Carol Stone, CBE

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/031106c.jpg" width="353">
Ahead of tomorrow&#39;s big labor market report in the US, Australia and Germany both reported generally favorable moves in unemployment in October. In Australia, in particular, the rate decrease 0.2% to 5.6% from 5.8% in August and September. 5.6% is the second lowest in the nearly 24-year history of the data. It is also the lowest since the end of 1989, when it was also 5.6%; the record low was 5.4% in mid-1981.
This performance accompanied an increase in employment of 69,100 in October and a total rise of 164,500 over the last three months. Labor force participation is up 0.4% in the last three months as well, to 63.8% from 63.4% in July, underscoring that the reduced unemployment is in fact due to more job opportunities, not people&#39;s withdrawal from the labor force. Quite the contrary.
Unemployment in Germany held steady at 10.5%, including a flat 8.4% in Western Germany and a decrease from 18.6% to 18.5% in Eastern Germany. The improvement here is slight, but has been sustained over several months. In Western Germany, the rate has been unchanged since June, while in Eastern Germany, it has fallen 0.4% since that same month. Employment data are reported later in Germany and have just been released for August, when jobs were still decreasing, albeit modestly. (See table below.) Thus, some of the unemployment &quot;improvement&quot; in that country has resulted from a smaller labor force, which is not much sign of economic strength. However, recent gains in business confidence and in the Purchasing Managers surveys suggest that employers are beginning to regard employment prospects more positively or at least less negatively. The employment component of the PMI for the services sector, at 43.8 in October, remains below the expansion-contraction 50% breakpoint, but it is still 3.5 percentage points above its January low. So labor market conditions look to be moving toward recovery in Germany.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">Labor Market Indicators</th>
<th scope="col">Oct 2003</th>
<th scope="col">Sept 2003</th>
<th scope="col">Aug 2003</th>
<th scope="col">Year Ago</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Australia: Unemployment Rate (%)</td>
<td>5.6</td>
<td>5.8</td>
<td>5.8</td>
<td>6.0</td>
<td>6.3</td>
<td>6.7</td>
<td>6.3</td>
</tr>
<tr>
<td class="firstcol">Australia: Employment (Change, thous)</td>
<td>69</td>
<td>15</td>
<td>81</td>
<td>21*</td>
<td>23*</td>
<td>7*</td>
<td>15*</td>
</tr>
<tr class="odd">
<td class="firstcol">Germany: Unemployment Rate (%)</td>
<td>10.5</td>
<td>10.5</td>
<td>10.6</td>
<td>10.0</td>
<td>9.8</td>
<td>9.4</td>
<td>9.6</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Western Germany (%)</td>
<td>8.4</td>
<td>8.4</td>
<td>8.4</td>
<td>7.8</td>
<td>7.7</td>
<td>7.2</td>
<td>7.5</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp; Eastern Germany (%)</td>
<td>18.5</td>
<td>18.6</td>
<td>18.6</td>
<td>17.8</td>
<td>17.7</td>
<td>17.3</td>
<td>17.1</td>
</tr>
<tr>
<td class="firstcol">Germany: Employment (Change, thous)</td>
<td>N.A.</td>
<td>N.A.</td>
<td>-29</td>
<td>-39*</td>
<td>-42*</td>
<td>-6*</td>
<td>45*</td>
</tr>
<tr class="odd">
<td class="firstcol">Germany: PMI Services Employment (50 = Expansion/Contraction)</td>
<td>43.8</td>
<td>43.7</td>
<td>43.2</td>
<td>40.3 &nbsp;(Jan &#39;03 low)</td>
<td>46.5</td>
<td>49.7</td>
<td>53.8</td>
</tr>
</tbody>
</table>
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Ahead of tomorrow's big labor market report in the US, Australia and Germany both reported generally favorable moves in unemployment in October. In Australia, in particular, the rate decrease 0.2% to 5.6% from 5.8% in August and [...]

Unemployment Picture Improves in Australia, Germany

Tom Moeller

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<img align="left" border="0" height="258" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/031106b.jpg" width="345">
Nonfarm labor productivity growth last quarter surged 8.1%, the fastest rate of growth since 1Q02. Productivity growth in 2Q was revised up slightly. Consensus expectations had been for 3Q growth of 8.0%.
Strong growth in recent quarters pulled the five-year growth in productivity to 3.6%, the fastest since the mid-1960s. Combined with 1.2% growth in the labor force over that period it suggests the economy&#39;s potential rate of growth is near 5.0%.
Unit labor costs plunged 4.6% in 3Q, the sharpest decline since 1Q02. Compensation per hour was moderate at 3.1%, about the growth rate during the last two years.
Output grew 8.8% (4.1% y/y) last quarter and hours of all persons (employment times hours) rose just 0.7% (-0.6% y/y). Since peaking in three years ago, hours worked have fallen 5.3%.
Manufacturing sector productivity growth surged 8.6% (3.8% y/y) in 3Q. That pulled the five year growth rate to 4.2%. Unit labor costs fell 4.0% (+0.7% y/y).
A report from the Brookings Institution by Barry P. Bosworth and Jack E. Triplett on economic growth and productivity can be found <a href="http://www.brookings.edu/views/papers/bosworth/20001020.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/@EC/@EC02/@EC02.HTM">Nonfarm Business Sector</a> (SAAR)</th>
<th scope="col">3Q &#39;03 </th>
<th scope="col">2Q &#39;03</th>
<th scope="col">Y/Y</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Output per Hour</td>
<td>8.1%</td>
<td>7.0%</td>
<td>4.7%</td>
<td>5.4%</td>
<td>1.9%</td>
<td>3.0%</td>
</tr>
<tr>
<td class="firstcol">Compensation</td>
<td>3.1%</td>
<td>3.6%</td>
<td>2.7%</td>
<td>2.8%</td>
<td>3.6%</td>
<td>7.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">Unit Labor Costs</td>
<td>-4.6%</td>
<td>-3.2%</td>
<td>-1.9%</td>
<td>-2.4%</td>
<td>1.7%</td>
<td>3.9%</td>
</tr>
</tbody>
</table>
Initial Claims for Jobless Insurance Plunge 
by <a href="/comment/Moeller.html">Tom Moeller</a> November 6, 2003


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/031106a.jpg" width="353">
Initial claims for jobless insurance plunged 43,000 to 348,000 last week, the lowest level since January 2001. The modest decline reported initially for the week prior was revised to unchanged. Consensus expectations had been for claims of 385,000.
The four-week moving average of initial claims fell to 380,000 (-7.5% y/y).
Continuing claims for unemployment insurance fell 22,000 and the 57,000 reported initially for the prior week was about halved.
The insured rate of unemployment was stable at 2.8%.

