Tom Moeller

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090810a.jpg" align="left" border="0" height="265" width="353">
Consumers' near-term worry is about the poor shape of the U.S.
economy and what, for many, are balance sheets loaded with too much
debt. The longer-term situation is that the consumer spending cycle has
passed its peak and is now being damped by an aging population.
Together, these forces are causing individuals to shed debt at a record
rate. The Federal Reserve reported late Friday that consumer credit
outstanding during June fell for the fifth straight month and for the
ninth month since last summer. The $10.3B decline followed a
slightly-revised $5.4B May drop and it reduced consumer debt by a
record 2.8% year-to-year. Since December that rate has accelerated to
4.3%.
Usage of revolving credit again fell sharply. The 5.3B m/m
decline followed a $4.8B drop during May. The latest was the ninth
decline in as many months. It lowered usage by 5.1% versus one year ago
and at an 8.3% rate so far this year. <img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090810b.jpg" align="right" border="0" height="265" width="353">
Separately, the Fed reported that non-revolving credit (autos
&amp; other consumer durables), which accounts for nearly
two-thirds of the total, fell a similarly hard $5.1B in June. Compared
to the decline in revolving credit usage, the drop here has been less
dramatic, but still substantial. The 1.4% y/y shortfall compares to a
6.8% drop after the 1990-91 recession. It is similar to the pullbacks
during 1975 and even the "credit crunch" recession of 1980. During the
last six months non-revolving consumer credit has fallen at a 1.9%
annual rate.
These figures are the major input to the Fed's quarterly Flow
of Funds accounts for the household sector.
Credit data are available in Haver's USECON
database. The Flow of Funds data are in Haver's FFUNDS
database.
5 Tips for Dealing with a Home Equity Line Freeze or
Reduction from the Federal Reserve Board can be found <a href="http://www.federalreserve.gov/newsevents/press/other/20090806a.htm">
here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">Consumer
Credit (m/m Chg, SAAR)</th>
<th scope="col">June</th>
<th scope="col">May</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006&nbsp;</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>$-10.3B</td>
<td>&nbsp;$-5.4B</td>
<td>-2.8%</td>
<td>1.6%</td>
<td>5.6%</td>
<td>4.1%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Revolving</td>
<td>$-5.3B</td>
<td>$-4.8B</td>
<td>-5.1%</td>
<td>1.9%</td>
<td>7.8%</td>
<td>5.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Non-revolving</td>
<td>$-5.1B</td>
<td>$-0.5B</td>
<td>-1.4%</td>
<td>1.4%</td>
<td>4.4%</td>
<td>3.6%</td>
</tr>
</tbody>
</table>
French Output Begins To Stabilize 
by <a href="/comment/Brusca.html">Robert
Brusca</a> August 10, 2009


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090810c.jpg" align="left" border="0" height="265" width="353">
French industrial output in June has expanded by 0.3% m/m
after rising by 2.8% in May, turning the three-month rate of growth
positive. Capital goods and intermediate goods output lead the rise.
The output of consumer goods is still falling over three months
although consumer nondurables output is looking steadier than consumer
durable goods output, which fell sharply in June. 
 

In the completed quarter to date output in France is off by
3.2% at an annual rate. Output in the quarter is stabilized by the
rising output of consumer nondurable goods and capital goods, each of
which rose at a pace of 6.4% in Q2. But consumer durables output is
still falling at a 16.1% annual rate and intermediate goods output
fell, dragging the overall growth rate of production into negative
territory for the quarter. 
 

Auto output is up strongly on auto incentives. Output for the
auto sector is up at a 266% annual rate over three months and at a 47%
annual rate in the quarter, helping to buoy the economy. 
 

On balance the French figures are offering very hopefuls signs
of stabilization in the sector. Europe is trying to find its footing
and France is part of the solution. 


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="8" scope="col">French IP
Excluding
Construction
</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Saar exept m/m</td>
<td>Jun-09</td>
<td>May-09</td>
<td>Apr-09</td>
<td>3-mo</td>
<td>6-mo</td>
<td>12-mo</td>
<td>Quarter-to-date</td>
</tr>
<tr>
<td class="firstcol">IP total</td>
<td>0.3%</td>
<td>2.8%</td>
<td>-1.4%</td>
<td>7.2%</td>
<td>-10.0%</td>
<td>-12.8%</td>
<td>-3.2%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Consumer Dur</td>
<td>-2.7%</td>
<td>0.9%</td>
<td>-2.3%</td>
<td>-15.1%</td>
<td>-18.6%</td>
<td>-17.6%</td>
<td>-16.1%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Consumer Ndur</td>
<td>0.0%</td>
<td>0.2%</td>
<td>-0.5%</td>
<td>-1.2%</td>
<td>-12.3%</td>
<td>-3.7%</td>
<td>6.4%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Capital</td>
<td>1.3%</td>
<td>2.7%</td>
<td>-0.1%</td>
<td>16.4%</td>
<td>-10.7%</td>
<td>-14.1%</td>
<td>6.4%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Intermed</td>
<td>-0.3%</td>
<td>3.7%</td>
<td>-0.4%</td>
<td>12.6%</td>
<td>-8.4%</td>
<td>-21.6%</td>
<td>-0.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">Memo</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Auto</td>
<td>14.5%</td>
<td>11.3%</td>
<td>8.6%</td>
<td>266.7%</td>
<td>41.9%</td>
<td>-24.3%</td>
<td>47.3%</td>
</tr>
</tbody>
</table>
Japan's Current Account Balance
Improves Sharply In June 
by <a href="/comment/Curley.html">Louise
Curley</a> August 10, 2009



<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090810h.jpg" align="right" border="0" height="265" width="353">Japan's
Current Account increased sharply, outpacing expectations, in June to
1,799 billion yen from 1, 016 billion Yen in May.&nbsp; It was
moreover,&nbsp; the fifth successive month of increase and the year
over year change is now above the year ago figure for the first time
since November, 2007.&nbsp; The first chart shows the current
account and its major components--Goods and Services, Income and
Current Transfers. (The Chart shows the data in 100 millions of Yen,
while the table below and text figures are in billions of Yen.)
 The
balance of Trade in Goods and Services accounted for the largest part
of the June increase in the current account balance.&nbsp; <img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090810i.jpg" align="right" border="0" height="265" width="353">
The
positive balance on goods increased by 333 billion Yen while the
negative balance on services decreased by 172 billion Yen, resulting in
a 505 billion yen improvement in the balance on Goods and Services.
The balance on Income has become more important than the
balance on
Goods in the Current Account Balance since the second quarter of 2005
as can be seen in the second chart.&nbsp; This reflects the growth
of Japan's net international investment position as Japans direct and
portfolio investments abroad have generally exceeded foreign direct and
portfolio investments in Japan.&nbsp; The third chart shows Japan's
net international investment position. <img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090810j.jpg" align="right" border="0" height="265" width="353">
The June increase in Income was
200 billion yen, smaller than the goods contribution, but the actual
balance of 1,219 billion Yen remains well above the goods balance of
735 billion Yen.&nbsp; The decline in the income balance of 244
billion Yen from a year ago is due largely to the decline in returns on
portfolio investments.
 Finally, the negative balance on current
transfers declined in June by 78 billion yen, also contributing to the
improvement of the current account balance.&nbsp; 

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">JAPAN</th>
<th scope="col">Jun 09</th>
<th scope="col">May 09</th>
<th scope="col">Jun 08</th>
<th scope="col">M/M Dif&nbsp;</th>
<th scope="col">Y/Y&nbsp;&nbsp;
Dif</th>
<th scope="col">2008&nbsp;</th>
<th scope="col">2007 </th>
<th scope="col"> 2006 </th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Current Account (SA Bil.Yen)</td>
<td>1799</td>
<td>1016</td>
<td>1663</td>
<td>783</td>
<td>335</td>
<td>16425</td>
<td>25054</td>
<td>19965</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Goods and Services</td>
<td>658</td>
<td>153</td>
<td>120</td>
<td>505</td>
<td>538</td>
<td>1916</td>
<td>10088</td>
<td>7250</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Goods</td>
<td>735</td>
<td>402</td>
<td>347</td>
<td>333</td>
<td>388</td>
<td>4016</td>
<td>12564</td>
<td>9404</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp;&nbsp;
Services</td>
<td>-77</td>
<td>-249</td>
<td>-227</td>
<td>172</td>
<td>150</td>
<td>-2100</td>
<td>-2475</td>
<td>-2154</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Income</td>
<td>1219</td>
<td>1019</td>
<td>1463</td>
<td>200</td>
<td>-244</td>
<td>15876</td>
<td>16326</td>
<td>13943</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Current Transfers</td>
<td>-78</td>
<td>-156</td>
<td>-119</td>
<td>78</td>
<td>41</td>
<td>-1367</td>
<td>-1360</td>
<td>-1233</td>
</tr>
</tbody>
</table>


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Consumers' near-term worry is about the poor shape of the U.S. economy and what, for many, are balance sheets loaded with too much debt. The longer-term situation is that the consumer spending cycle has passed its peak and is now [...]

