Gerald D. Cohen

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Output per hour in the nonfarm business sector was revised down to a 0.4% gain at a seasonally adjusted annual rate in Q1'18 (1.3% year-on-year), from the previously reported 0.7% increase. In Q4'17 productivity grew at an unrevised 0.3% rate. The consensus in the Action Economics Forecast Survey looked for a Q1 gain of 0.7%. First quarter output was revised slightly lower to a 2.7% rate (3.6% y/y), while hours worked were revised up to a 2.3% pace (2.3% y/y).

Unit labor costs were revised higher in both Q1’18 and Q4’17 to 2.9% (1.3% y/y) and 2.5% respectively. A 2.8% rise in Q1 had been expected in the Action Economics survey. Compensation costs were revised slightly lower to 3.3% (2.6% y/y), following an upwardly revised 2.9% gain.

In the manufacturing sector, productivity was revised substantially lower to a 1.2% annualized decline in Q1 (+0.3% y/y). The fourth quarter’s advance was revised down to 4.3%. Output increased at a downwardly revised 1.7% pace in Q1 (2.0% y/y) after 5.4% in Q4. Hours worked grew a slightly faster 2.9% (1.7% y/y) following 1.1% in Q4.

Unit labor costs in the factory sector rose at a 5.2% rate in Q1 (2.5% y/y), following a 0.2% increase. Compensation per hour grew 3.9% (2.9% y/y) following a 4.5% gain.

The productivity & cost figures are available in Haver's USECON database. The expectations figures are from the Action Economics Forecast Survey and are found in the AS1REPNA database.


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<table class="centered" width="100%" border="0" cellspacing="0">
	<colgroup><col><col><col><col><col><col><col><col></colgroup>


 <thead>
 <tr>
 <th class="firstcol" scope="col" >Productivity &amp; Costs
 (SAAR, %)</th>
 <th>Q1'18</th>
 <th>Q4'17</th>
 <th>Q3'17</th>
 <th>Q1'18 Y/Y</th>
 <th>2017</th>
 <th>2016</th>
 <th>2015</th>
 </tr>
 </thead>
 <tbody>
 <tr class="grey3">
 <td class="firstcol" colSpan="8" >Nonfarm Business Sector</td>
 </tr>
 <tr>
 <td class="firstcol" >Output per Hour (Productivity)</td>
 <td >0.4</td>
 <td >0.3</td>
 <td >2.6</td>
 <td >1.3</td>
 <td >1.3</td>
 <td >0.0</td>
 <td >1.2</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >Compensation per Hour</td>
 <td >3.3</td>
 <td >2.9</td>
 <td >3.6</td>
 <td >2.6</td>
 <td >1.7</td>
 <td >1.1</td>
 <td >3.1</td>
 </tr>
 <tr>
 <td class="firstcol" >Unit Labor Costs</td>
 <td >2.7</td>
 <td >2.5</td>
 <td >1.0</td>
 <td >1.3</td>
 <td >0.4</td>
 <td >1.1</td>
 <td >1.8</td>
 </tr>
 <tr class="grey3">
 <td class="firstcol" colSpan="8" >Manufacturing Sector</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >Output per Hour (Productivity)</td>
 <td >-1.2</td>
 <td >4.3</td>
 <td >-5.0</td>
 <td >0.3</td>
 <td >0.7</td>
 <td >0.3</td>
 <td >-1.5</td>
 </tr>
 <tr>
 <td class="firstcol" >Compensation per Hour</td>
 <td >3.9</td>
 <td >4.5</td>
 <td >0.7</td>
 <td >2.9</td>
 <td >1.7</td>
 <td >0.7</td>
 <td >2.5</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >Unit Labor Costs</td>
 <td >5.2</td>
 <td >0.2</td>
 <td >6.0</td>
 <td >2.5</td>
 <td >1.0</td>
 <td >0.4</td>
 <td >4.1</td>
 </tr>
 </tbody>
 </table>
 
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Output per hour in the nonfarm business sector was revised down to a 0.4% gain at a seasonally adjusted annual rate in Q1'18 (1.3% year-on-year), from the previously reported 0.7% increase. In Q4'17 productivity grew at an unrevised [...]

U.S. Productivity Revised Lower in Q1; Unit Labor Costs Revised Higher

Tom Moeller

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<a href="http://haver.com/comment/Moeller.html">Tom
Moeller</a>&nbsp;&nbsp; June 7, 2018
Initial claims for unemployment insurance eased to 222,000
during the week ended June 1 from 223,000 during the prior week, revised from
221,000. Expectations in the Action Economics Forecast Survey were for 220,000
claims. The four-week moving average of claims rose to 225,500, its highest
level since late April. During the last ten years, there has been a 73%
correlation between the level of initial claims and the month-to-month change in
nonfarm payroll employment.
In the week ending May 26, continuing claims for unemployment
insurance rose to 1.741 million from a little-revised 1.720 million. The
four-week moving average of claimants fell to 1.729 million from 1.752 million,
the lowest since December 1973.
The insured rate of unemployment remained at the record low
of 1.2% for a fourth consecutive week.
Insured rates of unemployment varied widely by state. During
the week ended May 18, the lowest rates were in South Dakota (0.26%), Nebraska
(0.37%), North Carolina (0.45%), Florida (0.45%) and Indiana (0.46%). The
highest rates were in Pennsylvania (1.59%), Connecticut (1.92%), California (
1.95%), New Jersey (2.02%) and Alaska (2.61%). These state data are not
seasonally adjusted.
Data on weekly unemployment insurance are contained in
Haver's WEEKLY database, and they are summarized monthly in USECON.
Data for individual states are in REGIONW. The expectations figure is
from the Action Economics Forecast Survey, carried in the AS1REPNA
database.
<table width="1871" class="centered" border="0" cellSpacing="0">
 <thead>
 <tr>
 <th class="firstcol" width="736">Unemployment Insurance (SA, 000s)</th>
 <th width="161">06/01/18</th>
 <th width="161">05/26/18</th>
 <th width="161">05/19/18</th>
 <th width="162">Y/Y %</th>
 <th width="162">2017</th>
 <th width="162">2016</th>
 <th width="162">2015</th>
 </tr>
 </thead>
 <tbody>
 <tr>
 <td class="firstcol" width="736">Initial Claims</td>
 <td align="center" width="161">222</td>
 <td align="center" width="161">223</td>
 <td align="center" width="161">234</td>
 <td align="center" width="162">-9.8</td>
 <td align="center" width="162">245</td>
 <td align="center" width="162">262</td>
 <td align="center" width="162">278</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" width="736">Continuing Claims</td>
 <td align="center" width="161">--</td>
 <td align="center" width="161">1,741</td>
 <td align="center" width="161">1,720</td>
 <td align="center" width="162">-10.1</td>
 <td align="center" width="162">1,961</td>
 <td align="center" width="162">2,135</td>
 <td align="center" width="162">2,266</td>
 </tr>
 <tr>
 <td class="firstcol" width="736">Insured Unemployment Rate (%)</td>
 <td align="center" width="161">--</td>
 <td align="center" width="161">1.2</td>
 <td align="center" width="161">1.2</td>
 <td align="center" width="162">
 1.4 
 (Jun 2017)
 </td>
 <td align="center" width="162">1.4</td>
 <td align="center" width="162">1.6</td>
 <td align="center" width="162">1.7S</td>
 </tr>
 </tbody>
</table>


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Initial claims for unemployment insurance eased to 222,000 during the week ended June 1 from 223,000 during the prior week, revised from 221,000. Expectations in the Action Economics Forecast Survey were for 220,000 claims. The four- [...]