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<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/WEEKLY/@W5/@W507/@W507.HTM"> Unemployment Insurance (000s)</a></th>
<th scope="col">11/01/2003</th>
<th scope="col">10/25/2003</th>
<th scope="col">Y/Y</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Initial Claims</td>
<td>348.0</td>
<td>391.0</td>
<td>-7.2%</td>
<td>404.3</td>
<td>406.0</td>
<td>299.7</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>--</td>
<td>3,511</td>
<td>-2.2%</td>
<td>3,575</td>
<td>3,022</td>
<td>2,114</td>
</tr>
</tbody>
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Nonfarm labor productivity growth last quarter surged 8.1%, the fastest rate of growth since 1Q02. Productivity growth in 2Q was revised up slightly. Consensus expectations had been for 3Q growth of 8.0%. Strong growth in recent [...]

U.S. Productivity Surged in 3Q 2003

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/031105d.jpg" width="353">
Activity in Europe&#39;s service businesses improved for a sixth consecutive month in October and achieved its fourth successive outright expansion. This diffusion index for the service industry is based on a survey of purchasing managers by NTC Research in Henley-on-Thames, England, for Reuters Group Plc. The data, which begin in July 1998, are contained in Haver&#39;s PMI database. The October gain carried the index to 56.0, the highest since December 2000. The similar index for manufacturing, released two days ago, was 51.3 in October, up from 50.1 in September and its highest since July 2002. With the manufacturing reading finally crossing back above 50 in September, the sector was able to resume the expansion that had begun after the 2001 recession.
In the services industry, components describing developments in existing business, new business and expectations have all moved ahead markedly, rising one or more percentage points in each recent month. Employment continues to lag, as seen in the table below. In both services and manufacturing, this sub-index remains below 50, indicating that employment is still falling. However, both employment indexes began to improve in the spring and are up nearly 3 percentage points from May levels. This remains a &quot;jobless recovery&quot; in Europe, but at least the pace of job reduction is slowing.
Among the countries with local PMI indexes, France had the biggest rise in October, up 3.2 points, while Germany&#39;s was the smallest, up &quot;just&quot; 1.3 points. However, all are up 6 points or more from their early-2003 lows and all are above the 50% expansion-contraction breakeven point. So there is a vigorous, widespread advance in European service businesses, and these data indicate that it is starting to bring jobs along with it, although they have yet <span style="font-size:10.0pt;font-family:Verdana;
mso-fareast-font-family:&quot;Times New Roman&quot;;mso-bidi-font-family:&quot;Times New Roman&quot;;
mso-ansi-language:EN-US;mso-fareast-language:EN-US;mso-bidi-language:AR-SA">to attain positive territory.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">Euro-Zone PMIs&nbsp;&nbsp; (50+ = Expansion)</th>
<th scope="col">Oct 2003</th>
<th scope="col">&nbsp;Sept 2003</th>
<th scope="col">Aug 2003</th>
<th scope="col">Oct 2002</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">PMI Manufacturing</td>
<td>51.3</td>
<td>50.1</td>
<td>49.1</td>
<td>49.2</td>
<td>49.8</td>
<td>47.8</td>
<td>57.4</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Employment</td>
<td>47.9</td>
<td>47.0</td>
<td>47.1</td>
<td>46.0</td>
<td>47.0</td>
<td>48.9</td>
<td>54.5</td>
</tr>
<tr class="odd">
<td class="firstcol">PMI Services</td>
<td>56.0</td>
<td>53.6</td>
<td>52.0</td>
<td>51.0</td>
<td>51.6</td>
<td>51.6</td>
<td>59.8</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Employment</td>
<td>48.5</td>
<td>47.7</td>
<td>46.2</td>
<td>47.9</td>
<td>49.4</td>
<td>52.5</td>
<td>57.4</td>
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Activity in Europe's service businesses improved for a sixth consecutive month in October and achieved its fourth successive outright expansion. This diffusion index for the service industry is based on a survey of purchasing managers [...]

Euro-Zone Services and Manufacturing Businesses Share in Expansion

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/031105b.jpg" width="353">
The Institute for Supply Management reported that the October Business Activity Index for the non-manufacturing sector gained back most of the prior month&#39;s decline. The increase to 64.7 was versus Consensus expectations for little change at 63.5.
Since the series&#39; inception in 1997 there has been a 58% correlation between the level of the ISM non-manufacturing business activity index and the quarterly change in real GDP for services plus construction.
The employment index was quite strong, rising 3.8 points to 52.9, the highest level since November 2000.
Since the series&#39; inception in 1997 there has been an 68% correlation between the level of the ISM non-manufacturing employment index and the m/m change in payroll employment in the service producing and construction industries.
The seasonally adjusted orders index posted a rise to 64.4 and gained back more than half of the sharp September drop.
Business activity for the non-manufacturing sector is a question separate from the subgroups mentioned above. In contrast, the NAPM manufacturing sector composite index weights the components.
The seasonally adjusted prices index fell moderately to 58.7.
ISM surveys more than 370 purchasing managers in more than 62 industries including construction, law firms, hospitals, government and retailers. The non-manufacturing survey dates only to July 1997, therefore its seasonal adjustment should be viewed tentatively. 

