Robert Brusca

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German trade flows came up lame in April as exports were flat and imports fell by 0.2%. These performances follow a 1.9% gain for exports in March and a 2.3% drop for imports.

Exports grow but imports stay slow or worse

Suddenly (Poof!) out of thin air German exports have lift off. They are accelerating from a 0.9% pace over 12-month to 4.6% over six-month to a pace of 14.1% over three-month. Imports, however, are hopelessly mired in a declining phase. They are net lower by 1.8% over 12-month, falling at a 3.5% pace over six-month and falling at a 10% pace over three-month. Germany is not spreading the `joy' of its economic performance across Europe or the world by increasing its imports. Far from it. The German economy is ploughing ahead. German exports are now actually surging but the German import appetite is like that of an anorexic fashion model.

Widespread import weakness

We could blame weak German imports on falling oil prices in the past, but oil prices are firming. And import detail (where data lag by one month) show that over three months German imports are falling for capital goods (at a -27.6% annual rate!), for motor vehicles (-13.3% annual rate), and for consumer goods (-16.2% annual rate).

Export/Import relative performance

The current ratio of exports to import is up to 1.31 (131%). This is its highest ratio value since May 2004 (more than a decade!). Germany's trade balance, already one of the largest in the world, especially relative to GDP, continues to hold at a high level and even to work higher.

Forgotten goals and mechanisms

The principles of economic adjustment are being undermined by the hijacked global monetary system and by countries' failures to implement correct policies at home. While there is a focus on the risk of excessive monetary policy, there is nothing being said about the forced diet off of fiscal policy. There is no debate that fiscal policy, too, has been overused. But the sharp and near-global shut off of the fiscal channel at a time of diminished growth and slack global demand has left global conditions in the hands of a private sector that itself is struggling with change and economic pressures-and with its adjustment mechanism spigots turned to an `OFF' setting. As a result, countries with surpluses are keeping them or making them larger and countries with deficits continue to keep and run deficits. There is no adjustment. Funds continue to transfer into low wage high savings (low spending) regions damping the global growth multipliers and steeping the slope of the hill we need to climb to achieve growth.

You can't use the pump because the vandals stole the handle

There is no adjusting exchange rate mechanism; for all intents and purposes, it does not exist. Surplus country currencies do NOT rise to choke off current account surpluses and restore balance. Deficit country currencies (hint USA) do not fall (enough or consistently enough). Exchange rates have become the dominion of various nations' economic policies and are used to secure export-led economic growth- not as a cyclical mechanism to readjust trade balances when they get out of kilter. In the case of the euro area, Germany is deeply embedded in a secure economic zone, nestled inside a troubled area so that the currency its shares with these struggling nations reflects their weakness instead of its strength. Germany benefits from being in a weak currency zone: its exports are made stronger; its import weaker. Meanwhile, Germany takes no countervailing domestic actions to diminish its surplus even though EU rules demand that it do so. Germans are good at pointing out other countries' shortcoming and at the same time ignoring the rules it finds inconvenient for itself. And that is what we see in the EMU and Germany.

ECB policy options (buy a lottery ticket and pray)

At the ECB (today!), we hear Mario Draghi begging for structural change and that is only because he cannot beg for the use of fiscal policy when countries are over their Maastricht (sounds like, mass-trick) allotment. You can believe that Germany is watching everyone else's budget very carefully while its own pot-belly of current account surplus spills over its own belt.

ECB credibility is being eroded

Germany sees ECB credibility as damaged and as damaged by its novel policies and bloated balance sheet size. Much of the rest of Europe sees ECB credibility damaged too but sees it as damaged by three years of inability to hit its inflation target while Germany blocked every attempt by the ECB to use an innovative policy. Germany refuses to admit that blood of ECB failure is all over its hands. In fact, most Germans do not even see ECB policy as `failed' since the ECB (successfully!) is keeping inflation below 2% and to them all is fine even though it is not the ECB mandate. Some Germans (astonishingly!) think that `to regain credibility' the ECB should boost interest rates back to `normal' now! Other analysts look at EMU inflation and worry about deflation. Germans call the inflation environment `moderate'- not even low! Today Mario Draghi is warning that Europe could be scarred permanently by this period of too-low growth and inflation. But German unemployment is at a reunification low. Germans do not feel the pain. They have a `get out of deflation-free card.' They have created a Shangri-la-la-la economy that thrives even in the moribund euro area.

Germany's rigid and selective view of rules hurts EMU

When the dust settles, Germany wins. Its economy is meant to operate in first gear and is still pounding ahead - inch by centimeter. And yet because of Angela Merkel, it has absorbed a sharp rise in migrants and now various crime problems including backlash hate crimes being reported in Germany. Apart from this one act of self-sacrifice -that many Germans seem to oppose and that has been abruptly slowed- Germany is doing little (actually nothing) to make the way easier for fellow EMU members despite its own cushy environment. Germany refuses to obey rules it is violating that could help fellow EMU members. Obeying the rules on deficit reduction would help. And that will happen... when pigs fly and all the beer gardens close and probably not before.


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German trade flows came up lame in April as exports were flat and imports fell by 0.2%. These performances follow a 1.9% gain for exports in March and a 2.3% drop for imports. Exports grow but imports stay slow or worse Suddenly [...]