U.S. Initial Unemployment Insurance Applications Slip

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The U.S. trade deficit in goods and services fell to $48.20
billion during April from $47.21 billion during March, revised from $48.96
billion. It was the smallest deficit since September. A $49.0 billion April
deficit had been expected in the Action Economics Forecast Survey. Last quarter,
improvement in the trade deficit had a modestly positive effect on real GDP
growth following a sharply negative effect in Q4'17.&nbsp; Exports improved 0.3%
(9.9% y/y) following a revised 2.2% gain. Imports eased 0.2% (+8.0% y/y) after a
1.4% decline. Foreign trade data were revised back to 2010. 
The deficit on goods trade eased to $67.34 billion from $68.52
billion. Exports of goods gained 0.2% (11.3% y/y) following a 2.2% rise. Exports
of foods, feeds &amp; beverages jumped 5.6% (8.5% y/y) following an 8.2% surge.&nbsp;
Exports of industrial materials rose 3.0% (21.4% y/y) following a 3.0% increase.
Nonauto consumer goods exports were up 0.4% (7.6% y/y) following a 2.4% rise. To
the downside, exports of motor vehicles &amp; parts fell 1.5% (+10.3 y/y)
following a 2.3% decline. Capital goods exports declined 3.0% (+5.8% y/y) and
reversed a 3.9% rise.
Imports of goods slipped 0.4% (+8.0% y/y) following a 1.4%
drop. Working lower were nonauto consumer product imports which fell 5.1% (+3.0%
y/y) following a 1.8% drop. Motor vehicle &amp; parts imports were off 2.9% (+0.7%
y/y) after a 0.6% fall. Foods, feeds &amp; beverage imports fell 0.5% (+7.9%
y/y) after a 1.9% decline. Increasing were capital goods imports which improved
0.7% (10.3% y/y) after a 1.9% drop. Industrial supplies &amp; materials imports
rose 2.5% (15.2% y/y) after a 0.8% fall. 
All non-petroleum goods imports declined 0.9% (+6.6% y/y) after
a 1.4% fall. Petroleum imports increased 4.9% (24.7% y/y) following two months
of decline. The per barrel cost of crude oil rose to $54.50 (20.0% y/y), up from
a $27.49 low in February 2016. The value of energy-related petroleum product
imports increased 6.3% (24.6% y/y) after a 9.6% rise. The quantity of
energy-related product imports rose 4.4% (3.3% y/y) after a 10.7% increase.
The surplus on services trade was unchanged at $22.2 billion
in April. Services exports increased 0.6% (8.6% y/y) after a 1.2% decline Travel
exports eased 0.3% (+2.6% y/y) after a 0.1% slip. Charges for the use of
intellectual property gained 0.8% (5.8% y/y) after a 0.8% rise. Transport
exports gained 1.0% (8.9% y/y) following a 0.4% decline.
Imports of services rose 0.6% (8.6% y/y) after a 1.2% decline.
Charges for the use of intellectual property increased 1.6% (22.1% y/y) after a
15.5% decline. U.S. residents' travel abroad held steady (8.1% y/y) following a
1.6% increase. Transport charges strengthened 1.6% (6.0% y/y), after a 0.2% gain.
By country, the goods trade deficit with China deepened m/m
to $28.0 billion in April (NSA) after a $25.9 billion deficit in March. Exports
rose 4.7% y/y while imports rose 2.0% y/y. The deficit with the European Union
deepened m/m to $14.6 billion (NSA) from $12.1 billion. Exports increased 17.2%
y/y and imports rose 16.0% y/y. The trade deficit with Japan eased m/m to $6.3
billion (NSA) from $6.4 billion as exports declined 2.2% y/y and imports increased 8.1%
y/y.
The international trade data can be found in Haver's USECON
database. Detailed figures are available in the USINT database. The
expectations figures are from the Action Economics Forecast Survey, which is
carried in AS1REPNA.
<table width="1871" class="centered" border="0" cellSpacing="0">
 <thead>
 <tr>
 <th class="firstcol" scope="col" width="746">Foreign Trade in Goods &amp;
 Services (Current $)</th>
 <th width="160">Apr</th>
 <th width="160">Mar</th>
 <th width="160">Feb</th>
 <th width="160">Y/Y</th>
 <th width="160">2017</th>
 <th width="160">2016</th>
 <th width="161">2015</th>
 </tr>
 </thead>
 <tbody>
 <tr>
 <td class="firstcol" scope="col" width="746">U.S. Trade Deficit</td>
 <td align="center" width="160">$46.20 bil.</td>
 <td align="center" width="160">$47.21 bil.</td>
 <td align="center" width="160">$55.54 bil.</td>
 <td align="center" width="160">$45.07 bil. 
 (4/17)</td>
 <td align="center" width="160">$552.28 bil.</td>
 <td align="center" width="160">$502.00 bil.</td>
 <td align="center" width="161">$498.53 bil.</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" width="746">Exports of Goods &amp; Services (% Chg)</td>
 <td align="center" width="160">0.3</td>
 <td align="center" width="160">2.2</td>
 <td align="center" width="160">1.8</td>
 <td align="center" width="160">9.9</td>
 <td align="center" width="160">6.1</td>
 <td align="center" width="160">-2.5</td>
 <td align="center" width="161">-4.6</td>
 </tr>
 <tr>
 <td class="firstcol" width="746">Imports of Goods &amp; Services (% Chg)</td>
 <td align="center" width="160">-0.2</td>
 <td align="center" width="160">-1.4</td>
 <td align="center" width="160">2.4</td>
 <td align="center" width="160">8.0</td>
 <td align="center" width="160">6.8</td>
 <td align="center" width="160">-1.9</td>
 <td align="center" width="161">-3.5</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" width="746">&nbsp;&nbsp;Petroleum (% Chg)</td>
 <td align="center" width="160">4.9</td>
 <td align="center" width="160">-2.0</td>
 <td align="center" width="160">-0.9</td>
 <td align="center" width="160">24.7</td>
 <td align="center" width="160">27.2</td>
 <td align="center" width="160">-19.5</td>
 <td align="center" width="161">-45.5</td>
 </tr>
 <tr>
 <td class="firstcol" width="746">&nbsp; Nonpetroleum Goods (% Chg)</td>
 <td align="center" width="160">-0.9</td>
 <td align="center" width="160">-1.4</td>
 <td align="center" width="160">2.9</td>
 <td align="center" width="160">6.6</td>
 <td align="center" width="160">5.6</td>
 <td align="center" width="160">-1.2</td>
 <td align="center" width="161">2.2</td>
 </tr>
 </tbody>
</table>