Consumer Debt Deleveraging Continues At A Record Pace

Robert Brusca

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090807e.jpg" align="left" border="0" height="265" width="353">
The OECD LEIs are now jumpin.&#8217; The rise is strongly
accelerating across OECD countries; even Japan whose indicator is still
falling is seeing a substantial shift in its negative growth rate to a
substantially diminished pace of decline. The detailed progressive
growth rates from 12-months to six months to three months show that the
acceleration is well in force. The OECD&#8217;s preferred reading is on the
six month growth rate. The US rate is now flat compared to declining at
a 16% pace six months ago. The European index is up at a very strong
6.4% pace after dropping at a 12% rate six months ago. Japan is falling
at a 7% rate after dropping at a 22% rate six months ago. What a
difference a half year makes. 
 

The United State&#8217;s own LEI from the Conference Board usually
carves out lower recession lows than the OECD LEI for the US. The
Conference Board indicator usually carves out higher highs in the
transition to recovery, by a small amount, as well. In this recession
however the OECD LEI for the US is much weaker than the low for the
Conference Board&#8217;s measure based on percentage drops in the respective
indices. As a result, while the OECD index has a bigger US turnaround
from its low to its present value, the positive reading on the
Conference Board LEI is far stronger that the current OECD LEI signal
(the OECD measure is flat over six months). 
 

Different measures capture different aspects of the economy&#8217;s
weakness. Right now both of these measures have the same sort of
positive momentum to different degrees but positive momentum
nonetheless. It is interesting that the European economies are showing
much more momentum in this framework. We will have to keep our eye on
the economies and see if European economic performance can live up to
the strong positive signal the OECD has for that region. 
 
 
 
 


<table border="0" cellspacing="0" width="100%">
</table>

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr><th colspan="7" scope="col">OECD Trend-restored leading Indicators </th>
</tr>
</thead>
<tbody>
<tr class="grey4">
<td colspan="5" class="firstcol">Growth progression-SAAR</td>
</tr>
<tr class="grey3">
<td class="firstcol">&nbsp;</td>
<td>3Mos</td>
<td>6Mos</td>
<td>12mos</td>
<td>Yr-Ago</td>
</tr>
<tr class="grey2">
<td class="firstcol">OECD</td>
<td>11.0%</td>
<td>2.7%</td>
<td>-6.1%</td>
<td>-2.9%</td>
</tr>
<tr class="grey2">
<td class="firstcol">OECD7</td>
<td>10.4%</td>
<td>1.3%</td>
<td>-7.6%</td>
<td>-3.3%</td>
</tr>
<tr class="grey2">
<td class="firstcol">OECD.E-Area</td>
<td>16.0%</td>
<td>6.4%</td>
<td>-3.2%</td>
<td>-3.9%</td>
</tr>
<tr class="grey2">
<td class="firstcol">OECD.Japan</td>
<td>-4.4%</td>
<td>-7.1%</td>
<td>-15.0%</td>
<td>-1.9%</td>
</tr>
<tr class="grey2">
<td class="firstcol">OECD US</td>
<td>11.4%</td>
<td>0.0%</td>
<td>-8.5%</td>
<td>-3.2%</td>
</tr>
<tr class="grey4">
<td colspan="5" class="firstcol">Six month readings at 6-Mo
Intervals:</td>
</tr>
<tr class="grey3">
<td class="firstcol">&nbsp;</td>
<td>Recent six</td>
<td>6Mo Ago</td>
<td>12Mo Ago</td>
<td>18MO Ago</td>
</tr>
<tr class="grey2">
<td class="firstcol">OECD</td>
<td>2.7%</td>
<td>-14.2%</td>
<td>-4.2%</td>
<td>-1.5%</td>
</tr>
<tr class="grey2">
<td class="firstcol">OECD7</td>
<td>1.3%</td>
<td>-15.8%</td>
<td>-4.2%</td>
<td>-2.5%</td>
</tr>
<tr class="grey2">
<td class="firstcol">OECD.Eur</td>
<td>6.4%</td>
<td>-12.0%</td>
<td>-6.9%</td>
<td>-0.7%</td>
</tr>
<tr class="grey2">
<td class="firstcol">OECD.Japan</td>
<td>-7.1%</td>
<td>-22.3%</td>
<td>2.0%</td>
<td>-5.6%</td>
</tr>
<tr class="grey2">
<td class="firstcol">OECD US</td>
<td>0.0%</td>
<td>-16.3%</td>
<td>-4.3%</td>
<td>-2.2%</td>
</tr>
<tr class="grey1">
<td colspan="5" class="firstcol">Slowdowns indicated by BOLD
RED</td>
</tr>
</tbody>
</table>
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The OECD LEIs are now jumpin.’ The rise is strongly accelerating across OECD countries; even Japan whose indicator is still falling is seeing a substantial shift in its negative growth rate to a substantially diminished pace of [...]