German Trade Surplus Moves Higher: Fiddle Dee Dee Europe

Tom Moeller

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Initial claims for jobless insurance fell to 264,000 (-15.6% y/y) during the
week ended June 4 versus 268,000 claims in the prior week, revised from 267,000.
Despite the weekly decline, the average of claims in May were 6.7% above April.
The Action Economics Forecast Survey expected 270,000 claims. The four-week moving
average of claims fell to 269,500. During the last ten years, there has been a 74%
correlation between the level of claims and the m/m change in payroll employment.

In the week ending May 28, continuing claims for unemployment insurance
declined to 2.095 million (-8.1% y/y) from 2.172 million. The four-week moving
average eased to 2.145 million.

The insured rate of unemployment fell to 1.5%, a record low.

Insured rates of unemployment across states continued to vary. Near the low
end of the range were Nebraska (0.50%), Florida (0.60%), Tennessee (0.70%), South
Carolina (0.76%), Georgia (0.80%) and Virginia (0.80%). At the
high end of the scale were Rhode Island (1.80%), Massachusetts (1.90%), Illinois
(1.90%), Pennsylvania (2.20%), New Jersey (2.30%) and Puerto Rico (2.40%). The
state data are not seasonally adjusted.

Data on weekly unemployment insurance are contained in Haver's WEEKLY
database and they are summarized monthly in USECON. Data for individual
states are in REGIONW. The expectations figure is from the Action
Economics survey, carried in the AS1REPNA database.

Is There Still Slack in the Labor Market? from the Federal Reserve
Bank of Chicago can be found <a href="https://www.chicagofed.org/publications/chicago-fed-letter/2016/359">here</a>.

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<table class="centered" width="100%" border="0" cellspacing="0">
	<colgroup><col><col><col><col><col><col><col><col></colgroup>

 <thead>
 <tr>
 <th class="firstcol" 0801 >Unemployment Insurance (000s)</th>
 <th 0801 >06/04/16</th>
 <th 0801 >05/28/16</th>
 <th 0801 >05/21/16</th>
 <th 0801 >Y/Y</th>
 <th 0801 >2015</th>
 <th 0801 >2014</th>
 <th 0801 >2013</th>
 </tr>
 </thead>
 <tbody>
 <tr>
 <td class="firstcol" 0801 >Initial Claims</td>
 <td 0801 >264</td>
 <td 0801 >268</td>
 <td 0801 >268</td>
 <td 0801 >-15.6%</td>
 <td 0801 >277</td>
 <td 0801 >307</td>
 <td 0801 >342</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" 0801 >Continuing Claims</td>
 <td 0801 >--</td>
 <td 0801 >2,095</td>
 <td 0801 >2,172</td>
 <td 0801 >-8.1</td>
 <td 0801 >2,268</td>
 <td 0801 >2,607</td>
 <td 0801 >2,978</td>
 </tr>
 <tr>
 <td class="firstcol" 0801 >Insured Unemployment Rate (%)</td>
 <td 0801 >--</td>
 <td 0801 >1.5</td>
 <td 0801 >1.6</td>
 <td 0801 >
 1.7 
 (May 2015)
 </td>
 <td 0801 >1.7</td>
 <td 0801 >2.0</td>
 <td 0801 >2.3</td>
 </tr>
 </tbody>
 </table>
 
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Initial claims for jobless insurance fell to 264,000 (-15.6% y/y) during the week ended June 4 versus 268,000 claims in the prior week, revised from 267,000. Despite the weekly decline, the average of claims in May were 6.7% above [...]

U.S. Initial Unemployment Insurance Claims Fall

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The job openings rate increased to 3.9% during April after remaining
at 3.8% for three months. The latest level equaled the record high. The private
sector job openings rate increased to a record 4.2%. This rate compared to 2.2%
in the public sector. The 4.7% job opening rate in leisure &amp; hospitality
compared to 3.3% in the factory sector.&nbsp; 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. The Bureau of Labor Statistics reports
these figures in its Job Openings &amp; Labor Turnover Survey (JOLTS).
The hires rate in April dropped sharply to 3.5%, the lowest level
since August 2014. The private sector rate declined m/m to 3.9%, a three month
low. The 6.2% rate in leisure &amp; hospitality compared to 2.7% in education
&amp; health services. The hires rate of 5.1% in the construction sector
compared to 1.6% in the public sector. The hires rate is the number of hires
during the month divided by employment. 
The actual number of job openings increased 2.1% to a record 5.788 million
(3.7% y/y). A 4.1% y/y rise in private sector openings was led by a 23.1% y/y
surge in manufacturing and a 17.6% y/y increase in construction. These were
followed by a 16.4% y/y gain in retail trade and a 6.4% y/y improvement in
education &amp; health services. Job openings in leisure &amp; hospitality rose
5.1% y/y, but professional &amp; business services openings fell 22.0% y/y.
Government sector job openings were roughly unchanged y/y following gains of
7.6% and 39.8% in 2015 and 2014.
The number of hires declined 3.7% m/m to 5.092 million in April, the third
decline in four months, and they were roughly steady y/y. Hires grew 5.2% during
all of last year and 8.2% in 2014. Private sector hiring was little changed y/y
versus peak 8.3% growth in 2014. Factory sector hiring grew 7.5% y/y and leisure
&amp; hospitality jobs rose 3.0% y/y. Jobs in educational &amp; health services
also increased 3.0% y/y. Construction jobs improved 1.3% y/y, but jobs in
professional &amp; business services declined 2.6% y/y to the lowest level since
August. Retail trade hiring fell 1.0% y/y, but public sector jobs improved 2.1%
y/y.
The total job separations rate was steady at 3.5%, down from its cycle high
of 3.6%. The actual number of separations increased 2.1% y/y. Information
services separations jumped 20.6% y/y while construction sector job separations
increased 12.7% y/y. Factory sector separations rose 7.7% y/y. Education &amp;
health services separations rose 7.2% y/y. Leisure &amp; hospitality separations
were roughly unchanged y/y, but financial sector separations declined 11.1% y/y.
Government sector job separations increased 8.8% y/y. Separations include
quits, layoffs, discharges, and other separations as well as retirements.
The layoff &amp; discharge rate fell to the record low of 1.1%. The private
sector rate of 1.2% was also at the all-time low and compared to 0.6% in the
public sector. Layoffs overall declined 8.5% y/y in the private sector, but were
up 14.3% y/y in the public sector.
The JOLTS survey dates to December 2000 and the figures are available
in Haver's USECON database.

