Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050713a.jpg" width="353">
The U.S. foreign trade deficit improved more than expected in May to $55.3B versus April&#39;s downwardly revised deficit of $56.9. Consensus expectations had been for a deficit of $57.0B.
Total exports ticked up 0.1% after the 3.3% spike in April. Goods exports slipped 0.1% (+9.3% y/y) as capital goods fell 3.0% (+4.3% y/y) due to a 28.4% (+13.4% y/y) drop in civilian aircraft. Exports of advanced technology products fell for the second month and the 8.0% decline (NSA, +0.8% y/y) was nearly double the drop in April. Exports of nonauto consumer goods rose 4.7% (13.9% y/y) and exports of foods, feeds &amp; beverages jumped 11.1% (15.9% y/y).
Services exports rose 0.6% (14.8% y/y) as passenger fares rose 2.9% (17.3% y/y) but private travel fell 0.3% (+15.8% y/y).
Imports of goods &amp; services fell 0.9% as imports of petroleum products fell 6.8% (+35.5% y/y). The average price of crude oil fell 3.8% to $43.08 per bbl. (+30.0% y/y). Since May the price of oil has more than recouped that decline and risen to roughly $50 per bbl. Imports of non-petroleum goods slipped 0.3% (+9.1% y/y) as capital goods imports fell 1.8% (+11.3% y/y).
The US trade deficit with China deepened to $15.8B ($161.9B in 2004) as imports were strong for the second consecutive month and jumped 5.1% (26.4% y/y). The US trade deficit with Japan again improved slightly to $6.6B ($75.6B in 2004) but the monthly trade deficit with the Asian NICs deepened to $1.2B ($21.9B in 2004). The US trade deficit with the European Union deepened to $10.5B ($109.3B in 2004). 
U.S. Economic Growth, Relatively Speaking from the Federal Reserve Bank of St. Louis can be found <a href="http://research.stlouisfed.org/publications/aiet/20050701/cover.pdf"> here</a>.

<table border="0" cellspacing="0" width="100%">
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EE/@EE03/@EE03.HTM">Foreign Trade</a></th>
<th scope="col">May</th>
<th scope="col">April</th>
<th scope="col">Y/Y</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Trade Deficit</td>
<td>$55.3B</td>
<td>$56.9B</td>
<td>$48.7B (5/04)</td>
<td>$617.6B</td>
<td>$494.8B</td>
<td>$421.2B</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Exports - Goods &amp; Services</td>
<td>0.1%</td>
<td>3.3%</td>
<td>10.9%</td>
<td>12.6%</td>
<td>4.6%</td>
<td>-3.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Imports - Goods &amp; Services</td>
<td>-0.9%</td>
<td>4.3%</td>
<td>11.8%</td>
<td>16.6%</td>
<td>8.5%</td>
<td>2.1%</td>
</tr>
</tbody>
</table>
Import Prices Recovered 
by <a href="/comment/Moeller.html">Tom Moeller</a> July 13, 2005


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050713b.jpg" width="353">
Import prices in June recovered the prior month&#39;s revised decline with a 1.0% increase and about matched Consensus expectations.
Petroleum prices more than recovered May&#39;s decline with a 7.6% jump. In early July, Brent crude moved higher to $57.69/bbl. from an average $55.37 in June.
Import prices other than petroleum posted the second consecutive monthly decline and fell 0.4% last month. The decline primarily reflected a 1.7% drop in prices for foods, feeds &amp; beverages.
Prices for nonauto consumer goods fell 0.1% (+1.4% y/y) and capital goods prices were unchanged (0.0% y/y). Excluding computers capital goods prices also were unchanged (2.9% y/y).
During the last ten years there has been a 66% (negative) correlation between the nominal trade-weighted exchange value of the US dollar vs. major currencies and the y/y change in non oil import prices. The correlation is a lower 47% against a broader basket of currencies and a lower 57% against the real value of the dollar.
Export prices were unchanged.