OECD LEIs Turn On A Green Light For Recovery

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090807a.jpg" align="left" border="0" height="265" width="353">
Slack in the labor market developed less rapidly last month.
The Bureau of Labor Statistics indicated that nonfarm payrolls fell
247,000 during July after declines during the prior two months that
were revised slightly shallower. Expectations for July had been for a
deeper 325,000 drop in payrolls and it was the shallowest since August
of last year. Nevertheless, so far during this recession employment has
fallen by a total of 6.7 million, the record by far for a 19-month
period. In percentage terms jobs are down 4.8% since the 2007 peak,
also a record. Most recently, the payroll decline moderated to an
average 331,000 over the last three months versus a peak three-month
rate of 701,000 this past winter.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090807b.jpg" align="right" border="0" height="265" width="353">
Another indication of the economy's slower rate of decline was
that the unemployment rate slipped m/m for the first time since April
of last year. The dip to 9.4% from 9.5% in July compared with
expectations for a rise to 9.6%. The rate's cycle low of 4.4% occurred
in October 2006. Last month, the dip was due to a sharp 422,000 decline
in the labor force (-0.0% y/y) as the number of "discouraged workers"
surged. This 106,000 rise in the number of workers who want a job now
but stopped looking left the y/y gain at 19.0%. Household sector
employment fell 155,000 (-3.8% y/y) which was a moderation from the
323,000-to-1,239,000 monthly declines since last August.
Also from the household survey, the median duration of
unemployment slipped m/m to 15.7 weeks but that still was up from 9.8
weeks one year ago. The ranks of the long-term unemployed, however,
jumped again m/m and, at 5.0 million, they are more than double one
year ago.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090807c.jpg" align="right" border="0" height="265" width="353">
From the payroll survey, the moderation in the rate of job
loss owed to easier declines in both factory sector and private service
payrolls. Manufacturing sector jobs fell 52,000 last month and that was
the mildest decline in one year. On a three-month basis, the 110,000
average monthly decline also was nearly half the rate of this past
winter. Employment in the private service sector dropped 126,000 last
month (-3.2% y/y). Here again the three-month rate of decline of
126,000 was well-reduced from the 393,000 average of this past winter
and fall. The moderation is apparent across industries. Job cuts in the
construction sector also have moderated, but to a lesser extent.
Employment here fell a reduced 76,000 last month but the three-month
average rate of decline amounted to a still-strong 73,000 versus the
worst of 124,000 this winter.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090807d.jpg" align="right" border="0" height="265" width="353">
In the government sector employment was broadly under pressure
as tax revenues lag. Government jobs rose by just 7,000 last month
(0.1% y/y) after two months of decline. Jobs with the Federal
government rose by 12,000 (+2.0% y/y) after two down months. The number
of state gov't jobs fell for the second consecutive month (-0.3% y/y)
and local gov't payrolls were unchanged (-0.1% y/y. Should
the federal government bail out the states? Lessons from past recessions
from the Federal Reserve Bank of Chicago can be found <a href="http://www.chicagofed.org/publications/fedletter/cflaugust2009_265.pdf">here</a>.
The breadth of the cutbacks in employment remained a huge
30.1% amongst industries. That is, however, improved from the worst of
this past March. Over a six-month span just 17.3% of firms raised
employment which was near the worst. In the factory sector an improved
22.3% of firms raised employment but over a six-month span just 7.2%
did.
Average hourly earnings rose 0.2% during July and the
three-month change seems to have bottomed at a 1.3% annual rate. That
compares to to roughly 4% growth from 2006 to 2008. Earnings in the
factory sector rose 0.8% and the three-month growth rate improved to
3.8%. Growth in the durable sector's earnings (NSA) jumped over the
last three months but earnings in the private service sector remained
under pressure at +1.1% during the last three months.
The figures referenced above are available in Haver's USECON
database. Additional detail can be found in the LABOR and
in the EMPL databases
Raising automotive fuel efficiency from
the Federal Reserve Bank of Chicago can be found <a href="http://www.chicagofed.org/publications/fedletter/cflseptember2009_266.pdf">here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">Employment:
000s</th>
<th scope="col">July</th>
<th scope="col">June</th>
<th scope="col">May</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Payroll Employment</td>
<td>-247</td>
<td>-443</td>
<td>-303</td>
<td>-4.2%</td>
<td>-0.4%</td>
<td>1.1%</td>
<td>1.8%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Previous</td>
<td>--</td>
<td>-467</td>
<td>-322</td>
<td>--</td>
<td>--</td>
<td>--</td>
<td>--</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Manufacturing</td>
<td>-52</td>
<td>-131</td>
<td>-146</td>
<td>-12.2%</td>
<td>-3.3%</td>
<td>-2.0%</td>
<td>-0.5%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Construction</td>
<td>-76</td>
<td>-86</td>
<td>-57</td>
<td>-14.6%</td>
<td>-5.5%</td>
<td>-0.8%</td>
<td>4.9%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Service Producing</td>
<td>-119</td>
<td>-220</td>
<td>-91</td>
<td>-2.6%</td>
<td>0.2%</td>
<td>1.6%</td>
<td>1.8%</td>
</tr>
<tr>
<td class="firstcol">Average Weekly Hours</td>
<td>33.1</td>
<td>33.0</td>
<td>33.1</td>
<td>33.6 (July '08)</td>
<td>33.6</td>
<td>33.8</td>
<td>33.9</td>
</tr>
<tr class="odd">
<td class="firstcol">Average Hourly Earnings</td>
<td>0.2%</td>
<td>0.0%</td>
<td>0.2%</td>
<td>2.5%</td>
<td>3.8%</td>
<td>4.0%</td>
<td>3.9%</td>
</tr>
<tr>
<td class="firstcol">Unemployment Rate</td>
<td>9.4%</td>
<td>9.5%</td>
<td>9.4%</td>
<td>5.8% (July '08)</td>
<td>5.8%</td>
<td>4.6%</td>
<td>4.6%</td>
</tr>
</tbody>
</table>
</body></html>

Slack in the labor market developed less rapidly last month. The Bureau of Labor Statistics indicated that nonfarm payrolls fell 247,000 during July after declines during the prior two months that were revised slightly shallower. [...]

U.S. Payroll Employment Decline Eases While Unemployment Rate Falls

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090807a.jpg" align="left" border="0" height="265" width="353">
Slack in the labor market developed less rapidly last month.
The Bureau of Labor Statistics indicated that nonfarm payrolls fell
247,000 during July after declines during the prior two months that
were revised slightly shallower. Expectations for July had been for a
deeper 325,000 drop in payrolls and it was the shallowest since August
of last year. Nevertheless, so far during this recession employment has
fallen by a total of 6.7 million, the record by far for a 19-month
period. In percentage terms jobs are down 4.8% since the 2007 peak,
also a record. Most recently, the payroll decline moderated to an
average 331,000 over the last three months versus a peak three-month
rate of 701,000 this past winter.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090807b.jpg" align="right" border="0" height="265" width="353">
Another indication of the economy's slower rate of decline was
that the unemployment rate slipped m/m for the first time since April
of last year. The dip to 9.4% from 9.5% in July compared with
expectations for a rise to 9.6%. The rate's cycle low of 4.4% occurred
in October 2006. Last month, the dip was due to a sharp 422,000 decline
in the labor force (-0.0% y/y) as the number of "discouraged workers"
surged. This 106,000 rise in the number of workers who want a job now
but stopped looking left the y/y gain at 19.0%. Household sector
employment fell 155,000 (-3.8% y/y) which was a moderation from the
323,000-to-1,239,000 monthly declines since last August.
Also from the household survey, the median duration of
unemployment slipped m/m to 15.7 weeks but that still was up from 9.8
weeks one year ago. The ranks of the long-term unemployed, however,
jumped again m/m and, at 5.0 million, they are more than double one
year ago.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090807c.jpg" align="right" border="0" height="265" width="353">
From the payroll survey, the moderation in the rate of job
loss owed to easier declines in both factory sector and private service
payrolls. Manufacturing sector jobs fell 52,000 last month and that was
the mildest decline in one year. On a three-month basis, the 110,000
average monthly decline also was nearly half the rate of this past
winter. Employment in the private service sector dropped 126,000 last
month (-3.2% y/y). Here again the three-month rate of decline of
126,000 was well-reduced from the 393,000 average of this past winter
and fall. The moderation is apparent across industries. Job cuts in the
construction sector also have moderated, but to a lesser extent.
Employment here fell a reduced 76,000 last month but the three-month
average rate of decline amounted to a still-strong 73,000 versus the
worst of 124,000 this winter.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090807d.jpg" align="right" border="0" height="265" width="353">
In the government sector employment was broadly under pressure
as tax revenues lag. Government jobs rose by just 7,000 last month
(0.1% y/y) after two months of decline. Jobs with the Federal
government rose by 12,000 (+2.0% y/y) after two down months. The number
of state gov't jobs fell for the second consecutive month (-0.3% y/y)
and local gov't payrolls were unchanged (-0.1% y/y. Should
the federal government bail out the states? Lessons from past recessions
from the Federal Reserve Bank of Chicago can be found <a href="http://www.chicagofed.org/publications/fedletter/cflaugust2009_265.pdf">here</a>.
The breadth of the cutbacks in employment remained a huge
30.1% amongst industries. That is, however, improved from the worst of
this past March. Over a six-month span just 17.3% of firms raised
employment which was near the worst. In the factory sector an improved
22.3% of firms raised employment but over a six-month span just 7.2%
did.
Average hourly earnings rose 0.2% during July and the
three-month change seems to have bottomed at a 1.3% annual rate. That
compares to to roughly 4% growth from 2006 to 2008. Earnings in the
factory sector rose 0.8% and the three-month growth rate improved to
3.8%. Growth in the durable sector's earnings (NSA) jumped over the
last three months but earnings in the private service sector remained
under pressure at +1.1% during the last three months.
The figures referenced above are available in Haver's USECON
database. Additional detail can be found in the LABOR and
in the EMPL databases
Raising automotive fuel efficiency from
the Federal Reserve Bank of Chicago can be found <a href="http://www.chicagofed.org/publications/fedletter/cflseptember2009_266.pdf">here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">Employment:
000s</th>
<th scope="col">July</th>
<th scope="col">June</th>
<th scope="col">May</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Payroll Employment</td>
<td>-247</td>
<td>-443</td>
<td>-303</td>
<td>-4.2%</td>
<td>-0.4%</td>
<td>1.1%</td>
<td>1.8%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Previous</td>
<td>--</td>
<td>-467</td>
<td>-322</td>
<td>--</td>
<td>--</td>
<td>--</td>
<td>--</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Manufacturing</td>
<td>-52</td>
<td>-131</td>
<td>-146</td>
<td>-12.2%</td>
<td>-3.3%</td>
<td>-2.0%</td>
<td>-0.5%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Construction</td>
<td>-76</td>
<td>-86</td>
<td>-57</td>
<td>-14.6%</td>
<td>-5.5%</td>
<td>-0.8%</td>
<td>4.9%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Service Producing</td>
<td>-119</td>
<td>-220</td>
<td>-91</td>
<td>-2.6%</td>
<td>0.2%</td>
<td>1.6%</td>
<td>1.8%</td>
</tr>
<tr>
<td class="firstcol">Average Weekly Hours</td>
<td>33.1</td>
<td>33.0</td>
<td>33.1</td>
<td>33.6 (July '08)</td>
<td>33.6</td>
<td>33.8</td>
<td>33.9</td>
</tr>
<tr class="odd">
<td class="firstcol">Average Hourly Earnings</td>
<td>0.2%</td>
<td>0.0%</td>
<td>0.2%</td>
<td>2.5%</td>
<td>3.8%</td>
<td>4.0%</td>
<td>3.9%</td>
</tr>
<tr>
<td class="firstcol">Unemployment Rate</td>
<td>9.4%</td>
<td>9.5%</td>
<td>9.4%</td>
<td>5.8% (July '08)</td>
<td>5.8%</td>
<td>4.6%</td>
<td>4.6%</td>
</tr>
</tbody>
</table>
OECD LEIs Turn On A Green Light
For Recovery 
by <a href="/comment/Brusca.html">Robert
Brusca</a> August 7, 2009


