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[SASEHAVR](http://support.sas.com/documentation/cdl/en/etsug/67525/HTML/default/viewer.htm#etsug_sasehavr_gettingstarted01.htm) is a seamless interface between Haver and SAS data processing that enables SAS users to read economic and financial time series data that reside in a Haver Analytics DLX (Data Link Express) database. [SASEHAVR](http://support.sas.com/documentation/cdl/en/etsug/67525/HTML/default/viewer.htm#etsug_sasehavr_gettingstarted01.htm) requires both SAS/ETS and Base SAS Software.

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[RATS (Regression Analysis of Time Series) Econometric Software](https://estima.com) by Estima is a leading econometrics and time-series analysis software package. It provides ability to do linear and non-linear least squares, forecasting, SUR and ARIMA models and in addition, supports advanced techniques such as GMM, ARCH and GARCH models, state space models, and more.

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Abdel M. Zellou, Ph.D.

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Construction of data centers has overtaken transportation construction in US

Andrew Cates

**More Hawkish Central Banks**
One of the most important developments in recent months has been the steady shift in expectations surrounding monetary policy. Earlier this year, investors were largely focused on the prospect of widespread rate cuts as growth slowed and inflation appeared to be moving back towards target. Today, the narrative has changed materially. According to the latest Blue Chip Financial Forecasts survey, economists now expect policy rates to rise modestly over the next twelve months in Japan, Canada, the euro area and Australia. Only the UK and US are still expected to see rate reductions and even these are relatively modest compared with expectations earlier in the year. Perhaps more interesting is the growing divergence between economists and financial markets. While the Blue Chip panel continues to anticipate small reductions in policy rates in both the UK and US, market pricing has increasingly shifted towards the possibility of modest tightening instead. Stronger economic activity, firmer labour markets (in the US) and renewed inflation concerns have all contributed to this reassessment. The result is a global interest rate environment that increasingly looks "higher for longer" rather than one characterised by an aggressive easing cycle.

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**US Labour Demand Remains Surprisingly Resilient**
As noted, part of the reason markets have become less convinced about future rate cuts is that the US labour market continues to show surprising resilience. Job opening rates have actually risen over recent months, suggesting that labour demand may be reaccelerating despite growing discussion about AI-related job displacement. On that last note, the sectoral detail is particularly revealing. Professional and business services recorded the largest increase in job openings over the past three months, significantly outperforming most other sectors. This is noteworthy because professional services are frequently cited as one of the areas most vulnerable to disruption from generative AI. Rather than reducing hiring demand, however, AI investment may currently be creating additional demand for highly skilled workers involved in software development, consulting, implementation and digital transformation.

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**Middle East Tensions Continue to Generate Inflation Risks**
A second factor contributing to higher bond yields and reduced expectations of monetary easing is the persistence of supply-side inflation pressures. The latest global PMI surveys show that manufacturing output prices are climbing more sharply while supplier delivery times have lengthened compared with earlier in the year. Much of this appears linked to ongoing instability in the Middle East and the associated disruption to global shipping routes. Longer transit times, higher insurance costs and logistical bottlenecks have all contributed to upward pressure on manufacturing costs. There is, however, a modestly encouraging signal in the latest data. While delivery times remain relatively stretched, the most recent PMI survey does not indicate any significant further deterioration at the global level. This suggests that supply chain conditions may be stabilising rather than entering another period of sustained disruption.

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**Manufacturing Is Benefiting from a More Benign Trade Environment**
While supply chain concerns remain important, there are also signs that some of the pressures facing global manufacturers may be easing. Effective tariff rates facing many major US trading partners have declined significantly over the past six months. The largest reductions have occurred across several key Asian economies including India, China, Japan, South Korea, Taiwan and members of ASEAN. Europe and the UK have also experienced some easing, although to a lesser extent, while Australia stands out as one of the few countries facing an increase in effective tariff rates. This chart may help explain some of the resilience visible in recent manufacturing surveys around the world. While trade policy uncertainty remains elevated, the actual tariff burden facing many exporters has become less restrictive.

