Tom Moeller

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<p></p>
<p>
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100407e.jpg" style="border: 0px solid ; width: 353px; height: 265px; float: left;" align="left"></p>
<p>The Bureau of Labor Statistics reported yesterday that the
rate of improvement in job market conditions eased in February. The
latest Job Openings &amp; Labor Turnover Survey (JOLTS) indicated
that the <b>job openings rate </b>slipped to 2.1% from an
upwardly revised 2.2% in January. Nevertheless the rate was near the
highest in roughly one year. <i>The job openings rate is the
number of job openings on the last business day of the month as a
percent of total employment plus job openings. </i>Job
availability fell 4.6% and retraced nearly half of its upwardly revised
January increase. It remained off 3.8% year-to-year. Last year job
availability fell 17.8% following a 29.7% decline during 2008. The
series dates back to December 2000.</p>
<p>The government sector led the latest decline in the job
openings rate. It fell to the lowest level since November after several
months of improvement. A slip in the private sector rate reflected
fewer professional, education &amp; health services jobs but
factory and retail jobs grew strongly.</p>
<p>The <b>hires rate</b> has been stable near 3.1%
since the end of 2008.<i>The hires rate is the number of hires
during the month divided by employment.</i>The actual number of
hires reversed all of the January increase (-3.3% y/y) but the rate of
decline has moderated substantially since the recession.</p>
<p>The <b>job separations rate </b>eased to a new
series' low of 3.1% with the actual number of separations off 18.7%
year-to-year. The layoff rate alone fell to a nineteen-month low of
1.4%. <i>Separations include quits, layoffs, discharges, and
other separations as well as retirements. </i>The layoff rate
alone fell to 1.4% from 2.0% twelve months earlier.</p>
<p>The JOLTS survey dates only to December 2000 but has followed
the movement in nonfarm payrolls, though the actual correlation between
the two series is low.</p>
</span>
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100407f.jpg" style="width: 312px; height: 265px;"><img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100407g.jpg" style="width: 312px; height: 265px;">
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><b><a href="http://www.haverselect.com/dlx/USECON/@EB/@EB14/@EB14.HTM">JOLTS (Job Openings &amp; Labor
&nbsp;Turnover Survey)</a></b></th>
<th scope="col"><b>February</b></th>
<th scope="col"><b>January</b></th>
<th scope="col"><b>December</b></th>
<th scope="col"><b>Feb. '09</b></th>
<th scope="col"><b>2009</b></th>
<th scope="col"><b>2008</b></th>
<th scope="col"><b>2007</b></th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td colspan="8" class="firstcol"><b>Job
Openings, Total</b></td>
</tr>
<tr>
<td class="firstcol">&nbsp; Rate (%)</td>
<td>2.1</td>
<td>2.2</td>
<td>1.9</td>
<td>2.1</td>
<td>1.9</td>
<td>2.2</td>
<td>3.1</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Total (000s)</td>
<td>2,723</td>
<td>2,854</td>
<td>2,531</td>
<td>2,830</td>
<td>2,531</td>
<td>3,078</td>
<td>4,378</td>
</tr>
<tr class="odd">
<td colspan="8"><b>Hires, Total</b></td>
</tr>
<tr>
<td class="firstcol">&nbsp; Rate (%)</td>
<td>3.1</td>
<td>3.2</td>
<td>3.1</td>
<td>3.1</td>
<td>37.3</td>
<td>41.1</td>
<td>45.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Total (000s)</td>
<td>3,961</td>
<td>4,087</td>
<td>3,997</td>
<td>4,095</td>
<td>48,649</td>
<td>56,082</td>
<td>63,234</td>
</tr>
<tr class="odd">
<td colspan="8" class="firstcol"><b>Layoffs
&amp;
Discharges, Total</b></td>
</tr>
<tr>
<td class="firstcol">&nbsp; Rate (%)</td>
<td>1.4</td>
<td>1.5</td>
<td>1.6</td>
<td>2.0</td>
<td>20.7</td>
<td>17.7</td>
<td>16.5</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Total (000s)</td>
<td>1,822</td>
<td>1,953</td>
<td>2,049</td>
<td>2,593</td>
<td>27,683</td>
<td>24,589</td>
<td>22,606</td>
</tr>
</tbody>
</table>
</body></html>

The Bureau of Labor Statistics reported yesterday that the rate of improvement in job market conditions eased in February. The latest Job Openings & Labor Turnover Survey (JOLTS) indicated that the job openings rate slipped to 2.1% [...]