<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/@EF/@EF03/@EF03.HTM">ISM Nonmanufacturing Survey</a></th>
<th scope="col">Oct</th>
<th scope="col">Sept</th>
<th scope="col">Y/Y</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Business Activity Index</td>
<td>64.7</td>
<td>63.3</td>
<td>53.9</td>
<td>55.1</td>
<td>49.0</td>
<td>59.3</td>
</tr>
<tr>
<td class="firstcol">Prices Index</td>
<td>58.7</td>
<td>60.1</td>
<td>56.5</td>
<td>53.9</td>
<td>51.6</td>
<td>63.5</td>
</tr>
</tbody>
</table>
Mortgage Applications for Purchase Jump 
by <a href="/comment/Moeller.html">Tom Moeller</a> November 5, 2003


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/031105a.jpg" width="353">
The index of mortgage applications compiled by the Mortgage Bankers Association rose 5.5% (-33.5% y/y) last week on the strength of higher purchase applications.
Purchase applications jumped 11.1% following a 5.7% drop the week prior. Purchase applications for all of October fell 4.7% (+12.1% y/y) versus September.
During the last ten years there has been a 54% correlation between the y/y change in purchase applications and the change in new plus existing home sales.
Applications to refinance ticked up 0.3% following a 4.9% rise week prior. For all of October applications to refinance fell 5.0% (-58.6% y/y) versus September.
The effective interest rate on a conventional 30-Year mortgage rose slightly w/w to 6.14%. The effective rate on a 15-year mortgage also rose w/w to 5.52%.
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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<thead>
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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">10/31/03</th>
<th scope="col">10/24/03</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
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</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total Market Index</td>
<td>685.2</td>
<td>649.6</td>
<td>799.7</td>
<td>625.6</td>
<td>322.7</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Purchase</td>
<td>404.3</td>
<td>363.9</td>
<td>354.7</td>
<td>304.9</td>
<td>302.7</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Refinancing</td>
<td>2,319.4</td>
<td>2,311.8</td>
<td>3,388.0</td>
<td>2,491.0</td>
<td>438.8</td>
</tr>
</tbody>
</table>
Factory Orders Recover, Inventories Fell Again 
by <a href="/comment/Moeller.html">Tom Moeller</a> November 5, 2003


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/031105c.jpg" width="353">
Manufacturing inventories fell 0.4% in September for the sixth monthly decline this year. The ISM inventory index in October ticked a bit higher vs. September but at 44.5 suggested further decumulation last month. Declines in inventories continued widespread.
New research from the Federal Reserve Bank of Philadelphia titled &quot;The Role of Inventories in the Business Cycle&quot; can be found <a href="http://www.phil.frb.org/files/br/brq303ak.pdf">here</a>.
Factory orders rose about as expected, up 0.5% in September. The ISM orders index surged to 64.3 in October. During the last ten years there has been a 38% correlation between the y/y change in factory orders and the level of the ISM orders index.
Durable goods orders were revised upward to a 1.1% m/m increase versus the 0.8% rise indicated in last week&#39;s advance report.
Non-durable goods orders fell 0.2% m/m (+4.2% y/y) following a 0.6% decline in August. The y/y strength in non-durable goods orders derives mostly from higher prices for petroleum products and for industrial chemicals. (Non-durable goods orders equal shipments in this report on factory sector activity.)
Factory shipments jumped 1.4%. Shipments of transportation equipment were quite strong, up 6.2% (0.8% y/y) and mostly reflected higher shipments of autos &amp; trucks. Excluding transportation, shipments rose 0.5% (3.5% y/y).

<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/@ED/@ED01/@ED0101/@ED01016/@ED01016.HTM"> Factory Survey</a> (NAICS)</th>
<th scope="col">Sept</th>
<th scope="col">Aug</th>
<th scope="col">Y/Y</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Inventories</td>
<td>-0.4%</td>
<td>-0.3%</td>
<td>-1.3%</td>
<td>-1.8%</td>
<td>-6.1%</td>
<td>3.8%</td>
</tr>
<tr>
<td class="firstcol">New Orders</td>
<td>0.5%</td>
<td>-0.3%</td>
<td>5.4%</td>
<td>-1.9%</td>
<td>-6.7%</td>
<td>5.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">Shipments</td>
<td>1.4%</td>
<td>-1.7%</td>
<td>3.1%</td>
<td>-2.0%</td>
<td>-5.4%</td>
<td>4.2%</td>
</tr>
<tr>
<td class="firstcol">Unfilled Orders</td>
<td>0.1%</td>
<td>0.8%</td>
<td>-0.7%</td>
<td>-6.1%</td>
<td>-5.9%</td>
<td>8.7%</td>
</tr>
</tbody>
</table>


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The Institute for Supply Management reported that the October Business Activity Index for the non-manufacturing sector gained back most of the prior month's decline. The increase to 64.7 was versus Consensus expectations for little [...]

ISM Nonmanufacturing Index Jumped

Louise Curley

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/031104d.jpg" width="353">
The INSEE indicator of confidence among French households fell to -29, after holding steady at -27 for the five months, May through September. Rising unemployment so far this year has probably been an important dampener on consumer confidence. The employment situation is an important factor in shaping the opinions of the various components of the overall confidence measure
The INSEE indicator of French Household confidence is an average of the trends in the opinions of French households on such matters as their present and future financial situation, buying plans, ability to save, price trends and unemployment prospects. The individual opinions are expressed as the balance of rising versus declining trends or favorable versus unfavorable outlooks. In the case of future unemployment prospects, the balance between those expecting rising unemployment and those expecting declining unemployment was 62, a slight improvement over the 63 registered in September. In the case of buying plans, the balance between those who believe it is a good time to make major purchases and those who do not, became more unfavorable in October, going to -18 from -16 in September.
Except for a few months in early 2000, the indicator has never been positive. At the current, -29, the overall indicator is some ten points lower than the average of the series to date.

<table border="0" cellspacing="0" width="100%">

</table>
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">&nbsp;</th>
<th scope="col">SEP 2003</th>
<th scope="col"> AUG 2003 </th>
<th scope="col">SEP 2002</th>
<th scope="col"> M/M&nbsp; %</th>
<th scope="col">Y/Y&nbsp; %</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">French unemployment Rate</td>
<td>9.7</td>
<td>9.6</td>
<td>9.3</td>
<td>0.1</td>
<td>0.4</td>
<td>9.0</td>
<td>8.7</td>
<td>9.5</td>
</tr>
<tr>
<td class="firstcol">&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>OCT 2003</td>
<td>SEP 2003</td>
<td>OCT 2002&nbsp;</td>
<td> M/M&nbsp; %</td>
<td>Y/Y&nbsp; %</td>
<td>2002</td>
<td>2001</td>
<td>2000</td>
</tr>
<tr>
<td class="firstcol">Overall Consumer Confidence in France&nbsp;</td>
<td>-29</td>
<td>-27</td>
<td>-17</td>
<td>-2</td>
<td>-12</td>
<td>-16</td>
<td>-7</td>
<td>-1</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Future employment prospects</td>
<td>62</td>
<td>63</td>
<td>54</td>
<td>-1</td>
<td>12</td>
<td>50</td>
<td>26</td>
<td>16</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Good time to make major purchases</td>
<td>-18</td>
<td>-16</td>
<td>-11</td>
<td>-2</td>
<td>-7</td>
<td>-12</td>
<td>5</td>
<td>8</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;Future financial situation</td>
<td>-5</td>
<td>-4</td>
<td>2</td>
<td>-1</td>
<td>-7</td>
<td>2</td>
<td>3</td>
<td>5</td>
</tr>
</tbody>
</table>
</body>
</html>

The INSEE indicator of confidence among French households fell to -29, after holding steady at -27 for the five months, May through September. Rising unemployment so far this year has probably been an important dampener on consumer [...]