&nbsp;
U.S. Mortgage Loan Applications Fall As Interest Rates
Rise 
by <a href="http://haver.com/comment/Moeller.html">Tom Moeller</a>&nbsp;
June 6, 2018
The Mortgage Bankers Association reported that its total
Mortgage Applications Volume Index was off 2.6% last week (-11.9% y/y),
following a similar fall during the prior week. It was the fifth consecutive
week of decline and left applications at the lowest level since December.
The effective interest rate on a 15-year mortgage increased
to 4.45% and remained up sharply from September's low of 3.46%. It was the
highest rate since April 2011. The effective rate on a 30-year fixed-rate loan
increased to 5.01%. The rate on a Jumbo 30-year loan rose to 4.93%. For
adjustable 5-year mortgages, the effective interest rate held steady w/w at
4.29%, up from the July 2016 low of 2.87%.
Purchase loan applications declined 2.0% (+2.4% y/y), after a
2.1% fall during the prior week. Applications to refinance were off 3.7% (-27.4%
y/y), also about the same as the week prior.
The average mortgage loan size rose to $301,400 (2.7% y/y).
For purchases, the average loan size increased to $390,200 (0.3% y/y); for
refinancings, it held steady at $267,500 (2.7% y/y).
Applications for adjustable-rate loans declined 26.9% y/y,
while applications for fixed-rate loans fell 10.6% y/y.
The survey covers over 75% of all U.S. retail residential
mortgage applications and has been conducted weekly since 1990. Respondents
include mortgage bankers, commercial banks and thrifts. The base period and
value for all indexes is March 16, 1990=100. The figures for weekly mortgage
applications and interest rates are available in Haver's SURVEYW
database.
<table width="1871" class="centered" border="0" cellSpacing="0">
 <thead>
 <tr>
 <th class="firstcol" scope="col" width="808">MBA Mortgage Applications (%,
 SA)</th>
 <th scope="col" align="center" width="151">06/01/18</th>
 <th scope="col" align="center" width="151">05/25/18</th>
 <th scope="col" align="center" width="151">05/18/18</th>
 <th scope="col" align="center" width="151">Y/Y</th>
 <th scope="col" align="center" width="151">2017</th>
 <th scope="col" align="center" width="152">2016</th>
 <th scope="col" align="center" width="152">2015</th>
 </tr>
 </thead>
 <tbody>
 <tr class="odd">
 <td class="firstcol" width="808">Total Market Index</td>
 <td align="center" width="151"></td>
 <td align="center" width="151"></td>
 <td align="center" width="151">-2.6</td>
 <td align="center" width="151">-11.9</td>
 <td align="center" width="151">-17.8</td>
 <td align="center" width="152">15.6</td>
 <td align="center" width="152">17.9</td>
 </tr>
 <tr>
 <td class="firstcol" width="808">&nbsp;Purchase</td>
 <td align="center" width="151"></td>
 <td align="center" width="151"></td>
 <td align="center" width="151">-2.0</td>
 <td align="center" width="151">2.4</td>
 <td align="center" width="151">5.6</td>
 <td align="center" width="152">13.3</td>
 <td align="center" width="152">15.5</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" width="808">&nbsp;Refinancing</td>
 <td align="center" width="151"></td>
 <td align="center" width="151"></td>
 <td align="center" width="151">-3.7</td>
 <td align="center" width="151">-27.4</td>
 <td align="center" width="151">-34.0</td>
 <td align="center" width="152">17.3</td>
 <td align="center" width="152">19.7</td>
 </tr>
 <tr>
 <td class="firstcol" width="808">15-Year Mortgage Effective Interest Rate
 (%)</td>
 <td align="center" width="151"></td>
 <td align="center" width="151"></td>
 <td align="center" width="151">4.45</td>
 <td align="center" width="151">3.56 (May'17)</td>
 <td align="center" width="151">3.59</td>
 <td align="center" width="152">3.22</td>
 <td align="center" width="152">3.3</td>
 </tr>
 </tbody>
</table>


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The U.S. trade deficit in goods and services fell to $48.20 billion during April from $47.21 billion during March, revised from $48.96 billion. It was the smallest deficit since September. A $49.0 billion April deficit had been [...]

U.S. Trade Deficit Declines Modestly

Robert Brusca

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The trend for Spain’s industrial output shows ongoing increases since 2014. The headline index for industrial production, the mining sector and the index for all manufacturing show secular deterioration in their respective growth rates. But that is an unreliable signal for Spain where large monthly changes can dominate even a three month growth rate. Still, Spain shows sequential declines in growth rates of output for consumer goods intermediate goods and for investment goods. On a monthly basis there are declines in at least two and in most cases three of the three most recent three months by sector. So while volatility plays a role in Spain, weakness recently is also the result of a more protracted soft spot in the data. That explains why the monthly annualized growth rates by sector are all in the neighborhood of -30%.

However, both Spain’s manufacturing index and the Markit manufacturing PMI index for Spain are showing deteriorating trends over 12-months. Moreover, recalculating the data in the table from three-month averages does not change the pattern of weakness nor reverse the sequential deterioration in all three industrial production manufacturing sectors. Spain appears to have an authentic manufacturing slowdown in place not just one that is the artifact of one month’s severe weakness. The growth rates are damped by the averaging of the data but the progression to weakness is still very readily apparent.



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The change in the PMI index shows more weakness than does the IP gauge. But plotting the two together gives the volatility in industrial production a bit more of a framework that helps it to fit the paradigm of weakness to strength to weakness apparent in the PMI gauge since 2015.

Spain is having its own political problems. Long-serving Prime Minister Mariano Rajoy has just been forced out of office. A minority Socialist government has taken control. But even this new government needs a lot of help from its friends. Spain, for the time being, is next to rudderless. The socialists are minding their Ps and Qs and promising to stay in the Great European experiment and in EMU; they are making none of the noises we had previously heard from the new Italian governing arrangement. Still, the Right no longer rules; it has been replaced by the Left and that has to put Spain at greater risk to events, come what may.

Separately ECB Executive Board Member Peter Praet today said that the EMU was making progress toward its goal of just under 2% inflation. Maybe that’s true and maybe it’s wishful thinking. But that is the message that the ECB wants to convey. With political instability spreading in Europe and with the economic expansion losing steam central bank watching takes on a new and more important dimension. For now every central bank claims to be holding the course. We’ll see how long that can last.





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The trend for Spain’s industrial output shows ongoing increases since 2014. The headline index for industrial production, the mining sector and the index for all manufacturing show secular deterioration in their respective growth [...]

Volatile Spanish Industrial Output Declines in April

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The U.S. trade deficit in goods and services fell to $46.20
billion during April from $47.21 billion during March, revised from $48.96
billion. It was the smallest deficit since September. A $49.0 billion April
deficit had been expected in the Action Economics Forecast Survey. Last quarter,
improvement in the trade deficit had a modestly positive effect on real GDP
growth following a sharply negative effect in Q4'17. Exports improved 0.3%
(9.9% y/y) following a revised 2.2% gain. Imports eased 0.2% (+8.0% y/y) after a
1.4% decline. Foreign trade data were revised back to 2010.

The deficit on goods trade eased to $67.34 billion from $68.52
billion. Exports of goods gained 0.2% (11.3% y/y) following a 2.2% rise. Exports
of foods, feeds &amp; beverages jumped 5.6% (8.5% y/y) following an 8.2% surge.&nbsp;
Exports of industrial materials rose 3.0% (21.4% y/y) following a 3.0% increase.
Nonauto consumer goods exports were up 0.4% (7.6% y/y) following a 2.4% rise. To
the downside, exports of motor vehicles &amp; parts fell 1.5% (+10.3 y/y)
following a 2.3% decline. Capital goods exports declined 3.0% (+5.8% y/y) and
reversed a 3.9% rise.

Imports of goods slipped 0.4% (+8.0% y/y) following a 1.4%
drop. Working lower were nonauto consumer product imports which fell 5.1% (+3.0%
y/y) following a 1.8% drop. Motor vehicle &amp; parts imports were off 2.9% (+0.7%
y/y) after a 0.6% fall. Foods, feeds &amp; beverage imports fell 0.5% (+7.9%
y/y) after a 1.9% decline. Increasing were capital goods imports which improved
0.7% (10.3% y/y) after a 1.9% drop. Industrial supplies &amp; materials imports
rose 2.5% (15.2% y/y) after a 0.8% fall.