JOLTS: U.S. Job Openings Slip

Robert Brusca

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<p></p>
<p><img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100407d.jpg" style="border: 0px solid ; width: 353px; height: 265px; float: left;" align="left"></p>
<p>German orders were flat in February as they held the 5.1% m/m
gain from the month before. Foreign orders built on a 3.7% gain in
January by rising an additional 1.8% m/m as domestic orders gave back
1.9 percentage points of their 6.7 percentage point spurt in January.
Over three months foreign orders are rising at an 11.8% pace while
domestic orders are right behind at a 9.7% pace. Overall orders are up
by 24.5% Yr/Yr, they are lower over six months, but are back strong on
the three-month horizon.</p>
<p>In the quarter to date German orders are showing a strong lift
rising at a 24.1% annual rate, with nearly identical foreign and
domestic order rates of growth. Sales of consumer durables and capital
goods are advancing the fastest in Germany in the quarter.</p>
<p>The orders news in Germany for February is good buffer to the
revised Q4 e-Zone GDP growth rate which has been cut to show zero
growth. But, looking ahead, the OECD now expects G-7 growth to slow
although growth in the US is expected to lead the pack. Europe is
having a hard time getting growth lined up. Its broader social safety
net put a quicker bottom on the decline in GDP in the Zone during the
downturn, but the enlarged public sector deficits and fiscal problems
throughout the e-Zone put any further fiscal help off limits. Europe&#8217;s
more stifled job market means that private sector jobs will not
comeback quickly leaving its hope for stronger growth in the hands of
the export sector.</p>
<p>German orders data are encouraging from that standpoint.
Germany seems to making its export-led progress and the domestic sector
appears to be in tow. The Service sector is coming along in Europe as
well. That is important because that will be the sector of job creation
that will sustain recovery.</p>
</span>
<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="9" scope="col"> <b>German
Orders and Sales By Sector and Origin</b></th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td style="font-weight: bold;" class="firstcol">Real and SA</td>
<td style="font-weight: bold;" colspan="3">% M/M</td>
<td style="font-weight: bold;" colspan="4">% Saar</td>
<td style="font-weight: bold;">&nbsp;QTR <br>
to Date</td>
</tr>
<tr class="odd">
<td style="font-weight: bold;" class="firstcol">&nbsp;</td>
<td style="font-weight: bold;">Feb-10</td>
<td style="font-weight: bold;">Jan-10</td>
<td style="font-weight: bold;">Dec-09</td>
<td style="font-weight: bold;">3-MO</td>
<td style="font-weight: bold;">6-Mo</td>
<td style="font-weight: bold;">12-Mo</td>
<td style="font-weight: bold;">YrAgo</td>
<td style="font-weight: bold;"></td>
</tr>
<tr>
<td class="firstcol">Total Orders</td>
<td>0.0%</td>
<td>5.1%</td>
<td>-2.4%</td>
<td>10.5%</td>
<td style="color: red;">5.1%</td>
<td>24.5%</td>
<td style="color: red;">-36.2%</td>
<td>24.1%</td>
</tr>
<tr>
<td class="firstcol">Foreign</td>
<td>1.8%</td>
<td>3.7%</td>
<td>-2.5%</td>
<td>11.8%</td>
<td style="color: red;">5.7%</td>
<td>30.1%</td>
<td style="color: red;">-40.7%</td>
<td>23.5%</td>
</tr>
<tr>
<td class="firstcol">Domestic</td>
<td>-1.9%</td>
<td>6.7%</td>
<td>-2.1%</td>
<td>9.7%</td>
<td style="color: red;">4.8%</td>
<td>18.7%</td>
<td style="color: red;">-30.6%</td>
<td>24.9%</td>
</tr>
<tr style="font-weight: bold;" class="odd">
<td colspan="9" class="firstcol">Real
Sector Sales</td>
</tr>
<tr>
<td class="firstcol">MFG/Mining</td>
<td>-0.1%</td>
<td>1.3%</td>
<td>-1.1%</td>
<td>0.4%</td>
<td style="color: red;">0.2%</td>
<td>8.2%</td>
<td style="color: red;">-24.1%</td>
<td>3.0%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Consumer</td>
<td>-2.0%</td>
<td>-4.0%</td>
<td>2.2%</td>
<td style="color: red;">-14.6%</td>
<td style="color: red;">-7.6%</td>
<td>-1.5%</td>
<td>-11.7%</td>
<td>-12.8%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Cons
Durables</td>
<td>-2.5%</td>
<td>4.1%</td>
<td>-2.1%</td>
<td style="color: red;">-2.6%</td>
<td style="color: red;">-1.3%</td>
<td>5.3%</td>
<td style="color: red;">-22.2%</td>
<td>10.8%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Cons
Non-Durable</td>
<td>-2.0%</td>
<td>-5.0%</td>
<td>2.8%</td>
<td style="color: red;">-16.3%</td>
<td style="color: red;">-8.5%</td>
<td>-2.4%</td>
<td>-9.8%</td>
<td>-15.6%</td>
</tr>
<tr>
<td class="firstcol">Captial Gds</td>
<td>1.0%</td>
<td>2.6%</td>
<td>-1.3%</td>
<td>9.4%</td>
<td style="color: red;">4.6%</td>
<td>10.9%</td>
<td style="color: red;">-29.9%</td>
<td>11.9%</td>
</tr>
<tr>
<td class="firstcol">Intermediate Gds</td>
<td>-0.1%</td>
<td>2.6%</td>
<td>-2.8%</td>
<td style="color: red;">-1.2%</td>
<td style="color: red;">-0.6%</td>
<td>12.3%</td>
<td style="color: red;">-24.3%</td>
<td>2.7%</td>
</tr>
<tr>
<td class="firstcol">All MFG-Sales</td>
<td>0.0%</td>
<td>1.2%</td>
<td>-1.1%</td>
<td>0.4%</td>
<td style="color: red;">0.2%</td>
<td>8.4%</td>
<td style="color: red;">-24.3%</td>
<td>2.6%</td>
</tr>
</tbody>
</table>
</body></html>