<table border="0" cellspacing="0" width="100%">
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E8/@E807/@E807.HTM">Import/Export Prices (NSA)</a></th>
<th scope="col">June</th>
<th scope="col">May</th>
<th scope="col">Y/Y</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Import - All Commodities</td>
<td>1.0%</td>
<td>-1.0%</td>
<td>7.0%</td>
<td>5.6%</td>
<td>2.9%</td>
<td>-2.5%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Petroleum</td>
<td>7.6%</td>
<td>-4.8%</td>
<td>37.6%</td>
<td>30.5%</td>
<td>21.0%</td>
<td>3.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Non-petroleum</td>
<td>-0.4%</td>
<td>-0.2%</td>
<td>2.1%</td>
<td>2.6%</td>
<td>1.1%</td>
<td>-2.4%</td>
</tr>
<tr>
<td class="firstcol">Export - All Commodities</td>
<td>0.0%</td>
<td>-0.2%</td>
<td>3.2%</td>
<td>3.9%</td>
<td>1.6%</td>
<td>-1.0%</td>
</tr>
</tbody>
</table>
Mortgage Applications Back Down 
by <a href="/comment/Moeller.html">Tom Moeller</a> July 13, 2005


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050713c.jpg" width="353">
Total mortgage applications gave back last week most of the prior week&#39;s surge and fell 7.2, according to the Mortgage Bankers Association. Applications nevertheless remained 2.6% above the June average which rose 9.9% versus May.
Purchase applications fell 6.1% w/w after the 9.1% jump the prior period and in July are 2.7% above June which rose 1.3% from May. During the last ten years there has been a 50% correlation between the y/y change in purchase applications and the change in new plus existing single family home sales.
Applications to refinance fell for the third week in the last four but in July are 2.4% ahead of June.
The effective interest rate on a conventional 30-year mortgage increased for the second week and rose to 5.87%. The effective rate on a 15-year mortgage also rose to 5.53% after falling from the peak of 5.96%.
The Mortgage Bankers Association surveys between 20 to 35 of the top lenders in the U.S. housing industry to derive its refinance, purchase and market indexes. The weekly survey accounts for more than 40% of all applications processed each week by mortgage lenders. Visit the Mortgage Bankers Association site <a href="http://www.mbaa.org">here</a>.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYW/@S5/@S5.HTM">MBA Mortgage Applications (3/16/90=100)</a></th>
<th scope="col">07/08/05</th>
<th scope="col">07/01/05</th>
<th scope="col">Y/Y</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
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<td class="firstcol">Total Market Index</td>
<td>791.9</td>
<td>853.4</td>
<td>23.0%</td>
<td>735.1</td>
<td>1,067.9</td>
<td>799.7</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Purchase</td>
<td>489.0</td>
<td>520.8</td>
<td>4.3%</td>
<td>454.5</td>
<td>395.1</td>
<td>354.7</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Refinancing</td>
<td>2,554.3</td>
<td>2,788.2</td>
<td>53.7%</td>
<td>2,366.8</td>
<td>4,981.8</td>
<td>3,388.0</td>
</tr>
</tbody>
</table>
Trade Expands at Individual Ports, Shown in Extensive Data Offerings in PORTS Database 
by <a href="/comment/Stone.html">Carol Stone</a> July 13, 2005


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050713e.jpg" width="353">
In addition to the usual national trade data that Haver carries in the USECON and USINT databases, regional databases give information on foreign trade shipments into and out of various locations around the country. Some time ago, we described EXPORTSR, an annual database, and its associated monthly counterparts. These contain exports from individual states to specific countries by broad product category. We also have the PORTS database, showing the value and weight of imports and exports through various ports, by both sea and air transportation. This database covers 46 customs districts encompassing 443 ports. All of these huge quantities of data are produced by the Census Bureau and are released on the same day as the aggregate trade data.
The table below shows imports arriving at a sample of Customs Districts. Los Angeles is the largest and includes the ports of Los Angeles and Long Beach as well as Los Angeles International Airport (LAX), among others. Its merchandise receipts in May were $21.6 billion, up 6.1% from a year ago. [Exports outbound from there were $6.7 billion, up 6.7%.]
In the New York area, imports were almost exactly $16.0 billion in May, up 16.5% from May 2004. An interesting aspect of New York trade is the huge value of imports that come by air through JFK Airport, as seen below, $6.5 billion in May and an average of $6.1 billion for all of last year.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050713f.jpg" width="353">
At the same time, the volume of these flows in metric tons is vastly different. A rule of thumb in shipping is that items with high value per unit weight are good for air freight, while the opposite is true for sea-going trade. A quick comparison illustrates this easily. Goods coming into JFK in May weighed 53,740 metric tons, yielding a unit value of $120,077. Goods coming by ship into Port Newark were worth $7.399 billion, but they weighed 4.5 million metric tons (MT), a value per MT of just $1,638.

