Robert Brusca

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090615f.jpg" align="left" border="0">
The number of people at work in the Euro Area fell by 1.2mln
in Q1, the greatest quarterly drop since records began in 1995. Still,
that performance is dwarfed by the huge declines in the US as the
percentage calculations in the table show. 
 

Europe has been hurt badly but it is a region with far more
labor market rigidities than the US. And those rigidities help
employment during times of economic shocks. Employment in the Euro Area
is down by just 1.3% Yr/Yr and unemployment is up by 20.9%. Compare
that to the US where employment is down by 3.1% Yr/Yr and unemployment
is up by 63% Yr/Yr. But even with those figures the ratio of the
unemployed-to-employed is greater in the Euro Area than in the US. The
fact is simply that the US unemployment rate was much lower than
Europe&#8217;s before recession and now it has ticked up to the same general
region as Europe&#8217;s rate. 
 

Obviously the structure of the economy in Europe and in the US
is very different. Still this recession has hit Europe hard. By its own
metrics the labor market has been hit hard. The US is looking at one of
its most severe recessions in the Post-war period. EMU has not been
around long enough to make any such statement. 
 

Through 2009-Q1 both EMU and the US are showing signs of an
increased pace of job losses and an increased pace of unemployment.
Monthly data in the US strongly support the notion that the
unemployment mess is unwinding rapidly in Q2. At this pace of unwind
the US could have job growth by August of 2009. We have no such bright
future in hand for Europe. 
 

While there is still a debate afoot about the US and whether
it will spawn a strong or weak recovery, we can be sure that Europe&#8217;s
will be slow in part because of all the disguised unemployment its
labor force rigidities hide. Forecasts still foresee weak growth for
the rest of the year in Europe. For the US that same forecast generally
is in place but conditions in the US are shifting pretty fast and some
forecasts have simply not been recast. Europe does not shift gears fast. 
 

We can&#8217;t judge the recession to be than much harsher in the US
than in Europe because of the jobs data and the greater US labor force
displacement. There are simply different economic structures at work.
But the figures are telling in terms of the impact on jobs in both EMU
and in the US. GDP has been hard hit in both regions. In the US the GDP
downturn simply dislodges more jobs. US GDP has fallen by about 6%
(SAAR) for two quarters a row. In EMU the drops have been more like 7%
and 10% at annual rates. Clearly jobs don&#8217;t tell the whole story of
dislocation. 


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="8" scope="col"> Growth
rates by Quarter or period for various EU Nations</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Saar: All</td>
<td>Q1-09</td>
<td>Q4-08</td>
<td>Q3-08</td>
<td>Q2-08</td>
<td>2Qtr</td>
<td>4Qtr</td>
<td>5Yr</td>
</tr>
<tr>
<td class="firstcol">All Employed: EMU</td>
<td>-3.3%</td>
<td>-1.4%</td>
<td>-0.7%</td>
<td>0.2%</td>
<td>-2.3%</td>
<td>-1.3%</td>
<td>0.9%</td>
</tr>
<tr>
<td class="firstcol">No Unemployed</td>
<td>39.9%</td>
<td>26.6%</td>
<td>12.0%</td>
<td>7.8%</td>
<td>33.0%</td>
<td>20.9%</td>
<td>0.5%</td>
</tr>
<tr>
<td class="firstcol">EA: Industry</td>
<td>-5.3%</td>
<td>-3.9%</td>
<td>-1.7%</td>
<td>-0.8%</td>
<td>-4.6%</td>
<td>-2.9%</td>
<td>-0.8%</td>
</tr>
<tr>
<td class="firstcol">EA: Agric, Forestry</td>
<td>-2.5%</td>
<td>0.8%</td>
<td>-2.2%</td>
<td>-5.5%</td>
<td>-0.8%</td>
<td>-2.4%</td>
<td>-1.3%</td>
</tr>
<tr>
<td class="firstcol">EA: Construction</td>
<td>-8.6%</td>
<td>-8.7%</td>
<td>-5.8%</td>
<td>-4.6%</td>
<td>-8.6%</td>
<td>-6.9%</td>
<td>0.6%</td>
</tr>
<tr>
<td class="firstcol">EA: Wholesale Retail</td>
<td>-3.8%</td>
<td>-1.5%</td>
<td>-0.2%</td>
<td>0.3%</td>
<td>-2.7%</td>
<td>-1.3%</td>
<td>1.0%</td>
</tr>
<tr>
<td class="firstcol">EA: Financial</td>
<td>-3.9%</td>
<td>-2.2%</td>
<td>0.3%</td>
<td>0.9%</td>
<td>-3.1%</td>
<td>-1.3%</td>
<td>2.5%</td>
</tr>
<tr>
<td class="firstcol">EA: Gov't Education</td>
<td>0.0%</td>
<td>2.2%</td>
<td>0.5%</td>
<td>2.5%</td>
<td>1.1%</td>
<td>1.3%</td>
<td>1.4%</td>
</tr>
<tr class="odd">
<td colspan="8" class="firstcol">Memo: Industry Employment</td>
</tr>
<tr>
<td class="firstcol">Germany</td>
<td>-3.8%</td>
<td>-0.1%</td>
<td>0.2%</td>
<td>1.0%</td>
<td>-2.0%</td>
<td>-0.7%</td>
<td>-0.2%</td>
</tr>
<tr>
<td class="firstcol">UK (MFG)*</td>
<td>#N/A</td>
<td>-6.6%</td>
<td>-6.3%</td>
<td>-2.0%</td>
<td>-6.5%</td>
<td>-4.0%</td>
<td>-3.4%</td>
</tr>
<tr>
<td class="firstcol">France (MFG)</td>
<td>-5.8%</td>
<td>-3.3%</td>
<td>-1.6%</td>
<td>-1.7%</td>
<td>-4.6%</td>
<td>-3.1%</td>
<td>-2.0%</td>
</tr>
<tr class="odd">
<td colspan="8" class="firstcol">UK
growth rates lag by one
quarter</td>
</tr>
<tr>
<td class="firstcol">US Employment</td>
<td>-6.7%</td>
<td>-3.4%</td>
<td>-1.9%</td>
<td>-0.4%</td>
<td>-5.1%</td>
<td>-3.1%</td>
<td>0.4%</td>
</tr>
<tr>
<td class="firstcol">US Unemployment</td>
<td>88.0%</td>
<td>65.2%</td>
<td>61.8%</td>
<td>41.7%</td>
<td>76.3%</td>
<td>63.4%</td>
<td>8.3%</td>
</tr>
<tr>
<td class="firstcol">US MFG Employment</td>
<td>-17.0%</td>
<td>-9.4%</td>
<td>-4.7%</td>
<td>-4.1%</td>
<td>-13.3%</td>
<td>-8.9%</td>
<td>-2.7%</td>
</tr>
</tbody>
</table>
</body></html>

The number of people at work in the Euro Area fell by 1.2mln in Q1, the greatest quarterly drop since records began in 1995. Still, that performance is dwarfed by the huge declines in the US as the percentage calculations in the table [...]

