacity grew 1.8% during the last year and 2.0% in the factory sector. Less high tech, factory capacity grew a lower 0.9% over the last year.
Risk Management in Financial Institutions is today&#39;s speech by Fed Chairman Ben S. Bernanke and it is available <a href="http://www.federalreserve.gov/newsevents/speech/bernanke20080515a.htm"> here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">INDUSTRIAL PRODUCTION (SA)</th>
<th scope="col">April</th>
<th scope="col">March</th>
<th scope="col">Y/Y</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>-0.7</td>
<td>0.2</td>
<td>0.2</td>
<td>1.7</td>
<td>2.2</td>
<td>3.3</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Manufacturing</td>
<td>-0.8</td>
<td>0.0</td>
<td>-0.3</td>
<td>1.7</td>
<td>2.4</td>
<td>4.0</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Utilities</td>
<td>0.4</td>
<td>0.7</td>
<td>0.8</td>
<td>3.3</td>
<td>-0.6</td>
<td>2.1</td>
</tr>
</tbody>
</table>


</html>

Industrial production fell a sharp 0.7% last month after a little revised increase of 0.2% during March. The decline was close to the largest since September 2005 and it was more than double Consensus expectations for a 0.3% drop. [...]

U.S. Industrial Output Fell Hard Last Month

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080515a.jpg" width="353">
Industrial production fell a sharp 0.7% last month after a little revised increase of 0.2% during March. The decline was close to the largest since September 2005 and it was more than double Consensus expectations for a 0.3% drop.
Factory output fell a slightly sharper 0.8% after no change during March. Output has now fallen 1.8% since its peak in July of 2007 and the three month rate change was a negative 5.8% (AR).<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080515b.jpg" width="353">
Production in the high tech sector continued strong and rose 1.0% (24.5% y/y) while the three month rate of change amounted to 23.5%. Production of computers &amp; office equipment rose a lesser 0.5% and three month growth totaled 9.8% (AR). Output of communications equipment rose an even stronger 2.1%. The three month rate of growth was 27.5%.
The trend in output outside the high tech sector has been decidedly different and one of weakness. Less high tech, factory output fell 0.9% last month and three month output growth fell to -7.6% (AR). Output of motor vehicles &amp; parts has been notably weak and fell 8.2% last month, at a -43.5% annual rate during the last three months. Furniture output also fell 0.7% last month and at a hard 10.2% rate during the last three. Electrical equipment fell 0.8% during April and at a 2.6% rate during the last three months. Machinery output also was quite weak and fell 1.7% and at a three month rate of -9.1% <img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080515c.jpg" width="353">
In the nondurables area the picture is little better. Output ticked down 0.1% last month and at a 3.3% rate during the last three. Though apparel output rose 0.1% last month it followed sharp declines during the prior three. Three month annual growth was -7.0%. Paper output has been falling at an 8.9% rate during the last three months and chemical output is off at a 3.4% rate.
Capacity utilization fell sharply to 79.7% during April but utilization in the factory sector slipped even further to 77.5%, its lowest also since late 2004. Utilization rates in the durables industries outside of high tech were notably weak, exemplified by the machinery industry where utilization fell to 74.6% versus 81% nearly two years ago. Overall capacity grew 1.8% during the last year and 2.0% in the factory sector. Less high tech, factory capacity grew a lower 0.9% over the last year.
Risk Management in Financial Institutions is today&#39;s speech by Fed Chairman Ben S. Bernanke and it is available <a href="http://www.federalreserve.gov/newsevents/speech/bernanke20080515a.htm"> here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">INDUSTRIAL PRODUCTION (SA)</th>
<th scope="col">April</th>
<th scope="col">March</th>
<th scope="col">Y/Y</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>-0.7</td>
<td>0.2</td>
<td>0.2</td>
<td>1.7</td>
<td>2.2</td>
<td>3.3</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Manufacturing</td>
<td>-0.8</td>
<td>0.0</td>
<td>-0.3</td>
<td>1.7</td>
<td>2.4</td>
<td>4.0</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Utilities</td>
<td>0.4</td>
<td>0.7</td>
<td>0.8</td>
<td>3.3</td>
<td>-0.6</td>
<td>2.1</td>
</tr>
</tbody>
</table>
U.S. Empire State Index Slipped 
by <a href="/comment/Moeller.html">Tom Moeller</a> May, 2008