<table border="0" cellspacing="0" width="100%">
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/PORTS/PORTS.HTM">Customs District: Customs Value, NSA, Million $</a></th>
<th scope="col">May 2005</th>
<th scope="col">Apr 2005</th>
<th scope="col">May 2004</th>
Monthly Averages
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">2004</td>
<td>2003</td>
<td>2002</td>
</tr>
<tr>
<td class="firstcol">Total Imports</td>
<td>135,542</td>
<td>135,257</td>
<td>118,271</td>
<td>122,475</td>
<td>104,760</td>
<td>96,780</td>
</tr>
<tr class="odd">
<td class="firstcol">New York total</td>
<td>16,000</td>
<td>15,331</td>
<td>13,736</td>
<td>14,800</td>
<td>13,070</td>
<td>12,161</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Air at JFK</td>
<td>6,453</td>
<td>6,220</td>
<td>5,563</td>
<td>6,050</td>
<td>5,442</td>
<td>5,723</td>
</tr>
<tr class="odd">
<td class="firstcol">Los Angeles</td>
<td>21,627</td>
<td>21,261</td>
<td>20,389</td>
<td>21,005</td>
<td>18,609</td>
<td>16,984</td>
</tr>
<tr>
<td class="firstcol">Seattle</td>
<td>6,091</td>
<td>6,167</td>
<td>4,825</td>
<td>5,408</td>
<td>4,558</td>
<td>4,378</td>
</tr>
<tr class="odd">
<td class="firstcol">Chicago Total</td>
<td>4,570</td>
<td>4,665</td>
<td>3,821</td>
<td>4,473</td>
<td>3,750</td>
<td>3,245</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Chicago Air </td>
<td>3,423</td>
<td>3,602</td>
<td>2,798</td>
<td>3,349</td>
<td>2,813</td>
<td>2,433</td>
</tr>
<tr class="odd">
<td class="firstcol">New Orleans</td>
<td>7,157</td>
<td>7,864</td>
<td>5,242</td>
<td>5,729</td>
<td>4,384</td>
<td>3,874</td>
</tr>
</tbody>
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The U.S. foreign trade deficit improved more than expected in May to $55.3B versus April's downwardly revised deficit of $56.9. Consensus expectations had been for a deficit of $57.0B. Total exports ticked up 0.1% after the 3.3% spike [...]

U.S. Trade Deficit Smaller

Louise Curley

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050712f.jpg" width="353">
Signs that Japan&#39;s deflation may be ending remain equivocal. The Corporate Goods Price Index (CGPI) has been showing year to year increases since May, 2004. But corporations have been unable to pass these increases on to consumers. The first chart compares the year to year change in the CGPI and the Consumer Price Index. (Since the June CPI for all Japan is not yet available we have used the CPI for the Ku area of Tokyo, which, although lower than that for all Japan, has the same general trend.) This index declined in June and was almost 1% below June, 2004.
Another way of showing that so far, at least, corporations have been unable to pass on the higher cost of oil and other raw materials is shown in the second chart, which compares the indexes of raw material prices and of final goods prices. While the raw material price index in June was almost 17% above the level of June, 2004, the final goods index was 1% below its June, 2004 level.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050712e.jpg" width="353">
Partly offsetting the rise in raw material costs has been the continued deflation among some final goods resulting from increased productivity. It is highly likely that increased productivity accounts for much of the decline in the index for the price of electric machinery and equipment, which was 70.5 in June, indicating a price decline of almost 30% since the year 2000. Other sophisticated goods such as transportation equipment and precision instruments that have been selling at levels below 2000 have also benefited from increase productivity.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/JAPAN/JAPAN.HTM">Japan</a> Indexes 2000=100</th>
<th scope="col">Jun 05</th>
<th scope="col">May 05</th>
<th scope="col">Jun 04</th>
<th scope="col">M/M%</th>
<th scope="col">Y/Y%</th>
<th scope="col">&nbsp;2004&nbsp;&nbsp;</th>
<th scope="col">&nbsp;2003</th>
<th scope="col">&nbsp;2002</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Corporate Goods Price Index&nbsp;&nbsp;</td>
<td>99.3</td>
<td>99.3</td>
<td>97.1</td>
<td>0.0</td>
<td>2.3</td>
<td>97.1</td>
<td>96.0</td>
<td>97.2</td>
</tr>
<tr>
<td class="firstcol">Consumer Price Index: &nbsp;Ku-area of Tokyo&nbsp;</td>
<td>96.8</td>
<td>97.3</td>
<td>97.6</td>
<td>-0.51</td>
<td>-0.82</td>
<td>97.4</td>
<td>97.5</td>
<td>97.9</td>
</tr>
<tr class="odd">
<td class="firstcol">GCPI&nbsp; Raw Materials</td>
<td>141.2</td>
<td>142.2</td>
<td>120.8</td>
<td>-0.70</td>
<td>16.89</td>
<td>118.5</td>
<td>107.7</td>
<td>103.7</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Petrol and Coal</td>
<td>149.6</td>
<td>151.2</td>
<td>127.4</td>
<td>-1.06</td>
<td>17.43</td>
<td>127.4</td>
<td>116.3</td>
<td>109.3</td>
</tr>
<tr class="odd">
<td class="firstcol">GCP1 Final Goods</td>
<td>91.0</td>
<td>91.1</td>
<td>92.0</td>
<td>-0.11</td>
<td>-1.09</td>
<td>91.8</td>
<td>92.9</td>
<td>95.2</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Elec. Machinery &amp; Eqpt</td>
<td>70.5</td>
<td>70.6</td>
<td>74.6</td>
<td>-0.14</td>
<td>-5.50</td>
<td>74.1</td>
<td>78.7</td>
<td>86.2</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Transportation Equip</td>
<td>97.3</td>
<td>97.4</td>
<td>98.3</td>
<td>-0.10</td>
<td>-1.02</td>
<td>98.3</td>
<td>99.5</td>
<td>100.1</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Precision Instruments</td>
<td>97.1</td>
<td>97.0</td>
<td>98.2</td>
<td>0.10</td>
<td>-1.12</td>
<td>98.1</td>
<td>100.5</td>
<td>102.5</td>
</tr>
</tbody>
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Signs that Japan's deflation may be ending remain equivocal. The Corporate Goods Price Index (CGPI) has been showing year to year increases since May, 2004. But corporations have been unable to pass these increases on to consumers. [...]