French Households Become Less Confident in October

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/031104c.jpg" width="353">
Light vehicle sales fell more than expected in October for the second consecutive month. Vehicle sales fell 6.5% m/m to 15.64M after falling 12.0% m/m in September from a two year high. Consensus expectations had been for sales of 16.5M.
Car sales fell hard, down 7.4% to 6.98M units. That was the lowest level of car sales since December of 1970.
Sales of light trucks slid for the second month, to 8.66M. That was down 5.7% to the lowest level since March.
Domestic light vehicle sales fell 6.2% to a 12.58M unit selling rate. Sales of cars fell to a near record low.
Imported vehicle sales also were weak, falling 7.4% m/m to the lowest sales rate in a year.
Imports captured 19.5% of the US market for new vehicles in October, the same share as last year.

<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/@ED/@ED09/@ED0901/@ED0901.HTM"> Light Vehicle Sales (SAAR, Mil.Units)</a></th>
<th scope="col">Oct</th>
<th scope="col">Sept</th>
<th scope="col">Y/Y</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>15.64</td>
<td>16.72</td>
<td>1.2%</td>
<td>16.81</td>
<td>17.26</td>
<td>17.40</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Autos</td>
<td>6.98</td>
<td>7.54</td>
<td>-4.2%</td>
<td>8.07</td>
<td>8.48</td>
<td>8.83</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Light Trucks</td>
<td>8.66</td>
<td>9.18</td>
<td>6.1%</td>
<td>8.74</td>
<td>8.78</td>
<td>8.56</td>
</tr>
</tbody>
</table>
Challenger Layoffs Surged 
by <a href="/comment/Moeller.html">Tom Moeller</a> November 4, 2003


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/031104b.jpg" width="353">
According to Challenger, Gray &amp; Christmas, announced job cuts more than doubled in October versus September. In recent years, layoff announcements have similarly surged in October.
The three month moving average of job cut announcements jumped to the highest level since April.
Job cut announcements differ from layoffs in that many are achieved through attrition or just never occur.
During the last ten years there has been an 83% (inverse) correlation between the three month average level of announced job cuts and the y/y percent change payroll employment.
Job cut announcements surged m/m in the commodities (597.6% y/y), automotive (180.5% y/y), insurance (7.5% y/y), telecommunications (-37.8% y/y) and financial (-40.9% y/y) industries.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S3/@S301/@S301.HTM"> Challenger, Gray &amp; Christmas</a></th>
<th scope="col">Oct</th>
<th scope="col">Sept</th>
<th scope="col">Y/Y</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Announced Job Cuts</td>
<td>171,874</td>
<td>76,506</td>
<td>-2.3%</td>
<td>1,431,052</td>
<td>1,956,876</td>
</tr>
</tbody>
</table>
Weekly Chain Store Sales Recover 
by <a href="/comment/Moeller.html">Tom Moeller</a> November 4, 2003


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/031104a.jpg" width="353">
In the week ended November 1, chain store sales recovered 0.5% of the previous week&#39;s 0.9% drop according to the BTM-UBSW survey.
Despite the latest rise, sales for the full month of October fell 0.6% versus September. That followed a 0.8% m/m decline in September.
During the last five years there has been a 61% correlation between the year-to-year percent change in the BTM-UBSW measure of chain store sales and the change in non-auto retail sales less gasoline.
The BTM-UBSW retail chain-store sales index is constructed using the same-store sales reported by 78 stores of seven retailers: Dayton Hudson, Federated, Kmart, May, J.C. Penney, Sears and Wal-Mart.

<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/surveyw/@S2/@S2.HTM">BTM-UBSW (SA, 1977=100)</a></th>
<th scope="col">11/01/03</th>
<th scope="col">10/25/03</th>
<th scope="col">Y/Y</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Total Weekly Retail Chain Store Sales</td>
<td>420.3</td>
<td>418.4</td>
<td>5.1%</td>
<td>3.6%</td>
<td>2.1%</td>
<td>3.4%</td>
</tr>
</tbody>
</table>
</body>
</html>

Light vehicle sales fell more than expected in October for the second consecutive month. Vehicle sales fell 6.5% m/m to 15.64M after falling 12.0% m/m in September from a two year high. Consensus expectations had been for sales of [...]

U.S. Light Vehicle Sales Broadly Weak

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/031103c.jpg" width="353">
The PMI index for the manufacturing sector of the Euro-zone rose for the fourth consecutive month in October. Moreover, the index was above 50 in September and October. A reading above 50 means that activity in the manufacturing sector is in an expansionary phase whereas a reading below 50 means that business is in a contractionary phase.
The PMI index tends to lead the manufacturing sector of the Industrial Production index.
Although the data suggest that the area, as a whole, is only in the early stages of expansion, indexes, available* for France, Germany, Italy, Ireland, the Netherlands, Austria, Spain and Greece, show that the move to an expansionary stage is widespread. The indexes for Greece, Austria and Spain declined slightly in October, but they remained above the 50 mark.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">Purchasing Managers Survey</th>
<th scope="col">AUG 2003</th>
<th scope="col">JULY 2003</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Euro-zone</td>
<td>51.32</td>
<td>50.09</td>
</tr>
<tr>
<td class="firstcol">France</td>
<td>50.96</td>
<td>48.60</td>
</tr>
<tr class="odd">
<td class="firstcol">Germany</td>
<td>51.18</td>
<td>20.22</td>
</tr>
<tr>
<td class="firstcol">Italy</td>
<td>51.79</td>
<td>49.79</td>
</tr>
<tr class="odd">
<td class="firstcol">Netherlands</td>
<td>51.43</td>
<td>51.31</td>
</tr>
<tr>
<td class="firstcol">Ireland</td>
<td>52.40</td>
<td>50.44</td>
</tr>
<tr class="odd">
<td class="firstcol">Spain</td>
<td>50.28</td>
<td>50.69</td>
</tr>
<tr>
<td class="firstcol">Austria</td>
<td>54.31</td>
<td>54.41</td>
</tr>
<tr class="odd">
<td class="firstcol">Greece</td>
<td>50.21</td>
<td>51.36</td>
</tr>
</tbody>
</table>
</body>
</html>

The PMI index for the manufacturing sector of the Euro-zone rose for the fourth consecutive month in October. Moreover, the index was above 50 in September and October. A reading above 50 means that activity in the manufacturing [...]