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080515f.jpg" width="353">
The May index of manufacturing activity in New York State slipped to -3.23% and gave back a small piece of the prior month&#39;s improvement. It was just slightly more of a decline than expectations for a May reading of zero. The figure is a diffusion index and it is reported by the Federal Reserve Bank of New York.
Since the series&#39; inception in 2001 there has been a 55% correlation between the index level and the three month change in U.S. factory sector industrial production.
Weaker shipments accounted for most of the overall decline while new orders fell just slightly and employment rose. In the (perhaps too) short seven year history of the NY employment index, there has been an 85% correlation between it and the three month growth in overall factory sector employment.
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 advanced sharply yet again. The latest index level of 69.57 set a new record. Since the series&#39; inception in 2001 there has been an 81% 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 ticked up just slightly and remained near the lowest level since 2001.
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. 
For more on the Empire State Manufacturing Survey, including methodologies and the latest report, click <a href="http://www.newyorkfed.org/survey/empire/empiresurvey_overview.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/SURVEYS/@S5/@S511/@S511.HTM">Empire State Manufacturing Survey</a></th>
<th scope="col">May</th>
<th scope="col">April</th>
<th scope="col">May &#39;07&nbsp;</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">General Business Conditions (diffusion index, %)&nbsp;&nbsp;</td>
<td>-3.23</td>
<td>0.63</td>
<td>10.10</td>
<td>17.23</td>
<td>20.24</td>
<td>15.53</td>
</tr>
<tr>
<td class="firstcol">Prices Paid</td>
<td>69.57</td>
<td>57.29</td>
<td>34.44</td>
<td>35.64</td>
<td>41.88</td>
<td>44.74</td>
</tr>
</tbody>
</table>
Philadelphia Fed Index Recovered, Expectations Up Sharply 
by <a href="/comment/Moeller.html">Tom Moeller</a> May 15, 2008


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080515d.jpg" width="353">
The May Index of General Business conditions in the manufacturing sector, from the Philadelphia Federal Reserve Bank, rose to -15.6 and reversed all of its deterioration in April. The latest was the highest level this year.
The Philadelphia Fed constructs a diffusion index for total business activity and each of the sub indexes. The business conditions index reflects a separate survey question, not the sub indexes listed below.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080515e.jpg" width="353">
During the last ten years there has been a 59% correlation between the level of the Philadelphia Fed Business Conditions Index and the three-month growth in factory sector industrial production. There has been a 42% correlation with q/q growth in real GDP.
The new orders sub-index improved the most during May while shipments, inventories and employment also rose.
The prices paid index advanced sharply to its highest level since January 2005. During the last ten years there has been a 76% correlation between the prices paid index and the three-month growth in the intermediate goods PPI. There has been an 85% correlation with the change in core intermediate goods prices.
The separate index of expected business conditions in six months again rose sharply this month to a level of 28.2 from 13.7 in April. Expectations for each sub-component rose sharply and the overall series was at it&#39;s highest since last October.
The latest Business Outlook Survey from the Federal Reserve Bank of Philadelphia can be found <a href="http://www.philadelphiafed.org/files/bos/bos0508.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">Philadelphia Fed (%)</th>
<th scope="col">May</th>
<th scope="col">April</th>
<th scope="col">May &#39;07</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">General Activity Index</td>
<td>-15.6</td>
<td>-24.9</td>
<td>4.1</td>
<td>5.1</td>
<td>8.1</td>
<td>11.5</td>
</tr>
<tr>
<td class="firstcol">Prices Paid Index</td>
<td>53.8</td>
<td>&nbsp;51.6</td>
<td>&nbsp;29.6</td>
<td>26.4</td>
<td>36.6</td>
<td>40.1</td>
</tr>
</tbody>
</table>
U.S. Initial Claims for Unemployment Insurance Ticked Up 
by <a href="/comment/Moeller.html">Tom Moeller</a> May 15, 2008