Deflation Still a Problem in Japan

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050712d.jpg" width="353">
Chain store sales inched 0.1% higher last week following a 0.5% rise during the opening week of July, according to the International Council of Shopping Centers (ICSC)-UBS survey. So far this month sales are 0.3% higher than the June average which fell 0.4% versus May.
During the last ten years there has been a 56% correlation between the y/y change in chain store sales and the change in non-auto retail sales less gasoline, as published by the US Census Department. Chain store sales correspond directly with roughly 14% of non-auto retail sales less gasoline.
The leading indicator of chain store sales from ICSC rose 0.4% w/w (1.0% y/y) following no change during the week prior.
The ICSC-UBS retail chain-store sales index is constructed using the same-store sales (stores open for one year) reported by 78 stores of seven retailers: Dayton Hudson, Federated, Kmart, May, J.C. Penney, Sears and Wal-Mart.
Productivity and the Post-1990 U.S. Economy from the Federal Reserve Bank of St. Louis can be found <a href="http://research.stlouisfed.org/publications/review/05/07/McGrattan.pdf"> here</a>.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/surveyw/@S2/@S2.HTM">ICSC-UBS (SA, 1977=100)</a></th>
<th scope="col">07/09/05</th>
<th scope="col">07/02/05</th>
<th scope="col">Y/Y</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
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</thead>
<tbody>
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<td class="firstcol">Total Weekly Chain Store Sales</td>
<td>455.7</td>
<td>455.2</td>
<td>3.9%</td>
<td>4.6%</td>
<td>2.9%</td>
<td>3.6%</td>
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Chain store sales inched 0.1% higher last week following a 0.5% rise during the opening week of July, according to the International Council of Shopping Centers (ICSC)-UBS survey. So far this month sales are 0.3% higher than the June [...]