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090807e.jpg" align="left" border="0" height="265" width="353">
The OECD LEIs are now jumpin.&#8217; The rise is strongly
accelerating across OECD countries; even Japan whose indicator is still
falling is seeing a substantial shift in its negative growth rate to a
substantially diminished pace of decline. The detailed progressive
growth rates from 12-months to six months to three months show that the
acceleration is well in force. The OECD&#8217;s preferred reading is on the
six month growth rate. The US rate is now flat compared to declining at
a 16% pace six months ago. The European index is up at a very strong
6.4% pace after dropping at a 12% rate six months ago. Japan is falling
at a 7% rate after dropping at a 22% rate six months ago. What a
difference a half year makes. 
 

The United State&#8217;s own LEI from the Conference Board usually
carves out lower recession lows than the OECD LEI for the US. The
Conference Board indicator usually carves out higher highs in the
transition to recovery, by a small amount, as well. In this recession
however the OECD LEI for the US is much weaker than the low for the
Conference Board&#8217;s measure based on percentage drops in the respective
indices. As a result, while the OECD index has a bigger US turnaround
from its low to its present value, the positive reading on the
Conference Board LEI is far stronger that the current OECD LEI signal
(the OECD measure is flat over six months). 
 

Different measures capture different aspects of the economy&#8217;s
weakness. Right now both of these measures have the same sort of
positive momentum to different degrees but positive momentum
nonetheless. It is interesting that the European economies are showing
much more momentum in this framework. We will have to keep our eye on
the economies and see if European economic performance can live up to
the strong positive signal the OECD has for that region. 
 
 
 
 


<table border="0" cellspacing="0" width="100%">
</table>
<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="7" scope="col">OECD
Trend-restored leading Indicators </th>
</tr>
</thead>
<tbody>
<tr class="grey4">
<td colspan="5" class="firstcol">Growth
progression-SAAR</td>
</tr>
<tr class="grey3">
<td class="firstcol">&nbsp;</td>
<td>3Mos</td>
<td>6Mos</td>
<td>12mos</td>
<td>Yr-Ago</td>
</tr>
<tr class="grey2">
<td class="firstcol">OECD</td>
<td>11.0%</td>
<td>2.7%</td>
<td>-6.1%</td>
<td>-2.9%</td>
</tr>
<tr class="grey2">
<td class="firstcol">OECD7</td>
<td>10.4%</td>
<td>1.3%</td>
<td>-7.6%</td>
<td>-3.3%</td>
</tr>
<tr class="grey2">
<td class="firstcol">OECD.E-Area</td>
<td>16.0%</td>
<td>6.4%</td>
<td>-3.2%</td>
<td>-3.9%</td>
</tr>
<tr class="grey2">
<td class="firstcol">OECD.Japan</td>
<td>-4.4%</td>
<td>-7.1%</td>
<td>-15.0%</td>
<td>-1.9%</td>
</tr>
<tr class="grey2">
<td class="firstcol">OECD US</td>
<td>11.4%</td>
<td>0.0%</td>
<td>-8.5%</td>
<td>-3.2%</td>
</tr>
<tr class="grey4">
<td colspan="5" class="firstcol">Six
month readings at 6-Mo
Intervals:</td>
</tr>
<tr class="grey3">
<td class="firstcol">&nbsp;</td>
<td>Recent six</td>
<td>6Mo Ago</td>
<td>12Mo Ago</td>
<td>18MO Ago</td>
</tr>
<tr class="grey2">
<td class="firstcol">OECD</td>
<td>2.7%</td>
<td>-14.2%</td>
<td>-4.2%</td>
<td>-1.5%</td>
</tr>
<tr class="grey2">
<td class="firstcol">OECD7</td>
<td>1.3%</td>
<td>-15.8%</td>
<td>-4.2%</td>
<td>-2.5%</td>
</tr>
<tr class="grey2">
<td class="firstcol">OECD.Eur</td>
<td>6.4%</td>
<td>-12.0%</td>
<td>-6.9%</td>
<td>-0.7%</td>
</tr>
<tr class="grey2">
<td class="firstcol">OECD.Japan</td>
<td>-7.1%</td>
<td>-22.3%</td>
<td>2.0%</td>
<td>-5.6%</td>
</tr>
<tr class="grey2">
<td class="firstcol">OECD US</td>
<td>0.0%</td>
<td>-16.3%</td>
<td>-4.3%</td>
<td>-2.2%</td>
</tr>
<tr class="grey1">
<td colspan="5" class="firstcol">Slowdowns
indicated by BOLD
RED</td>
</tr>
</tbody>
</table>
</body></html>

U.S. Payroll Employment DeclineEases While Unemployment Rate Falls

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090806d.jpg" align="left" border="0" height="265" width="353">
German new orders rose by 4.5% in June after rising by 4.4% in
May. Orders are up and at a 42% annual rate over three-months and STILL
they stand lower by 23.7% than they did one year ago. In the newly
completed second quarter, orders are up at a 26.8% annual rate. While
real sector sales in mining and MFG are up at a 3.4% pace in the
quarter. Germany is beginning to turn the corner, despite ongoing
weakness in retail sales. 
 

German domestic orders barely nudged higher rising by nearly
rounding error (0.2%) in June. Foreign orders spurted by 8.3% putting
in their second strong month in a row. Exports remain the lifeblood of
the German economy. The report that Hungary&#8217;s industrial output rose
for the second month in a row is good news for Germany, suggesting that
eastern European export markets are among those that are reviving. 
 

In June German real sector sales for consumer goods rose by
0.2% as consumer durables plunged by 3.7%. Capital goods real sales
rose by 1.2% after spurting by 9.2% in May. Intermediates goods sales
rose by 2.8%. German real sector sales were up across the abroad in the
quarter as well with the exception of consumer durables, where sales
fell in the quarter at a hefty -8.4% annual rate. 
 