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**South Korea Highlights the Scale of the AI Boom**
If there is one chart that captures the extraordinary scale of the AI investment cycle, it is South Korea's semiconductor export data. Semiconductor exports surged by an astonishing 169% year-on-year in May, one of the strongest readings on record and a powerful illustration of the strong demand currently flowing through the global technology supply chain. South Korea occupies a pivotal position within the global semiconductor ecosystem, making its export data one of the most useful real-time indicators of AI-related capital expenditure. The rapid buildout of data centres, cloud infrastructure and advanced computing capacity is generating unprecedented demand for memory chips, processors and other semiconductor components. While concerns about eventual overcapacity remain valid, the near-term momentum remains remarkable. The strength of South Korean exports suggests that AI-related investment spending is continuing to accelerate rather than slow, providing an increasingly important support to global growth and trade at a time when many other sectors are facing cyclical headwinds.

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**Investors Are Following the AI Money**
Our final chart this week highlights how investors are positioning for these trends. Equity fund flows since the beginning of 2025 show a striking divergence across Asian markets. Taiwan and South Korea have attracted substantial inflows, while broader Asia ex-Japan regional funds and India have experienced net outflows. The explanation is relatively straightforward. Taiwan and South Korea sit at the centre of the global AI supply chain and are among the largest beneficiaries of surging semiconductor demand. At the same time, both economies have also benefited from the recent easing in tariff pressures highlighted in the previous chart. Investors have therefore become increasingly selective, directing capital towards those markets with the greatest exposure to AI-driven growth. The concentration of flows into a relatively narrow group of markets inevitably raises questions about valuations and positioning. Nevertheless, the broader message remains clear. The AI investment boom continues to dominate both trade flows and capital flows across Asia and remains one of the most powerful forces shaping the global economy today.

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The global macro backdrop continues to evolve in ways that would have surprised many investors at the start of the year. Expectations of widespread monetary easing have steadily receded as inflation has proven more persistent and economic activity more resilient than anticipated. The latest Blue Chip Financial Forecasts point to a growing bias towards policy tightening rather than loosening in several major economies (chart 1), while rising US job opening rates suggest labour demand remains firmer than expected (chart 2). At the same time, ongoing instability in the Middle East continues to generate supply-side inflation risks and lengthier delivery times (chart 3). There are, however, also reasons for optimism. Manufacturing activity appears to be finding some support from a reduction in effective tariff rates facing many major US trading partners (chart 4). More importantly, the AI investment boom continues to gather momentum. South Korea's semiconductor exports surged by an extraordinary 169% year-on-year in May, highlighting the strength of global demand for AI-related hardware (chart 5). Unsurprisingly, investors continue to direct capital towards those markets most exposed to these trends, with Taiwan and South Korea attracting substantial equity inflows (chart 6). The bottom line is that inflation concerns and higher-for-longer interest rates remain important risks, but they are increasingly being offset, for now, by a combination of improving economic conditions and one of the strongest technology-driven investment cycles in modern history.

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Charts of the Week: Inflation Fears, AI Cheers

Sandy Batten

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Growth of nonfarm business productivity (output per hour) was revised down more than expected in Q1 to 0.3% q/q saar from 0.8% previously and 1.6% in Q4. The Action Economics Forecast Survey expected a 0.7% quarterly increase in productivity. Compared to a year ago, productivity rose 2.8% y/y in Q1 (revised down from 2.9% previously), up from 2.5% in Q4. Since productivity growth began to accelerate at the beginning of 2023, it has grown at a well above trend 2.6% annual rate, likely a reflection of AI and other technology advances. Strong productivity is a key factor for boosting real incomes and restraining inflation pressures.

Growth in nonfarm business output (not quite the same as real GDP) was revised down to 1.0% q/q saar in Q1 from 1.5% in the previous estimate. This was in line with the previously announced downward revision in Q1 real GDP growth to 1.6% from 2.0% in the first estimate. Growth in hours worked was not revised at 0.7%. However, compensation growth was revised down markedly in both Q1 and last year’s Q4. For Q1, compensation growth was revised down to 2.1% from 3.1% in the first estimate. The revision for Q4 was even larger with compensation growth revised to 3.7% from 6.3% previously. These revisions in compensation led to similarly large downward revisions to growth of unit labor costs. Unit labor costs rose 1.8% in Q1 versus 2.3% in the first estimate and 2.1% in Q4 versus 4.6% in the previous estimate. Accordingly, the annual rate of growth of unit labor costs slowed to 0.5% y/y in Q1, the slowest annual pace since Q3 2019 and generally supports what former Fed Chair Powell has noted several times: that the labor market is not a source of the recent rise in US inflation.