All non-petroleum goods imports declined 0.9% (+6.6% y/y) after
a 1.4% fall. Petroleum imports increased 4.9% (24.7% y/y) following two months
of decline. The per barrel cost of crude oil rose to $54.50 (20.0% y/y), up from
a $27.49 low in February 2016. The value of energy-related petroleum product
imports increased 6.3% (24.6% y/y) after a 9.6% rise. The quantity of
energy-related product imports rose 4.4% (3.3% y/y) after a 10.7% increase.

The surplus on services trade was unchanged at $22.2 billion
in April. Services exports increased 0.6% (8.6% y/y) after a 1.2% decline Travel
exports eased 0.3% (+2.6% y/y) after a 0.1% slip. Charges for the use of
intellectual property gained 0.8% (5.8% y/y) after a 0.8% rise. Transport
exports gained 1.0% (8.9% y/y) following a 0.4% decline.

Imports of services rose 0.6% (8.6% y/y) after a 1.2% decline.
Charges for the use of intellectual property increased 1.6% (22.1% y/y) after a
15.5% decline. U.S. residents' travel abroad held steady (8.1% y/y) following a
1.6% increase. Transport charges strengthened 1.6% (6.0% y/y), after a 0.2% gain.

By country, the goods trade deficit with China deepened m/m
to $28.0 billion in April (NSA) after a $25.9 billion deficit in March. Exports
rose 4.7% y/y while imports rose 2.0% y/y. The deficit with the European Union
deepened m/m to $14.6 billion (NSA) from $12.1 billion. Exports increased 17.2%
y/y and imports rose 16.0% y/y. The trade deficit with Japan eased m/m to $6.3
billion (NSA) from $6.4 billion as exports declined 2.2% y/y and imports increased 8.1% y/y.

The international trade data can be found in Haver's USECON
database. Detailed figures are available in the USINT database. The
expectations figures are from the Action Economics Forecast Survey, which is
carried in AS1REPNA.

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<table class="centered" width="100%" border="0" cellspacing="0">
	<colgroup><col><col><col><col><col><col><col><col></colgroup>

 <thead>
 <tr>
 <th class="firstcol" scope="col" >Foreign Trade in Goods &amp;
 Services (Current $)</th>
 <th>Apr</th>
 <th>Mar</th>
 <th>Feb</th>
 <th>Y/Y</th>
 <th>2017</th>
 <th>2016</th>
 <th>2015</th>
 </tr>
 </thead>
 <tbody>
 <tr>
 <td class="firstcol" scope="col" >U.S. Trade Deficit</td>
 <td>$46.20 bil.</td>
 <td>$47.21 bil.</td>
 <td>$55.54 bil.</td>
 <td>$45.07 bil. 
 (4/17)</td>
 <td>$552.28 bil.</td>
 <td>$502.00 bil.</td>
 <td>$498.53 bil.</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >Exports of Goods &amp; Services (% Chg)</td>
 <td>0.3</td>
 <td>2.2</td>
 <td>1.8</td>
 <td>9.9</td>
 <td>6.1</td>
 <td>-2.5</td>
 <td>-4.6</td>
 </tr>
 <tr>
 <td class="firstcol" >Imports of Goods &amp; Services (% Chg)</td>
 <td>-0.2</td>
 <td>-1.4</td>
 <td>2.4</td>
 <td>8.0</td>
 <td>6.8</td>
 <td>-1.9</td>
 <td>-3.5</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp;&nbsp;Petroleum (% Chg)</td>
 <td>4.9</td>
 <td>-2.0</td>
 <td>-0.9</td>
 <td>24.7</td>
 <td>27.2</td>
 <td>-19.5</td>
 <td>-45.5</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp; Nonpetroleum Goods (% Chg)</td>
 <td>-0.9</td>
 <td>-1.4</td>
 <td>2.9</td>
 <td>6.6</td>
 <td>5.6</td>
 <td>-1.2</td>
 <td>2.2</td>
 </tr>
 </tbody>
 </table>
 
</body></html>

The U.S. trade deficit in goods and services fell to $46.20 billion during April from $47.21 billion during March, revised from $48.96 billion. It was the smallest deficit since September. A $49.0 billion April deficit had been [...]

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The services PMIs from Markit finalized today and with that the composite (or total) PMIs also finalized. EMU and its two largest member economies show weakened Composite PMI readings. Japan’s composite weakened. China’s composite was steady, as its two sector indices, were unchanged. The US composite moved higher as manufacturing slipped and the services gauge moved higher. Within EMU Italy’s composite was unchanged and Spain’s was higher on a weaker manufacturing sector and stronger services.

EMU’s morphing in perspective 
Earlier in this cycle the 5-plus year rankings of the EMU gauges were all extremely strong with high rankings in their 90th percentile for all four of the largest EMU economies. The only exception was even in the midst of strength the German service sector was lagging. Now the German service sector on a diffusion reading of 52.1 in May has a 5.7% percentile standing. It has been this low or lower less than 6% of the time in the last four and one-half years. While German manufacturing is still at a solid 71 percentile rank standing itself, the total or composite German PMI has a standing that has been weaker less than 10% of the time. Because of the weight of Germany in EMU the EMU service sector now has only a 50.9 percentile standing barely above its four and one-half year median value. EMU manufacturing has a percentile standing in its low 70th percentile range but its composite PMI reading is at a very modest 58.6 percentile queue standing.

In addition Italy has both composite and manufacturing standings that reside at or near the lower one-third of their respective historic queue of values. Europe suddenly displays a lot of moderation as well as outright weakness in its PMI readings.

However, we have to be careful using rankings to tell us how strong a PMI gauge is. A PMI value of 52 or 53 or 57 actually means nothing to us. And the percentile rankings only give the raw diffusion readings meaning over some selected time period. The gauges take on life and meaning when we compare them to where they have been historically. But five years of data is not enough to give us a decisive positioning.

Drilling down to China 
Take China for example: China has been in a protracted slump. Its manufacturing PMI diffusion reading at 51.1, a rather low-seeming reading, has a percentile standing over the past four and one-half years in its 81st percentile- and that is relatively high standing for such a low raw diffusion reading. Together these metrics tell us not that manufacturing in China is strong but that manufacturing in China has been very weak, so weak that a reading of 51.1 garners an 81 queue percentile standing against that pale background. We can double check this prognosis by vetting it against a second China PMI that has a longer history. China’s second manufacturing PMI series is from The Federation of Logistics and Purchasing (TFLP). Its metric for May is 51.9 in that survey (instead of 51.1). That survey covers some 13 years. If we rank the 51.9 reading over 13 years it has a 58.6 percentile standing which sounds a bit more like it (than an 81 percentile standing). A reading of 51.1 in the longer TFLP series would have a 42 percentile standing (even weaker). However, looked at another way, the actual China Federation standing in May for the same period as the Markit readings produces a 96.2 percentile standing (even above the Markit 81st percentile standing)! This index confirms both that China is doing relatively well in this recent period and that against a broader background data China are not doing so well at all. Still, by the standards of the past four and one half years China is at least better.