 <thead>
 <tr>
 <th class="firstcol" scope="col" width="1002"><a href="http://www.haverselect.com/dlx/USECON/@EB/@EB14/@EB14.HTM">JOLTS
 (Job Openings &amp; Labor Turnover Survey, SA)</a></th>
 <th scope="col" width="110">Apr</th>
 <th scope="col" width="111">Mar</th>
 <th scope="col" width="111">Feb</th>
 <th scope="col" width="111">Apr '15</th>
 <th scope="col" width="111">2015</th>
 <th scope="col" width="111">2014</th>
 <th scope="col" width="111">2013</th>
 </tr>
 </thead>
 <tbody>
 <tr class="grey3">
 <td class="firstcol" colSpan="7" width="1667">Job Openings, Total</td>
 </tr>
 <tr>
 <td class="firstcol" width="1002">&nbsp;Rate (%)</td>
 <td align="center" width="110">3.9</td>
 <td align="center" width="111">3.8</td>
 <td align="center" width="111">3.8</td>
 <td align="center" width="111">3.8</td>
 <td align="center" width="111">3.6</td>
 <td align="center" width="111">3.3</td>
 <td align="center" width="111">2.7</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" width="1002">&nbsp;Total (000s)</td>
 <td align="center" width="110">5,788</td>
 <td align="center" width="111">5,670</td>
 <td align="center" width="111">5,608</td>
 <td align="center" width="111">3.7%</td>
 <td align="center" width="111">9.7%</td>
 <td align="center" width="111">28.7%</td>
 <td align="center" width="111">4.6%</td>
 </tr>
 <tr class="grey3">
 <td class="firstcol" colSpan="7" width="1667">Hires, Total</td>
 </tr>
 <tr>
 <td class="firstcol" width="1002">&nbsp;Rate (%)</td>
 <td align="center" width="110">3.5</td>
 <td align="center" width="111">3.7</td>
 <td align="center" width="111">3.8</td>
 <td align="center" width="111">3.6</td>
 <td align="center" width="111">43.6</td>
 <td align="center" width="111">42.2</td>
 <td align="center" width="111">39.6</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" width="1002">&nbsp;Total (000s)</td>
 <td align="center" width="110">5,092</td>
 <td align="center" width="111">5,290</td>
 <td align="center" width="111">5,510</td>
 <td align="center" width="111">0.4%</td>
 <td align="center" width="111">5.2%</td>
 <td align="center" width="111">8.2%</td>
 <td align="center" width="111">3.5%</td>
 </tr>
 <tr class="grey3">
 <td class="firstcol" colSpan="7" width="1667">Layoffs &amp; Discharges,
 Total</td>
 </tr>
 <tr>
 <td class="firstcol" width="1002">&nbsp;Rate (%)</td>
 <td align="center" width="110">1.1</td>
 <td align="center" width="111">1.2</td>
 <td align="center" width="111">1.3</td>
 <td align="center" width="111">1.3</td>
 <td align="center" width="111">14.9</td>
 <td align="center" width="111">14.7</td>
 <td align="center" width="111">14.7</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" width="1002">&nbsp;Total (000s)</td>
 <td align="center" width="110">1,646</td>
 <td align="center" width="111">1,768</td>
 <td align="center" width="111">1,808</td>
 <td align="center" width="111">-8.5%</td>
 <td align="center" width="111">2.7%</td>
 <td align="center" width="111">2.4%</td>
 <td align="center" width="111">-5.3%</td>
 </tr>
 </tbody>