Chain Store Sales Ticked Higher

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050712c.jpg" width="353">
The Small Business Optimism Index reported by the National Federation of Independent Business (NFIB) remained stable in June with the somewhat improved level in May. The stability reflected contradictory indications of a sharp rise in the percentage of firms expecting the economy to improve but a decline in the percentage expecting higher real sales in six months.
During the last ten years there has been a 64% correlation between the level of the NFIB index and the two quarter change in real GDP.
The job outlook deteriorated as the percentage of firms planning to raise employment gave back half of the improvement in May and the percentage of firms with one or more job openings dropped to a nine month low. During the last ten years there has been a 67% correlation between hiring plans and the three month growth in nonfarm payrolls.
The percentage of firms planning to raise capital spending was stable at a somewhat improved May level of 33%.
The percentage of firms raising average selling prices rose.
About 24 million businesses exist in the United States. Small business creates 80% of all new jobs in America.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S7/@S7.HTM">Nat&#39;l Federation of Independent Business</a></th>
<th scope="col">June</th>
<th scope="col">May</th>
<th scope="col">Y/Y</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Small Business Optimism Index (1986=100)</td>
<td>100.8</td>
<td>100.8</td>
<td>-2.1%</td>
<td>104.6</td>
<td>101.3</td>
<td>101.2</td>
</tr>
</tbody>
</table>
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The Small Business Optimism Index reported by the National Federation of Independent Business (NFIB) remained stable in June with the somewhat improved level in May. The stability reflected contradictory indications of a sharp rise in [...]

Small Business Optimism Stable

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050712a.jpg" width="353">
The Bureau of Labor Statistics reported that the job openings rate, from the Job Openings &amp; Labor Turnover Survey (JOLTS), eased in May to 2.5% while the previously reported April increase was revised away. 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 total number of job openings fell 3.1% m/m (+8.9% y/y) after a downwardly revised 0.6% decline during April
The hires rate recovered to 3.5% following the sharp decline in April. The hires rate is the number of hires during the month divided by employment.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050712b.jpg" width="353">
The job separations rate fell to 3.3% after having been elevated during the prior two month. Total separations include quits, layoffs, discharges, and other separations as well as retirements. The total separations, or turnover, rate is the total number of separations during the month divided by employment.
The survey dates only to December 2000 but has since followed the movement in nonfarm payrolls.
A description of the Jolts survey and the latest release from the U.S. Department of Labor is available <a href="http://www.bls.gov/news.release/jolts.nr0.htm">here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EB/@EB14/@EB14.HTM">JOLTS</a> (Job Openings &amp; Labor Turnover Survey)</th>
<th scope="col">May</th>
<th scope="col">April</th>
<th scope="col">May &#39;04</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Job Openings Rate: Total</td>
<td>2.5%</td>
<td>2.6%</td>
<td>2.4%</td>
<td>2.4%</td>
<td>2.1%</td>
<td>2.2%</td>
</tr>
<tr>
<td class="firstcol">Hires Rate: Total</td>
<td>3.5%</td>
<td>3.4%</td>
<td>3.3%</td>
<td>3.4%</td>
<td>3.2%</td>
<td>3.2%</td>
</tr>
</tbody>
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</body>
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The Bureau of Labor Statistics reported that the job openings rate, from the Job Openings & Labor Turnover Survey (JOLTS), eased in May to 2.5% while the previously reported April increase was revised away. The job openings rate is [...]

JOLTS: U.S. Job Openings Eased

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050712a.jpg" width="353">
The Bureau of Labor Statistics reported that the job openings rate, from the Job Openings &amp; Labor Turnover Survey (JOLTS), eased in May to 2.5% while the previously reported April increase was revised away. 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 total number of job openings fell 3.1% m/m (+8.9% y/y) after a downwardly revised 0.6% decline during April
The hires rate recovered to 3.5% following the sharp decline in April. The hires rate is the number of hires during the month divided by employment.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050712b.jpg" width="353">
The job separations rate fell to 3.3% after having been elevated during the prior two month. Total separations include quits, layoffs, discharges, and other separations as well as retirements. The total separations, or turnover, rate is the total number of separations during the month divided by employment.
The survey dates only to December 2000 but has since followed the movement in nonfarm payrolls.
A description of the Jolts survey and the latest release from the U.S. Department of Labor is available <a href="http://www.bls.gov/news.release/jolts.nr0.htm">here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EB/@EB14/@EB14.HTM">JOLTS</a> (Job Openings &amp; Labor Turnover Survey)</th>
<th scope="col">May</th>
<th scope="col">April</th>
<th scope="col">May &#39;04</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Job Openings Rate: Total</td>
<td>2.5%</td>
<td>2.6%</td>
<td>2.4%</td>
<td>2.4%</td>
<td>2.1%</td>
<td>2.2%</td>
</tr>
<tr>
<td class="firstcol">Hires Rate: Total</td>
<td>3.5%</td>
<td>3.4%</td>
<td>3.3%</td>
<td>3.4%</td>
<td>3.2%</td>
<td>3.2%</td>
</tr>
</tbody>
</table>
Small Business Optimism Stable 
by <a href="/comment/Moeller.html">Tom Moeller</a> July 12, 2005