EMU Job Market Has Record Q1 Job Loss

Tom Moeller

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090615d.jpg" align="left" border="0" height="265" width="353">
According to the National Association of Home Builders, the recent
improvement in the housing market took this month off. Their June index
of sales slipped to 15 from the unrevised May level of 16.
Nevertheless, the index remained near the highest level since last
September. The index is compiled from survey questions asking builders
to rate market conditions as &#8220;good&#8221;, &#8220;fair&#8221;, &#8220;poor&#8221; or &#8220;very high&#8221; to
&#8220;very low&#8221;. Numerical results over 50 indicate a predominance of &#8220;good&#8221; readings.
During the first quarter the Home Builders' Housing Opportunity
Index, which is the share of homes sold that could be considered
affordable to a family earning the median income, jumped m/m to a
record high buoyed by lower home prices, lower interest rates and
higher income. (There is a break in the series from 2002 to 2003.)<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090615e.jpg" align="right" border="0" height="265" width="353">
The Home Builders Association indicated that its sub-index of
present sales remained stable at a reading of 14 but that also was up
significantly from the low of last year. Since 1990, the year-to-year
change in this index has had an 80% correlation with the year-to-year
percentage change in new single-family home sales.
The index of builders&#8217; expectations for home sales in six months also slipped but remained near its highest since September. The &#8220;traffic" of prospective buyers was unchanged from May and still up from the record lows of this past Winter.
During June the index readings for each of the county's regions improved except in the South.
The NAHB has compiled the Housing Market Index since 1985. The
weights assigned to the individual index components are .5920 for
single family detached sales, present time; .1358 for single family
detached sales, next six months; and .2722 for traffic of prospective
buyers. The results, along with other housing and remodeling indexes
from NAHB Economics, are included in Haver&#8217;s SURVEYS database.

<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/@S4/@S4.HTM">Nat'l Association of Home Builders</a></th>
<th scope="col">June</th>
<th scope="col">May</th>
<th scope="col">&nbsp;June '08</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Composite Housing Market Index (All Good = 100)</td>
<td>15</td>
<td>16</td>
<td>18</td>
<td>16</td>
<td>27</td>
<td>42</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Single-Family Sales</td>
<td>14</td>
<td>14</td>
<td>17</td>
<td>16</td>
<td>27</td>
<td>45</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Single-Family Sales: Next Six Months</td>
<td>26</td>
<td>27</td>
<td>27</td>
<td>25</td>
<td>37</td>
<td>51</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Traffic of Prospective Buyers</td>
<td>13</td>
<td>13</td>
<td>16</td>
<td>14</td>
<td>21</td>
<td>30</td>
</tr>
</tbody>
</table>
</body></html>

According to the National Association of Home Builders, the recent improvement in the housing market took this month off. Their June index of sales slipped to 15 from the unrevised May level of 16. Nevertheless, the index remained [...]

U.S. Home Builders' Index Slips

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090615a.jpg" align="right" border="0" height="265" width="353">This
month's Empire State Index of manufacturing sector activity, reported
by the Federal Reserve Bank of New York, fell versus May. Nevertheless,
the latest reading remained very much improved from the low of this
past Winter and, as a result, suggests that recessionary forces have
moderated. The reading of -9.41 compared with -4.55 in May. The index
reached a level of -38.23 this past March and the latest level compared
to Consensus expectations for a reading of -4.5.The Empire State
Manufacturing Survey is a monthly survey of manufacturers in New York
State. Participants from across the state in a variety of industries
respond to a questionnaire and report the change in 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/Empire2009/empiresurvey_20090615.html">here</a>.The figure is a diffusion index. Since the series' inception in 2001,
there has been a 75% correlation between its level and the three-month
change in U.S. factory sector industrial production. Like the
Philadelphia Fed Index of General Business Conditions, the Empire State
Business <img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090615b.jpg" align="right" border="0" height="265" width="353">
Conditions Index reflects answers to independent survey
questions; it is not a weighted combination of the components. The
series dates back only to 2001. Deterioration in the component of the
June survey was limited to shipments and inventories. Otherwise, the
new orders index improved modestly to -8.15 and that compares to
March's reading of -44.76. Twenty-five percent of survey participants
reported higher new orders, versus the March low of nine percent. The
employment index also improved to the highest level since last October.
Fourteen percent of respondents reported higher employment versus the
March low of 4.5%. In the history of the NY employment index, there has
been an 87% correlation between it and the three-month growth in
overall U.S. factory sector employment as reported by the Labor
Department. The length of the average workweek also grew.Price
deflation also moderated as the rate of contraction in the factory
sector slowed. The price index rose to its highest level since late
last year as the number of respondents reporting lower prices fell
sharply to 16%,<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090615c.jpg" align="right" border="0" height="265" width="353">
half of the percentage of this past January. Only 10%
of respondents reported paying higher prices and that was near the
series' low. Since inception in 2001, there has been a 76% 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 improved during
June to the highest level since mid-2007. The subseries for shipments,
employment and capital expenditures jumped while prices paid and new
orders remained off their lows. The Empire State data is
available in Haver's SURVEYS database.
Large Banks and Small Banks in an Era of Systemic Risk
Regulation is this morning's speech by Fed Governor Daniel K.
Tarullo and it can be found <a href="http://www.federalreserve.gov/newsevents/speech/tarullo20090615a.htm">
here</a>.&nbsp;
<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">June</th>
<th scope="col">May</th>
<th scope="col">June '08&nbsp;</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">General Business Conditions
(diffusion index, %)&nbsp;&nbsp;</td>
<td>-9.41</td>
<td>-4.55</td>
<td>-8.12</td>
<td>-10.10</td>
<td>17.23</td>
<td>20.24</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; New Orders</td>
<td>-8.15</td>
<td>-9.01</td>
<td>-3.73</td>
<td>-6.25</td>
<td>15.71</td>
<td>20.11</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Employment</td>
<td>-21.84</td>
<td>-23.86</td>
<td>1.16</td>
<td>-5.36</td>
<td>11.28</td>
<td>12.62</td>
</tr>
<tr class="odd">
<td class="firstcol">Prices Paid</td>
<td>-5.75</td>
<td>-11.36</td>
<td>66.28</td>
<td>46.99</td>
<td>35.64</td>
<td>41.88</td>
</tr>
</tbody>
</table>
</body></html>

This month's Empire State Index of manufacturing sector activity, reported by the Federal Reserve Bank of New York, fell versus May. Nevertheless, the latest reading remained very much improved from the low of this past Winter and, as [...]