&nbsp;
U.S. Mortgage Loan Applications Rebound 
by <a href="http://haver.com/comment/Moeller.html">Tom Moeller</a>&nbsp;&nbsp;June
8, 2016
The Mortgage Bankers Association reported that its total Mortgage Market
Volume Index increased 9.3% last week (29.9% y/y) following a 4.1% decline
during the week prior. Purchase applications jumped 11.7% (16.6% y/y) and more
than made up the prior week's drop. Applications to refinance also jumped 7.4%
(42.3% y/y) after a 3.9% decline.
The effective interest rate on a 15-year mortgage was little changed at
3.20%. Rates remained down from the 3.50% highs of November and December. The
effective rate on a 30-year fixed-rate loan eased to 3.93%, but was down versus
4.28% near year-end. The rate on a Jumbo 30-year loan was 3.88%. For adjustable
5-year mortgages, the effective interest rate eased to 3.07%.
The average mortgage loan size was fairly steady w/w at $276,700 (3.7% y/y).
For purchases, it was $303,700 (2.7% y/y); for refinancings, it was $253,500
(7.2% y/y).
Applications for fixed interest rate loans increased 31.8% y/y, while
adjustable-rate loan applications gained 2.6% y/y.
The survey covers over 75 percent of all U.S. retail residential mortgage
applications, and has been conducted weekly since 1990. Respondents include
mortgage bankers, commercial banks and thrifts. The base period and value for
all indexes is March 16, 1990=100. The figures for weekly mortgage applications
and interest rates are available in Haver's SURVEYW database. 
<table width="1782" class="centered" border="0" cellSpacing="0">
 <thead>
 <tr>
 <th class="firstcol" scope="col" width="846">MBA Mortgage Applications (%, SA)</th>
 <th scope="col" width="135">06/03/16</th>
 <th scope="col" width="135">05/27/16</th>
 <th scope="col" width="135">05/20/16</th>
 <th scope="col" width="135">Y/Y</th>
 <th scope="col" width="136">2015</th>
 <th scope="col" width="136">2014</th>
 <th scope="col" width="136">2013</th>
 </tr>
 </thead>
 <tbody>
 <tr class="odd">
 <td class="firstcol" width="846">Total Market Index</td>
 <td align="center" width="135">9.3</td>
 <td align="center" width="135">-4.1</td>
 <td align="center" width="135">2.3</td>
 <td align="center" width="135">29.9</td>
 <td align="center" width="136">17.9</td>
 <td align="center" width="136">-41.4</td>
 <td align="center" width="136">-24.2</td>
 </tr>
 <tr>
 <td class="firstcol" width="846">&nbsp;Purchase</td>
 <td align="center" width="135">11.7</td>
 <td align="center" width="135">-4.7</td>
 <td align="center" width="135">4.8</td>
 <td align="center" width="135">16.6</td>
 <td align="center" width="136">15.5</td>
 <td align="center" width="136">-12.9</td>
 <td align="center" width="136">5.2</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" width="846">&nbsp;Refinancing</td>
 <td align="center" width="135">7.4</td>
 <td align="center" width="135">-3.9</td>
 <td align="center" width="135">0.4</td>
 <td align="center" width="135">42.3</td>
 <td align="center" width="136">19.7</td>
 <td align="center" width="136">-52.8</td>
 <td align="center" width="136">-31.9</td>
 </tr>
 <tr>
 <td class="firstcol" width="846">15-Year Mortgage Effective Interest Rate (%)</td>
 <td align="center" width="135">3.20</td>
 <td align="center" width="135">3.22</td>
 <td align="center" width="135">3.16</td>
 <td align="center" width="135">3.33</td>
 <td align="center" width="136">3.37</td>
 <td align="center" width="136">3.54</td>
 <td align="center" width="136">3.42</td>
 </tr>
 </tbody>
</table>


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The job openings rate increased to 3.9% during April after remaining at 3.8% for three months. The latest level equaled the record high. The private sector job openings rate increased to a record 4.2%. This rate compared to 2.2% in [...]

U.S. JOLTS: Job Openings Rate Reaches Record High, But Hires Ease Again

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The job openings rate increased to 3.9% in April from 3.8% in March.
The latest level equaled the record high. The private sector job openings rate
increased to a record 4.2%. This rate compared to 2.2% in the
public sector. The 4.7% job opening rate in leisure &amp; hospitality compared
to 3.3% in the factory sector. 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. The Bureau of Labor Statistics reports these
figures in its Job Openings &amp; Labor Turnover Survey (JOLTS).

The hires rate in April dropped sharply to 3.5%, the lowest level
since August 2014. The private sector rate declined m/m to 3.9%, a three month
low. The 6.2% rate in leisure &amp; hospitality compared to 2.7% in education
&amp; health services. The hires rate of 5.1% in the construction sector
compared to 1.6% in the public sector. The hires rate is the number of hires
during the month divided by employment. 

The actual number of job openings increased 2.1% to a record 5.788 million
(3.7% y/y). A 4.1% y/y rise in private sector openings was led by a 23.1% y/y
surge in manufacturing and a 17.6% y/y increase in construction. These were
followed by a 16.4% y/y gain in retail trade and a 6.4% y/y improvement in
education &amp; health services. Job openings in leisure &amp; hospitality rose
5.1% y/y, but professional &amp; business services openings fell 22.0% y/y.
Government sector job openings were roughly unchanged y/y following gains of
7.6% and 39.8% in 2015 and 2014.

The number of hires declined 3.7% m/m to 5.092 million in April, the third
decline in four months, and they were roughly steady y/y. Hires grew 5.2% during
all of last year and 8.2% in 2014. Private sector hiring was little changed y/y
versus peak 8.3% growth in 2014. Factory sector hiring grew 7.5% y/y and leisure
&amp; hospitality jobs rose 3.0% y/y. Jobs in educational &amp; health services
also increased 3.0% y/y. Construction jobs improved 1.3% y/y, but jobs in
professional &amp; business services declined 2.6% y/y to the lowest level since
August. Retail trade hiring fell 1.0% y/y, but public sector jobs improved 2.1% y/y.