German orders were flat in February as they held the 5.1% m/m gain from the month before. Foreign orders built on a 3.7% gain in January by rising an additional 1.8% m/m as domestic orders gave back 1.9 percentage points of their 6.7 [...]

German Orders Hold Gains

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<p></p>
<p><img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100405g.jpg" style="border: 0px solid ; width: 353px; height: 265px; float: left;" align="left"></p>
<p>So far only the UK is showing a sharp shift in its rate of
money growth. But the e-Zone is showing a small money growth revival.
US money growth has been dropping very rapidly but is showing a hint of
stability- still its sequential rates of growth continue to ramp down.
Japan&#8217;s money growth that has so very steady has taken a step lower.
But Japan&#8217;s Tankan report suggests that the economy there is getting
better and that the downturn in money growth may not be signaling a new
round of weakness. In truth central banks have not taken their cues
from money growth for some time. Is that about to change?</p>
<p>EMU, the US and the UK have seen the biggest winding down in
money growth rates from their cycle peaks. The UK has seen that
wind-down give way to a bounce. The US shows a hint of some
stabilization in money growth but real balances are contacting over the
most recent three-months. EMU shows only a slowing in the pace of money
supply deceleration in its Yr/Yr trends but real balances over
three-months have posted positive growth. . In the Zone Credit to
residents and loans continue to contract in real terms but they are
slowing their pace of contraction, too.</p>
<p>Money growth rates seem to be showing signs - or at least
hints -of stabilization. In the US the jobs figures for March hint that
the period of job contraction may have some to a close. In Japan the
tankan report was better than expected. EMU and the UK continue to blow
and hot and cold reports back and forth. Europe still seems to be
having a tough time posting consistent growth numbers. EMU, in
particular is dealing with PR issues and the reality of very divergent
circumstances across member countries, challenging the ECB. The UK
continues to get battered with some seasonably extreme weather but also
to continue to issue a very uneven stream of economic reports.</p>
<p>In the wake of the US jobs report the entire global picture is
looking better. Commodity prices tell a story of new confidence in
growth prospects. Money supply trends do not wave any cautionary flags
about building inflation, however. The UK has persistently high money
growth and is also experiencing an inflation overshoot. The Bank of
England has said it will let it run its course since it views the
overshoot as being not problematical. In the US, with job growth coming
on stream, &#8216;inflationists&#8217; are sounding warning signals. In Europe
recent German inflation reports have been boosted by rising oil prices,
this will make the ECB wary regardless of other zone issues. Bond
yields are moving up.</p>
<p>It is true that there is a shifting of trends and of risks but
it is really even more subtle than what it seems. There remains a great
deal of slack in the global economy. In the US alone the recession
displaced eight and one-half million people (net!). Putting 162,000
back to work in one month can&#8217;t ramp up much of an inflation risk can
it? I suspect that fears of inflation are overdone and commodity prices