Empire State Factory Conditions Deteriorated M/M But Remain Improved From Earlier Low

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090615a.jpg" align="right" border="0" height="265" width="353">This
month's Empire State Index of manufacturing sector activity, reported
by the Federal Reserve Bank of New York, fell versus May. Nevertheless,
the latest reading remained very much improved from the low of this
past Winter and, as a result, suggests that recessionary forces have
moderated. The reading of -9.41 compared with -4.55 in May. The index
reached a level of -38.23 this past March and the latest level compared
to Consensus expectations for a reading of -4.5.
The Empire State
Manufacturing Survey is a monthly survey of manufacturers in New York
State. Participants from across the state in a variety of industries
respond to a questionnaire and report the change in 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/Empire2009/empiresurvey_20090615.html">here</a>.
The figure is a diffusion index. Since the series' inception
in 2001,
there has been a 75% correlation between its level and the three-month
change in U.S. factory sector industrial production. Like the
Philadelphia Fed Index of General Business Conditions, the Empire State
Business <img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090615b.jpg" align="right" border="0" height="265" width="353">
Conditions Index reflects answers to independent survey
questions; it is not a weighted combination of the components. The
series dates back only to 2001.
 Deterioration in the component of the
June survey was limited to shipments and inventories. Otherwise, the
new orders index improved modestly to -8.15 and that compares to
March's reading of -44.76. Twenty-five percent of survey participants
reported higher new orders, versus the March low of nine percent. The
employment index also improved to the highest level since last October.
Fourteen percent of respondents reported higher employment versus the
March low of 4.5%. In the history of the NY employment index, there has
been an 87% correlation between it and the three-month growth in
overall U.S. factory sector employment as reported by the Labor
Department. The length of the average workweek also grew.
Price
deflation also moderated as the rate of contraction in the factory
sector slowed. The price index rose to its highest level since late
last year as the number of respondents reporting lower prices fell
sharply to 16%,<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090615c.jpg" align="right" border="0" height="265" width="353">
half of the percentage of this past January. Only 10%
of respondents reported paying higher prices and that was near the
series' low. Since inception in 2001, there has been a 76% 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 improved during
June to the highest level since mid-2007. The subseries for shipments,
employment and capital expenditures jumped while prices paid and new
orders remained off their lows.
 The Empire State data is
available in Haver's SURVEYS database.


Large Banks and Small Banks in an Era of Systemic
Risk
Regulation is this morning's speech by Fed Governor Daniel K.
Tarullo and it can be found <a href="http://www.federalreserve.gov/newsevents/speech/tarullo20090615a.htm">
here</a>.&nbsp;
<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">June</th>
<th scope="col">May</th>
<th scope="col">June '08&nbsp;</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">General Business Conditions
(diffusion index, %)&nbsp;&nbsp;</td>
<td>-9.41</td>
<td>-4.55</td>
<td>-8.12</td>
<td>-10.10</td>
<td>17.23</td>
<td>20.24</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; New Orders</td>
<td>-8.15</td>
<td>-9.01</td>
<td>-3.73</td>
<td>-6.25</td>
<td>15.71</td>
<td>20.11</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Employment</td>
<td>-21.84</td>
<td>-23.86</td>
<td>1.16</td>
<td>-5.36</td>
<td>11.28</td>
<td>12.62</td>
</tr>
<tr class="odd">
<td class="firstcol">Prices Paid</td>
<td>-5.75</td>
<td>-11.36</td>
<td>66.28</td>
<td>46.99</td>
<td>35.64</td>
<td>41.88</td>
</tr>
</tbody>
</table>
U.S. Home Builders' Index Slips 
by <a href="/comment/Moeller.html">Tom
Moeller</a> June 15, 2009


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090615d.jpg" align="left" border="0" height="265" width="353">
According to the National Association of Home Builders, the
recent improvement in the housing market took this month off. Their
June index of sales slipped to 15 from the unrevised May level of 16.
Nevertheless, the index remained near the highest level since last
September. The index is compiled from survey questions asking builders
to rate market conditions as &#8220;good&#8221;, &#8220;fair&#8221;, &#8220;poor&#8221; or &#8220;very high&#8221; to
&#8220;very low&#8221;. Numerical results over 50
indicate a predominance of &#8220;good&#8221; readings.
During the first quarter the Home Builders' Housing
Opportunity Index, which is the share of homes sold that could be
considered affordable to a family earning the median income, jumped m/m
to a record high buoyed by lower home prices, lower interest rates and
higher income. (There is a break in the series from 2002 to 2003.)<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090615e.jpg" align="right" border="0" height="265" width="353">
The Home Builders Association indicated that its sub-index of
present sales remained stable at a reading of 14 but that also was up
significantly from the low of last year. Since 1990, the year-to-year
change in this index has had an 80% correlation with the year-to-year
percentage change in new single-family home sales.
The index of builders&#8217; expectations for home sales in six
months also slipped but remained near its highest since September.
The &#8220;traffic" of prospective buyers was unchanged from May
and still up from the record lows of this past Winter.
During June the index readings for each of the county's
regions improved except in the South.
The NAHB has compiled the Housing Market Index
since 1985. The weights assigned to the
individual index components are .5920 for single family detached sales,
present time; .1358 for single family detached sales, next six months;
and .2722 for traffic of prospective buyers. The results, along with
other housing and remodeling indexes from NAHB Economics, are included
in Haver&#8217;s SURVEYS database.

<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/@S4/@S4.HTM">Nat'l
Association of Home Builders</a></th>
<th scope="col">June</th>
<th scope="col">May</th>
<th scope="col">&nbsp;June '08</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Composite Housing Market Index
(All Good = 100)</td>
<td>15</td>
<td>16</td>
<td>18</td>
<td>16</td>
<td>27</td>
<td>42</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Single-Family Sales</td>
<td>14</td>
<td>14</td>
<td>17</td>
<td>16</td>
<td>27</td>
<td>45</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Single-Family Sales:
Next Six Months</td>
<td>26</td>
<td>27</td>
<td>27</td>
<td>25</td>
<td>37</td>
<td>51</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Traffic of
Prospective Buyers</td>
<td>13</td>
<td>13</td>
<td>16</td>
<td>14</td>
<td>21</td>
<td>30</td>
</tr>
</tbody>
</table>
EMU Job Market Has Record Q1 Job
Loss 
by <a href="/comment/Brusca.html">Robert
Brusca</a> June 15, 2009


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090615f.jpg" align="left" border="0">
The number of people at work in the Euro Area fell by 1.2mln
in Q1, the greatest quarterly drop since records began in 1995. Still,
that performance is dwarfed by the huge declines in the US as the
percentage calculations in the table show. 
 

Europe has been hurt badly but it is a region with far more
labor market rigidities than the US. And those rigidities help
employment during times of economic shocks. Employment in the Euro Area
is down by just 1.3% Yr/Yr and unemployment is up by 20.9%. Compare
that to the US where employment is down by 3.1% Yr/Yr and unemployment
is up by 63% Yr/Yr. But even with those figures the ratio of the
unemployed-to-employed is greater in the Euro Area than in the US. The
fact is simply that the US unemployment rate was much lower than
Europe&#8217;s before recession and now it has ticked up to the same general
region as Europe&#8217;s rate. 
 

Obviously the structure of the economy in Europe and in the US
is very different. Still this recession has hit Europe hard. By its own
metrics the labor market has been hit hard. The US is looking at one of
its most severe recessions in the Post-war period. EMU has not been
around long enough to make any such statement. 
 