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080515h.jpg" width="353">
Initial claims for unemployment insurance last week ticked up a modest 6,000 to 371,000 following the prior week&#39;s little revised 17,000 rise. Consensus expectations had been for claims to total 370,000 last week.
The four week moving average of initial claims fell very slightly week-to-week to 365,750 (19.5% y/y). Claims averaged 365,000 during April.
A claims level below 400,000 typically has been associated with growth in nonfarm payrolls. During the last ten years there has been a (negative) 76% correlation between the level of initial claims and the m/m change in nonfarm payroll employment.
Continuing claims for unemployment insurance rose 28,000 after a gain of 2,000 during the prior week. That was revised from the initial report of a moderate decline. The latest level was the highest since March 2004. It provides some indication of workers&#39; ability to find employment.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080515i.jpg" width="353">
The continuing claims numbers lag the initial claims figures by one week.
The insured rate of unemployment held steady at 2.3% for the third week. That was the highest since 2004.
Yesterday&#39;s speech by Fed Governor Randall S. Kroszner titled Risk Management and Basel II can be found <a href="http://www.federalreserve.gov/newsevents/speech/kroszner20080514a.htm"> 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/WEEKLY/@W5/@W507/@W507.HTM">Unemployment Insurance (000s)</a>&nbsp;</th>
<th scope="col">05/10/08</th>
<th scope="col">05/03/08</th>
<th scope="col">Y/Y</th>
<th scope="col">2007</th>
<th scope="col">2006&nbsp;</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Initial Claims</td>
<td>&nbsp;371</td>
<td>365</td>
<td>22.8%</td>
<td>322</td>
<td>313</td>
<td>331</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>--</td>
<td>3,060</td>
<td>22.9%</td>
<td>2,552</td>
<td>2,459</td>
<td>2,662</td>
</tr>
</tbody>
</table>


</html>

Robert Brusca

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080514d.jpg" align="left" border="0" height="265" width="353">
The OECD composite leading indicators show abroad slowing in
the OECD area. Only Japan is showing a rebound and that is because it
had been much weaker in earlier months. The six month horizons on the
bottom of the table shows the CLI trends in the six month periods that
the OECD likes to look at them. Weakness and accelerating weakness is
the predominate result on this basis of observation. 
 

The chart shows that the depth of the slowdown in the various
indicators is comparable to their respective lows in the last
recession. Still the cycles are more out of phase at this time with
Japan dropping early and already signaling that it may be headed for
recovery- may be. 
 

The Indicators are a stark reminder why the IMF has been
urging the ECB to hold off in being more aggressive in its inflation
fight. Already there is evidence of pending weakness that could help to
damp existing inflation pressures. 
 