More Indicators of Optimism in the Euro-zone

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/031103a.jpg" width="353">
The Purchasing Managers&#146; Composite Index (PMI) released by the Institute of Supply Management rose more than expected to 57.0 in October from 53.7 in September. Consensus expectations were for a reading of 55.5.
During the last twenty years there has been a 63% correlation between the level of the PMI Composite Index and quarterly growth in real GDP.
The index for new orders (64.3) surged nearly four points to the highest level since 1994. The production index (62.6) jumped more than five points to the highest level since 1997.
The employment index (47.7) rose moderately to the highest level this year. This index has not been above 50, the dividing line between rising and falling payrolls, since September 2000. There has been a 71% correlation during the last ten years between the ISM employment index and the one-month change in factory sector payrolls.
The prices paid index rose last month to 58.5. There has been a 28% correlation between the prices paid index and the y/y change in the finished goods PPI over the last ten years. The correlation with the intermediate materials PPI has been a higher 62%.
A report from the Federal Reserve Bank of San Francisco asking &quot;Is Our IT Manufacturing Edge Drifting Overseas?&quot; can be found <a href="http://www.frbsf.org/publications/economics/letter/2003/el2003-30.html">here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EF/@EF02/@EF02.HTM"> ISM Manufacturing Survey</a></th>
<th scope="col"> Oct &#39;03</th>
<th scope="col">Sep &#39;03</th>
<th scope="col">Oct &#39;02</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Composite Index</td>
<td>57.0</td>
<td>53.7</td>
<td>49.7</td>
<td>52.4</td>
<td>44.0</td>
<td>51.7</td>
</tr>
<tr>
<td class="firstcol">&nbsp; New Orders Index</td>
<td>64.3</td>
<td>60.4</td>
<td>52.2</td>
<td>56.7</td>
<td>46.2</td>
<td>52.0</td>
</tr>
<tr class="odd">
<td class="firstcol">Prices Paid Index (NSA)</td>
<td>58.5</td>
<td>56.0</td>
<td>59.5</td>
<td>57.6</td>
<td>42.9</td>
<td>64.8</td>
</tr>
</tbody>
</table>
U.S. Construction Spending Strong 
by <a href="/comment/Moeller.html">Tom Moeller</a> November 3, 2003


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/031103b.jpg" width="353">
The value of total construction put in place jumped 1.3% in September and prior months&#39; figures were revised up sharply due to raised figures for private sector building. A 0.3% gain had been expected by the Consensus.
Private residential building activity surged 1.4% following strong gains in the prior two months. The gain was led by a 2.0% (15.9% y/y) jump in single family home building.
Nonresidential building activity recovered 2.5% following a 1.5% August drop that was revised shallower from the initial report. Office building activity rose 1.7% (-13.7% y/y) but it has moved in a tight, depressed range for all of this year. Commercial construction slumped 1.5% (+0.1% y/y) and gave back all of the strong gains in the prior two months.
These more detailed categories represent the Census Bureau&#146;s reclassification of construction activity into end-use groups. Finer detail is available for many of the categories; for instance, commercial construction is shown for Automotive sales and parking facilities, drugstores, building supply stores, and both commercial warehouses and mini-storage facilities. Note that start dates vary for some seasonally adjusted line items in 2000 and 2002 and that constant-dollar data are no longer computed.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E9/@E907/@E90701/@E90701.HTM"> Construction Put-in-place</a></th>
<th scope="col">Sept</th>
<th scope="col">Aug</th>
<th scope="col">Y/Y</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>1.3%</td>
<td>0.7%</td>
<td>6.5%</td>
<td>1.1%</td>
<td>2.7%</td>
<td>8.3%</td>
</tr>
<tr>
<td class="firstcol">Private</td>
<td>1.7%</td>
<td>0.7%</td>
<td>7.6%</td>
<td>-0.2%</td>
<td>1.4%</td>
<td>8.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Residential</td>
<td>1.4%</td>
<td>1.7%</td>
<td>10.7%</td>
<td>8.6%</td>
<td>3.3%</td>
<td>7.4%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Nonresidential</td>
<td>2.5%</td>
<td>-1.5%</td>
<td>1.5%</td>
<td>-13.0%</td>
<td>-1.3%</td>
<td>8.9%</td>
</tr>
<tr class="odd">
<td class="firstcol">Public</td>
<td>0.0%</td>
<td>0.8%</td>
<td>3.1%</td>
<td>5.3%</td>
<td>7.4%</td>
<td>9.5%</td>
</tr>
</tbody>
</table>
</body>
</html>

The Purchasing Managers Composite Index (PMI) released by the Institute of Supply Management rose more than expected to 57.0 in October from 53.7 in September. Consensus expectations were for a reading of 55.5. During the last twenty [...]

ISM Factory Index Higher, Orders Strong

US and China big leaders in adoption of AI models

Robust US demand for advanced technology products

China's export growth rotating away from the US

More pronounced upward revisions in countries more exposed to AI investment

Stable job openings and hiring rates point to cautious hiring

Global freight costs are on the rise while supply chain pressures are contained

Accelerating positive economic surprises in the G10 are boosting the global economy

Considerably more monetary ease expected from US and UK as Japan tightens

Tighter US immigration enforcement adversely impacting labor force

Economic policy uncertainty, while still elevated, is declining

Gradual disinflation and easier monetary policies across advanced economies

Largest October layoffs since 2003, led by technology

Subdued global shipping costs not yet pointing to supply chain problems

PMIs show still-elevated but slowing US inflation

AI boosting US investment in data centers

US productivity growth has been significantly faster than in other major economies

Consumers' short-term US inflation expectations still elevated while longer-term expectations of financial markets are steady

US financial markets have gotten used to elevated policy uncertainty

FOMC now expects more rate cuts going forward than in June

China gaining ASEAN exports while US exports slump

Job openings less than the number unemployed in July for first time since 2021

Reaccelerating goods price inflation along with sticky services inflation clouds the outlook