Through 2009-Q1 both EMU and the US are showing signs of an
increased pace of job losses and an increased pace of unemployment.
Monthly data in the US strongly support the notion that the
unemployment mess is unwinding rapidly in Q2. At this pace of unwind
the US could have job growth by August of 2009. We have no such bright
future in hand for Europe. 
 

While there is still a debate afoot about the US and whether
it will spawn a strong or weak recovery, we can be sure that Europe&#8217;s
will be slow in part because of all the disguised unemployment its
labor force rigidities hide. Forecasts still foresee weak growth for
the rest of the year in Europe. For the US that same forecast generally
is in place but conditions in the US are shifting pretty fast and some
forecasts have simply not been recast. Europe does not shift gears fast. 
 

We can&#8217;t judge the recession to be than much harsher in the US
than in Europe because of the jobs data and the greater US labor force
displacement. There are simply different economic structures at work.
But the figures are telling in terms of the impact on jobs in both EMU
and in the US. GDP has been hard hit in both regions. In the US the GDP
downturn simply dislodges more jobs. US GDP has fallen by about 6%
(SAAR) for two quarters a row. In EMU the drops have been more like 7%
and 10% at annual rates. Clearly jobs don&#8217;t tell the whole story of
dislocation. 


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="8" scope="col"> Growth
rates by Quarter or period for various EU Nations</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Saar: All</td>
<td>Q1-09</td>
<td>Q4-08</td>
<td>Q3-08</td>
<td>Q2-08</td>
<td>2Qtr</td>
<td>4Qtr</td>
<td>5Yr</td>
</tr>
<tr>
<td class="firstcol">All Employed: EMU</td>
<td>-3.3%</td>
<td>-1.4%</td>
<td>-0.7%</td>
<td>0.2%</td>
<td>-2.3%</td>
<td>-1.3%</td>
<td>0.9%</td>
</tr>
<tr>
<td class="firstcol">No Unemployed</td>
<td>39.9%</td>
<td>26.6%</td>
<td>12.0%</td>
<td>7.8%</td>
<td>33.0%</td>
<td>20.9%</td>
<td>0.5%</td>
</tr>
<tr>
<td class="firstcol">EA: Industry</td>
<td>-5.3%</td>
<td>-3.9%</td>
<td>-1.7%</td>
<td>-0.8%</td>
<td>-4.6%</td>
<td>-2.9%</td>
<td>-0.8%</td>
</tr>
<tr>
<td class="firstcol">EA: Agric, Forestry</td>
<td>-2.5%</td>
<td>0.8%</td>
<td>-2.2%</td>
<td>-5.5%</td>
<td>-0.8%</td>
<td>-2.4%</td>
<td>-1.3%</td>
</tr>
<tr>
<td class="firstcol">EA: Construction</td>
<td>-8.6%</td>
<td>-8.7%</td>
<td>-5.8%</td>
<td>-4.6%</td>
<td>-8.6%</td>
<td>-6.9%</td>
<td>0.6%</td>
</tr>
<tr>
<td class="firstcol">EA: Wholesale Retail</td>
<td>-3.8%</td>
<td>-1.5%</td>
<td>-0.2%</td>
<td>0.3%</td>
<td>-2.7%</td>
<td>-1.3%</td>
<td>1.0%</td>
</tr>
<tr>
<td class="firstcol">EA: Financial</td>
<td>-3.9%</td>
<td>-2.2%</td>
<td>0.3%</td>
<td>0.9%</td>
<td>-3.1%</td>
<td>-1.3%</td>
<td>2.5%</td>
</tr>
<tr>
<td class="firstcol">EA: Gov't Education</td>
<td>0.0%</td>
<td>2.2%</td>
<td>0.5%</td>
<td>2.5%</td>
<td>1.1%</td>
<td>1.3%</td>
<td>1.4%</td>
</tr>
<tr class="odd">
<td colspan="8" class="firstcol">Memo:
Industry Employment</td>
</tr>
<tr>
<td class="firstcol">Germany</td>
<td>-3.8%</td>
<td>-0.1%</td>
<td>0.2%</td>
<td>1.0%</td>
<td>-2.0%</td>
<td>-0.7%</td>
<td>-0.2%</td>
</tr>
<tr>
<td class="firstcol">UK (MFG)*</td>
<td>#N/A</td>
<td>-6.6%</td>
<td>-6.3%</td>
<td>-2.0%</td>
<td>-6.5%</td>
<td>-4.0%</td>
<td>-3.4%</td>
</tr>
<tr>
<td class="firstcol">France (MFG)</td>
<td>-5.8%</td>
<td>-3.3%</td>
<td>-1.6%</td>
<td>-1.7%</td>
<td>-4.6%</td>
<td>-3.1%</td>
<td>-2.0%</td>
</tr>
<tr class="odd">
<td colspan="8" class="firstcol">UK
growth rates lag by one
quarter</td>
</tr>
<tr>
<td class="firstcol">US Employment</td>
<td>-6.7%</td>
<td>-3.4%</td>
<td>-1.9%</td>
<td>-0.4%</td>
<td>-5.1%</td>
<td>-3.1%</td>
<td>0.4%</td>
</tr>
<tr>
<td class="firstcol">US Unemployment</td>
<td>88.0%</td>
<td>65.2%</td>
<td>61.8%</td>
<td>41.7%</td>
<td>76.3%</td>
<td>63.4%</td>
<td>8.3%</td>
</tr>
<tr>
<td class="firstcol">US MFG Employment</td>
<td>-17.0%</td>
<td>-9.4%</td>
<td>-4.7%</td>
<td>-4.1%</td>
<td>-13.3%</td>
<td>-8.9%</td>
<td>-2.7%</td>
</tr>
</tbody>
</table>
</body></html>

Empire State Factory ConditionsDeteriorated M/M But Remain Improved From Earlier Low