<table border="0" cellspacing="0" width="100%">
</table>
<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr><th colspan="5" scope="col"> OECD Trend-restored leading Indicators</th>
</tr>
<tr>
<th colspan="5" scope="col">Growth progression-SAAR
</th></tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>3-Mos</td>
<td>6-Mos</td>
<td>12-Mos</td>
<td>Yr-Ago</td>
</tr>
<tr class="odd">
<td class="firstcol">OECD</td>
<td>-1.9%</td>
<td>-1.7%</td>
<td>-1.3%</td>
<td>1.3%</td>
</tr>
<tr class="odd">
<td class="firstcol">OECD 7</td>
<td>-3.8%</td>
<td>-3.3%</td>
<td>-2.2%</td>
<td>0.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">OECD Europe</td>
<td>-3.9%</td>
<td>-2.3%</td>
<td>-1.8%</td>
<td>1.5%</td>
</tr>
<tr class="odd">
<td class="firstcol">OECD Japan</td>
<td>3.2%</td>
<td>4.6%</td>
<td>-1.8%</td>
<td>-0.1%</td>
</tr>
<tr class="odd">
<td class="firstcol">OECD US</td>
<td>-6.1%</td>
<td>-5.7%</td>
<td>-2.4%</td>
<td>0.1%</td>
</tr>
<tr>
<td colspan="5" class="firstcol">Six month readings at 6-Mo
Intervals:</td>
</tr>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td>Recent six</td>
<td>6-Mos Ago</td>
<td>12-Mos Ago</td>
<td>18-Mos Ago</td>
</tr>
<tr class="odd">
<td class="firstcol">OECD</td>
<td>-1.7%</td>
<td>-0.8%</td>
<td>2.3%</td>
<td>0.3%</td>
</tr>
<tr class="odd">
<td class="firstcol">OECD 7</td>
<td>-3.3%</td>
<td>-1.2%</td>
<td>1.1%</td>
<td>-0.6%</td>
</tr>
<tr class="odd">
<td class="firstcol">OECD Europe</td>
<td>-2.3%</td>
<td>-1.3%</td>
<td>1.2%</td>
<td>1.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">OECD Japan</td>
<td>4.6%</td>
<td>-7.7%</td>
<td>-0.3%</td>
<td>0.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">OECD US</td>
<td>-5.7%</td>
<td>1.1%</td>
<td>1.5%</td>
<td>-1.2%</td>
</tr>
<tr class="odd">
<td colspan="5" class="firstcol">Slowdowns indicated by BOLD RED</td>
</tr>
</tbody>
</table>
</body></html>

The OECD composite leading indicators show abroad slowing in the OECD area. Only Japan is showing a rebound and that is because it had been much weaker in earlier months. The six month horizons on the bottom of the table shows the CLI [...]

OECD Indicators Show Faltering Growth Prospects

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080514e.jpg" width="353">
The National Federation of Independent Business (NFIB) reported that small business optimism during April gained back just more than half of its sharp drop in March. The 2.1% m/m increase to a reading of 91.5 followed a 3.6% March drop that had been to the lowest level since the short, &quot;credit crunch&quot; recession of 1980.
During the last ten years there has been a 70% correlation between the level of the NFIB index and the two quarter change in real GDP.
The percentage of firms actually raising prices again rose m/m, to 20% which was the highest level since August, 2006. During the last ten years there has been a 64% correlation between the y/y change in the producer price index and the level of the NFIB price index. The percentage of firms planning to raise prices also rose to 31%, its highest since late 2005.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080514f.jpg" width="353">
Twelve percent fewer respondents expected the economy to improve and only five percent (up from 3% in March) of the respondents expected to raise employment. The latest was near the least since 2003. Twenty one percent of firms had one or more job openings. During the last ten years there has been a 71% correlation between the NFIB employment percentage and the y/y change in nonfarm payrolls.
Nine percent of firms indicated that credit was harder to get. That was near the highest level since 1993 and that was more than double the percentage during 2004.
Only six percent of respondents, up from five percent in March, thought that now was a good time to expand the business, the least since 1982, and expectations for earnings improved just slightly.
About 24 million businesses exist in the United States. Small business creates 80% of all new jobs in America.
The NFIB figures can be found in Haver&#39;s SURVEYS database.
Credit, Housing, Commodities, and the Economy is yesterday&#39;s speech by Janet L. Yellen, President and CEO, Federal Reserve Bank of San Francisco and it is available <a href="http:/www.frbsf.org/news/speeches/2008/0513.pdf"> here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S7/@S7.HTM">Nat&#39;l Federation of Independent Business</a></th>
<th scope="col">April</th>
<th scope="col">March</th>
<th scope="col">Y/Y</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Small Business Optimism Index (1986=100)</td>
<td>91.5</td>
<td>89.6</td>
<td>-5.5%</td>
<td>96.7</td>
<td>98.9</td>
<td>101.6</td>
</tr>
</tbody>
</table>
</body>
</html>

The National Federation of Independent Business (NFIB) reported that small business optimism during April gained back just more than half of its sharp drop in March. The 2.1% m/m increase to a reading of 91.5 followed a 3.6% March [...]