which are reacting to something else (call it perceived scarcity) are
acting as a misaligned lighting rod for inflation fears.</p>
<p>We do think this cycle is entering a different, better, growth
phase globally, but we do not think inflation is much of a threat. We
think this confusion will however drive prices and bond yields quite
possibly too far ahead whatever risks may emerge.</p>
<a href="http://www.haver.com/COMMENT/archive.htm">
</a>
<p></p>
</span>
<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="8" scope="col"><b>Look at
Global and Euro Liquidity Trends</b> </th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td style="font-weight: bold;" class="firstcol">Saar-all</td>
<td style="font-weight: bold;" colspan="3">Euro Measures (E13):
Money &amp; Credit</td>
<td style="font-weight: bold;" colspan="3">G-10 Major Markets:
Money</td>
<td style="font-weight: bold;">Memo</td>
</tr>
<tr class="odd">
<td style="font-weight: bold;" class="firstcol">&nbsp;</td>
<td style="font-weight: bold;">&#8364;-Supply M2</td>
<td style="font-weight: bold;">Credit:Resid</td>
<td style="font-weight: bold;">Loans</td>
<td style="font-weight: bold;">$US M2</td>
<td style="font-weight: bold;">&#163;UK M4</td>
<td style="font-weight: bold;">&#165;Jpn M2+Cds</td>
<td style="font-weight: bold;">OIL:WTI</td>
</tr>
<tr class="odd">
<td class="firstcol">3-MO</td>
<td>3.1%</td>
<td>0.1%</td>
<td>0.7%</td>
<td>0.4%</td>
<td>33.8%</td>
<td>1.6%</td>
<td style="color: red;">-10.3%</td>
</tr>
<tr class="odd">
<td class="firstcol">6-MO</td>
<td>0.6%</td>
<td style="color: red;">-0.2%</td>
<td style="color: red;">-0.1%</td>
<td>2.5%</td>
<td>21.1%</td>
<td>2.4%</td>
<td>14.3%</td>
</tr>
<tr class="odd">
<td class="firstcol">12-MO</td>
<td>1.4%</td>
<td style="color: red;">-0.2%</td>
<td style="color: red;">-0.8%</td>
<td>2.1%</td>
<td>11.0%</td>
<td>2.7%</td>
<td>94.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">2Yr</td>
<td>4.7%</td>
<td>3.0%</td>
<td>1.9%</td>
<td>5.7%</td>
<td>14.3%</td>
<td>2.4%</td>
<td style="color: red;">-10.4%</td>
</tr>
<tr class="odd">
<td class="firstcol">3Yr</td>
<td>6.9%</td>
<td>6.4%</td>
<td>4.9%</td>
<td>6.1%</td>
<td>13.4%</td>
<td>2.4%</td>
<td>8.8%</td>
</tr>
<tr style="font-weight: bold;">
<td colspan="8" class="firstcol">Real Balances: deflated
by Own CPI. Oil deflated by US CPI</td>
</tr>
<tr class="odd">
<td class="firstcol">3-MO</td>
<td>1.9%</td>
<td style="color: red;">-1.2%</td>
<td style="color: red;">-0.5%</td>
<td style="color: red;">-0.9%</td>
<td>27.3%</td>
<td>0.8%</td>
<td style="color: red;">-11.5%</td>
</tr>
<tr class="odd">
<td class="firstcol">6-MO</td>
<td style="color: red;">-0.8%</td>
<td style="color: red;">-1.6%</td>
<td style="color: red;">-1.5%</td>
<td>0.6%</td>
<td>16.4%</td>
<td>2.4%</td>
<td>12.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">12-MO</td>
<td>0.5%</td>
<td style="color: red;">-1.1%</td>
<td style="color: red;">-1.7%</td>
<td style="color: red;">-0.1%</td>
<td>7.7%</td>
<td>3.9%</td>
<td>90.5%</td>
</tr>
<tr class="odd">
<td class="firstcol">2Yr</td>
<td>3.6%</td>
<td>2.0%</td>
<td>0.9%</td>
<td>4.5%</td>
<td>10.9%</td>
<td>3.0%</td>
<td style="color: red;">-11.5%</td>
</tr>
<tr class="odd">
<td class="firstcol">3Yr</td>
<td>5.0%</td>
<td>4.6%</td>
<td>3.1%</td>
<td>3.9%</td>
<td>10.3%</td>
<td>2.4%</td>
<td>6.5%</td>
</tr>
<tr>
<td colspan="8" class="firstcol">All figures
are through February</td>
</tr>
</tbody>
</table>
</body></html>