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050712c.jpg" width="353">
The Small Business Optimism Index reported by the National Federation of Independent Business (NFIB) remained stable in June with the somewhat improved level in May. The stability reflected contradictory indications of a sharp rise in the percentage of firms expecting the economy to improve but a decline in the percentage expecting higher real sales in six months.
During the last ten years there has been a 64% correlation between the level of the NFIB index and the two quarter change in real GDP.
The job outlook deteriorated as the percentage of firms planning to raise employment gave back half of the improvement in May and the percentage of firms with one or more job openings dropped to a nine month low. During the last ten years there has been a 67% correlation between hiring plans and the three month growth in nonfarm payrolls.
The percentage of firms planning to raise capital spending was stable at a somewhat improved May level of 33%.
The percentage of firms raising average selling prices rose.
About 24 million businesses exist in the United States. Small business creates 80% of all new jobs in America.

<table border="0" cellspacing="0" width="100%">
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S7/@S7.HTM">Nat&#39;l Federation of Independent Business</a></th>
<th scope="col">June</th>
<th scope="col">May</th>
<th scope="col">Y/Y</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Small Business Optimism Index (1986=100)</td>
<td>100.8</td>
<td>100.8</td>
<td>-2.1%</td>
<td>104.6</td>
<td>101.3</td>
<td>101.2</td>
</tr>
</tbody>
</table>
Chain Store Sales Ticked Higher 
by <a href="/comment/Moeller.html">Tom Moeller</a> July 12, 2005


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050712d.jpg" width="353">
Chain store sales inched 0.1% higher last week following a 0.5% rise during the opening week of July, according to the International Council of Shopping Centers (ICSC)-UBS survey. So far this month sales are 0.3% higher than the June average which fell 0.4% versus May.
During the last ten years there has been a 56% correlation between the y/y change in chain store sales and the change in non-auto retail sales less gasoline, as published by the US Census Department. Chain store sales correspond directly with roughly 14% of non-auto retail sales less gasoline.
The leading indicator of chain store sales from ICSC rose 0.4% w/w (1.0% y/y) following no change during the week prior.
The ICSC-UBS retail chain-store sales index is constructed using the same-store sales (stores open for one year) reported by 78 stores of seven retailers: Dayton Hudson, Federated, Kmart, May, J.C. Penney, Sears and Wal-Mart.
Productivity and the Post-1990 U.S. Economy from the Federal Reserve Bank of St. Louis can be found <a href="http://research.stlouisfed.org/publications/review/05/07/McGrattan.pdf"> here</a>.

<table border="0" cellspacing="0" width="100%">
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<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/surveyw/@S2/@S2.HTM">ICSC-UBS (SA, 1977=100)</a></th>
<th scope="col">07/09/05</th>
<th scope="col">07/02/05</th>
<th scope="col">Y/Y</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Total Weekly Chain Store Sales</td>
<td>455.7</td>
<td>455.2</td>
<td>3.9%</td>
<td>4.6%</td>
<td>2.9%</td>
<td>3.6%</td>
</tr>
</tbody>
</table>
Deflation Still a Problem in Japan  
by <a href="/comment/Curley.html">Louise Curley</a> July 12, 2005