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090612g.jpg" width="353">
Good news seems better than bad news. That&#39;s an obvious statement, but it&#39;s behind the recent rise in the University of Michigan&#39;s early-June reading of consumer sentiment. At 69.0 the latest index level was roughly unchanged from May and it about matched Consensus expectations. The increase bodes well for the consumer spending outlook because during the last ten years, there has been a 61% correlation between the level of sentiment and the growth in real spending during the next five months.
The current economic conditions jumped ten percent from May to its highest level since last September. The reading for current personal finances just about made up the May decline. however, it was the jump in the reading of current conditions for buying large household goods to the highest level since March of last year that powered the increase. Showing a huge increase was the reading of current conditions for buying a motor vehicle. Though conditions for buying a house slipped, the level remained up sharply from last year.
The expectations component of consumer sentiment slipped this month from May but it remained near the highest level since early last year. Expectations for personal finances rose with higher stock prices but expected business conditions during the next year slipped. Expected conditions during the next five years similarly slipped. Both of these readings remained, however, from their lows of earlier this year. Though unemployment was expected to decline over the next twelve months, price inflation was expected to heat up. Interest rates were expected to fall<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090612h.jpg" width="353">
The opinion of government policy, which may eventually influence economic expectations, fell this month after having jumped through May. It remained near the highest level since 2002. A reduced 22% of respondents thought that a good job was being done by government while an increased 29% thought that a poor job was being done. Nevertheless, despite these monthly changes, the trend is still very much toward a favorable reading of policy actions.
Inflation expectations for the next year rose further to 3.8%. That compares to a low of 1.7% last December but remained down from a reading which was as high as 7.0% last May.
The University of Michigan survey data 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&#39;s USECON database with details in the proprietary UMSCA database.
Jobless Recovery Redux? from the Federal Reserve Bank of San Francisco can be found <a href="http://www.frbsf.org/publications/economics/letter/2009/el2009-18.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/@EF/@EF14/@EF1402/@EF1402.HTM">University of Michigan</a></th>
<th scope="col">Mid-June</th>
<th scope="col">May</th>
<th scope="col">April</th>
<th scope="col">June y/y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Consumer Sentiment</td>
<td>69.0</td>
<td>68.7</td>
<td>65.1</td>
<td>22.3%</td>
<td>63.8</td>
<td>85.6</td>
<td>87.3</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Current Conditions</td>
<td>74.5</td>
<td>67.7</td>
<td>68.3</td>
<td>10.2</td>
<td>73.7</td>
<td>101.2</td>
<td>105.1</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Expectations</td>
<td>65.4</td>
<td>69.4</td>
<td>63.1</td>
<td>32.9</td>
<td>57.3</td>
<td>75.6</td>
<td>75.9</td>
</tr>
</tbody>
</table>
</body>
</html>

Good news seems better than bad news. That's an obvious statement, but it's behind the recent rise in the University of Michigan's early-June reading of consumer sentiment. At 69.0 the latest index level was roughly unchanged from May [...]

Michigan Consumer Sentiment Stable But The Current View of Economic Conditions Jumps

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090612f.jpg" align="left" border="0" height="265" width="353">
Industrial output fell again in April marking the 12th
straight month of decline in Yr/Yr output; industrial output has gone
12-months without a month to month gain as well (m/m output was flat in
August of 2008). 
 

Declines spread across all major output categories in the
month. In terms of the sequential growth rates (3m compared to 6mo
compared to 12mo) there is improvement in train for intermediate and
capital goods but consumer goods output trends are getting
progressively worse. The overall trends show that after a worsening in
the growth rate at 6-months, the three-month growth rate has limited
its pace of decline to -18.9%. 
 

Obviously the picture for EMU is still poor. Output is
declining on a broad front and still falling sharply on that broad
front. There are some signs that the output declines are abating. The
signs from the EMU index are the weakest. Strongest signs of a
turnaround come from the patterns in the large EMU economies. 
 







<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr><th colspan="11" scope="col"> Euro Area MFG IP</th></tr></thead>
<tbody>
<tr class="even">
<td class="firstcol">Saar except m/m</td>
<td colspan="3">Mo/Mo</td>
<td>Apr 09</td>
<td>Mar 09</td>
<td>Apr 09</td>
<td>Mar 09</td>
<td>Apr 09</td>
<td>Mar 09</td>
<td>&nbsp;</td>
</tr>
<tr class="even">
<td class="firstcol">Euro Area Detail</td>
<td>Apr 09</td>
<td>Mar 09</td>
<td>Feb 09</td>
<td>3mo</td>
<td>3mo</td>
<td>6mo</td>
<td>6mo</td>
<td>12mo</td>
<td>12mo</td>
<td>Q-to- Date</td>
</tr>
<tr class="odd">
<td class="firstcol">MFG</td>
<td>-1.5%</td>
<td>-1.2%</td>
<td>-2.5%</td>
<td>-18.9%</td>
<td>-25.4%</td>
<td>-26.5%</td>
<td>-27.6%</td>
<td>-21.5%</td>
<td>-20.2%</td>
<td>-17.3%</td>
</tr>
<tr class="odd">
<td class="firstcol">Consumer</td>
<td>-0.9%</td>
<td>-0.5%</td>
<td>-1.8%</td>
<td>-11.9%</td>
<td>-10.3%</td>
<td>-9.6%</td>
<td>-9.4%</td>
<td>-8.6%</td>
<td>-7.3%</td>
<td>-10.3%</td>
</tr>
<tr class="odd">
<td class="firstcol">Consumer Durables</td>
<td>-0.8%</td>
<td>-1.2%</td>
<td>-3.6%</td>
<td>-20.2%</td>
<td>-24.6%</td>
<td>-25.9%</td>
<td>-26.8%</td>
<td>-22.2%</td>
<td>-20.9%</td>
<td>--</td>
</tr>
<tr class="odd">
<td class="firstcol">Consumer Nondurables</td>
<td>-0.7%</td>
<td>-0.3%</td>
<td>-1.5%</td>
<td>-9.9%</td>
<td>-7.8%</td>
<td>-6.7%</td>
<td>-6.6%</td>
<td>-6.2%</td>
<td>-5.1%</td>
<td>--</td>
</tr>
<tr class="odd">
<td class="firstcol">Intermediate</td>
<td>-1.7%</td>
<td>-1.8%</td>
<td>-2.5%</td>
<td>-21.6%</td>
<td>-22.8%</td>
<td>-32.5%</td>
<td>-34.1%</td>
<td>-26.6%</td>
<td>-25.3%</td>
<td>-20.4%</td>
</tr>
<tr class="odd">
<td class="firstcol">Capital</td>
<td>-2.7%</td>
<td>0.0%</td>
<td>-3.1%</td>
<td>-21.0%</td>
<td>-34.6%</td>
<td>-32.6%</td>
<td>-32.8%</td>
<td>-26.3%</td>
<td>-22.3%</td>
<td>-20.5%</td>
</tr>
<tr><td colspan="11" class="firstcol">Main Euro Area Countries
and UK IP in MFG</td></tr>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td colspan="3">Mo/Mo</td>
<td>Apr-09</td>
<td>Mar 09</td>
<td>Apr 09</td>
<td>Mar 09</td>
<td>Apr 09</td>
<td>Mar 09</td>
<td>&nbsp;</td>
</tr>
<tr class="even">
<td class="firstcol">MFG Only</td>
<td>Apr 09</td>
<td>Mar 09</td>
<td>Feb 09</td>
<td>3mo</td>
<td>3mo</td>
<td>6mo</td>
<td>6mo</td>
<td>12mo</td>
<td>12mo</td>
<td>Q-to- Date</td>
</tr>
<tr class="odd">
<td class="firstcol">Germany:</td>
<td>-2.9%</td>
<td>0.8%</td>
<td>-3.5%</td>
<td>-20.5%</td>
<td>-35.2%</td>
<td>-36.8%</td>
<td>-35.8%</td>
<td>-24.2%</td>
<td>-22.1%</td>
<td>-19.4%</td>
</tr>
<tr class="odd">
<td class="firstcol">France: IP excl Construction</td>
<td>-1.4%</td>
<td>-1.7%</td>
<td>-0.9%</td>
<td>-15.0%</td>
<td>-24.4%</td>
<td>-22.5%</td>
<td>-26.1%</td>
<td>-18.8%</td>
<td>-16.4%</td>
<td>-15.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">Italy</td>
<td>0.7%</td>
<td>-4.7%</td>
<td>-5.0%</td>
<td>-30.9%</td>
<td>-36.7%</td>
<td>-30.6%</td>
<td>-34.8%</td>
<td>-25.2%</td>
<td>-25.6%</td>
<td>-22.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">Spain</td>
<td>5.8%</td>
<td>-5.0%</td>
<td>1.2%</td>
<td>7.1%</td>
<td>-39.1%</td>
<td>-24.7%</td>
<td>-36.1%</td>
<td>-28.6%</td>
<td>-13.7%</td>
<td>16.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">UK: EU member</td>
<td>0.2%</td>
<td>0.2%</td>
<td>-0.2%</td>
<td>0.9%</td>
<td>-12.2%</td>
<td>-15.2%</td>
<td>-18.2%</td>
<td>-12.7%</td>
<td>-13.1%</td>
<td>1.8%</td>
</tr>
</tbody>
</table>
</body></html>