The total job separations rate was steady at 3.5%, down from its cycle high
of 3.6%. The actual number of separations increased 2.1% y/y. Information
services separations jumped 20.6% y/y while construction sector job separations
increased 12.7% y/y. Factory sector separations rose 7.7% y/y. Education &amp;
health services separations rose 7.2% y/y. Leisure &amp; hospitality separations
were roughly unchanged y/y, but financial sector separations declined 11.1% y/y.
Government sector job separations increased 8.8% y/y. Separations include
quits, layoffs, discharges, and other separations as well as retirements.

The layoff &amp; discharge rate fell to the record low of 1.1%. The private
sector rate of 1.2% was also at the all-time low and compared to 0.6% in the
public sector. Layoffs overall declined 8.5% y/y in the private sector, but were
up 14.3% y/y in the public sector.

The JOLTS survey dates to December 2000 and the figures are available
in Haver's USECON database.

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 <thead>
 <tr>
 <th class="firstcol" scope="col" ><a href="http://www.haverselect.com/dlx/USECON/@EB/@EB14/@EB14.HTM">JOLTS
 (Job Openings &amp; Labor Turnover Survey, SA)</a></th>
 <th scope="col" >Apr</th>
 <th scope="col" >Mar</th>
 <th scope="col" >Feb</th>
 <th scope="col" >Apr '15</th>
 <th scope="col" >2015</th>
 <th scope="col" >2014</th>
 <th scope="col" >2013</th>
 </tr>
 </thead>
 <tbody>
 <tr class="grey3">
 <td class="firstcol" colSpan="8" >Job Openings, Total</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp;Rate (%)</td>
 <td >3.9</td>
 <td >3.8</td>
 <td >3.8</td>
 <td >3.8</td>
 <td >3.6</td>
 <td >3.3</td>
 <td >2.7</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp;Total (000s)</td>
 <td >5,788</td>
 <td >5,670</td>
 <td >5,608</td>
 <td >3.7%</td>
 <td >9.7%</td>
 <td >28.7%</td>
 <td >4.6%</td>
 </tr>
 <tr class="grey3">
 <td class="firstcol" colSpan="8" >Hires, Total</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp;Rate (%)</td>
 <td >3.5</td>
 <td >3.7</td>
 <td >3.8</td>
 <td >3.6</td>
 <td >43.6</td>
 <td >42.2</td>
 <td >39.6</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp;Total (000s)</td>
 <td >5,092</td>
 <td >5,290</td>
 <td >5,510</td>
 <td >0.4%</td>
 <td >5.2%</td>
 <td >8.2%</td>
 <td >3.5%</td>
 </tr>
 <tr class="grey3">
 <td class="firstcol" colSpan="8" >Layoffs &amp; Discharges,
 Total</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp;Rate (%)</td>
 <td >1.1</td>
 <td >1.2</td>
 <td >1.3</td>
 <td >1.3</td>
 <td >14.9</td>
 <td >14.7</td>
 <td >14.7</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp;Total (000s)</td>
 <td >1,646</td>
 <td >1,768</td>
 <td >1,808</td>
 <td >-8.5%</td>
 <td >2.7%</td>
 <td >2.4%</td>
 <td >-5.3%</td>
 </tr>
 </tbody>
 </table>
 
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The job openings rate increased to 3.9% in April from 3.8% in March. The latest level equaled the record high. The private sector job openings rate increased to a record 4.2%. This rate compared to 2.2% in the public sector. The 4.7% [...]

U.S. JOLTS: Job Openings Rate Equals the Record High Reached Last July, But Hires Ease Again

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The job openings rate increased to 3.9% during April after remaining
at 3.8% for three months. The latest level equaled the record high. The private
sector job openings rate increased to a record 4.2%. This rate compared to 2.2%
in the public sector. The 4.7% job opening rate in leisure &amp; hospitality
compared to 3.3% in the factory sector. 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. The Bureau of Labor Statistics reports
these figures in its Job Openings &amp; Labor Turnover Survey (JOLTS).

The hires rate in April dropped sharply to 3.5%, the lowest level
since August 2014. The private sector rate declined m/m to 3.9%, a three month
low. The 6.2% rate in leisure &amp; hospitality compared to 2.7% in education
&amp; health services. The hires rate of 5.1% in the construction sector
compared to 1.6% in the public sector. The hires rate is the number of hires
during the month divided by employment.

The actual number of job openings increased 2.1% to a record 5.788 million
(3.7% y/y). A 4.1% y/y rise in private sector openings was led by a 23.1% y/y
surge in manufacturing and a 17.6% y/y increase in construction. These were
followed by a 16.4% y/y gain in retail trade and a 6.4% y/y improvement in
education &amp; health services. Job openings in leisure &amp; hospitality rose
5.1% y/y, but professional &amp; business services openings fell 22.0% y/y.
Government sector job openings were roughly unchanged y/y following gains of
7.6% and 39.8% in 2015 and 2014.