The thrill is gone... 
On balance PMI data are not very encouraging any more. There is still growth. There is much less momentum. For EMU and its largest members the composite PMIs are lower than their respective 12-month averages. That is true for Japan too. China is at its 12-Mo average while the US boasts a stronger composite that its 12-month average on above average readings for each sector, manufacturing and services. The global economy has lost all the momentum it was showing at the end 2017 while the US has greater gains. Will these trends continue as the Federal Reserve in the US raises rates?

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The services PMIs from Markit finalized today and with that the composite (or total) PMIs also finalized. EMU and its two largest member economies show weakened Composite PMI readings. Japan’s composite weakened. China’s composite was [...]

Composite PMIs Show Wear and Tear

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The Bureau of Labor Statistics reported that the total job
openings rate during April was unchanged at 4.3%, but was higher than the 4.0%
rate twelve months earlier. (The job openings rate is the job openings level
as a percent of total employment plus the job openings level.) The hiring
rate rose to 3.8% and equaled the highest level since October 2007.
The private-sector job openings rate held steady at the
expansion high of 4.6%, and March was revised up from 4.5%. The rate rose in
professional &amp; business services (5.7%), leisure &amp; hospitality (5.5%)
and education &amp; health services (5.1%). The job openings rate in trade,
transportation and utilities held steady at 4.3%, and in the manufacturing
sector the job openings rate improved to 3.4%. In construction, the rate eased
to 3.1%. The job openings rate in the government sector slipped to 2.5%.
The level of job openings increased 1.0% (9.7% y/y) after
surging 9.1% in March. Private-sector openings improved 1.5% (9.9% y/y) to 6.117
million. Job opening increased 21.0% y/y in trade, transportation &amp;
utilities. Professional &amp; business services job openings gained 22.9% y/y
while leisure &amp; hospitality openings rose 11.0% y/y. Openings in education
&amp; health services increased 9.1% y/y and factory sector openings increased
20.9% y/y. To the downside, openings in construction eased 0.4% y/y. Openings in
government improved 6.8% y/y.
The private-sector hiring rate held steady at 4.1%, where
it's been for five of the last six months. The rate in leisure &amp; hospitality
(6.4%), professional and business services (5.7%) and trade, transportation
&amp; utilities (4.0%) remained firm. In construction, the rate rose to 4.9% and
in education &amp; health services, it improved to 2.9%. In the factory sector,
the rate eased to 2.7%. The government sector hiring rate held steady at 1.5%,
about where it's been since late 2016.
Total hiring increased 6.8% y/y. Hiring in the private sector
also increased 6.8% y/y led by a 14.4% y/y gain in professional &amp; business
services jobs. Factory sector hiring rose 11.3% y/y, but construction sector
employment declined 7.2% y/y. Leisure &amp; hospitality hiring improved 4.2% y/y,
while the number of education &amp; health services workers improved 2.4% y/y.
Hiring in the public sector increased 6.6% y/y.
The overall job separations rate was stable m/m to 3.6%,
about where it's been since 2015. It held at 4.0% in the private sector and
ticked up to 1.6% in government. The level of overall separations rose 5.8% y/y.
The level of layoffs increased 1.4% y/y, leaving the 1.2%
layoff rate up from March's record low of 1.0%. In the private sector, the
layoff rate rose to 1.3% and gained to 0.5% in the public sector.
The Job Openings &amp; Labor Turnover Survey (JOLTS) survey
dates to December 2000 and the figures are available in Haver's USECON
database.
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<table class="centered" width="100%" border="0" cellspacing="0">
	<colgroup><col><col><col><col><col><col><col><col></colgroup>
 <thead>
 <tr>
 <th class="firstcol" scope="col" ><a href="http://www.haverselect.com/dlx/USECON/@EB/@EB14/@EB14.HTM">JOLTS
 (Job Openings &amp; Labor Turnover Survey, SA)</a></th>
 <th scope="col" >Apr</th>
 <th scope="col" >Mar</th>
 <th scope="col" >Feb</th>
 <th scope="col" >Apr'17</th>
 <th scope="col" >Apr '16</th>
 <th scope="col" >Apr'15</th>
 </tr>
</thead>
<tbody>
 <tr class="grey3">
 <td class="firstcol" colSpan="7" >Job Openings, Total</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp;Rate (%)</td>
 <td >4.3</td>
 <td >4.3</td>
 <td >3.9</td>
 <td >4.0</td>
 <td >3.9</td>
 <td >3.8</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp;Total (000s)</td>
 <td >6,698</td>
 <td >6,633</td>
 <td >6,078</td>
 <td >6,108</td>
 <td >5,893</td>
 <td >5,625</td>
 </tr>
 <tr class="grey3">
 <td class="firstcol" colSpan="7" >Hires, Total</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp;Rate (%)&nbsp;</td>
 <td >3.8</td>
 <td >3.7</td>
 <td >3.7</td>
 <td >3.6</td>
 <td >3.6</td>
 <td >3.6</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp;Total (000s)</td>
 <td >5,578</td>
 <td >5,486</td>
 <td >5,511</td>
 <td >5,225</td>
 <td >5,243</td>
 <td >5,120</td>
 </tr>
 <tr class="grey3">
 <td class="firstcol" colSpan="7" >Layoffs &amp; Discharges,
 Total</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp;Rate (%)</td>
 <td >1.2</td>
 <td >1.0</td>
 <td >1.1</td>
 <td >1.2</td>
 <td >1.2</td>
 <td >1.3</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp;Total (000s)</td>
 <td >1,710</td>
 <td >1,547</td>
 <td >1,620</td>
 <td >1,687</td>
 <td >1,736</td>
 <td >1,793</td>
 </tr>
</tbody>
</table></html>

The Bureau of Labor Statistics reported that the total job openings rate during April was unchanged at 4.3%, but was higher than the 4.0% rate twelve months earlier. (The job openings rate is the job openings level as a percent of [...]

U.S. JOLTS: Job Openings Rate Holds Steady; Hires Rate Improves

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The pace of business activity in the service sector firmed
last month. The Composite Index of Nonmanufacturing Sector Activity from the
Institute for Supply Management (ISM) rose to 58.6 during May from an unrevised
56.8 in April. The Action Economics Forecast Survey expected a rise to 57.5 last
month. Despite being below the January high of 59.9, the index remained up
sharply versus the August 2016 low of 51.6. The ISM data are diffusion indexes
where readings above 50 indicate expansion.
Haver Analytics constructs a Composite Index using the
nonmanufacturing ISM index and the ISM factory sector measure released Tuesday.
This composite increased to 58.6 from 56.9 in both April and in May 2017. During
the last ten years, there has been a 71% correlation between this index and the
q/q change in real GDP.
Movement amongst the component series was all positive last
month. The business activity reading increased 61.3 and was improved versus the
2016 low. The new orders index rose modestly to 60.5 and also remained up versus
2016. The vendor delivery index rebounded and equaled the slowest rate of order
fulfillment since 2005.
The employment measure ticked higher m/m but remained near
the lowest level since April of last year. During the last ten years, there has
been an 87% correlation between the ISM nonmanufacturing sector jobs index and
the m/m change in private service plus construction sector payrolls. An
increased 26% (NSA) of industries reported a rising jobs level and a roughly
stable 14% indicated a decline.
The prices paid index increased to 64.3 and remained up
sharply versus its February 2016 low. A strengthened 41% (NSA) of firms reported
paying higher prices while five percent of firms reported paying less.
Amongst the other detail indexes, which are not seasonally
adjusted, the export order series declined sharply to the lowest level since
December. Nevertheless, it remained up sharply versus 2016. The import index
backed away from March's twelve-month high. The order backlog index surged to a
record high.
The ISM figures are available in Haver's USECON
database, with additional detail in the SURVEYS database. The
expectations figure from Action Economics is in the AS1REPNA database.