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050712f.jpg" width="353">
Signs that Japan&#39;s deflation may be ending remain equivocal. The Corporate Goods Price Index (CGPI) has been showing year to year increases since May, 2004. But corporations have been unable to pass these increases on to consumers. The first chart compares the year to year change in the CGPI and the Consumer Price Index. (Since the June CPI for all Japan is not yet available we have used the CPI for the Ku area of Tokyo, which, although lower than that for all Japan, has the same general trend.) This index declined in June and was almost 1% below June, 2004.
Another way of showing that so far, at least, corporations have been unable to pass on the higher cost of oil and other raw materials is shown in the second chart, which compares the indexes of raw material prices and of final goods prices. While the raw material price index in June was almost 17% above the level of June, 2004, the final goods index was 1% below its June, 2004 level.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050712e.jpg" width="353">
Partly offsetting the rise in raw material costs has been the continued deflation among some final goods resulting from increased productivity. It is highly likely that increased productivity accounts for much of the decline in the index for the price of electric machinery and equipment, which was 70.5 in June, indicating a price decline of almost 30% since the year 2000. Other sophisticated goods such as transportation equipment and precision instruments that have been selling at levels below 2000 have also benefited from increase productivity.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/JAPAN/JAPAN.HTM">Japan</a> Indexes 2000=100</th>
<th scope="col">Jun 05</th>
<th scope="col">May 05</th>
<th scope="col">Jun 04</th>
<th scope="col">M/M%</th>
<th scope="col">Y/Y%</th>
<th scope="col">&nbsp;2004&nbsp;&nbsp;</th>
<th scope="col">&nbsp;2003</th>
<th scope="col">&nbsp;2002</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Corporate Goods Price Index&nbsp;&nbsp;</td>
<td>99.3</td>
<td>99.3</td>
<td>97.1</td>
<td>0.0</td>
<td>2.3</td>
<td>97.1</td>
<td>96.0</td>
<td>97.2</td>
</tr>
<tr>
<td class="firstcol">Consumer Price Index: &nbsp; Ku-area of Tokyo&nbsp;</td>
<td>96.8</td>
<td>97.3</td>
<td>97.6</td>
<td>-0.51</td>
<td>-0.82</td>
<td>97.4</td>
<td>97.5</td>
<td>97.9</td>
</tr>
<tr class="odd">
<td class="firstcol">GCPI&nbsp; Raw Materials</td>
<td>141.2</td>
<td>142.2</td>
<td>120.8</td>
<td>-0.70</td>
<td>16.89</td>
<td>118.5</td>
<td>107.7</td>
<td>103.7</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Petrol and Coal</td>
<td>149.6</td>
<td>151.2</td>
<td>127.4</td>
<td>-1.06</td>
<td>17.43</td>
<td>127.4</td>
<td>116.3</td>
<td>109.3</td>
</tr>
<tr class="odd">
<td class="firstcol">GCP1 Final Goods</td>
<td>91.0</td>
<td>91.1</td>
<td>92.0</td>
<td>-0.11</td>
<td>-1.09</td>
<td>91.8</td>
<td>92.9</td>
<td>95.2</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Elec. Machinery &amp; Eqpt</td>
<td>70.5</td>
<td>70.6</td>
<td>74.6</td>
<td>-0.14</td>
<td>-5.50</td>
<td>74.1</td>
<td>78.7</td>
<td>86.2</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Transportation Equip</td>
<td>97.3</td>
<td>97.4</td>
<td>98.3</td>
<td>-0.10</td>
<td>-1.02</td>
<td>98.3</td>
<td>99.5</td>
<td>100.1</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Precision Instruments</td>
<td>97.1</td>
<td>97.0</td>
<td>98.2</td>
<td>0.10</td>
<td>-1.12</td>
<td>98.1</td>
<td>100.5</td>
<td>102.5</td>
</tr>
</tbody>
</table>
</body>
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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050711b.jpg" width="353">
Data on the volume and value of Chinese imports of crude petroleum and petroleum products were released today by CEIC, a private organization based in Hong Kong that publishes a vast amount of data on China. In its new data base--CHINA--Haver lists some 125,000 data series that CEIC publishes.
According to these data, the volume of Chinese imports of crude petroleum shows some signs of peaking, but with rising prices, the value is still on a sharp upward trend. The volume and value trends of petroleum products are more muted than those of crude petroleum . The first chart shows the value of imports of crude petroleum and petroleum products while the second chart shows the volume of imports of each.
The CEIC data are available a week to ten days before the official data shown in EMERGEPR and while the CEIC data do not equal the official data exactly, they are a good approximation as can be seen in the third chart, which compares the value of imports of crude petroleum and petroleum products in the EMERGEPR data base with the sum of these two items in the CHINA data base.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050711c.jpg" width="353"><img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050711d.jpg" width="353">