The number of hires declined 3.7% m/m to 5.092 million in April, the third
decline in four months, and they were roughly steady y/y. Hires grew 5.2% during
all of last year and 8.2% in 2014. Private sector hiring was little changed y/y
versus peak 8.3% growth in 2014. Factory sector hiring grew 7.5% y/y and leisure
&amp; hospitality jobs rose 3.0% y/y. Jobs in educational &amp; health services
also increased 3.0% y/y. Construction jobs improved 1.3% y/y, but jobs in
professional &amp; business services declined 2.6% y/y to the lowest level since
August. Retail trade hiring fell 1.0% y/y, but public sector jobs improved 2.1% y/y.

The total job separations rate was steady at 3.5%, down from its cycle high
of 3.6%. The actual number of separations increased 2.1% y/y. Information
services separations jumped 20.6% y/y while construction sector job separations
increased 12.7% y/y. Factory sector separations rose 7.7% y/y. Education &amp;
health services separations rose 7.2% y/y. Leisure &amp; hospitality separations
were roughly unchanged y/y, but financial sector separations declined 11.1% y/y.
Government sector job separations increased 8.8% y/y. Separations include
quits, layoffs, discharges, and other separations as well as retirements.

The layoff &amp; discharge rate fell to the record low of 1.1%. The private
sector rate of 1.2% was also at the all-time low and compared to 0.6% in the
public sector. Layoffs overall declined 8.5% y/y in the private sector, but were
up 14.3% y/y in the public sector.

The JOLTS survey dates to December 2000 and the figures are available
in Haver's USECON database.

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	<colgroup><col><col><col><col><col><col><col><col></colgroup>

 <thead>
 <tr>
 <th class="firstcol" scope="col" ><a href="http://www.haverselect.com/dlx/USECON/@EB/@EB14/@EB14.HTM">JOLTS
 (Job Openings &amp; Labor Turnover Survey, SA)</a></th>
 <th scope="col" >Apr</th>
 <th scope="col" >Mar</th>
 <th scope="col" >Feb</th>
 <th scope="col" >Apr '15</th>
 <th scope="col" >2015</th>
 <th scope="col" >2014</th>
 <th scope="col" >2013</th>
 </tr>
 </thead>
 <tbody>
 <tr class="grey3">
 <td class="firstcol" colSpan="8" >Job Openings, Total</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp;Rate (%)</td>
 <td >3.9</td>
 <td >3.8</td>
 <td >3.8</td>
 <td >3.8</td>
 <td >3.6</td>
 <td >3.3</td>
 <td >2.7</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp;Total (000s)</td>
 <td >5,788</td>
 <td >5,670</td>
 <td >5,608</td>
 <td >3.7%</td>
 <td >9.7%</td>
 <td >28.7%</td>
 <td >4.6%</td>
 </tr>
 <tr class="grey3">
 <td class="firstcol" colSpan="8" >Hires, Total</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp;Rate (%)</td>
 <td >3.5</td>
 <td >3.7</td>
 <td >3.8</td>
 <td >3.6</td>
 <td >43.6</td>
 <td >42.2</td>
 <td >39.6</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp;Total (000s)</td>
 <td >5,092</td>
 <td >5,290</td>
 <td >5,510</td>
 <td >0.4%</td>
 <td >5.2%</td>
 <td >8.2%</td>
 <td >3.5%</td>
 </tr>
 <tr class="grey3">
 <td class="firstcol" colSpan="8" >Layoffs &amp; Discharges,
 Total</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp;Rate (%)</td>
 <td >1.1</td>
 <td >1.2</td>
 <td >1.3</td>
 <td >1.3</td>
 <td >14.9</td>
 <td >14.7</td>
 <td >14.7</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp;Total (000s)</td>
 <td >1,646</td>
 <td >1,768</td>
 <td >1,808</td>
 <td >-8.5%</td>
 <td >2.7%</td>
 <td >2.4%</td>
 <td >-5.3%</td>
 </tr>
 </tbody>
 </table>
 
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The OECD's own results for this month's report are, in my opinion, way too weak to show, or do much more than very vaguely hint, at stabilization in the U.S., China or elsewhere. But that is the headline that news services are picking up and one that the OECD has in some fashion put on its charts. So let's address those circumstances directly.

What the OECD actually said

What the OECD said about China is that there is `stable growth momentum' which sounds good until you look at the chart (mine or the OECD's) and notice that China's index is still SINKING at a stable pace. That is not good. The table below shows that China's LEI is lower on balance over six months as well as being lower over six months as of six months ago. China was also producing readings below 100, six months ago as well as 12 months ago. The benchmark of 100 is a period average meant to flag neutrality. China remains below neutrality and is sinking further below it.

What U.S. `stability' means

As for the U.S., the `stability' means that the U.S. index is stuck at 98.9 for three months in a row. The U.S. index is lower on balance over six months and over 12 months and it is stuck at a subpar pace (below 100). If we take the U.S. index and rank it in its queue of values since 1991, we find the U.S. gauge has been lower only 17.9% of the time. This would not be a good place for the U.S. economy to `stabilize.' By comparison, China, on a timeline back to 1992 when its data begin, has been weaker only 13.2% of the time - and it is still slowing with `stable momentum.'