Manufacturing productivity growth in Q1 was also revised down, to 3.2% q/q saar from 3.6% in the first estimate. However, in contrast to the revision to nonfarm productivity, the downward revision to manufacturing productivity was due to an upward revision in hours worked with no revision to manufacturing output (up 3.3% in both estimates). Hours worked were revised to unchanged from a 0.4% decline in the first estimate. Growth in manufacturing compensation was also revised down to 5.5% from 6.1%. The larger downward revision to compensation than to productivity resulted in the growth in manufacturing unit labor cost being revised down to 2.2% from 2.4% previously. This was down sharply from 8.8% unit labor cost growth reported for Q4, revised down 9.8%.

The productivity and labor cost data are available in Haver’s **USECON** database. The Action Economics expectations figures are in the **AS1REPNA** database.

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- Q1 output per hour growth was revised down to 0.3% q/q saar in the second estimate from 0.8% in the first, reflecting a downward revision to output.
- However, longer-term productivity growth remained solidly well above trend.
- Compensation growth was revised down meaningfully, resulting in a downward revision to unit labor cost growth to 1.8% from 2.3% previously.

U.S. Q1 Productivity and Unit Labor Cost Growth Revised Down

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Initial claims for unemployment insurance rose 13,000 to 225,000 in the week ending May 30 from a downwardly revised 212,000 in the prior week (previously 215,000). This was the highest weekly reading since the week ending February 7. The four-week average jumped to 214,750 in the week of May 30 from 208,250 in the previous week. The Action Economics/Haver Analytics Survey looked for 215,000 claims to have been filed.

The total number of unemployment insurance beneficiaries—also known as “continuing claims”—fell by 8,000 to 1.777 million in the week ending May 23 from a downwardly revised 1.785 million in the prior week (previously 1.786 million). The four-week average edged up to 1.777 million from 1.773 million. The insured unemployment rate was unchanged at 1.2% for the fourth consecutive week. Except for a one-week dip to 1.1% in the week of April 25, the insured unemployment rate has been at 1.2% since the week of November 29, 2025.

The insured unemployment rate varied greatly across individual states and territories. In the week ending May 16, the highest unemployment rates were in New Jersey (2.08%), Washington (2.06%), Massachusetts (1.92%) and California (1.89%). The lowest rates were in South Dakota (0.26%), Louisiana (0.33%), Florida (0.34%), Alabama (0.38%) and North Carolina (0.39%). Rates in other notable states include New York (1.57%), Illinois (1.47%), Pennsylvania (1.27%), and Texas (1.06%). These state data are not seasonally adjusted.

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

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- Initial claims rose more than expected to 225k in the week ending May 30.
- This is the largest weekly claims figure since February 7.
- However, continuing claims continued to trend down, falling to 1.777 million in the week ending May 23 from 1.785 million in the previous week.

U.S. Initial Unemployment Claims Jumped in Latest Week

Robert Brusca

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Retail sales in the euro area declined in volume terms in April, falling 0.4% on the month after rising 0.8% in March and falling 0.5% in February. Food and beverage volume recovered to post an expansion after two monthly declines.

**Sales trends slip**: However, the headline for retail volume growth shows that there has been steady slippage, with growth over 12 months weaker than it was over the previous 12 months, growth over six months at a weaker pace than it was over 12 months, and growth over three months posting an outright decline compared to a gain over six months. The highlighted red background in the table shows this string of continuous slowing that marks decelerating retail spending in the euro area as of April. In the quarter to date, retail sales volumes are declining at a 0.2% annual rate—a very slight contraction but a net reduction in sales volume, nonetheless, to start the second quarter.