 
 
 


<table border="0" cellspacing="0" width="100%">
</table>
<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr><th colspan="9" scope="col">
German Orders and Sales By Sector and Origin
</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Real and SA</td>
<td colspan="3">% M/M</td>
<td colspan="5">% Saar</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>Jun-09</td>
<td>May-09</td>
<td>Apr-09</td>
<td>3-MO</td>
<td>6-Mo</td>
<td>12-Mo</td>
<td>YrAgo</td>
<td>QTR-2-Date</td>
</tr>
<tr>
<td class="firstcol">Total Orders</td>
<td>4.5%</td>
<td>4.4%</td>
<td>0.1%</td>
<td>42.6%</td>
<td>19.4%</td>
<td>-23.7%</td>
<td>-8.0%</td>
<td>26.8%</td>
</tr>
<tr>
<td class="firstcol">Foreign</td>
<td>8.3%</td>
<td>4.9%</td>
<td>-0.9%</td>
<td>61.2%</td>
<td>27.0%</td>
<td>-24.2%</td>
<td>-11.4%</td>
<td>40.0%</td>
</tr>
<tr>
<td class="firstcol">Domestic</td>
<td>0.2%</td>
<td>4.1%</td>
<td>1.1%</td>
<td>23.8%</td>
<td>11.3%</td>
<td>-23.1%</td>
<td>-3.6%</td>
<td>13.5%</td>
</tr>
<tr class="odd">
<td class="firstcol" colspan="9">Real Sector Sales</td>

</tr>
<tr>
<td class="firstcol">MFG/Mining</td>
<td>1.4%</td>
<td>4.6%</td>
<td>-2.0%</td>
<td>16.6%</td>
<td>8.0%</td>
<td>-17.4%</td>
<td>0.9%</td>
<td>3.4%</td>
</tr>
<tr>
<td class="firstcol">Consumer</td>
<td>0.2%</td>
<td>-2.2%</td>
<td>4.0%</td>
<td>8.0%</td>
<td>3.9%</td>
<td>-6.8%</td>
<td>-3.9%</td>
<td>4.7%</td>
</tr>
<tr>
<td class="firstcol">Consumer Durables</td>
<td>-3.7%</td>
<td>6.1%</td>
<td>-1.2%</td>
<td>3.8%</td>
<td>1.9%</td>
<td>-21.8%</td>
<td>-1.6%</td>
<td>-8.4%</td>
</tr>
<tr>
<td class="firstcol">Consumer Nondurables</td>
<td>0.6%</td>
<td>-3.2%</td>
<td>4.6%</td>
<td>7.8%</td>
<td>3.8%</td>
<td>-4.1%</td>
<td>-4.2%</td>
<td>6.7%</td>
</tr>
<tr>
<td class="firstcol">Capital Goods</td>
<td>1.2%</td>
<td>9.2%</td>
<td>-7.3%</td>
<td>10.1%</td>
<td>4.9%</td>
<td>-22.3%</td>
<td>3.9%</td>
<td>1.2%</td>
</tr>
<tr>
<td class="firstcol">Intermediate Goods</td>
<td>2.8%</td>
<td>2.8%</td>
<td>1.5%</td>
<td>32.0%</td>
<td>14.9%</td>
<td>-18.2%</td>
<td>1.2%</td>
<td>9.7%</td>
</tr>
<tr>
<td class="firstcol">All MFG-Sales</td>
<td>1.5%</td>
<td>4.4%</td>
<td>-2.0%</td>
<td>16.6%</td>
<td>8.0%</td>
<td>-17.6%</td>
<td>0.8%</td>
<td>3.3%</td>
</tr>
</tbody>
</table>
</body></html>

German new orders rose by 4.5% in June after rising by 4.4% in May. Orders are up and at a 42% annual rate over three-months and STILL they stand lower by 23.7% than they did one year ago. In the newly completed second quarter, orders [...]

German Orders Surge Again

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090806a.jpg" align="left" border="0" height="265" width="353">
Improvement in the U.S. labor market still is evident, but
lately it's been a halting trend. The latest figures from the Labor
Department indicate that initial claims for unemployment insurance fell
last week to 550,000 and more than reversed the prior week's unrevised
increase. For all of July, claims fell 9.4% from June, but since the
beginning of the month they moved sideways. The four-week moving
average of claims, which smoothes out some of the volatility in the
weekly numbers, slipped to 555,250 which was its lowest level since
late-January. A rise in weekly claims to 580,000 had been expected.
The Bureau of Labor Statistics will release the report on July
nonfarm payrolls tomorrow. During the last ten years, there has been an
86% correlation between the level of initial unemployment insurance
claims and the m/m change in payroll employment.
The Labor Department indicated that the largest increases in
initial claims for the week ending July 25 were in Ohio (+891, +3.6%
y/y), Oklahoma (+644, +121% y/y), Mississippi (+222, -5.2% y/y),
Louisiana (+154, +33.7% y/y), and Alaska (+129, +51.9% y/y), while the
largest decreases were in North Carolina (-9,809, +17.7% y/y), Michigan
(-9,085, +20.9% y/y), Florida (-8,714, +11.9% y/y), Georgia (-6,948,
+61.5% y/y), and Alabama (-3,822, +31.8% y/y).
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090806b.jpg" align="right" border="0" height="265" width="353">
A sideways movement in continuing claims for unemployment
insurance also became apparent last month. For the latest week, they
rose a modest 69,000 and that was enough to reverse the declines during
the prior two weeks. Continuing claims provide an indication of
workers' ability to find employment and the level of 6,310,000
claims is up sharply from the year-ago level. The four-week
average of continuing claims fell back to 6,378,750 and that was the
lowest since late-April. The series dates back to 1966.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090806c.jpg" align="right" border="0" height="265" width="353">
The insured rate of unemployment remained at 4.7% which was
the lowest level since mid-April. During the last ten years, there has
been a 93% correlation between the level of the insured unemployment
rate and the overall rate of unemployment published by the Bureau of
Labor Statistics.
The highest insured unemployment rates in the week ending July
18 were in Puerto Rico (8.0 percent), Michigan (6.7), Oregon (6.5),
Pennsylvania (6.5), Nevada (6.1), Wisconsin (5.7), Connecticut (5.5),
New Jersey (5.5), California (5.4), Rhode Island (5.3), and South
Carolina (5.3). The lowest rates were in South Dakota (1.4) and North
Dakota (1.5), Virginia (2.5), Wyoming (3.0), Texas (3.1), Maine (3.3),
Colorado (3.3), Maryland (3.7), Minnesota (3.8), Florida (4.3),
Mississippi (4.3), New York (4.4) and Georgia (4.4).
The unemployment insurance claims data is available in Haver's
WEEKLY database and the state data is in the REGIONW
database

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/WEEKLY/@W5/@W507/@W507.HTM">Unemployment
Insurance (000s)</a>&nbsp;</th>
<th scope="col">08/01/09</th>
<th scope="col">07/25/09</th>
<th scope="col">07/18/09</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006&nbsp;</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Initial Claims</td>
<td>550</td>
<td>588</td>
<td>559</td>
<td>22.2%</td>
<td>420</td>
<td>321</td>
<td>313</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>--</td>
<td>6,310</td>
<td>6,241</td>
<td>88.7%</td>
<td>3,342</td>
<td>2,552</td>
<td>2,459</td>
</tr>
<tr class="odd">
<td class="firstcol">Insured Unemployment Rate (%)</td>
<td></td>
<td>4.7</td>
<td>4.7</td>
<td>2.5</td>
<td>2.5</td>
<td>1.9</td>
<td>1.9</td>
</tr>
</tbody>
</table>
</body></html>

Improvement in the U.S. labor market still is evident, but lately it's been a halting trend. The latest figures from the Labor Department indicate that initial claims for unemployment insurance fell last week to 550,000 and more than [...]

U.S. Weekly Claims For Jobless Insurance Inch Lower While Continuing Claims Tick Higher