EMU: The best of the lot but showing erosion

Only the EMU among the grouping of countries and regions in the table has consistent readings above 100. And the EMU shows some crack in this stability as it notched lower in March and has stayed at the lower reading in April. The EMU gauge is net lower over six months but it is level six months ago at the same reading it had 12 months ago with both readings (100.5) above the key metric of 100. The details for the EMU corroborate that this sort of stability is still the common denominator across the euro area with members generally producing a string of readings below 100 as well as net declines over both six-months and 12-months. Of these 11 early EMU members, four show improved conditions over the last six months (Austria, Finland, France and Greece). The rest show six-month erosion but only Germany and Ireland show LEI values below 100 as of April 2016 and only Germany shows a string of such readings. However, Germany also shows net declines over six months and 12 months and is joined in that metric by Ireland, Spain and Portugal. So while the EMU continues to show readings above 100 indicating `better than normal' conditions, there is evidence of erosion at work and more than there is evidence that the EMU is building upon that stability.

Forecast reductions are still in train

In other news overnight, the World Banks has cut its forecast for 2016 again, this time to 2.6% growth from 2.9% growth- a sizeable reduction in the outlook. A Bank of France survey has led the BoF to reduce its expectation for French growth in Q2. China's central bank cut its forecast for Chinese exports this year but held to its projection of 6.8% for GDP growth. The World Bank cuts its own projection for China's GDP growth to 6.7% from the 6.9% growth pace China posted in 2015. Further news on China shows that it is still losing foreign exchange reserves with the dollar value of its reserves lower by $28 billion in May.

Poll-o-nomics

I guess we now also live in the age of Poll-o-nomics since expectations are a central part of economic theory. Today we have a poll telling us that the U.K. is believed to be weak because of fears of Brexit. Another poll suggests that Euroscepticism is in the rise. The Pew poll still shows a razor thin majority of 51% favoring the EU. And most EU members want the U.K. to `stay in.' But with this sort of thin balance, the stakes for Brexit appear to be high. We have every reason to believe that our fear over Brexit is not over Brexit alone but over Brexit as a potential catalyst for other succession votes. And because of that we have every reason to believe that if the U.K. does vote to leave it will not be treated kindly since the EU would not want to send the signal to member countries telling them that they can leave and yet `everything else' will remain the same. Brexit polls are producing all sorts of results. While two internet-based polls earlier showed that the `Out's had surged to the lead, several more conventionally based polls found that the tilt still favors `In.' I doubt that either side in this fight feels `comfortable' with its polling margin. Markets will hang on poll results in the coming weeks until the vote is in.

South China Sea/China Talks

Other potentially significant news on the geopolitical front today found China chiding the Philippines arguing that there is a mechanism for the two countries to discuss their differences. I wonder it if this is a way for China to be, or to appear to be, open minded on the South China Sea issue even as it prepares to reject the decision of the Permanent Court of Arbitration in The Hague. However, U.S. talks with China appear to have ended in disappointment with little progress reported on their bilateral issues. Talking with China does not seem to have been fruitful and it appears to have become less impactful over the years.

Summing up

On balance, despite a somewhat upbeat assessment from the OECD, there is still a lot of weakness and an environment in which forecasts of all sorts are being cut. This hardly seems like the stuff of stability. As always there are some cross currents as the U.K. reported solid gains in IP contrasted by Japan's economy watchers index (service sector gauge) hitting an 18-month low. Growth remains sluggish with many disappointing elements and there is no real evidence that there is any new break out in any direction, despite the way the OECD LEI data have been reported today. Decay still seems to be the order of the day.


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The OECD's own results for this month's report are, in my opinion, way too weak to show, or do much more than very vaguely hint, at stabilization in the U.S., China or elsewhere. But that is the headline that news services are picking [...]

OECD LEIs Still Struggle

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The Mortgage Bankers Association reported that its total Mortgage Market
Volume Index increased 9.3% last week (29.9% y/y) following a 4.1% decline during
the week prior. Purchase applications jumped 11.7% (16.6% y/y) and more than
made up the prior week's drop. Applications to refinance also jumped 7.4% (42.3% y/y)
after a 3.9% decline.

The effective interest rate on a 15-year mortgage was little changed at
3.20%. Rates remained down from the 3.50% highs of November and December.
The effective rate on a 30-year fixed-rate loan eased to
3.93%, but was down versus 4.28% near year-end. The rate on a Jumbo 30-year
loan was 3.88%. For adjustable 5-year mortgages, the effective interest rate
eased to 3.07%.

The average mortgage loan size was fairly steady w/w at $276,700 (3.7% y/y).
For purchases, it was $303,700 (2.7% y/y); for refinancings, it was $253,500 (7.2% y/y).

Applications for fixed interest rate loans increased 31.8% y/y, while
adjustable-rate loan applications gained 2.6% y/y.

The survey covers over 75 percent of all U.S. retail residential mortgage
applications, and has been conducted weekly since 1990. Respondents include
mortgage bankers, commercial banks and thrifts. The base period and value for
all indexes is March 16, 1990=100. The figures for weekly mortgage applications
and interest rates are available in Haver's SURVEYW database.