So far only the UK is showing a sharp shift in its rate of money growth. But the e-Zone is showing a small money growth revival. US money growth has been dropping very rapidly but is showing a hint of stability- still its sequential [...]

Money Supply Growth Begins To Shift – Is That All?

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<p></p>
<p><img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100405d.jpg" align="left" border="0" height="265" width="353"></p>
<p>It appears that snow-storms in February didn't dampen home
sales as much as during the prior month. The National Association of
Realtors (NAR) reported that pending sales of existing single-family
homes recovered virtually all of the January decline with an 8.2%
increase. The recovery left home sales up nearly one-quarter from the
low in January of last year. The latest gain compares with Consensus
expectations for a slight m/m decline.</p>
<p>The m/m performance of home sales varied across the country. A
large increase in the Midwest was accompanied by smaller increases in
the Northeast and in the South while sales fell in the West.</p>
<p>These home sales figures are analogous to the new home sales
data from the Commerce Department in that they measure existing home
sales when the sales contract is signed, not at the time the sale is
closed. The series dates back to 2001 and the data is available in
Haver's <b>PREALTOR </b>database.</p>
<p><b>How Much Is That Home Really Worth? Appraisal Bias
and House-Price Uncertainty </b>from the Federal Reserve Bank of
Philadelphia can be found <a href="http://www.philadelphiafed.org/research-and-data/publications/business-review/2010/q1/brq110_home-worth-appraisal-bias.pdf">here</a>.</p>
</span>
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100405e.jpg" style="width: 312px; height: 265px;"><img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100405f.jpg" style="width: 312px; height: 265px;">
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><b><a ;="" href="http://www.haverselect.com/dlx/WEEKLY/@W5/@W507/@W507.HTM">Pending Home Sales (2001=100)&nbsp;</a></b></th>
<th scope="col"><b>February</b></th>
<th scope="col"><b>January</b></th>
<th scope="col"><b>December</b></th>
<th scope="col"><b>Y/Y</b></th>
<th scope="col"><b>2009</b></th>
<th scope="col"><b>2008</b></th>
<th scope="col"><b>2007</b></th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>97.6</td>
<td>90.2</td>
<td>97.8</td>
<td>&nbsp;&nbsp;17.3%</td>
<td>95.1</td>
<td>86.9</td>
<td>95.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Northeast</td>
<td>77.7</td>
<td>71.3</td>
<td>78.1</td>
<td>18.8</td>
<td>76.7</td>
<td>73.0</td>
<td>86.1</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Midwest</td>
<td>97.9</td>
<td>80.4</td>
<td>89.2</td>
<td>18.7</td>
<td>88.8</td>
<td>80.7</td>
<td>89.6</td>
</tr>
<tr>
<td class="firstcol">&nbsp; South</td>
<td>107.0</td>
<td>98.0</td>
<td>100.2</td>
<td>17.5</td>
<td>98.9</td>
<td>90.3</td>
<td>107.4</td>
</tr>
<tr>
<td class="firstcol">&nbsp; West</td>
<td>98.0</td>
<td>102.9</td>
<td>118.5</td>
<td>14.6</td>
<td>109.9</td>
<td>99.2</td>
<td>92.1</td>
</tr>
</tbody>
</table>
</body></html>

It appears that snow-storms in February didn't dampen home sales as much as during the prior month. The National Association of Realtors (NAR) reported that pending sales of existing single-family homes recovered virtually all of the [...]