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/CHINA/CHINA.HTM">CEIC DATA</a></th>
<th scope="col">Jun 05</th>
<th scope="col">May 05</th>
<th scope="col">Jun 04</th>
<th scope="col">M/M%</th>
<th scope="col">Y/Y%</th>
<th scope="col">&nbsp;2004&nbsp;&nbsp;</th>
<th scope="col">&nbsp;2003</th>
<th scope="col">&nbsp;2002</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Value of Chinese Imports (Millions of US$)</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Crude Petroleum</td>
<td>3884.6</td>
<td>3883.1</td>
<td>3062.7</td>
<td>0.04</td>
<td>26.84</td>
<td>33913</td>
<td>19824</td>
<td>12761</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Petroleum Products</td>
<td>935.5</td>
<td>659.8</td>
<td>902.5</td>
<td>41.79</td>
<td>3.67</td>
<td>9241</td>
<td>5875</td>
<td>3802</td>
</tr>
<tr>
<td class="firstcol">Volume of Chinese Imports (Thousands of Tonnes)&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Crude Petroleum</td>
<td>11120</td>
<td>10410</td>
<td>11270</td>
<td>6.82</td>
<td>-1.33</td>
<td>122830</td>
<td>91130</td>
<td>69240</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Petroleum Products</td>
<td>2920</td>
<td>1970</td>
<td>3820</td>
<td>48.22</td>
<td>-2356</td>
<td>37860</td>
<td>28230</td>
<td>20350</td>
</tr>
</tbody>
</table>
</body>
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Data on the volume and value of Chinese imports of crude petroleum and petroleum products were released today by CEIC, a private organization based in Hong Kong that publishes a vast amount of data on China. In its new data base-- [...]

Chinese Imports of Crude Petroleum and Petroleum Products: A Comparison between Two Data Sources

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050711a.jpg" width="353">
The Leading Index of the Major 7 OECD economies fell for the fourth straight month in May. The 0.2% decline pulled the index down 1.3% since December and lowered six month growth in the index to a negative 1.8%, the weakest since March 2003.
During the last ten years there has been a 69% correlation between the change in the leading index and the q/q change in the GDP Volume Index for the Big Seven countries in the OECD.
A 0.2% decline in May coupled with downward revisions to earlier months&#39; data caused the leaders for the European Union (15 countries) to extend their decline to six consecutive months. Six month growth dropped to a negative 0.9%.
German leaders fell for the seventh month in the last eight. The 0.2% decline was caused by weaker new orders, a more sharply negative yield curve and a depressed business climate. Ssix month growth in the leading index fell to -2.1%, the worst in three and a half years. The French leaders also fell by 0.2% with six month growth a negative 1.3%. The yield curve was about dead flat and prospects for the industrial sector dimmed. The Italian leading index fell a hard 0.5% in May. This seventh consecutive decline lowered the six month growth rate to -2.8% and was caused by continued souring of consumer confidence as well as a weaker future tendency of orders books.
The UK economic leaders continued down and fell 0.4% for the second month. Six month growth fell to -1.9% due to even weaker consumer confidence and weaker prospects for production.The 1.0% decline in the leaders for Japan was double the drop in April, was the fifth decline this year and caused six month growth to fall to a negative 3.5%, the worst since late 2001.
The leading index for the US economy rose a modest 0.2%. The first increase since January improved six month growth slightly to -1.0% but the May increase was entirely due to higher durable goods (aircraft) orders. The Canadian leaders also moved higher by 0.4% and six month growth improved to a -0.3%. Share prices rose in May but other leading indicator components fell.
The latest OECD Leading Indicator report is available <a href="http://www.oecd.org/dataoecd/7/30/35110086.pdf"> here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/OECDMEI/OECDMEI.HTM">OECD</a></th>
<th scope="col">May</th>
<th scope="col">April</th>
<th scope="col">Y/Y</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Composite Leading Index&nbsp;</td>
<td>100.97</td>
<td>101.17</td>
<td>-1.0%</td>
<td>101.98</td>
<td>97.52</td>
<td>96.33</td>
</tr>
<tr>
<td class="firstcol">&nbsp;6 Month Growth Rate</td>
<td>-1.8%</td>
<td>-1.6%</td>
<td>&nbsp;</td>
<td>3.5%</td>
<td>2.5%</td>
<td>2.3%</td>
</tr>
</tbody>
</table>
</body>
</html>

The Leading Index of the Major 7 OECD economies fell for the fourth straight month in May. The 0.2% decline pulled the index down 1.3% since December and lowered six month growth in the index to a negative 1.8%, the weakest since [...]

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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

Robert Brusca

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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: July 2005

Jump to:

U.S. Trade Deficit Smaller

Deflation Still a Problem in Japan

Chain Store Sales Ticked Higher

Small Business Optimism Stable

JOLTS: U.S. Job Openings Eased

JOLTS: U.S. Job Openings Eased

Chinese Imports of Crude Petroleum and Petroleum Products: A Comparison between Two Data Sources

OECD Leaders Lower Still, North American Increase Limited