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<table class="centered" width="100%" border="0" cellspacing="0">
	<colgroup><col><col><col><col><col><col><col><col></colgroup>

 <thead>
 <tr>
 <th class="firstcol" scope="col" >MBA Mortgage Applications (%, SA)</th>
 <th scope="col" >06/03/16</th>
 <th scope="col" >05/27/16</th>
 <th scope="col" >05/20/16</th>
 <th scope="col" >Y/Y</th>
 <th scope="col" >2015</th>
 <th scope="col" >2014</th>
 <th scope="col" >2013</th>
 </tr>
 </thead>
 <tbody>
 <tr class="odd">
 <td class="firstcol" >Total Market Index</td>
 <td >9.3</td>
 <td >-4.1</td>
 <td >2.3</td>
 <td >29.9</td>
 <td >17.9</td>
 <td >-41.4</td>
 <td >-24.2</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp;Purchase</td>
 <td >11.7</td>
 <td >-4.7</td>
 <td >4.8</td>
 <td >16.6</td>
 <td >15.5</td>
 <td >-12.9</td>
 <td >5.2</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp;Refinancing</td>
 <td >7.4</td>
 <td >-3.9</td>
 <td >0.4</td>
 <td >42.3</td>
 <td >19.7</td>
 <td >-52.8</td>
 <td >-31.9</td>
 </tr>
 <tr>
 <td class="firstcol" >15-Year Mortgage Effective Interest Rate (%)</td>
 <td >3.20</td>
 <td >3.22</td>
 <td >3.16</td>
 <td >3.33</td>
 <td >3.37</td>
 <td >3.54</td>
 <td >3.42</td>
 </tr>
 </tbody>
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The Mortgage Bankers Association reported that its total Mortgage Market Volume Index increased 9.3% last week (29.9% y/y) following a 4.1% decline during the week prior. Purchase applications jumped 11.7% (16.6% y/y) and more than [...]

U.S. Mortgage Loan Applications Rebound

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Consumer credit outstanding jumped $29.7 billion during March (6.6% y/y)
following a $14.1 billion February rise, revised from $17.2 billion. It was the
fastest gain since November 2001. A $15.7 billion increase had been expected in
the Action Economics Forecast Survey. During the last ten years, there has been
a 46% correlation between the y/y growth in consumer credit and y/y growth in
personal consumption expenditures.
Revolving consumer credit surged $11.1 billion (6.2% y/y) after an unrevised
$2.9 billion rise. It was the strongest gain since February 2001. Credit card
balances at depository institutions (84% of the total) surged 8.8% y/y. Finance
company holdings (6% of the total) fell 5.1% y/y, while borrowing from credit
unions (5% of the total) advanced 7.3% y/y. Nonfinancial business credit (2% of
the total) fell 5.4% y/y, and securitized credit card balances (3% of the total)
declined 15.9% y/y.
Nonrevolving credit borrowing grew $18.6 billion (6.8% y/y) following an
$11.2 billion rise, revised from $14.3 billion reported last month. It was the
quickest rise in six months. Federal government loans (36% of the total)
increased 11.1% y/y. Finance company balances (24% of the total) eased 0.8% y/y.
Borrowing at depository institutions (25% of the total) accelerated to 5.7% y/y,
and borrowing at credit unions (11% of the total) also accelerated to 15.1% y/y.
Nonprofit &amp; educational institution loans (2% of the total) declined 8.7%
y/y, and nonfinancial business loans (1% of the total) remained unchanged y/y.
Student loans outstanding increased a diminished 6.2% y/y during Q1'16 while
motor vehicle loans rose a steady 8.2% y/y.
These Federal Reserve Board figures are break-adjusted and calculated by
Haver Analytics. There is a break in the credit outstanding data from November
2010 to December 2010 due to the Fed's benchmarking process. Benchmark estimates
are based on the Census of Finance Companies (CFC) and the Survey of Finance
Companies (SFC) conducted in 2010 and 2011, respectively.
The consumer credit data are available in Haver's USECON database. The
Action Economics figures are contained in the AS1REPNA database.

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<table class="centered" width="100%" border="0" cellspacing="0">
	<colgroup><col><col><col><col><col><col><col><col></colgroup>

 <thead>
 <tr>
 <th class="firstcol" scope="col">Consumer Credit
 Outstanding (M/M Chg, SA)</th>
 <th scope="col" >Apr</th>
 <th scope="col" >Mar</th>
 <th scope="col" >Feb</th>
 <th scope="col" >Y/Y</th>
 <th scope="col" >2015</th>
 <th scope="col" >2014</th>
 <th scope="col" >2013</th>
 </tr>
 </thead>
 <tbody>
 <tr>
 <td class="firstcol">Total</td>
 <td></td>
 <td>$29.7 bil.</td>
 <td>$14.1 bil.</td>
 <td>6.6%</td>
 <td>6.6%</td>
 <td>7.2%</td>
 <td>6.0%</td>
 </tr>
 <tr class="odd">
 <td class="firstcol">&nbsp; &nbsp;Revolving</td>
 <td></td>
 <td>11.1</td>
 <td>2.9</td>
 <td>6.2</td>
 <td>5.2</td>
 <td>3.9</td>
 <td>1.4</td>
 </tr>
 <tr>
 <td class="firstcol">&nbsp; &nbsp;Nonrevolving</td>
 <td></td>
 <td>18.6</td>
 <td>11.2</td>
 <td>6.8</td>
 <td>7.1</td>
 <td>8.4</td>
 <td>7.9</td>
 </tr>
 </tbody>
</table>


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Consumer credit outstanding jumped $29.7 billion during March (6.6% y/y) following a $14.1 billion February rise, revised from $17.2 billion. It was the fastest gain since November 2001. A $15.7 billion increase had been expected in [...]

U.S. Consumer Credit Increase Is Strongest Since 2001

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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

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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: June 2016

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