Falling oil prices aren't pulling down inflation expectations, pointing to a boost from increased tariffs

Equity market exuberance outpacing macroeconomic data

Apart from Japan, Blue Chip forecasters expect further sizable monetary easing

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Andrew Cates

**The Global Monetary Policy Consensus**
The latest Blue Chip Financial Forecasts survey points to a notably more balanced global monetary policy outlook over the coming year. In contrast to the pronounced easing bias that dominated much of the past two years, expectations are now more symmetric, with a similar number of central banks projected to raise rates as to ease policy. Japan is seen delivering further tightening, while Canada is expected to initiate an interest rate hike in coming months. In Australia’s case, this tightening guidance was reinforced this week, with the Reserve Bank lifting its policy rate by 25 basis points. Elsewhere, and in contrast, the euro area, UK and US are expected to move in the opposite direction.

260205Z1.jpg

**US manufacturing activity**
The second chart underscores the recent improvement in US economic momentum, highlighted by an unexpected surge in the January ISM manufacturing PMI. After spending much of the past year hovering below the 50 threshold consistent with stagnation, the index jumped sharply back into expansionary territory, signalling a renewed pickup in industrial activity. This rebound has coincided with a broader run of stronger-than-anticipated US economic data, as reflected in the upswing in the Citigroup Economic Surprise Index. Together, these developments point to a US economy that continues to display notable resilience, complicating expectations of monetary easing in the near term.

260205Z2.jpg

**US Bank Lending Standards and Financial Stress** 
The next chart turns to US financial conditions, highlighting the latest readings from the Senior Loan Officer Opinion Survey. The net proportion of banks tightening lending standards on corporate loans and mortgages is now more modest by historical standards, and well below the extremes seen during past episodes of financial stress. Some easing in credit headwinds has occurred alongside relatively subdued readings on the OFR Financial Stress Index, which continues to hover below its long-run average. Together, these indicators suggest that the US financial system has continued to avoid the kind of acute stress typically associated with sharp slowdowns in credit availability—helping to underpin the recent resilience in economic activity.

260205Z3.jpg

**Semiconductor Sales**
The fourth chart highlights the renewed surge in global semiconductor sales, with momentum strengthening sharply over recent months across the Americas, China and the broader Asia-Pacific region. After the cyclical downturn in 2022–23, sales have rebounded to fresh highs, reflecting a powerful revival in demand for advanced chips and related technologies. This upswing has taken place amid intense investor preoccupation with artificial intelligence, with expectations that AI adoption will drive a sustained wave of capital spending on data centres, cloud infrastructure and high-performance computing. In contrast, semiconductor sales in Europe remain comparatively subdued, reflecting the region’s smaller footprint in high-end chip manufacturing, weaker industrial demand, and the ongoing impact of slower economic growth. While semiconductors are inherently cyclical, markets have increasingly interpreted the current rebound elsewhere as structural rather than purely cyclical—underpinned by the belief that AI represents a transformative and durable source of demand growth.

260205Z4.jpg

**Large-Scale AI Models**
The next chart illustrates the rapid proliferation of large-scale AI models globally, with newly updated data for 2025 pointing to a further sharp acceleration in development activity. The United States continues to lead by a wide margin, while China has also seen a steep rise in model deployment in recent years, underscoring the intensifying technological competition between the two economies. Growth in the UK and other regions has been more modest by comparison, highlighting the increasingly concentrated nature of AI innovation. Taken together with the surge in semiconductor sales, these trends help explain the market’s strong preoccupation with AI as a potential driver of future productivity and investment cycles—although the geographic concentration of activity also raises questions about the uneven distribution of any resulting economic gains.

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**An AI Bubble?** 
The final chart draws on the latest Blue Chip Financial Forecasts special questions, highlighting market participants’ perceptions of the economic gains likely to be delivered by artificial intelligence. While a sizeable share of respondents still believe that financial markets may be overestimating AI’s potential benefits, an increasing proportion now judge current expectations to be broadly accurate, with only a small minority viewing the gains as underestimated. Notably, this represents a softening in scepticism compared with the survey results from last month, when concerns about excessive market optimism were more pronounced. The shift suggests a growing acceptance that AI-related investment and innovation could translate into meaningful economic impacts—though uncertainty remains high around the scale, timing and distribution of these gains.

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Financial markets have experienced renewed gyrations in recent weeks, as shifting geopolitical risks, questions around Federal Reserve independence, renewed talk of US dollar “debasement,” and ongoing enthusiasm surrounding artificial intelligence have combined to drive volatility across asset classes. These cross-currents have also contributed to a degree of rotation away from high-flying technology stocks, as investors reassess valuations and the timing of anticipated AI-driven gains. Against this backdrop, the charts in this week’s COTW highlight several important themes. Policy rate expectations now appear more balanced globally, marking a clear shift away from the one-sided easing bias of the past two years (chart 1), even as resilient US data—underscored by the unexpected jump in the January ISM index and a run of positive economic surprises—continues to complicate the outlook for monetary easing (chart 2). At the same time, US financial conditions remain relatively benign, with limited evidence of widespread credit stress or aggressive tightening in lending standards (chart 3). Meanwhile, the sharp rebound in semiconductor sales and the accelerating rollout of large-scale AI models underscore why investors remain so focused on the AI narrative, even as Europe lags behind due to weaker industrial momentum and a smaller footprint in advanced chip production (charts 4 and 5). Finally, while some scepticism about AI’s ultimate economic impact persists, the latest survey results suggest a moderation in concerns that markets are materially overestimating its gains (chart 6). Taken together, these developments paint a picture of a US economy that remains more resilient than many had anticipated, set against a financial landscape increasingly shaped by powerful—if sometimes competing—narratives around geopolitics, policy, and technological transformation.

Charts of the Week: Balanced Policy, Resilient Data and AI Narratives

Robert Brusca

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With the December report, Germany’s production and some of the early European industrial production data reveal a good deal of chaos in terms of the embedded trends. On the month, German industrial production fell by 1.9%, with consumer goods output up by 0.5%, capital goods output falling by 5.3%, and intermediate goods output falling by 1.2%. Among the early reporters in the monetary union—France, Spain, and Portugal—only Spain showed an increase in manufacturing IP in December; however, Spanish industrial production is notoriously volatile.