**Contrarian strength in vehicle demand**: Motor vehicle registrations pulled back in April after some strong gains in earlier months. Motor vehicle registrations are accelerating as the growth rate rises from 12 months to six months to three months; growth actually explodes over three months, rising at a 52.4% annualized rate. With this strength, naturally, motor vehicle registrations are logging strong growth at the beginning of this new quarter, rising at a 33.6% annual rate.

Despite the strength in motor vehicle registrations, registrations are still a lot lower in comparison to January 2020. They have averaged a decline of 1.2% per year over this period. Since January 2020, just before COVID struck, retail sales in the euro area have risen by 6.7%, implying an average annual growth rate of 1% per year. This has generally been a lethargic period for retail sales.

**Sales trends by country**
Looking at the individual countries in the table, we chronicle developments for EMU members Germany and the Netherlands, EU member Denmark, and Northern European countries Norway and Sweden, plus former EU member the United Kingdom. We see that all of these countries have had a long period of weak growth going back to January 2020. Among these countries, only Denmark and the Netherlands have averaged retail volume growth of over 1% for this date-span; Denmark averages 1.5% per year, and the Netherlands averages 1.3%. Sweden and Norway’s trends average 0.8% and 0.7% growth per year back to January 2020. Germany posted a compounded annual increase of only 0.6% annually, while in the U.K., in the wake of the problems that COVID and Brexit created, saw its retail sales volumes decline annually by 0.4%, marking a 2.2 percentage point decline in retail sales since January 2020. It has been a weak environment for retailing.

**Recent sales performance**: Up-to-date observations for April show declines in retail sales volume in Germany, Denmark, and the U.K., with flat sales in Sweden. Norway logs an increase of 0.3% month-to-month, and the Netherlands logs an increase of 1.6% month-to-month. The sequential data, looking at sales over 12 months to six months to three months, largely points to a continuation of this period of lethargic sales. Germany, the U.K., and Norway each are posting a sequential deceleration, as the rate of sales slows over progressively shorter time periods. Denmark and the Netherlands have somewhat erratic performance on retail sales, with no clear trends. Sweden stands alone as the only country with retail sales clearly accelerating, rising 4.2% at an annual rate over 12 months, at a 4.4% annual rate over six months, and at a 5.8% annual rate over three months.

**Challenging outlook**
The retail environment remains challenging in Europe. Oil prices are rising; the European Central Bank is expected to take steps to deal with excessive inflation and rising oil prices with at least one rate hike. The war in Ukraine remains hot; the war in the Middle East may be cooling down, but the Strait of Hormuz is still not open for business. The global economy continues to face significant challenges.

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Europe

Retail Sales in Europe Continue to Struggle

Michael J. Moran

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New orders for manufactured goods jumped 4.8 percent in April, led by a surge of 8.0% in the durable-goods sector and reinforced by an advance of 1.4% in orders for nondurable goods.

The increase in orders for durable goods was heavily influenced by the volatile aircraft category, which posted a striking advance of 113.3%. However, the jump did little to influence the underlying trend, as it followed a cumulative decline of 51.6% over the prior four months. Excluding aircraft orders, the durable component rose 0.9%, reinforcing a strong upward trend that began late last year (chart, above right). Bookings for computers, despite a dip in April, have been a force behind the advance excluding aircraft, but other areas have been firm as well (machinery, primary metals, fabricated metals). The results in the durable sector were in line with the preliminary estimate released last week, which showed an increase of 7.9% overall and 0.8% ex-aircraft.

The strong performance in new orders for durable goods has generated an upward trend in unfilled orders. Backlogs started to move higher in the second half of last year, and they added to that trend with an increase of 0.6% in April (chart, lower left).

The increase of 1.4% in the nondurable sector was led by a jump of 4.0% in the petroleum and coal category, which followed an average increase of 6.8% in the prior three months. These increases, of course, primarily reflected price changes rather than shifts in real activity. However, bookings outside of petroleum and coal have been firm on balance, increasing 0.8% in April after advances of 0.6% and 0.7% in the prior two months (chart, lower right). Nondurable orders also rose in the four months before this recent burst, but the changes were small. Orders for nondurable goods are typically shipped upon arrival, and thus backlogs are not tracked, but the recent flow of bookings certainly represents a solid trend.