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090806a.jpg" align="left" border="0" height="265" width="353">
Improvement in the U.S. labor market still is evident, but
lately it's been a halting trend. The latest figures from the Labor
Department indicate that initial claims for unemployment insurance fell
last week to 550,000 and more than reversed the prior week's unrevised
increase. For all of July, claims fell 9.4% from June, but since the
beginning of the month they moved sideways. The four-week moving
average of claims, which smoothes out some of the volatility in the
weekly numbers, slipped to 555,250 which was its lowest level since
late-January. A rise in weekly claims to 580,000 had been expected.
The Bureau of Labor Statistics will release the report on July
nonfarm payrolls tomorrow. During the last ten years, there has been an
86% correlation between the level of initial unemployment insurance
claims and the m/m change in payroll employment.
The Labor Department indicated that the largest increases in
initial claims for the week ending July 25 were in Ohio (+891, +3.6%
y/y), Oklahoma (+644, +121% y/y), Mississippi (+222, -5.2% y/y),
Louisiana (+154, +33.7% y/y), and Alaska (+129, +51.9% y/y), while the
largest decreases were in North Carolina (-9,809, +17.7% y/y), Michigan
(-9,085, +20.9% y/y), Florida (-8,714, +11.9% y/y), Georgia (-6,948,
+61.5% y/y), and Alabama (-3,822, +31.8% y/y).
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090806b.jpg" align="right" border="0" height="265" width="353">
A sideways movement in continuing claims for unemployment
insurance also became apparent last month. For the latest week, they
rose a modest 69,000 and that was enough to reverse the declines during
the prior two weeks. Continuing claims provide an indication of
workers' ability to find employment and the level of 6,310,000
claims is up sharply from the year-ago level. The four-week
average of continuing claims fell back to 6,378,750 and that was the
lowest since late-April. The series dates back to 1966.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090806c.jpg" align="right" border="0" height="265" width="353">
The insured rate of unemployment remained at 4.7% which was
the lowest level since mid-April. During the last ten years, there has
been a 93% correlation between the level of the insured unemployment
rate and the overall rate of unemployment published by the Bureau of
Labor Statistics.
The highest insured unemployment rates in the week ending July
18 were in Puerto Rico (8.0 percent), Michigan (6.7), Oregon (6.5),
Pennsylvania (6.5), Nevada (6.1), Wisconsin (5.7), Connecticut (5.5),
New Jersey (5.5), California (5.4), Rhode Island (5.3), and South
Carolina (5.3). The lowest rates were in South Dakota (1.4) and North
Dakota (1.5), Virginia (2.5), Wyoming (3.0), Texas (3.1), Maine (3.3),
Colorado (3.3), Maryland (3.7), Minnesota (3.8), Florida (4.3),
Mississippi (4.3), New York (4.4) and Georgia (4.4).
The unemployment insurance claims data is available in Haver's
WEEKLY database and the state data is in the REGIONW
database

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/WEEKLY/@W5/@W507/@W507.HTM">Unemployment
Insurance (000s)</a>&nbsp;</th>
<th scope="col">08/01/09</th>
<th scope="col">07/25/09</th>
<th scope="col">07/18/09</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006&nbsp;</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Initial Claims</td>
<td>550</td>
<td>588</td>
<td>559</td>
<td>22.2%</td>
<td>420</td>
<td>321</td>
<td>313</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>--</td>
<td>6,310</td>
<td>6,241</td>
<td>88.7%</td>
<td>3,342</td>
<td>2,552</td>
<td>2,459</td>
</tr>
<tr class="odd">
<td class="firstcol">Insured Unemployment Rate (%)</td>
<td></td>
<td>4.7</td>
<td>4.7</td>
<td>2.5</td>
<td>2.5</td>
<td>1.9</td>
<td>1.9</td>
</tr>
</tbody>
</table>
German Orders Surge Again 
by <a href="/comment/Brusca.html">Robert
Brusca</a> August 6, 2009


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090806d.jpg" align="left" border="0" height="265" width="353">
German new orders rose by 4.5% in June after rising by 4.4% in
May. Orders are up and at a 42% annual rate over three-months and STILL
they stand lower by 23.7% than they did one year ago. In the newly
completed second quarter, orders are up at a 26.8% annual rate. While
real sector sales in mining and MFG are up at a 3.4% pace in the
quarter. Germany is beginning to turn the corner, despite ongoing
weakness in retail sales. 
 

German domestic orders barely nudged higher rising by nearly
rounding error (0.2%) in June. Foreign orders spurted by 8.3% putting
in their second strong month in a row. Exports remain the lifeblood of
the German economy. The report that Hungary&#8217;s industrial output rose
for the second month in a row is good news for Germany, suggesting that
eastern European export markets are among those that are reviving. 
 

In June German real sector sales for consumer goods rose by
0.2% as consumer durables plunged by 3.7%. Capital goods real sales
rose by 1.2% after spurting by 9.2% in May. Intermediates goods sales
rose by 2.8%. German real sector sales were up across the abroad in the
quarter as well with the exception of consumer durables, where sales
fell in the quarter at a hefty -8.4% annual rate. 
 
 
 
 


<table border="0" cellspacing="0" width="100%">
</table>
<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="9" scope="col">German
Orders and Sales By Sector and Origin
</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Real and SA</td>
<td colspan="3">% M/M</td>
<td colspan="5">% Saar</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>Jun-09</td>
<td>May-09</td>
<td>Apr-09</td>
<td>3-MO</td>
<td>6-Mo</td>
<td>12-Mo</td>
<td>YrAgo</td>
<td>QTR-2-Date</td>
</tr>
<tr>
<td class="firstcol">Total Orders</td>
<td>4.5%</td>
<td>4.4%</td>
<td>0.1%</td>
<td>42.6%</td>
<td>19.4%</td>
<td>-23.7%</td>
<td>-8.0%</td>
<td>26.8%</td>
</tr>
<tr>
<td class="firstcol">Foreign</td>
<td>8.3%</td>
<td>4.9%</td>
<td>-0.9%</td>
<td>61.2%</td>
<td>27.0%</td>
<td>-24.2%</td>
<td>-11.4%</td>
<td>40.0%</td>
</tr>
<tr>
<td class="firstcol">Domestic</td>
<td>0.2%</td>
<td>4.1%</td>
<td>1.1%</td>
<td>23.8%</td>
<td>11.3%</td>
<td>-23.1%</td>
<td>-3.6%</td>
<td>13.5%</td>
</tr>
<tr class="odd">
<td class="firstcol" colspan="9">Real
Sector Sales</td>
</tr>
<tr>
<td class="firstcol">MFG/Mining</td>
<td>1.4%</td>
<td>4.6%</td>
<td>-2.0%</td>
<td>16.6%</td>
<td>8.0%</td>
<td>-17.4%</td>
<td>0.9%</td>
<td>3.4%</td>
</tr>
<tr>
<td class="firstcol">Consumer</td>
<td>0.2%</td>
<td>-2.2%</td>
<td>4.0%</td>
<td>8.0%</td>
<td>3.9%</td>
<td>-6.8%</td>
<td>-3.9%</td>
<td>4.7%</td>
</tr>
<tr>
<td class="firstcol">Consumer Durables</td>
<td>-3.7%</td>
<td>6.1%</td>
<td>-1.2%</td>
<td>3.8%</td>
<td>1.9%</td>
<td>-21.8%</td>
<td>-1.6%</td>
<td>-8.4%</td>
</tr>
<tr>
<td class="firstcol">Consumer Nondurables</td>
<td>0.6%</td>
<td>-3.2%</td>
<td>4.6%</td>
<td>7.8%</td>
<td>3.8%</td>
<td>-4.1%</td>
<td>-4.2%</td>
<td>6.7%</td>
</tr>
<tr>
<td class="firstcol">Capital Goods</td>
<td>1.2%</td>
<td>9.2%</td>
<td>-7.3%</td>
<td>10.1%</td>
<td>4.9%</td>
<td>-22.3%</td>
<td>3.9%</td>
<td>1.2%</td>
</tr>
<tr>
<td class="firstcol">Intermediate Goods</td>
<td>2.8%</td>
<td>2.8%</td>
<td>1.5%</td>
<td>32.0%</td>
<td>14.9%</td>
<td>-18.2%</td>
<td>1.2%</td>
<td>9.7%</td>
</tr>
<tr>
<td class="firstcol">All MFG-Sales</td>
<td>1.5%</td>
<td>4.4%</td>
<td>-2.0%</td>
<td>16.6%</td>
<td>8.0%</td>
<td>-17.6%</td>
<td>0.8%</td>
<td>3.3%</td>
</tr>
</tbody>
</table>
</body></html>

U.S. Weekly Claims For JoblessInsurance Inch Lower While Continuing Claims Tick Higher