U.S. Pending Home Sales Unexpectedly Recover

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<span id="articletext">
<p></p>
<p><img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100405a.jpg" align="left" border="0" height="265" width="353"></p>
<p>The service sector clearly is on the road to recovery. The
Institute for Supply Management's (ISM) Composite Index for the service
&amp; construction sectors rose in March to 55.4 from 53.0 in
February. It was the third consecutive monthly indication of solid
expansion and was the index's highest level since early-2006. Moreover,
the series has risen considerably from a low of 37.2 late in 2008. The
latest figure exceeded Consensus expectations for a reading of 54.0.
Since the series' inception in 1997 there has been a 65% correlation
between the level of the composite index in the nonmanufacturing sector
and the q/q change in real GDP for the services and the construction
sectors.</p>
<p>ISM surveys more than 370 purchasing managers in more than 62
industries including law firms, hospitals, government and retailers.
The nonmanufacturing survey dates back to July 1997. The figures are
available in Haver's <b>USECON </b>database.</p>
<p>The business activity index for the nonmanufacturing sector
surged m/m to 60.0 which was the highest level since early-2006. The
new orders index also rose considerably to 62.3, the highest level
since 2005. Thirty-seven percent of respondents reported higher orders
while only 14% reported them lower. Finally, the employment index rose
to nearly break-even. The latest level of 49.8 was the highest level
since April 2008 and was up sharply from the late-2008 low. Since the
series' inception in 1997 there has been an 80% correlation between the
level of the ISM nonmanufacturing employment index and the m/m change
in payroll employment in the service-producing plus the construction
industries.</p>
<p>Pricing power also improved to the strongest since September
2008 and was up sharply from the 2008 low. Thirty-two percent of
respondents reported higher prices while just 5% reported them lower.
At the worst, late in 2008, 41% reported lower prices. Since its
inception ten years ago, there has been a 73% correlation between the
price index and the q/q change in the GDP services chain price index.</p>
<p>Beginning with the January 2008 Nonmanufacturing <cite>Report
On Business</cite>&#174;, the composite index is calculated as an
indicator of the overall economic condition for the non-manufacturing
sector. It is a composite index based on the diffusion indices of four
of the indicators (business activity, new orders, employment and
supplier deliveries) with equal weights. The latest report from the ISM
can be found <a href="http://www.ism.ws/ISMReport/NonMfgROB.cfm">here</a>.</p>
</span>
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100405b.jpg" style="width: 312px; height: 265px;"><img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100405b.jpg" style="width: 312px; height: 265px;">
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><b><a ;="" href="http://www.haverselect.com/dlx/USECON/@EF/@EF03/@EF03.HTM">ISM
Nonmanufacturing Survey</a></b></th>
<th scope="col"><b>March</b></th>
<th scope="col"><b>February</b></th>
<th scope="col"><b>January</b></th>
<th scope="col"><b>March '09</b></th>
<th scope="col"><b>2009</b></th>
<th scope="col"><b>2008</b></th>
<th scope="col"><b>2007</b></th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Composite Index</td>
<td>55.4</td>
<td>53.0</td>
<td>50.5</td>
<td>41.2</td>
<td>46.2</td>
<td>47.3</td>
<td>53.5</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Business
Activity</td>
<td>60.0</td>
<td>54.8</td>
<td>52.2</td>
<td>44.5</td>
<td>48.0</td>
<td>47.4</td>
<td>56.0</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; New Orders</td>
<td>62.3</td>
<td>55.0</td>
<td>54.7</td>
<td>39.4</td>
<td>47.9</td>
<td>47.0</td>
<td>54.8</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Employment</td>
<td>49.8</td>
<td>48.6</td>
<td>44.6</td>
<td>32.8</td>
<td>39.9</td>
<td>43.8</td>
<td>52.0</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Supplier
Deliveries (NSA)</td>
<td>49.5</td>
<td>53.5</td>
<td>50.5</td>
<td>48.0</td>
<td>49.0</td>
<td>51.1</td>
<td>51.1</td>
</tr>
<tr class="odd">
<td class="firstcol">Prices Index</td>
<td>62.9</td>
<td>60.4</td>
<td>61.2</td>
<td>40.8</td>
<td>49.4</td>
<td>66.0</td>
<td>63.8</td>
</tr>
</tbody>
</table>
</body></html>

The service sector clearly is on the road to recovery. The Institute for Supply Management's (ISM) Composite Index for the service & construction sectors rose in March to 55.4 from 53.0 in February. It was the third consecutive [...]