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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- Aircraft bookings fueled durable bookings in April, accenting solid gains in prior months.
- Petroleum prices inflated nondurable orders in April, but orders ex-petrol advanced as well.

Factory Orders: Lots of Noise, but Also Firm Trends in Recent Months

Winnie Tapasanun

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U.S. nonfarm private sector payrolls jumped a more-than-expected 122,000 (0.5% y/y) in May—the largest of 11 straight m/m gains and the strongest since January 2025—after rises of 105,000 in April (+109,000 initially) and 61,000 in March (unrevised), according to the ADP National Employment Report. The Action Economics Forecast Survey expected a 110,000 May increase. The three-month average change rose to 96,000 in May, the highest since February 2025, from 77,000 in April and 46,000 in March.

Small business hiring (less than 50 employees) rose 67,000 (0.9% y/y) in May, the 11th consecutive m/m rise, after a 63,000 gain in April (+65,000 initially), with employment in very small firms (1-19 employees) up 49,000 and employment in small firms (20-49 employees) up 18,000. Employment at medium-sized firms (50-499 employees) advanced 17,000 (-0.3% y/y) in May following a 2,000 increase in April (unrevised) and two successive m/m declines. Large business hiring (500+ employees) rose 40,000 (1.6% y/y), the third m/m rise in four months, after a 42,000 April rebound (unrevised).

Service-producing jobs jumped 114,000 (0.7% y/y) in May, the 12th straight m/m gain, on top of a 91,000 rise in April (+94,000 initially). May’s gain was led by education & health services (+57,000), followed by trade, transportation & utilities (+36,000), professional & business services (+11,000), leisure & hospitality (+8,000), financial activities (+7,000), and other services (+4,000). In contrast, employment fell m/m in information (-9,000) in May, the only declining category, following three consecutive m/m increases.

Goods-producing employment increased 8,000 (-0.4% y/y) in May, the smallest of four straight m/m gains, following a 14,000 rise in April (+15,000 initially). May’s increase was led by construction (+8,000) and manufacturing (+3,000, the first m/m increase since March 2024), while natural resources & mining (-3,000) fell m/m for the first time since January.

By region, nonfarm private payroll employment rose m/m across all major regions in May, reflecting m/m gains in the West (+45,000; +1.0% y/y), Northeast (+35,000; +0.4% y/y), South (+23,000; +0.5% y/y), and Midwest (+21,000; +0.2% y/y).

Wage growth for job changers eased to 6.5% y/y in May from 6.6% in April and March, remaining well below a high of 16.1% in April 2022. Wage growth for job stayers held steady at 4.4% y/y for the second consecutive month in May, holding in a narrow 4.4%-4.5% range since April 2025. Pay growth was unchanged across major industries, including financial activities (5.1% y/y), manufacturing (4.8% y/y), construction (4.5% y/y), leisure & hospitality (4.5% y/y), trade, transportation & utilities (4.4% y/y), education & health services (4.2% y/y), other services (4.1% y/y), and professional & business services (4.1% y/y), while pay growth in natural resources & mining dipped to 4.2% in May from 4.3% in April.

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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- Private payrolls +122K in May, largest of 11 straight m/m gains, indicating sustained labor-market momentum.
- Broad-based hiring across company sizes, driven by small businesses (+67K).
- Service-sector jobs up (+114K), led by education & health svs. (+57K) and trade, transp. & utilities (+36K), partly offset by information (-9K).
- Goods-producing jobs up (+8K), driven by construction (+8K).
- Wage growth down marginally y/y for job changers (6.5%) but steady for job stayers (4.4%).

U.S. ADP Private Employment Growth in May Strongest Since Jan. ’25

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With 25 countries in the mix, it can be hard to draw a simple summary statement about the condition of the global economy judging from the S&P composite PMIs. The manufacturing sector has recently been doing better, while the services sector is still in an extreme bout of lethargy globally. Fewer countries issue specific services sector indexes than issue manufacturing or composite PMI results.