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<table class="centered" width="100%" border="0" cellspacing="0">
	<colgroup><col><col><col><col><col><col><col><col></colgroup>
 <thead>
 <tr>
 <th class="firstcol" scope="col" ><a href="http://www.haverselect.com/dlx/USECON/@EF/@EF03/@EF03.HTM">ISM
 Nonmanufacturing Survey (SA)</a></th>
 <th scope="col" >May</th>
 <th scope="col" >Apr</th>
 <th scope="col" >Mar</th>
 <th scope="col" >May'17</th>
 <th scope="col" >2017</th>
 <th scope="col" >2016</th>
 <th scope="col" >2015</th>
 </tr>
 </thead>
 <tbody>
 <tr>
 <td class="firstcol" >Composite Diffusion Index</td>
 <td>58.6</td>
 <td>56.8</td>
 <td>58.8</td>
 <td>57.1</td>
 <td>56.9</td>
 <td>54.9</td>
 <td>57.1</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp;&nbsp; Business Activity</td>
 <td>61.3</td>
 <td>59.1</td>
 <td>60.6</td>
 <td>60.6</td>
 <td>60.1</td>
 <td>58.0</td>
 <td>60.8</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp;&nbsp; New Orders</td>
 <td>60.5</td>
 <td>60.0</td>
 <td>59.5</td>
 <td>58.9</td>
 <td>59.3</td>
 <td>57.5</td>
 <td>59.2</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp;&nbsp; Employment</td>
 <td>54.1</td>
 <td>53.6</td>
 <td>56.6</td>
 <td>57.3</td>
 <td>55.2</td>
 <td>52.6</td>
 <td>56.0</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp;&nbsp; Supplier Deliveries (NSA)</td>
 <td>58.5</td>
 <td>54.5</td>
 <td>58.5</td>
 <td>51.5</td>
 <td>53.2</td>
 <td>51.5</td>
 <td>52.5</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >Prices Index</td>
 <td>64.3</td>
 <td>61.8</td>
 <td>61.5</td>
 <td>50.1</td>
 <td>57.7</td>
 <td>52.6</td>
 <td>50.6</td>
 </tr>
 </tbody>
</table>

&nbsp;

</body>

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The pace of business activity in the service sector firmed last month. The Composite Index of Nonmanufacturing Sector Activity from the Institute for Supply Management (ISM) rose to 58.6 during May from an unrevised 56.8 in April. The [...]

U.S. ISM Nonmanufacturing Index Improves

Incoming data surprising on downside in US; positive surprises elsewhere

FOMC expects more inflation and less growth than in March

With escalation of Israel/Iran conflict, geopolitical risk has recently surged while US trade policy uncertainty has ebbed

Renewed supply chain pressures point to a rebound in global inflation ahead

Apart from Japan, Blue Chip forecasters look for further significant monetary policy easing

Apart from the US, productivity is moribund

Financial market concerns ebb even though policy uncertainty continues to soar

US tariff revenues nearly doubled in April

Even with expected tariff-induced increases in inflation, BCFF forecasters look for a more aggressive round of monetary easing

USD/EUR exchange rate uncoupling from interest rate differential

Widespread downgrading of 2025 GDP outlook

Trade and fiscal policy uncertainty has exploded with the new administration

Much lower US electricity costs gives it a competitive advantage

Wage growth slowing in the US and Euro area; elevated and sticky in the UK

Stagflation-lite: Blue Chip forecasts below-trend growth and elevated inflation

US policy gyrations boosting policy uncertainty worldwide

Expected tariff hikes have boosted inflation expectations

US and Japan ended 2024 on solid ground in contrast to Europe

US economy expected to outperform other major economies in 2025

Only modest evidence of AI-related surge in US productivity growth

Previous Trump tariffs fading. A boost from new tariffs ahead?

Heavy US manufacturing states underperforming while Sun Belt states outperforming

Rising long-term yields a global phenomenon

US financial market concerns shifting from growth to inflation

Economic activity is picking up in the US but remains lackluster abroad

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Nonfarm payrolls increased 147,000 (1.1% y/y) during June after rising 144,000 in May, revised from 139,000, and 158,000 in April, revised from 147,000. Expectations had been for a 113,000 rise in the Action Economics Forecast Survey. The three-month average change of 150,000 in June compared to 232,000 in January.

Average hourly earnings rose 0.2% during June after an unrevised 0.4% May gain, and a 0.2% April increase. Earnings growth of 3.7% y/y is down from a high of 4.2% last November, and has been trending lower from the 5.9% high in March 2022. A 0.3% increase expected for June.

The unemployment rate, measured in the household survey, fell m/m to 4.1%. It compared to 4.2% in May where it had been for three straight months. A rise to 4.3% was expected. 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 7.7% last month from 7.8% In May. It was 6.6% in April 2023.

In the **establishment survey**, private-sector employment in June rose 74,000 (1.0% y/y) after a 137,000 May increase. Factory sector jobs declined 7,000 (-0.7% y/y) for the second consecutive month. Construction sector employment increased 15,000 (1.4% y/y), after rising 6,000 in May.

Private service-producing sector employment increased 68,000 (1.2% y/y) in June after improving 141,000 in May. Increases varied greatly amongst service sector categories. Private education & health sector employment rose 51,000 (3.3% y/y) last month while leisure & hospitality employment rose 20,000 (1.4% y/y). Trade, transportation & utilities employment gained 3,000 (0.6% y/y) and financial activities employment improved 3,000 (1.0% y/y).

Government sector payrolls strengthened 73,000 (1.5% y/y) last month following a 7,000 rise in May. State government employment increased 47,000 (2.8% y/y) while the number of local government jobs rose 33,000 (1.7% y/y). Federal government payrolls fell 7,000 (-2.1% y/y), the fifth straight monthly decline.

Private-sector average hourly earnings rose 0.2% (3.7% y/y) in June following unrevised increases of 0.4% in May and 0.2% in April. Earnings in the goods-producing sector edged 0.1% (3.6% y/y) higher. In construction earnings rose 0.4% (3.9% y/y) but factory sector earnings eased 0.1% (+3.5% y/y). In the private services-sector, earnings rose 0.2% (3.7% y/y) in June.

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The length of the average workweek shortened to 34.2 hours in June from 34.3 hours in May. The workweek in the goods-producing sector was unchanged at 39.8 hours. The construction sector average workweek eased to 38.9 hours while the factory sector workweek held steady at 40.1 hours. The average workweek in the private service sector eased to 33.1 hours.

In the **household survey**, the unemployment rate dipped to 4.1% in June from 4.2% in May as employment rose 96,000 and the size of the labor force declined 130,000, off for the second straight month. The labor force participation rate eased to 62.3% last month and remained below the high of 63.3% early in 2020. The rate for teenagers plunged to 35.1%, a five-year low. For workers aged 20-24, the rate declined to 71.0%. For workers aged 25-54, the participation rate edged up to 83.5%. For individuals 55 and over, the rate eased to nearly a 20-year low of 38.0% in June.

The employment/population ratio for all workers held steady at 59.7% last month. 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 improves with strength in state & local gov’t hiring.
- Earnings gain decelerates.
- Jobless rate falls to four-month low.