**Broader IP trends in Germany and elsewhere in Europe**
As for other early industrial production reporters, both Sweden and Norway showed strong-to-solid gains in December and each of them showed two-months of gains in a row. Beyond that, sequential growth rates from 12-months to six-months to three-months show accelerating growth in German consumer goods output against decelerating growth for intermediate goods. Real manufacturing output and real sales show mixed results- no clear trends; however, real manufacturing orders in Germany are off the map strong. 

**German manufacturing/industrial Surveys**
German industrial surveys from the IFO for manufacturing shows persistent weakening as well as for IFO manufacturing expectations, and in the EU Commission industrial index in the last three months. More broadly, Germany shows some modest but ongoing step up all of these based on average levels from 12-months to six-months to three-months for IFO expectations and the EU Commission industrial readings with mixed results for other survey readings.

**IP trends in Europe**
For the early reporting EMU members France, Spain, and Portugal, who report industrial production trends, each show mixed monthly trends against ongoing decelerations for manufacturing output over the broader sequential periods (12-month, to 6-month, to 3-month). However, for other Europe, Sweden and Norway, manufacturing trends are steadily accelerating on this broader timeline.

**A feeling of ‘Deja- What?’**
These combinations of opposed trends mixed with a lack of trends leave us with this sense of confusion about what's going on in manufacturing. For Germany, the extreme strength in orders is reassuring since orders should be forward-looking rather than backward-looking or even contemporaneous. But orders can also be a fickle series and so we'll have to watch it to see if the trends for German orders hold up.

**Current quarter-What’s been happening now**
In addition, current quarter growth for Germany actually looks quite good with industrial production up 3.7% at an annual rate in the current quarter, led by output increases in manufacturing against a decline in the intermediate goods output. Real orders in the quarter are surging at a 44% growth rate, while real sales in manufacturing only had a 0.1% uptick at an annual rate. The industrial indicators for Germany in the quarter show weakness or flatness with the only exception being IFO manufacturing expectations that advanced by a small amount. The three EMU members who report industrial production data show positive growth in the just-completed quarter except for Portugal where industrial production is falling at a 2.9% rate in the fourth quarter. Sweden and Norway, European countries but not monetary union members, show a strong 22% annual rate gain in Sweden against the 3% annual rate decline in Norway.

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**Rankings**
**How growth rates stack up…**
Moving away from short-term trends, the rankings of growth rates of these various metrics using 12-month growth rates on data back to 2006, show below-median growth rates for German industrial production and all three of its major sectors. All of them have rankings below the 50% mark where the median resides. Germany’s manufacturing output growth rate is below its median as is the growth of real sales; and once again real manufacturing orders break out and show a stunning 90th percentile standing, extremely strong compared to other growth rates on this period.

**Indicator rankings are poor**
However, the survey based industrial indicators for Germany, ranked based on their index levels, are all extremely weak and much weaker than German sector or other German metrics. The strongest indicator reading is the 29th percentile standing for IFO manufacturing expectations while the current ZEW index, IFO manufacturing index, and the EU Commission industrial readings, all reside below their 15th percentile. The survey rankings suggest that industrial sentiment is in much worse shape than activity and growth.

**IP elsewhere in Europe**
However, the growth ranking of manufacturing industrial production for the reporting EMU members and other European members are all quite solid, with percentile standings ranging from the 66th up to the 93rd percentile.

**Summing up**
From these data, Germany emerges as the weak economy compared with historic norms based on industrial production growth and indicator readings. However, there's a glimpse of positivity from the growth of real orders, and at the same time, some concern about ongoing sentiment for manufacturing in Germany as distinct from actual performance.

Germany

German IP Reveals Chaotic Trends

Winnie Tapasanun

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**Total job openings** fell 5.6% m/m (-12.9% y/y) to 6.542 million in December after a downwardly revised 7.0% decline to 6.928 million in November (previously -4.1% m/m; 7.146 million), according to the Job Openings and Labor Turnover Survey. December marked the third consecutive m/m fall and the lowest level since September 2020. The job openings rate declined to 3.9% in December, the lowest since April 2020, from 4.2% in November, remaining below a record-high 7.4% in March 2022. This rate is calculated as the ratio of job openings to total nonfarm employment plus openings. Significantly, the drop in job openings also lowered the **ratio of job openings to unemployed individuals** to 0.872 in December—the lowest since March 2021—from 0.890 in November, down from 1.085 in December 2024 and a pre-pandemic 1.211 in February 2020. A reading of 0.872 implies there were about 0.87 open jobs per unemployed person—indicating fewer openings than unemployed workers. December was the fifth time in six months that this ratio remained below 1.0.

**Private sector job openings** fell 6.8% (-12.5% y/y) to 5.804 million in December after a 6.6% fall to 6.227 million in November, registering the third successive m/m decline and the lowest level since September 2020. The private sector job openings rate fell to 4.1% in December, the lowest since April 2020, from 4.4% in November. The December m/m decline in private sector openings reflected drops of 27.7% (-36.9% y/y) in financial activities, 20.2% (-25.5% y/y) in professional & business services, 14.4% (-5.1% y/y) in trade, transportation & utilities, and 5.2% (-12.4% y/y) in private educational & health services. To the upside, private sector openings in the following categories rose m/m in December: other services (21.1%; 11.0% y/y), mining & lodging (17.6%; 0.0% y/y), information (13.5%; -4.7% y/y), manufacturing (8.5%; 0.5% y/y), leisure & hospitality (7.5%; -17.2% y/y), and construction (2.8%; 42.4% y/y). Meanwhile, government job openings rose 5.3% (-15.6% y/y) in December, the first m/m rise in three months, after a 10.6% drop in November.

**Total hiring** rebounded 3.4% (-1.5% y/y) to 5.293 million in December, the first m/m increase since September, following a 4.6% decrease to 5.121 million in November. The hiring rate edged up to 3.3% in December from 3.2% in November, though it remained below pre-pandemic levels. **Private sector hiring** rose 3.1% (-0.4% y/y) to 4.978 million in December, the third m/m rise in four months, after a 4.0% decline to 4.826 million in November. The private sector hiring rate rose to 3.7% in December from 3.5% in November, the same as in October and September. The December m/m increase in private sector hiring was led by a 32.1% jump (42.3% y/y) in information, followed by gains of 24.0% (-4.6% y/y) in financial activities, 23.5% (0.0% y/y) in mining & lodging, 6.5% (-4.8% y/y) in private educational & health services, 4.2% (-4.9% y/y) in trade, transportation & utilities, 3.6% (6.1% y/y) in construction, 3.4% (7.9% y/y) in leisure & hospitality, and 1.8% (-4.3% y/y) in manufacturing. To the downside, private sector hiring in professional & business services (-5.2%; +0.5% y/y) and other services (-4.3%; -16.5% y/y) declined m/m in December. Meanwhile, government hiring rebounded 6.4% (-16.3% y/y) in December, the first m/m rise since September, following a 13.5% drop in November.