U.S. Small Business Optimism Recovered Slightly, Pricing Pressure Strong

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080514a.jpg" width="353">
The consumer price index (CPI-U) rose 0.2% last month, down from the 0.3% March increase and less than the 0.3% rise that was generally expected. Year-to-year, prices rose 3.9% which was off the earlier highs of 4.4%.
Less food &amp; energy, consumer prices also were under control last month and posted just a 0.1% uptick. That was half the Consensus forecast for a 0.2% gain. The year-to-year rise of 2.3% was equal to last year&#39;s full year gain and down from the 2.5% increase during 2006.
Food &amp; beverage prices provided lift to last month&#39;s gain in the CPI with a 0.9% increase. The year-to-year increase of 5.0% was the strongest since 1990. Prices for meats poultry &amp; fish broke out of a several month slumber and rose 0.9% (3.7% y/y). Showing real strength, however, were prices for cereal &amp; bakery products which increased another 1.4%. The y/y rise in these prices of 8.9% was the strongest since 1989. Dairy product prices also were quite firm and rose 0.7%. They surged 11.8% year-to-year.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080514b.jpg" width="353">
Energy prices were under control last month and fell slightly. The weakness was due to a surprising 2.0% (+20.7% y/y) decline in seasonally adjusted gasoline prices. (Not seasonally adjusted gas prices rose 5.6% m/m in April and they are up another 6.1% so far in May.) Conversely, fuel oil prices last month surged 3.6% (42.8% y/y) while natural gas &amp; electricity prices also were strong. They posted a 2.5% increase (6.7% y/y).<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080514c.jpg" width="353">
Core goods prices were unchanged following two consecutive months of 0.1% decline. Lower prices for new &amp; used motor vehicles led the weakness with a 0.2% decline (-0.3% y/y). Prices for household furnishings &amp; operations also fell by 0.1% (-0.1% y/y) after their brief 0.5% March increase. Apparel prices showed the only one month strength with a 0.5% (-0.6% y/y) increase that was the strongest rise since last November.
Core services prices also were under control and ticked up just 0.1%. Shelter prices, which constitute 33% of the total CPI, for the second month rose just 0.1% (2.6% y/y). Owners equivalent rent of primary residence, a measure not equivalent to other house price measures, rose 0.2% (2.6% y/y) and rents rose 0.3% (3.6% y/y). The downside to shelter costs was provided by lodging away from home where prices fell 1.9% (+1.1% y/y). Medical care services prices increased 0.3% (4.7% y/y) and tuition costs surged 0.6% (5.6% y/y). Prices for public transportation fell 0.4% (7.3% y/y) after the 2.5% March rise.
Are Inflation Targets Good Inflation Forecasts? from the Federal Reserve Bank of Chicago is available <a href="http://www.chicagofed.org/publications/economicperspectives/ep_2qtr2008_part3_diron_mojon.pdf"> here</a>.
Has the Behavior of Inflation and Long-Term Inflation Expectations Changed? from the Federal Reserve Bank of Kansas City can be found <a href="http://www.kansascityfed.org/PUBLICAT/ECONREV/PDF/1q08Clark.pdf"> here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E8/@E801/@E80101/@E80101.HTM">Consumer Price Index</a> (%)</th>
<th scope="col">April</th>
<th scope="col">March</th>
<th scope="col">February</th>
<th scope="col">April Y/Y&nbsp;</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total&nbsp;</td>
<td>0.2</td>
<td>0.3</td>
<td>0.0</td>
<td>3.9</td>
<td>2.9</td>
<td>3.2</td>
<td>3.4</td>
</tr>
<tr class="odd">
<td class="firstcol">Total less Food &amp; Energy</td>
<td>0.1</td>
<td>0.2</td>
<td>0.0</td>
<td>2.3</td>
<td>2.3</td>
<td>2.5</td>
<td>2.2</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Goods less Food &amp; Energy</td>
<td>0.0</td>
<td>-0.1</td>
<td>-0.1</td>
<td>0.1</td>
<td>-0.4</td>
<td>0.2</td>
<td>0.5</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp; Services less Energy</td>
<td>0.1</td>
<td>0.2</td>
<td>0.1</td>
<td>3.1</td>
<td>3.4</td>
<td>3.4</td>
<td>2.8</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Energy</td>
<td>-0.0</td>
<td>1.9</td>
<td>-0.5</td>
<td>15.5</td>
<td>5.6</td>
<td>11.0</td>
<td>17.0</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Food &amp; Beverages</td>
<td>0.9</td>
<td>0.2</td>
<td>0.4</td>
<td>5.0</td>
<td>4.0</td>
<td>2.3</td>
<td>2.5</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td></td>
<td></td>
<td></td>
<td>&nbsp;&nbsp;</td>
<td></td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E8/@E801/@E80113/@E80113.HTM">Chained CPI: Total (NSA)</a>&nbsp;</td>
<td>0.5</td>
<td>0.8</td>
<td>0.3</td>
<td>3.5 </td>
<td>2.5</td>
<td>2.9 </td>
<td>2.9</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;Total less Food &amp; Energy&nbsp;</td>
<td>0.1</td>
<td>0.5</td>
<td>0.3</td>
<td>1.9</td>
<td>2.0</td>
<td>2.2</td>
<td>1.9</td>
</tr>
</tbody>
</table>
</body>
</html>