U.S. Job Growth Firms in June, While Earnings Growth & Jobless Rate Decline

Sandy Batten

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The U.S. trade deficit in goods and services (BOP basis) widened to $71.5 billion in May from a downwardly revised $60.3 billion in April (previously -$61.6 billion), according to the U.S. Census Bureau. The actual widening met the Action Economics Forecast Survey expectation. Exports fell 4.0% m/m (+5.3% y/y), the first monthly decline in five months, led by a 5.7% m/m decline in goods exports. Imports edged down 0.1% m/m (+3.3% y/y) in May after a 16.3% m/m plunge in April. Imports of goods have cooled markedly in the past two months after surging during Q1 as importers attempted to front run expected increases in tariffs.

The real (inflation adjusted) goods trade deficit widened to $92.5 billion (2017$) in May from $84.4 billion in April. The real trade deficit had widened to record levels during the first quarter with net exports subtracting 4.6%-points from Q1 GDP. The April/May figures put the real balance on course to narrow by roughly $150 billion in Q2 (at a quarterly rate), which would mean that net exports in the national accounts could add 2-1/2 to 3%-points to Q2 GDP.

The trade deficit in goods widened to $97.5 billion in May from $86.3 billion in April. Goods exports fell 5.7% m/m, the first monthly decline in five months. Exports of nonmonetary gold fell $5.5 billion (-56.4% m/m) while exports of finished metal shapes (which includes other forms of nonmonetary gold) fell $1.0 billion (-10.0% m/m). Both of these had surged in April, reflecting re-exports of previous nonmonetary gold imports that had risen markedly in Q1 in an attempt to front run expected tariff increases. More generally, exports of industrial supplies and materials slumped 13.3% m/m in May after a 16.1% m/m jump in April. Capital goods ex autos declined 3.1% m/m, and food exports fell 2.5% m/m, the fifth monthly decline in the past six months. In contrast, auto exports rebounded, rising 3.6% m/m, but failed to come close to reversing the 21.5% plunge in April. Exports of nonfood consumer goods ex autos posted a solid 6.9% monthly gain after having declined in each of the preceding two months.

Imports of goods edged down 0.1% m/m (+2.8% y/y) in May on top of a 19.9% monthly plunge in April, indicating that the surge in imports in Q1 ahead of expected tariff hikes has run its course. Auto imports jumped 10.3% m/m after a 19.9% monthly decline in April. Imports of “other” goods rebounded 8.4% m/m in May following a 3.3% m/m decline in April. In contrast, imports of industrial supplies and materials fell 1.8% m/m, the fourth consecutive monthly decline. Imports of nonfood consumer goods ex autos fell 5.7% m/m on top of a 32.0% drop in April. Food imports posted a small monthly decline while imports of capital goods ex autos posted a small increase.

The services trade surplus narrowed marginally to $25.99 billion in May from $26.05 billion in April. Exports of services slid 0.2% m/m after a 2.2% monthly increase in April. Exports of transport services fell 2.0% m/m, the third monthly decline in the past four months. Travel exports declined 1.8% m/m, the fourth monthly decline in the past five months. In contrast, maintenance services exports rose 2.1% m/m; exports of insurance services increased 1.5% m/m; exports of intellectual property rose 0.9% m/m; and construction service exports gained 1.4% m/m. Services imports declined 0.2% m/m in May, the first monthly decline in three months. Imported transport services fell 3.3% m/m, the fourth monthly decline in the past five months. Travel imports declined 1.0% m/m, also the fourth monthly decline in the past five months. In contrast, imported construction services jumped 3.9% m/m and imported intellectual property rose 1.6% m/m.

The U.S. goods trade deficit with China narrowed markedly to a seasonally adjusted $14.0 billion from $19.7 billion in April and $24.2 billion March. This is the smallest monthly deficit with China in the history of the series, which dates back to 2009. Exports to China plunged 19.9% m/m while imports from China plummeted 26.3% m/m. The trade deficit with the European Union widened to $22.5 billion from $17.9 billion in April. The trade deficit with Japan narrowed marginally to $5.77 billion in May from $5.81 billion in April.

The international trade data, including relevant data on oil prices, can be found in Haver’s **USECON** database. Detailed figures on international trade are available in the **USINT** and **USTRADE** databases. The expectations figures are from the Action Economics Forecast Survey in **AS1REPNA**.

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- Trade deficit widened in May on decline in goods exports.
- Still, the real deficit in April/May points to net exports making a meaningful positive contribution to Q2 GDP.
- Both exports and imports declined in May.
- Series low trade deficit with China.

U.S. Trade Deficit Widened in May

Kathleen Stephansen, CBE

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Initial claims for unemployment insurance were 233,000 in the week of June 28, down 4,000 from 237,000 in the week ending June 21, revised from 236,000. The Action Economics Forecast Survey expected 240,000. These data are seasonally adjusted by the Department of Labor. The 4-week moving average was 241,500, a decrease of 3,750 from the previous week’s average of 245,250, revised from 245,000.

The total number of unemployment insurance beneficiaries – also known as “continuing claims” – in the week ended June 21 was 1.964 million, unchanged from the prior week’s level, which was revised down from 1.974 million. The 4-week moving average was 1.954 million, up from 1.938 million in the previous week, revised from 1.941 million. This is the highest level for this average since November 20, 2021, when it was 2.004 million.

The insured unemployment rate for the week ending June 21, that is, the number of unemployment beneficiaries as a % of covered employment, was unchanged at 1.3% for the fourth consecutive week.

Economic conditions vary widely across states and territories. In the week ended June 14, the highest unemployment rates were in New Jersey (2.23%), Minnesota (2.22%), Puerto Rico (2.20%), California (2.16%), Washington (1.98%), and Rhode Island (1.95%). The lowest rates were in South Dakota (0.27%), Florida (0.41%), North Carolina (0.47%), and Alabama (0.48%). Rates in other notable states include Pennsylvania (1.71%), Illinois (1.67%), New York (1.55%), and Texas (1.26%). 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. The expectations figure is from the Action Economics Forecast Survey in the **AS1REPNA** database.

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- Initial claims for unemployment insurance declined by 4,000 in the week ended June 28.
- Total number of beneficiaries was unchanged in the week of June 21 week.
- The insured unemployment rate was unchanged at 1.3%.

U.S. Initial Jobless Claims Decreased in Latest Week

Andrew Cates

**The Blue Chip interest rate consensus**
The latest Blue Chip Financial Forecasts survey suggests that monetary policy across most major advanced economies is expected to loosen modestly over the next six months. Central banks in the US, Canada, UK, Australia, and the euro area are all forecast to cut rates to varying degrees, with Australia expected to deliver the largest reduction. In contrast, Japan continues to stand out as the only major economy where forecasters see scope for a slight increase in rates, highlighting its unique position in the global policy cycle. Overall, the chart reflects a broad but uneven tilt towards monetary easing as policymakers respond to softer inflation and growth signals.

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**The US dollar and data surprises** 
This next chart shows that the recent bout of US dollar weakness has coincided with a period in which US economic data surprises have turned more negative relative to the euro area. The surprise index differential between the US and euro area —measuring US growth surprises minus euro surprises—has declined, pointing to a run of weaker-than-expected US data and stronger euro area outturns. Historically, this has tended to pull the euro higher relative to the dollar. However, the scale of the dollar’s recent slide appears larger than the data surprises alone would imply, suggesting that other forces are potentially weighing on the currency as well.