**Total separations** rose 2.1% (3.3% y/y) to 5.251 million in December after a 1.5% rise to 5.144 million in November, marking the third m/m increase in four months and the highest level since September. The total separations rate edged up to 3.3% after holding at 3.2% in November and October. Private sector separations rose 1.6% (4.2% y/y) to 4.932 million in December, the highest level since June, while government sector separations jumped 10.4% (-9.1% y/y) to 319,000 following two consecutive m/m declines. **Total quits** (voluntary separations initiated by the employee) increased 0.3% (3.5% y/y) to 3.204 million in December, the third m/m rise in four months and the highest level since June, after a 7.4% rebound in November. The quits rate (a measure of workers’ willingness or ability to leave jobs) held at 2.0% in December and November, slightly below 2.3% in February 2020. Private sector quits eased 0.2% (+4.5% y/y) following an 8.4% November rebound. **Layoffs and discharges** (involuntary separations initiated by the employer) increased 3.6% (5.6% y/y) to 1.762 million in December, up for the third time in four months, after an 8.1% drop in November. The layoffs & discharges rate remained at 1.1% in December and November, marginally below 1.3% in February 2020. Private sector layoffs grew 4.3% (7.8% y/y) following a 7.3% November decrease.

The Job Openings and Labor Turnover Survey (JOLTS) data are available in Haver’s **USECON** database.

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- Job openings down 5.6% (-12.9% y/y) to 6.542 mil., third straight m/m decline.
- Hiring up 3.4% (-1.5% y/y) to 5.293 mil., first m/m increase since September.
- Separations rise to a three-month high; quits reach a six-month high; layoffs rebound.

U.S. JOLTS: Openings Drop to Lowest Level Since Sept. ’20; Hiring Rebounds in December

Sandy Batten

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Initial claims for unemployment insurance jumped 22,000 to 231,000 in the week ended January 31 following an unrevised 209,000 in the prior week. The four-week average rose to 212,250 from 206,250. The Action Economics Forecast Survey looked for 213,000 claims to have been filed. Winter Storm Fern and the accompanying very cold temperatures could have provided a temporary boost. Historically speaking, claims remain at low levels.

The total number of unemployment insurance beneficiaries—also known as “continuing claims”—increased by 25,000 to 1.844 million in the week ending January 24, from a downwardly revised 1.819 million in the prior week (previously 1.827 million). The insured unemployment rate remained at 1.2% in the week of January 24, unchanged from the previous eight weeks.

The insured unemployment rate varied greatly across individual states and territories. In the week ending January 17, the highest unemployment rates were in Rhode Island (2.83%), New Jersey (2.77%), Massachusetts (2.67%), Washington (2.54%), and Minnesota (2.45%). The lowest rates were in Florida (0.30%), North Carolina (0.42%), Louisiana (0.43%), Alabama (0.46%), and Arkansas (0.47). Rates in other notable states include Illinois (2.15%), California, (2.08%), New York (2.02%), Pennsylvania (1.91%), and Texas (1.09%). These state data are not seasonally adjusted.

Data on weekly unemployment claims are from the Department of Labor itself, not the Bureau of Labor Statistics. They begin in 1967 and are contained in Haver’s **WEEKLY** database and summarized monthly in **USECON**. Data for individual states are in **REGIONW** back to December 1986.

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- New claims jumped 22,000 to 231,000, the highest level since December 6.
- Continuing claims rose to 1.844 million from 1.819 million.

U.S. Initial Unemployment Claims Surged in Latest Week

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German real orders in December adjusted for inflation rose strongly again, gaining 7.8% month-to-month after rising 5.7% month-to-month in November. Foreign orders were up by 5.6% in December compared to 5.2% in November. Domestic orders surged by 10.7% in December after rising 6.4% in November and 10% in October.

**Real sales**
Real sales were mixed in December with overall sales falling 1.4% month-to-month mostly on weakness in capital goods sales.

**Broad categorical acceleration**
Many flows are accelerating this month. Sequential growth rates show acceleration. Total real orders accelerate from a year ago, to the current year, to six-months, and to three-months. Sales growth rates for consumer goods, consumer nondurables, and intermediate goods all show accelerations in gear. The exceptions are foreign orders that are not as strong over six months compared to their 12-month growth. And on the sales side, consumer durables sales and capital goods sales are weak.

**Quarter-to-quarter**
Quarterly annualized growth is complete for Q4 with this report. Foreign orders are the ‘weak flow’ expanding at a 13.6% annual rate – certainly not a weak growth rate. But domestic real orders are up at an astounding 101.9% annual rate. The net impact on the total real orders growth is to lift it to a pace of 44.1%. 

**Order ranking is very strong**
The table provides two rankings: one based on the level of variables and the other based on its year-on-year growth. The rankings this month for real orders overall, foreign, and domestic orders all reside in their top 80th to 90th percentiles- extremely strong based on level or growth. Sales do not follow suit. This gives us some reason to suspect that there is some lumpiness involved in the manufacturing data as distinct from strength. That will be something to watch. Overall mining and manufacturing sales growth is essentially at its historic median at a rank of 49.8. However, capital goods, intermediate goods and manufacturing sales all have rankings at or above their medians - as high as a 61-percentile standing for capital goods.

**Industrial confidence**
Industrial confidence for Germany, France, Italy and Spain (the EU’s big-four economies) show rankings based on these survey levels that are much lower at the 11th percentile for Germany, the 42nd and 36th percentiles, for France and Italy, respectively. Spain scores better with a 61.8 percentile standing on its industrial confidence measure. 

On balance, there is now an accelerating profile that is broad in sales trends and especially strong order trends. Perhaps Europe, under the pressure to stimulate its miliary capabilities, has a core of demand to help drive output ahead more consistently. This is something to watch in the coming months.

Economy in Brief: 2003

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