Industrial output fell again in April marking the 12th straight month of decline in Yr/Yr output; industrial output has gone 12-months without a month to month gain as well (m/m output was flat in August of 2008). Declines spread [...]

IP Still Falling in Euro Area: but Evidence of Slowing

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090612c.jpg" align="right" border="0" height="265" width="353">
During May, U.S. import prices moved higher again due to recent
increases in oil prices The expected 1.3% gain followed a similar 1.1%
rise during April and, since January, prices have risen by 2.9%.
Nevertheless, earlier declines in prices were severe with the start of
the global economic recession. Therefore the y/y change in import
prices remained a negative 17.6%.Higher petroleum prices have
accelerated recent import price gains. The 8.3% increase last month was
the fourth firm consecutive monthly rise and another strong gain is in
store for this month. The price for a barrel of Brent Crude oil
yesterday rose to $71.55. That's up nearly seven dollars, or ten
percent, from the end of May. Crude oil prices have returned to where
they were last October. Non-oil import prices have firmed as
well, though nowhere near as dramatically as oil. The lower value of
the dollar as well as a firming U.S. economy undoubtedly were behind
the 0.2% price uptick in May which left prices roughly flat over the
last three months. <img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090612d.jpg" align="right" border="0" height="265" width="353">
While not strong, by any means, the stability
compares to three-month price declines of 3.5% as recently as this past
January. (During the last ten years, there has been a negative 81%
correlation between the nominal trade-weighted exchange value of the US
dollar vs. major currencies and the y/y change in non-oil import
prices.)&nbsp;
During May, capital goods import prices were unchanged after a 0.1%
uptick during April. On a three-month basis, prices fell 0.3% after the
0.9% decline during March. Excluding computers, capital goods prices
were unchanged in May and three-month growth remained a low -0.4%.
Prices of computers, peripherals &amp; accessories rose 0.2% last
month but they were down 0.3% during the last three months. Regardless
of that firming, computer prices remained 6.4% lower than last
year.Prices for nonauto consumer goods were unchanged in
May, but here again there has been some firming versus earlier
declines. The three-month rate of change amounted to -0.2% which
compared to a -0.7% change as recently as January. Durable consumer
goods prices rose 0.4% over the last three months after a -1.7% decline
through January. Household goods and home entertainment equipment
prices have firmed considerably.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090612e.jpg" align="right" border="0" height="265" width="353">
Moving the other way, declines in
apparel prices have offset some of that strength in durables.Total
export prices have firmed and accompanied the gains in import prices.
Last month they rose 0.6% led by a 3.6% (-14.7% y/y) rise in
agricultural prices. Nonagricultural export prices also have firmed but
not to the same degree. Last month they rose 0.3% and over three months
they were up just 0.1% following a -6.0% decline as of the end of last
year.The import and export price series can be found in
Haver's USECON database. Detailed figures are
available in the USINT database.Risks
and Resolutions: The "Day After" for Financial Institutions - A
Conference Summary from the Federal Reserve Bank of Chicago
can be found <a href="http://www.chicagofed.org/publications/fedletter/cfljuly2009_264a.pdf">here</a>.&nbsp;&nbsp;
<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/@E807/@E807.HTM">Import/Export
Prices (NSA, %)</a></th>
<th scope="col">May</th>
<th scope="col">April</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Import - All Commodities</td>
<td>1.3</td>
<td>1.1</td>
<td>-17.6</td>
<td>11.5</td>
<td>4.2</td>
<td>4.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Petroleum</td>
<td>8.3</td>
<td>9.8</td>
<td>-51.4</td>
<td>37.7</td>
<td>11.6</td>
<td>20.6</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Nonpetroleum</td>
<td>0.2</td>
<td>-0.2</td>
<td>-5.8</td>
<td>5.3</td>
<td>2.7</td>
<td>1.7</td>
</tr>
<tr class="odd">
<td class="firstcol">Export - All Commodities</td>
<td>0.6</td>
<td>0.4</td>
<td>-6.5</td>
<td>6.0</td>
<td>4.9</td>
<td>3.6</td>
</tr>
</tbody>
</table>
</body></html>

During May, U.S. import prices moved higher again due to recent increases in oil prices The expected 1.3% gain followed a similar 1.1% rise during April and, since January, prices have risen by 2.9%. Nevertheless, earlier declines in [...]