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090805h.jpg" width="353">
An easing rate of inventory decumulation is now playing a part in improving the level of factory sector output. During June, factory sector inventories fell 0.8%, the same as they did in May and that compares with 1.0%+ declines extending back to December. During the last three months the 10.5% annualized rate of inventory decumulation was down from 15.9% this past Winter. Much of that deceleration is due, however, to lower oil prices. Excluding oil, factory inventories fell at a 12.4% three-month rate that was just a slight moderation from earlier.
In fact, moderation in inventory decumulation rates is fairly spotty amongst various industries. Showing very modest accumulation were inventories of transportation equipment after declining at a three-month rate of 9.3% as recently as March. In addition, inventories of electrical equipment &amp; appliances have fallen at a slightly reduced 19.3% rate and machinery inventories fell at a somewhat reduced 14.8% rate. Conversely, steep production cuts lowered furniture inventories at a 28.6% rate which near its quickest. Inventories of primary metals also fell at a fairly stable 32.4% pace and computer inventory decumulation accelerated to a 15.1% rate during the last three months. <img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090805i.jpg" width="353">
The reason for the modest improvement in inventory destocking has been an improved shipment picture. Factory shipments actually rose 1.4% during June and that was the first monthly increase in nearly one year. Increases in the transportation area and in the machinery industries accounted for much of the gain. Most elsewhere the rates of decline in shipments moderated substantially.
Finally, new orders have improved. The 0.4% June increase was the fourth in the last five months. It reflected a sharp monthly rise both in primary metals (-46.5% y/y) and machinery (-26.0% y/y) orders as well as a slight increase in electrical equipment (-30.8% y/y) orders. Bookings of transportation equipment and furniture continued to fall.
The Manufacturers&#39; Shipments, Inventories and Orders (MSIO) data is available in Haver&#39;s USECON database.
The international dimension of productivity and demand shocks in the U.S. economy from the Federal Reserve Bank of San Francisco can be found <a href="http://www.frbsf.org/publications/economics/papers/2009/wp09-09bk.pdf"> here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@ED/@ED01/@ED0101/@ED01016/@ED01016.HTM">Factory Survey</a> (NAICS, %)</th>
<th scope="col">June</th>
<th scope="col">May</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Inventories</td>
<td>-0.8</td>
<td>-0.8</td>
<td>-8.5</td>
<td>2.1</td>
<td>3.7</td>
<td>8.2&nbsp;</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Excluding Transportation</td>
<td>-1.0</td>
<td>-0.9</td>
<td>-11.4</td>
<td>-0.6</td>
<td>2.7</td>
<td>7.9</td>
</tr>
<tr class="odd">
<td class="firstcol">New Orders</td>
<td>0.4</td>
<td>11.1</td>
<td>-24.1</td>
<td>0.1</td>
<td>1.9</td>
<td>6.2</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Excluding Transportation</td>
<td>2.3</td>
<td>0.9</td>
<td>-22.6</td>
<td>3.1</td>
<td>1.2</td>
<td>7.4</td>
</tr>
<tr class="odd">
<td class="firstcol">Shipments</td>
<td>1.4</td>
<td>-0.8</td>
<td>-21.4</td>
<td>1.7</td>
<td>1.2</td>
<td>5.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Excluding Transportation</td>
<td>1.4</td>
<td>-0.0</td>
<td>-21.6</td>
<td>3.7</td>
<td>1.5</td>
<td>6.7</td>
</tr>
<tr class="odd">
<td class="firstcol">Unfilled Orders</td>
<td>-0.9</td>
<td>-0.3</td>
<td>-9.5</td>
<td>3.5</td>
<td>17.1</td>
<td>15.3</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Excluding Transportation</td>
<td>-0.1</td>
<td>-0.7</td>
<td>-14.0</td>
<td>-1.0</td>
<td>8.2</td>
<td>16.0</td>
</tr>
</tbody>
</table>
</body>
</html>

An easing rate of inventory decumulation is now playing a part in improving the level of factory sector output. During June, factory sector inventories fell 0.8%, the same as they did in May and that compares with 1.0%+ declines [...]

U.S. Factory Inventory Decumulation Eases Somewhat

USD/EUR exchange rate uncoupling from interest rate differential

Widespread downgrading of 2025 GDP outlook

Trade and fiscal policy uncertainty has exploded with the new administration

Much lower US electricity costs gives it a competitive advantage

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

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

US policy gyrations boosting policy uncertainty worldwide

Expected tariff hikes have boosted inflation expectations

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

US economy expected to outperform other major economies in 2025

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

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

Heavy US manufacturing states underperforming while Sun Belt states outperforming

Rising long-term yields a global phenomenon

US financial market concerns shifting from growth to inflation

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

Policy uncertainty has surged since the US national elections.

Recent turnaround in US economic surprises leading to increases in rate-cut expectations

The outlook has brightened in the US, while it has dimmed for other major economies

Headline US PCE inflation elevated by sticky services prices

US and global equity prices have recently diverged

US leading global upturn in economic surprises

Blue Chip forecasters look for further significant monetary easing apart from Japan

Recent rise in global supply chain pressures could augur a pickup in global inflation pressures

Underperforming German economy generating increased policy uncertainty relative to Europe and the US

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Nonfarm payrolls increased 177,000 (1.2% y/y) during April after rising 185,000 in March, revised from 228,000, and 102,000 in February, revised from 117,000. Expectations had been for a 130,000 rise in the Action Economics Forecast Survey. The latest figure left the three-month average change at 155,000 in April, down from 232,000 in January.

Average hourly earnings rose 0.2% during April after unrevised increases of 0.3% in March and 0.2% in February. Earnings growth of 3.8% y/y was below the 5.9% high in March 2022.

The unemployment rate, measured in the household survey, held m/m at an expected 4.2% in April, and compared to 4.1% in February and 4.0% in January. It reached a low of 3.4% in April 2023. The unemployment rate, including employees working part-time for economic reasons plus all marginally-attached workers, eased to 7.8% in April from 7.9% in March.

In the **establishment survey**, private-sector employment rose 167,000 (1.2% y/y) after a 170,000 March increase. Factory sector jobs edged 1,000 lower (-0.7% y/y) following a 3,000 gain. Construction sector employment increased 11,000 (1.7% y/y), after rising 7,000 in March.

Private service-producing sector employment increased 156,000 (1.4% y/y) in April after improving 161,000 in March. Increases varied greatly amongst service sector categories. Private education & health sector employment rose 70,000 (3.4% y/y) last month following a 74,000 March increase. Leisure & hospitality employment rose 24,000 (1.3% y/y) after a 38,000 gain. Trade, transportation & utilities rose 32,000 (0.9% y/y) in April following a 25,000 March increase. Professional & business services employment rose 17,000 (-0.1% y/y) following a 3,000 rise while temporary help employment rose 3,600 (-3.9% y/y) following a 2,700 decline. Financial activities employment improved 14,000 (1.2% y/y) after a 6,000 gain. The number of information sector jobs held steady (-0.4% y/y) last month after falling 2,000 in March.

Government sector payrolls rose 10,000 (1.3% y/y) last month after increasing 15,000 in March. The number of local government jobs increased 13,000 (1.4% y/y) following a 17,000 gain. State government employment rose 6,000 (1.8% y/y) following a 2,000 March increase but federal government payrolls fell 9,000 (-0.3% y/y), the third consecutive monthly decline.

Private-sector average hourly earnings rose 0.2% (3.8% y/y) in April after increasing 0.3% in March. Earnings in the goods-producing sector eased 0.1% (+4.0% y/y) following a 0.6% gain. Earnings in construction rose 0.3% (3.6% y/y), after a 0.2% rise but factory sector earnings declined 0.3% (+4.3% y/y) after surging 0.8% in March. In the private services-sector, earnings rose 0.2% (3.7% y/y) in April for the third straight month. Information sector pay increased 1.0% (5.2% y/y) last month after easing 0.1%, and financial activities earnings rose 0.5% (4.3% y/y) for the second straight month. Trade, transportation & utilities sector pay increased 0.4% (3.4% y/y) after 0.6%. Professional & business sector earnings increased 0.1% (4.4% y/y) after 0.2% in March. Leisure & hospitality earnings held steady (+3.8% y/y) following a 0.6% March increase.

250502C5.jpg

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The length of the average workweek held steady at 34.3 hours in April. The workweek in the goods-producing sector eased to 39.8 hours from 40.0 hours. The construction sector average workweek eased to 39.0 hours from 39.3 hours while the factory sector workweek moved lower to 40.0 hours from 40.2. The average workweek in the private service sector held at 33.2 hours. Professional & business service hours fell to 36.3 hours from 36.4 while trade, transportation & utilities hours improved to 34.3 from 34.0 hours. Private education hours rose slightly to 32.8, but leisure & hospitality held steady at 25.5 hours.