U.S. ISM Nonmanufacturing Index Continues To Strengthen

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<p></p>
<p>
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100402f.jpg" style="width: 353px; height: 265px;" align="right"> Making up
sales which earlier had suffered from "special" factors, <b>U.S.
unit sales of&nbsp; light vehicles</b> during March jumped to
11.78M units (SAAR) from 10.38M in February. The latest was the highest
level since last August when aggressive sales promotions lifted sales.
March sales fell slightly short of Consensus expectations for 12.0M.
(Seasonal adjustment of these figures is provided by the U.S. Bureau of
Economic Analysis).</p><p>Sales of <b>domestically&nbsp; produced
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100402g.jpg" style="width: 353px; height: 265px;" align="right">
vehicles</b> jumped 14.0% last month to 8.79M units (28.5% y/y)
from 7.71M in February. Sales of fuel efficient cars rose 11.8% for the
month (28.8% y/y) while light truck sales also posted a solid 16.0% m/m
gain (28.3% y/y). <b>Imported light vehicle</b> sales
recovered 12.0% (3.7% y/y) after a sharp February decline, due in part
to the recall of some Toyota models. With a 5.9% gain, sales of
imported autos recovered all of the February loss while light truck
sales were stronger with a m/m gain of 24.9%, though just 1.7% y/y.</p><p>Overall,<b> import's share </b>of the U.S.
light vehicle market during February fell to 25.4%. The share has been
declining erratically from its high of 30.5% in February '09 and from
27.6% during all of last year. (Imported vehicles are those produced
outside the United States.) Imports' share of the U.S. car market fell
m/m to 31.8% and that was below 34.8% during 2009. Imports' share of
the light truck market improved to 18.7% but remained below the 19.6%
last year.</p><p>The U.S. vehicle sales figures can be
found in Haver's<b> USECON </b>database.&nbsp;</p>
<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/@ED/@ED09/@ED0901/@ED0901.HTM%22" style="color: rgb(0, 0, 0);"><b>Light Vehicle Sales
(SAAR, Mil. Units)</b></a></th>
<th scope="col"><b>March</b></th>
<th scope="col"><b>February</b></th>
<th scope="col"><b>January</b></th>
<th scope="col"><b>March Y/Y</b></th>
<th scope="col"><b>2009</b></th>
<th scope="col"><b>2008</b></th>
<th scope="col"><b>2007</b></th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>11.78</td>
<td>10.38</td>
<td>10.78</td>
<td>21.2%</td>
<td>10.37</td>
<td>13.22</td>
<td>16.16</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Autos</td>
<td>6.04</td>
<td>5.49</td>
<td>5.70</td>
<td>20.1</td>
<td>5.46</td>
<td>6.76</td>
<td>7.58</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Domestic</td>
<td>4.12</td>
<td>3.68</td>
<td>3.78</td>
<td>28.8</td>
<td>3.56</td>
<td>4.44</td>
<td>5.06</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Imported</td>
<td>1.92</td>
<td>1.81</td>
<td>1.92</td>
<td>4.8</td>
<td>1.90</td>
<td>2.32</td>
<td>2.52</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Light Trucks</td>
<td>5.74</td>
<td>4.88</td>
<td>5.08</td>
<td>22.4</td>
<td>4.91</td>
<td>6.46</td>
<td>8.60</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Domestic</td>
<td>4.67</td>
<td>4.03</td>
<td>4.11</td>
<td>28.3</td>
<td>3.95</td>
<td>5.28</td>
<td>7.10</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Imported</td>
<td>1.07</td>
<td>0.86</td>
<td>0.97</td>
<td>1.7</td>
<td>0.96</td>
<td>1.18</td>
<td>1.47</td>
</tr>
</tbody>
</table>
</span></body></html>

Making up sales which earlier had suffered from "special" factors, U.S. unit sales of light vehicles during March jumped to 11.78M units (SAAR) from 10.38M in February. The latest was the highest level since last August when [...]