U.S. Import Prices Rise With Higher Oil Prices

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090612a.jpg" width="353">
Since the peak in 2Q 2007, the net worth of the U.S. household &amp; nonprofit sectors&#39; has fallen by $13.8 trillion, or by nearly one-quarter. The decline to its lowest level since 2004 was led by the rapid shrinkage in asset values, namely of stocks and real estate. Over just the last four quarters alone, the decline totaled $9.8 trillion. Over that period, the value of the household sector&#39;s financial assets fell by $7.9 trillion as the value of equity market shares fell by $3.3 trillion, or by 39.1% y/y, and mutual fund share values also fell by $1.3 trillion, or 28.4%. In addition, pension fund reserves were hit by $2.78 trillion during the year or by 21.2%. Tangible asset values suffered somewhat less than financial values but they still were down sharply. Over the last year, the value of tangibles overall dropped $2.2 trillion (-8.3%) as the reduction in real estate values totaled $2.3 trillion or 10.3%.
Accompanying the decline in the household sector&#39;s asset values was a reining in of liabilities. Total credit market liabilities of the household sector rose just 4.4% during the last four quarters, the weakest advance since 1954 (no typo). And all sectors pulled back their borrowing -- except the Federal government whose liabilities grew a record 28.3%. Non-government domestic liabilities retreated as the recession generated further deleveraging. These liabilities fell for the second quarter and were up a record slow 1.2% year-to-year. Credit market debt owed by the household sector dropped sharply for the second straight quarter (-0.6% y/y). After two quarters of breathtaking decline, mortgage borrowing inched up 1.6% (-1.0% y/y). Consumers also were of a mind to reduce credit liabilities which they did by a record $75.3 billion (-0.4% y/y). With the third decline in the last four quarters, the value of bank loans was up just 1.9% y/y, the least since 2005.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090612b.jpg" width="353">
Credit market debt owed by the financial sector contracted and reversed roughly one-third of a 4Q rise. Year-to-year growth of 3.7% was down from a peak of 13.4% back in 2007. Liabilities of commercial banks rose 31.4% y/y but savings institutions liabilities fell for the fourth straight quarter (-25.3% y/y).
The liabilities of the foreign sector increased for the first quarter in the last three but year-to-year growth was a negative 9.0%.
Credit Quantity and Credit Quality: Bank Competition and Capital Accumulation from the Federal Reserve Bank of New York can be found <a href="http://www.newyorkfed.org/research/staff_reports/sr366.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/FFUNDS/@F2/@F201/@F201.HTM">Flow of Funds</a> (Y/Y % Chg.)</th>
<th scope="col">% of Total</th>
<th scope="col">1Q &#39;09</th>
<th scope="col">4Q &#39;08</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total Credit Market Debt Outstanding</td>
<td>--</td>
<td>4.4</td>
<td>5.2</td>
<td>5.2</td>
<td>10.1</td>
<td>9.9</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp; Federal Government</td>
<td>11%</td>
<td>28.3</td>
<td>24.2</td>
<td>24.2</td>
<td>4.9</td>
<td>3.9</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp; Households</td>
<td>28%</td>
<td>-0.6</td>
<td>0.4</td>
<td>0.4</td>
<td>6.6</td>
<td>10.1</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp; Nonfinancial Corporate Business</td>
<td>13%</td>
<td>4.3</td>
<td>5.3</td>
<td>5.3</td>
<td>14.1</td>
<td>8.4</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp; Nonfarm, NonCorporate Business</td>
<td>7%</td>
<td>1.3</td>
<td>4.7</td>
<td>4.7</td>
<td>12.8</td>
<td>14.7</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Financial Sectors</td>
<td>32%</td>
<td>3.7</td>
<td>5.5</td>
<td>5.5</td>
<td>13.4</td>
<td>10.0</td>
</tr>
<tr>
<td class="firstcol">&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">Net Worth: Households &amp; Nonprofit Organizations (Trillions)</td>
<td>--</td>
<td>$50.376</td>
<td>$51.706</td>
<td>$51.706</td>
<td>$62.191</td>
<td>$62.206</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Tangible Assets: Households</td>
<td>--</td>
<td>$24.221</td>
<td>$24.782</td>
<td>$24.782</td>
<td>$27.102</td>
<td>$28.288</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp; Financial Assets: Households</td>
<td>--</td>
<td>$40.295</td>
<td>$41.179</td>
<td>$41.179</td>
<td>$49.831</td>
<td>$47.356</td>
</tr>
</tbody>
</table>
</body>
</html>

Since the peak in 2Q 2007, the net worth of the U.S. household & nonprofit sectors' has fallen by $13.8 trillion, or by nearly one-quarter. The decline to its lowest level since 2004 was led by the rapid shrinkage in asset values, [...]

U.S. Flow of Funds Indicate Further Shrinkage of Balance Sheets

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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Nonfarm payrolls increased 177,000 (1.2% y/y) during April after rising 185,000 in March, revised from 228,000, and 102,000 in February, revised from 117,000. Expectations had been for a 130,000 rise in the Action Economics Forecast Survey. The latest figure left the three-month average change at 155,000 in April, down from 232,000 in January.

Average hourly earnings rose 0.2% during April after unrevised increases of 0.3% in March and 0.2% in February. Earnings growth of 3.8% y/y was below the 5.9% high in March 2022.

The unemployment rate, measured in the household survey, held m/m at an expected 4.2% in April, and compared to 4.1% in February and 4.0% in January. 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, eased to 7.8% in April from 7.9% in March.

In the **establishment survey**, private-sector employment rose 167,000 (1.2% y/y) after a 170,000 March increase. Factory sector jobs edged 1,000 lower (-0.7% y/y) following a 3,000 gain. Construction sector employment increased 11,000 (1.7% y/y), after rising 7,000 in March.

Private service-producing sector employment increased 156,000 (1.4% y/y) in April after improving 161,000 in March. Increases varied greatly amongst service sector categories. Private education & health sector employment rose 70,000 (3.4% y/y) last month following a 74,000 March increase. Leisure & hospitality employment rose 24,000 (1.3% y/y) after a 38,000 gain. Trade, transportation & utilities rose 32,000 (0.9% y/y) in April following a 25,000 March increase. Professional & business services employment rose 17,000 (-0.1% y/y) following a 3,000 rise while temporary help employment rose 3,600 (-3.9% y/y) following a 2,700 decline. Financial activities employment improved 14,000 (1.2% y/y) after a 6,000 gain. The number of information sector jobs held steady (-0.4% y/y) last month after falling 2,000 in March.

Government sector payrolls rose 10,000 (1.3% y/y) last month after increasing 15,000 in March. The number of local government jobs increased 13,000 (1.4% y/y) following a 17,000 gain. State government employment rose 6,000 (1.8% y/y) following a 2,000 March increase but federal government payrolls fell 9,000 (-0.3% y/y), the third consecutive monthly decline.

Private-sector average hourly earnings rose 0.2% (3.8% y/y) in April after increasing 0.3% in March. Earnings in the goods-producing sector eased 0.1% (+4.0% y/y) following a 0.6% gain. Earnings in construction rose 0.3% (3.6% y/y), after a 0.2% rise but factory sector earnings declined 0.3% (+4.3% y/y) after surging 0.8% in March. In the private services-sector, earnings rose 0.2% (3.7% y/y) in April for the third straight month. Information sector pay increased 1.0% (5.2% y/y) last month after easing 0.1%, and financial activities earnings rose 0.5% (4.3% y/y) for the second straight month. Trade, transportation & utilities sector pay increased 0.4% (3.4% y/y) after 0.6%. Professional & business sector earnings increased 0.1% (4.4% y/y) after 0.2% in March. Leisure & hospitality earnings held steady (+3.8% y/y) following a 0.6% March increase.

250502C5.jpg

250502D5.jpg

The length of the average workweek held steady at 34.3 hours in April. The workweek in the goods-producing sector eased to 39.8 hours from 40.0 hours. The construction sector average workweek eased to 39.0 hours from 39.3 hours while the factory sector workweek moved lower to 40.0 hours from 40.2. The average workweek in the private service sector held at 33.2 hours. Professional & business service hours fell to 36.3 hours from 36.4 while trade, transportation & utilities hours improved to 34.3 from 34.0 hours. Private education hours rose slightly to 32.8, but leisure & hospitality held steady at 25.5 hours.

In the **household survey**, the unemployment rate held at 4.2% in April as employment rose 436,000 and the size of the labor force increased 518,000. The labor force participation rate edged up to 62.6% last month from 62.5% in March. It remained below the high of 63.3% early in 2020. The rate for teenagers declined to 36.9%. For workers aged 20-24, the rate held steady at 72.1%, up from 71.8% six months earlier. For workers aged 25-54 the rate rose to 83.6%, a five-month high. For individuals 55 and over, the rate improved to 38.4% in April.