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**US stagflation risk**
Latest ISM manufacturing survey data highlight a worrying decoupling between input costs and underlying demand that points to potential stagflation pressures in the US economy. Historically, the ISM New Orders Index and the Prices Paid Index have tended to move broadly in sync, reflecting cycles where stronger demand drives both production and cost pressures higher. However, the chart shows that while prices paid have recently rebounded sharply, new orders have remained subdued and stuck near contractionary territory. This breakdown suggests that firms are facing rising input costs without a corresponding pickup in demand—an imbalance that could be amplified by US tariff measures, which tend to push up costs for imported materials and components while weighing on new orders through weaker trade flows.

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**US Supply Chain Risks** 
Added to this, the number of vessels queuing at the Los Angeles and Long Beach harbours has climbed to elevated levels in recent weeks, highlighting supply chain bottlenecks on the US West Coast. While various factors may be driving this congestion—including seasonal trade patterns and shifts in global shipping routes—recent tariff measures could be contributing as well. New or increased tariffs sometimes distort normal trade flows by prompting importers to front-load shipments ahead of cost increases or reroute sourcing strategies in ways that strain particular ports.

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**Global warming** 
Pivoting to more structural issues, the next chart highlights the persistent upward trend in global surface temperature anomalies over the past century, with both land and ocean temperatures now averaging well over one degree Celsius. This long-term warming signal continues to manifest in extreme weather events and record-breaking heat waves, including the unusually high temperatures that have swept parts of Europe in recent days, pushing June readings to historic highs in several regions.

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**Climate change and productivity** 
This final chart illustrates the projected impact of heat stress on labour productivity in Europe under current climate policy scenarios, highlighting how rising temperatures could steadily erode worker efficiency over the coming decades. As shown, the median estimates from the Climate Analytics group suggest that productivity losses could deepen from around 0.3 percentage points today to nearly 0.9 percentage points by mid-century if climate conditions remain unchanged. These figures reflect the physical limits of the human body’s capacity to perform work in increasingly hot and humid environments, a challenge that will become more acute if climate change continues on its current path. With recent record-high June temperatures across parts of Europe underscoring the reality of more frequent heat extremes, these projections serve as a clear reminder of the economic stakes involved in addressing climate risks and investing in adaptation measures to protect labour productivity and economic resilience.

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Financial markets have remained generally buoyant in recent days, with global equity indices advancing on the back of relatively upbeat global growth data, benign European inflation readings and the prospect of further policy easing from major central banks. At the same time, the US dollar has continued to weaken, reflecting a run of disappointing US economic data and rising investor concerns about the fiscal outlook, even as European growth surprises have turned more positive. This divergence, combined with the prospect of lower US policy rates relative to some (though not all) peers, has added to the dollar’s drift lower (charts 1 and 2). Supply chain strains—highlighted by elevated vessel queues at US West Coast ports—also feed into the narrative that US tariff measures may be contributing to sticky input costs and stagflation risks (charts 3 and 4). Meanwhile, record temperatures in parts of Europe this week have reinforced the climate challenge facing policymakers, with the final two charts illustrating how rising global temperatures and heat stress could increasingly weigh on productivity and growth potential if left unchecked. With trading volumes light ahead of the July 4th holiday and markets awaiting tomorrow’s US non-farm payrolls report, the interplay between softer US data, resilient equities, a weaker dollar, and climate-related risks remains firmly in focus.

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Charts of the Week: Headwinds and Heatwaves

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The ADP National Employment Report reported that nonfarm private sector payrolls declined 33,000 (+1.1% y/y) during June after rising 29,000 in May, revised from 37,000 and increasing an unrevised 60,000 in April. It was the first monthly decline since March 2023. A 110,000 June rise had been expected in the in the Action Economics Forecast Survey.

Small business hiring (less than 50 employees) declined 47,000 (+0.4% y/y), after falling 13,000 in May. These were the first back-to-back monthly declines since the end of 2023. Employment at medium-sized firms (50-499,000 employees) declined 15,000 (1.1% y/y), after rising 46,000 in May, revised from 49,000. Large business hiring (500+ employees) increased 30,000 (2.7% y/y) after easing 4,000 in May.

Goods-producing employment rose 32,000 (1.4% y/y) in June after falling a minimally revised 3,000 in May. Manufacturing jobs increased 15,000, unchanged y/y, following a 6,000 decline in May. The number of construction sector jobs rose 9,000 (2.8% y/y) after increasing 6,000 in May. Natural resources & mining jobs rose 8,000 (4.3% y/y) in June after falling 3,000 in May.

The decline in payrolls overall reflected weakness in the service sector where the number of service-producing jobs declined 66,000 last month (+1.1% y/y) after increasing 32,000 in May, revised from 36,000. Professional & business services employment fell 56,000 (+0.2% y/y), after declining 13,000 in May. These weak readings came after a 1,000 April gain and a 46,000 March increase. Education & health services employment declined 52,000 (+0.8% y/y), the third consecutive month of decline. Employment in the financial industry weakened 14,000 (+1.8% y/y) last month, after rising 17,000 in May.

Offsetting these declines, leisure & hospitality employment increased 32,000 in June (3.2% y/y), following a 43,000 May gain. Monthly increases have averaged 36,000 this year. Trade, transportation & utilities employment increased 14,000 (0.3% y/y) after falling 8,000 in May. Information sector employment rose 5,000 (0.2% y/y) after a 4,000 May increase and a 10,000 April decline. Employment in “other” services sectors rose 5,000 in June (2.9% y/y), the same as in May.

Growth in median annual pay for "job stayers" slipped to 4.4% y/y in June, down from a high of 7.8% in September 2022. Manufacturing sector pay grew 4.6% y/y, steady with May. Construction sector pay also rose a steady 4.6% y/y. Natural resource & mining sector pay grew 4.5% y/y last month. Financial sector earnings rose an improved 5.2% y/y, while education & health services pay rose a lessened 4.6% y/y. Leisure & hospitality pay increased 4.7% y/y in June. Professional & business service sector pay increased a lessened 4.2% y/y as did trade, transportation & utilities pay, up 4.2% y/y. Information pay rose a lessened 4.1% y/y. Median annual pay for “job changers” rose 6.8% y/y in June, down from a high of 16.1% y/y in April 2022.

By region, employment in the Midwest declined 24,000 (+1.3% y/y) to 28,761 million after a 17,000 rise in May. Employment in the West, declined 20,000 to 31,363 million (+0.5% y/y) last month, and reversed a 31,000 rise during May. Employment in the Northeast fell 3,000 to 24,116 million (+1.4% y/y) in June, following a 23,000 decline in May. Partially offsetting these declines, in the South employment increased 13,000 to 50,092 million (1.0% y/y) in June, after rising 2,000 in May.

The ADP National Employment Report and Pay Insights data can be found in Haver's **USECON** database. Historical figures date back to January 2010 for private employment. Pay data date back to October 2020. The expectation figure is available in Haver's **AS1REPNA** database.

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- Employment declines in several service industries; factory & building industry jobs rise.
- Wage growth moderates further.
- Small- & medium-sized shed jobs.

Economy in Brief: June 2018

Jump to:

U.S. Productivity Revised Lower in Q1; Unit Labor Costs Revised Higher

U.S. Initial Unemployment Insurance Applications Slip

U.S. Trade Deficit Declines Modestly

Volatile Spanish Industrial Output Declines in April

U.S. Trade Deficit Declines Modestly

Composite PMIs Show Wear and Tear

U.S. JOLTS: Job Openings Rate Holds Steady; Hires Rate Improves

U.S. ISM Nonmanufacturing Index Improves