In the **household survey**, the unemployment rate held at 4.2% in April as employment rose 436,000 and the size of the labor force increased 518,000. The labor force participation rate edged up to 62.6% last month from 62.5% in March. It remained below the high of 63.3% early in 2020. The rate for teenagers declined to 36.9%. For workers aged 20-24, the rate held steady at 72.1%, up from 71.8% six months earlier. For workers aged 25-54 the rate rose to 83.6%, a five-month high. For individuals 55 and over, the rate improved to 38.4% in April.

The employment/population ratio for all workers in April rose to 60.0%. It remained below the peak reading of 61.1% in February, 2020 just prior to the pandemic.

The employment and earnings data are collected from surveys taken each month during the week containing the 12th day of the month. The labor market data are contained in Haver's **USECON** database. Detailed figures are in the **EMPL** and **LABOR** databases. The expectations figures are in the **AS1REPNA** database.

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- Job growth spreads across most sectors.
- Earnings growth trend decelerates.
- Jobless rate holds steady.

U.S. Job Growth Is Firm in April but March Gain Is Lessened

Winnie Tapasanun

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Total factory orders rose a slightly less-than-expected 4.3% m/m in March after rises of 0.5% in February and 1.8% in January, data from the U.S. Census Bureau showed. A 4.5% m/m March increase had been expected in the Action Economics Forecast Survey. The March reading was the third successive monthly rise and the largest since July 2024. The year-on-year rate accelerated to 6.0% in March, the highest since November 2022, from 2.3% in February. Notably, orders for nondefense aircraft & parts soared 139.0% in March following a 7.4% drop in February and a 92.9% surge in January. Factory orders excluding defense rose 4.8% (5.9% y/y), the largest of three straight m/m/ rises, after a 0.4% February increase. Factory orders excluding the transportation sector fell 0.2% (+1.1% y/y), the first m/m fall since August, after rising 0.3% in February, January and December.

Durable goods orders jumped 9.2% (11.9% y/y) in March, the third consecutive m/m gain and the biggest since July 2024, on top of a 0.8% increase in February (matching +9.2% m/m in the advance report on April 24). The March jump reflected m/m orders increases of 27.1% (the largest m/m surge since July 2024; 31.2% y/y) in transportation equipment, 1.1% (4.9% y/y) in primary metals, 0.5% (-0.4% y/y) in furniture & related products, 0.1% (2.5% y/y) in fabricated metal products, and 0.1% (0.9% y/y) in machinery. To the downside, durable goods orders for computers & electronic products (-1.3%; +2.7% y/y) and electrical equipment, appliances & components (-1.0%; +4.2% y/y) declined m/m in March.

Nondurable goods orders, which equal nondurable goods shipments, fell 0.3% (+0.4% y/y) in March, the first m/m fall since September, after a 0.1% uptick in February. The March fall reflected m/m drops of 2.4% (-9.3% y/y) in petroleum & coal products and 0.9% (-1.2% y/y) in apparel. To the upside, the following nondurable goods shipments rose m/m in March: leather & allied products (1.5%; 8.6% y/y), beverage & tobacco products (0.7%; 5.8% y/y), paper products (0.6%; 2.3% y/y), printing (0.3%; 3.8% y/y), textile mills (0.3%; 0.8% y/y), chemical products (0.2%; 5.4% y/y), plastics & rubber products (0.2%; 0.4% y/y), food products (0.1%; 1.8% y/y), and textile products (0.1%; 2.1% y/y).

Total shipments slipped 0.1% (+2.0% y/y) in March, the first m/m easing since October, after a 0.7% increase in February. Excluding transportation, shipments were virtually unchanged m/m (+1.1% y/y) in March following six straight m/m gains. Shipments of durable goods industries inched up 0.1% (3.8% y/y) in March, the smallest of four consecutive m/m increases, after a 1.3% advance in February. This reflected m/m durable goods shipments rises of 1.2% (5.6% y/y) in primary metals, 0.9% (0.1% y/y) in furniture & related products, 0.8% (-0.2% y/y) in nonmetallic mineral products, 0.4% (0.0% y/y) in machinery, 0.3% (1.8% y/y) in fabricated metal products, 0.2% (4.5% y/y) in computers & electronic products, 0.2% (-2.1% y/y) in wood products, and 0.1% (3.0% y/y) in electrical equipment, appliances & components. In contrast, durable goods shipments for transportation equipment (-0.5%; +7.3% y/y) and miscellaneous durable goods (-0.1%; +2.9% y/y) fell m/m in March following three successive m/m increases.

Unfilled orders rose 2.0% (2.3% y/y) in March, up for the eighth month in nine, after a 0.1% uptick in February. Excluding transportation, unfilled orders dipped 0.1% (+0.7% y/y) in March, the first m/m easing since May 2024, after holding steady in February. Backlogs of durable goods rose 2.0% (2.3% y/y) in March, reflecting m/m rises of 3.1% (3.1% y/y) in transportation equipment and 0.2% (2.4% y/y) in electrical equipment, appliances & components.

Inventories edged up 0.1% (0.9% y/y) in March, the fifth straight m/m increase, after rising at the same pace in the prior two months. Excluding transportation, inventories were up 0.1% (0.5% y/y) in March, the fifth consecutive m/m rise. Durable goods inventories ticked up 0.1% (1.0% y/y) in March after holding steady in February and January; nondurable goods inventories edged up 0.1% (0.8% y/y), the fifth successive m/m increase.

The factory sector data are available in Haver’s **USECON** database. The Action Economics Forecast Survey is in the **AS1REPNA** database.

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- March manufacturers’ new orders +4.3% m/m; +6.0% y/y, highest since Nov. ’22.
- Durable goods orders (+9.2%) jump m/m, while nondurable goods orders (-0.3%) and shipments (-0.1%) decline m/m.
- Transportation equipt. orders +27.1% m/m, w/ a 139.0% m/m surge in nondefense aircraft & parts orders.
- Unfilled orders +2.0%, the eighth m/m rise in nine months.
- Inventories +0.1%, the fifth consecutive m/m increase.

U.S. Factory Orders Increase for the Third Straight Month in March

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The global manufacturing data showed broad weakening in April as conditions weakened across more than half of the contributing early reporters in the S&P survey of manufacturing. Of the 18 early reporting countries, more than half of them showed deceleration over six months and 12 months. Over three months, only 8 of 18 showed deterioration and that's about as good as it got in this report. In the current month, month-to-month changes showed more than half of the survey contributors showing weaker results than the month before. In the S&P framework, manufacturing improved month-to-month for the U.S.; however, looking at sequential averages for the U.S., U.K., European monetary union, Canada, and Japan, we see a steady weakening and results over 12 months, over six months versus 12 months, and for three months versus 6 months. The highly developed countries are not doing particularly well.

Asian economies are also showing slight deterioration but doing a little better than the developed countries in general.

Only five of the 18 reporting countries have queue percentile standings in their data back to January 2021 that are above their medians. Readings at or above the 50% mark are at or above the median standing. Canada is showing the weakest manufacturing result on record over this span, in terms of its queue percentile standing which is at 0 in the current month.

I showed the graphic for the Baltic dry goods index in this report rather than statistics on the manufacturing PMI data because the Baltic data, which reflect shipping volume for dry goods - that is excluding things like oil - is weak but it's only in the neighborhood where it's been for some time. There has been a great deal of talk about how tariffs may have impacted trade flows, expected trade flows, shipping, shipping rates, and the like. However, according to the Baltic dry goods index, there isn't much evidence that this is occurring right now and affecting the current data. That may still lie ahead but for now it's not baked in the cake.

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Globally Manufacturing Weakens

Andrew Cates

**China-US shipping activity** 
The economic fallout from escalating US-China trade tensions is becoming increasingly visible in the data. A clear example is the chart below, which highlights a sharp drop in vessel arrivals at the ports of Los Angeles and Long Beach, along with a notable decline in ships waiting offshore. These trends point to a tangible weakening in bilateral trade flows, as the effects of tit-for-tat tariffs imposed by both countries begin to bite. Given the outsized role the US and China play in global commerce, this slowdown is likely to reverberate through global supply chains, weighing on trade volumes, dampening demand, and curbing economic growth worldwide.

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

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

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

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

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

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

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Charts of the Week: Tariff Truce, Tenuous Trust

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

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

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

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

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

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

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

Economy in Brief: August 2009

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