The employment/population ratio for all workers in April rose to 60.0%. It remained below the peak reading of 61.1% in February, 2020 just prior to the pandemic.

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.

250502X5.jpg

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- Job growth spreads across most sectors.
- Earnings growth trend decelerates.
- Jobless rate holds steady.

U.S. Job Growth Is Firm in April but March Gain Is Lessened

Winnie Tapasanun

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250502G32.jpg

Total factory orders rose a slightly less-than-expected 4.3% m/m in March after rises of 0.5% in February and 1.8% in January, data from the U.S. Census Bureau showed. A 4.5% m/m March increase had been expected in the Action Economics Forecast Survey. The March reading was the third successive monthly rise and the largest since July 2024. The year-on-year rate accelerated to 6.0% in March, the highest since November 2022, from 2.3% in February. Notably, orders for nondefense aircraft & parts soared 139.0% in March following a 7.4% drop in February and a 92.9% surge in January. Factory orders excluding defense rose 4.8% (5.9% y/y), the largest of three straight m/m/ rises, after a 0.4% February increase. Factory orders excluding the transportation sector fell 0.2% (+1.1% y/y), the first m/m fall since August, after rising 0.3% in February, January and December.

Durable goods orders jumped 9.2% (11.9% y/y) in March, the third consecutive m/m gain and the biggest since July 2024, on top of a 0.8% increase in February (matching +9.2% m/m in the advance report on April 24). The March jump reflected m/m orders increases of 27.1% (the largest m/m surge since July 2024; 31.2% y/y) in transportation equipment, 1.1% (4.9% y/y) in primary metals, 0.5% (-0.4% y/y) in furniture & related products, 0.1% (2.5% y/y) in fabricated metal products, and 0.1% (0.9% y/y) in machinery. To the downside, durable goods orders for computers & electronic products (-1.3%; +2.7% y/y) and electrical equipment, appliances & components (-1.0%; +4.2% y/y) declined m/m in March.

Nondurable goods orders, which equal nondurable goods shipments, fell 0.3% (+0.4% y/y) in March, the first m/m fall since September, after a 0.1% uptick in February. The March fall reflected m/m drops of 2.4% (-9.3% y/y) in petroleum & coal products and 0.9% (-1.2% y/y) in apparel. To the upside, the following nondurable goods shipments rose m/m in March: leather & allied products (1.5%; 8.6% y/y), beverage & tobacco products (0.7%; 5.8% y/y), paper products (0.6%; 2.3% y/y), printing (0.3%; 3.8% y/y), textile mills (0.3%; 0.8% y/y), chemical products (0.2%; 5.4% y/y), plastics & rubber products (0.2%; 0.4% y/y), food products (0.1%; 1.8% y/y), and textile products (0.1%; 2.1% y/y).

Total shipments slipped 0.1% (+2.0% y/y) in March, the first m/m easing since October, after a 0.7% increase in February. Excluding transportation, shipments were virtually unchanged m/m (+1.1% y/y) in March following six straight m/m gains. Shipments of durable goods industries inched up 0.1% (3.8% y/y) in March, the smallest of four consecutive m/m increases, after a 1.3% advance in February. This reflected m/m durable goods shipments rises of 1.2% (5.6% y/y) in primary metals, 0.9% (0.1% y/y) in furniture & related products, 0.8% (-0.2% y/y) in nonmetallic mineral products, 0.4% (0.0% y/y) in machinery, 0.3% (1.8% y/y) in fabricated metal products, 0.2% (4.5% y/y) in computers & electronic products, 0.2% (-2.1% y/y) in wood products, and 0.1% (3.0% y/y) in electrical equipment, appliances & components. In contrast, durable goods shipments for transportation equipment (-0.5%; +7.3% y/y) and miscellaneous durable goods (-0.1%; +2.9% y/y) fell m/m in March following three successive m/m increases.

Unfilled orders rose 2.0% (2.3% y/y) in March, up for the eighth month in nine, after a 0.1% uptick in February. Excluding transportation, unfilled orders dipped 0.1% (+0.7% y/y) in March, the first m/m easing since May 2024, after holding steady in February. Backlogs of durable goods rose 2.0% (2.3% y/y) in March, reflecting m/m rises of 3.1% (3.1% y/y) in transportation equipment and 0.2% (2.4% y/y) in electrical equipment, appliances & components.

Inventories edged up 0.1% (0.9% y/y) in March, the fifth straight m/m increase, after rising at the same pace in the prior two months. Excluding transportation, inventories were up 0.1% (0.5% y/y) in March, the fifth consecutive m/m rise. Durable goods inventories ticked up 0.1% (1.0% y/y) in March after holding steady in February and January; nondurable goods inventories edged up 0.1% (0.8% y/y), the fifth successive m/m increase.

The factory sector data are available in Haver’s **USECON** database. The Action Economics Forecast Survey is in the **AS1REPNA** database.

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- March manufacturers’ new orders +4.3% m/m; +6.0% y/y, highest since Nov. ’22.
- Durable goods orders (+9.2%) jump m/m, while nondurable goods orders (-0.3%) and shipments (-0.1%) decline m/m.
- Transportation equipt. orders +27.1% m/m, w/ a 139.0% m/m surge in nondefense aircraft & parts orders.
- Unfilled orders +2.0%, the eighth m/m rise in nine months.
- Inventories +0.1%, the fifth consecutive m/m increase.

U.S. Factory Orders Increase for the Third Straight Month in March

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The global manufacturing data showed broad weakening in April as conditions weakened across more than half of the contributing early reporters in the S&P survey of manufacturing. Of the 18 early reporting countries, more than half of them showed deceleration over six months and 12 months. Over three months, only 8 of 18 showed deterioration and that's about as good as it got in this report. In the current month, month-to-month changes showed more than half of the survey contributors showing weaker results than the month before. In the S&P framework, manufacturing improved month-to-month for the U.S.; however, looking at sequential averages for the U.S., U.K., European monetary union, Canada, and Japan, we see a steady weakening and results over 12 months, over six months versus 12 months, and for three months versus 6 months. The highly developed countries are not doing particularly well.

Asian economies are also showing slight deterioration but doing a little better than the developed countries in general.

Only five of the 18 reporting countries have queue percentile standings in their data back to January 2021 that are above their medians. Readings at or above the 50% mark are at or above the median standing. Canada is showing the weakest manufacturing result on record over this span, in terms of its queue percentile standing which is at 0 in the current month.

I showed the graphic for the Baltic dry goods index in this report rather than statistics on the manufacturing PMI data because the Baltic data, which reflect shipping volume for dry goods - that is excluding things like oil - is weak but it's only in the neighborhood where it's been for some time. There has been a great deal of talk about how tariffs may have impacted trade flows, expected trade flows, shipping, shipping rates, and the like. However, according to the Baltic dry goods index, there isn't much evidence that this is occurring right now and affecting the current data. That may still lie ahead but for now it's not baked in the cake.

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Globally Manufacturing Weakens

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.

250501Z1.jpg

**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.

Economy in Brief: June 2009

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