The consumer price index (CPI-U) rose 0.2% last month, down from the 0.3% March increase and less than the 0.3% rise that was generally expected. Year-to-year, prices rose 3.9% which was off the earlier highs of 4.4%. Less food & [...]

U.S. Consumer Price Index Under Control in April

US production rebounded in Q2, but demand continued to slow

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

Negative US inflation surprises leading G10 down

Deflation continues in China

Incoming data surprising on downside in US; positive surprises elsewhere

FOMC expects more inflation and less growth than in March

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

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

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

Apart from the US, productivity is moribund

Financial market concerns ebb even though policy uncertainty continues to soar

US tariff revenues nearly doubled in April

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

USD/EUR exchange rate uncoupling from interest rate differential

Widespread downgrading of 2025 GDP outlook

Trade and fiscal policy uncertainty has exploded with the new administration

Much lower US electricity costs gives it a competitive advantage

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

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

US policy gyrations boosting policy uncertainty worldwide

Expected tariff hikes have boosted inflation expectations

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

US economy expected to outperform other major economies in 2025

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

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

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

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

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

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

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

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

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

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

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

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

The employment and earnings data are collected from surveys taken each month during the week containing the 12th day of the month. The labor market data are contained in Haver's **USECON** database. Detailed figures are in the **EMPL** and **LABOR** databases. The expectations figures are in the **AS1REPNA** database.

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

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

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

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

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

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

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

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

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

U.S. Light Vehicle Sales Rebound in July

Winnie Tapasanun

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

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

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

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

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

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

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

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

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

Michael J. Moran

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

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

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

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

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

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

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

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

U.S. Construction: Sluggish in June

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

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

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

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

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

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

Economy in Brief: May 2008

Jump to:

U.S. Housing Starts April Rise Due to Multi-Family, Single-Family at 27 Year Low

Philadelphia Fed Index Recovered, Expectations Up Sharply

U.S. Initial Claims for Unemployment Insurance Ticked Up

U.S. Industrial Output Fell Hard Last Month

U.S. Industrial Output Fell Hard Last Month

OECD Indicators Show Faltering Growth Prospects

U.S. Small Business Optimism Recovered Slightly, Pricing Pressure Strong

U.S. Consumer Price Index Under Control in April