U.S. Vehicle Sales Recover

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<p></p>
<p><img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100402e.jpg" style="border: 0px solid ; width: 353px; height: 265px; float: left;" align="left"></p>
<p>Policymakers around the world have used the auto sector as a
lever to try and pry growth out of their respective economies. It may
seem strange that such a &#8216;big ticket item&#8217; would be uses so
universally, but that is partly the result of the type of crisis
governments and central banks have been fighting. Few buy cars without
bank financing. And bank financing had retracted sharply in the crisis.</p>
<p>Auto incentives ladened with tax breaks helped to get the
sector moving ahead. Now the incentives have been removed and sales are
falling back to economically supportable levels. In the e-Zone we can
see that while car sales are falling back retail sales have been
steadily cutting their losses. It&#8217;s not great but its progress.</p>
<p>France and Italy are the early auto sales (actually
registrations are recorded in Europe) reporters. They each show that
sales have advanced in March more than compensating for the sales drop
in February. Although the drop off in overall auto sales seems severe,
it is only sales getting back to normal after some very successful
incentives. The reduction in the rate of decline in retail sales
underscores that there is some progress on the part of the
Euro-consumer. France and Italy are showing that m/m sales can still
rise in this environment in which has the growth rate of Yr/Yr sales
dropping so sharply.</p>
</span>
<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="10" scope="col"> <b>Euro-Area
Car Registrations</b>
</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td colspan="3">Mo/Mo %</td>
<td colspan="2">3-Mo Trend From</td>
<td colspan="2">6-Mo Trend From</td>
<td colspan="2">12-Mo Trend From</td>
</tr>
<tr class="odd">
<td class="firstcol">All Seas Adj</td>
<td>Mar-10</td>
<td>Feb-10</td>
<td>Jan-10</td>
<td>Mar-10</td>
<td>Feb-10</td>
<td>Mar-10</td>
<td>Feb-10</td>
<td>Mar-10</td>
<td>Feb-10</td>
</tr>
<tr>
<td class="firstcol">&nbsp;
France(&amp;WDA)</td>
<td>1.0%</td>
<td>-0.2%</td>
<td>-17.0%</td>
<td>-50.8%</td>
<td>-46.2%</td>
<td>6.2%</td>
<td>23.6%</td>
<td>12.7%</td>
<td>18.8%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Italy</td>
<td>5.1%</td>
<td>-2.9%</td>
<td>-2.5%</td>
<td>-2.0%</td>
<td>-19.2%</td>
<td>11.6%</td>
<td>7.1%</td>
<td>12.2%</td>
<td>21.6%</td>
</tr>
<tr class="grey2">
<td class="firstcol">base Month of Calc</td>
<td>Feb-10</td>
<td>Jan-10</td>
<td>Dec-09</td>
<td>Dec-09</td>
<td>Nov-09</td>
<td>Sep-09</td>
<td>Aug-09</td>
<td>Mar-09</td>
<td>Feb-09</td>
</tr>
</tbody>
</table>
</body></html>

Policymakers around the world have used the auto sector as a lever to try and pry growth out of their respective economies. It may seem strange that such a ‘big ticket item’ would be uses so universally, but that is partly the result [...]

Auto Sales In The Zone Come Back To Earth

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.

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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.

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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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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.

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

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

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

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

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

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

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Charts of the Week: Tariff Truce, Tenuous Trust

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

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

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

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

Imports' 23.5% share of the U.S. light vehicle market was little changed from 23.6% in March and compared to a May 2023 low of 22.9% and a high of 26.3% in November of 2023. Imports' share of the passenger car market held steady at 25.3% last month and compared to 27.7% in April of last year. It reached a high of 38.7% in September 2021. Imports' share of the light truck market eased to 23.2% last month after falling to 23.3% in March.

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

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

Economy in Brief: April 2010

Jump to:

JOLTS: U.S. Job Openings Slip

German Orders Hold Gains

Money Supply Growth Begins To Shift – Is That All?

U.S. Pending Home Sales Unexpectedly Recover

U.S. ISM Nonmanufacturing Index Continues To Strengthen

U.S. ISM Nonmanufacturing Index Continues To Strengthen

U.S. Vehicle Sales Recover

Auto Sales In The Zone Come Back To Earth