The services sector tends to dominate the composite readings, so what we see this month is a great deal of weakness in the S&P composites, reflecting service sector weakness. The 18 early reporting manufacturing reporters registered a median queue ranking in their 67.7 percentile; that compared to a median ranking of 26.2% for this group of 25. However, the two groups are not the same. If we recalculate for the 10 common reporters, we get a median manufacturing ranking of 61.5% compared to a composite median ranking of 23.8%; for those same ten, the services sector median ranking was in its 16.9 percentile. That is a ranking that seems to flirt with recession potentially. To that point, in May 2026, eleven of twenty-five composite PMIs registered diffusion values below 50, indicating contraction.

In May, among the 25 reporting composite PMI reporters, 44% of them were weakening month-to-month, which is less than half but still a very large proportion and not particularly good news; this followed 48% weakening in April and 84% weakening in March. So, with the heating up of war in the Middle East and the closure of the Strait of Hormuz, service sector conditions have gotten a lot worse even though it might have seemed logical that it would be the manufacturing sector that would suffer. The PMI data do not bear out that expectation. In March, the global PMI data improved only in Spain, Sweden, Zambia, and Ghana—thin gruel for good news.

On a monthly basis, there is sequential weakening in progress in the European Monetary Union, France, Ireland, and Japan.

If we look at the broader sequential data over three months, six months, and 12 months, we see that conditions have gotten progressively weaker, with 82.6% of these reporters weaker over three months, 78.3% weaker over six months, and 43.5% weaker over 12 months. There is progressive weakening on this broader timeline in the United States, Spain, India, Saudi Arabia, and the United Arab Emirates. There's sequential improvement indicated only in Singapore.

The queue percentile standing evaluations at the far right of the table rank and therefore order the data across these reporters, on observations back to January 2021. On that relatively long timeline, only 5 reporters have current readings above their respective 4.5-year. medians. Those are Singapore, China, Nigeria, India, and Sweden. On this timeline, the French composite is at its absolute lowest ranking of the period. The European Monetary Union reading is in its lower 10th percentile, with the four largest monetary union economies each having a ranking below their respective 35th percentiles. The U.S. ranking is in its 26th percentile, roughly just above the bottom quarter of its raked results. The U.K. is in its lower 18th percentile. Japan is near its median, at its 49th percentile; however, none of these readings are reassuring. For example, Japan’s near 50th percentile ranking compares to a weaker U.S. ranking, but the U.S. composite PMI diffusion value at 51.5 is stronger than Japan’s at 51.1. But the U.S. value is weaker relative to its history back to January 2021. Japan’s higher ranking actually simply refers to performance that is still quite weak, but nearly as good as it has done over the past 4.5 years. It is important to keep the relative (ranking) and the absolute (diffusion value) comparisons separate. Diffusion values are not presented in the table—except for a few averages/medians—because putting those data in table for the countries is prohibited by the data provider.

The weakness is broad-based. While the manufacturing sectors have been digging out, the services sectors have continued to worsen during the improvement in manufacturing—which I take to be a bad sign. Manufacturing tends to be the more sensitive signal, and we often think of manufacturing showing a turnaround in the economy before it becomes a process involving the entire economy. But in this case, it doesn't look like the manufacturing revival is progressing across the various economies. Certainly, one reason could be rising oil prices and the fact that oil prices eventually become an input to just about every single business—because if it's not a direct input, it's an indirect input through its impact on transportation costs.

**Broad but mild slippage**
If we look at the average and median PMI values, we can see that while there has been broad slippage, the slippage has been quite slow. The average reading for this group over 12 months is the PMI at 52; that has slipped to 50.8 over three months and sits at 50.8 in May. The median for the group is 51.8 over 12 months; it has slipped to 50.6 over three months and registers 50.2 in May. The bad news is more that these economies have lingered at very weak readings than that there is technical slippage in progress. Over 12 months, there were only four of 25 reporters with PMIs below 50. Over three months, that figure has mushroomed to 9, and as of May, there are 11 reporters with PMIs below 50, indicating economic contraction. These are poor trends and clearly ones to watch. Weakness has been driven by the services sector where we get fewer observations and data, and this is a sharp counterpoint to some of the manufacturing data that have been improving.

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**Summing up**
In the U.S., for example, not only have some of the manufacturing data been improving but job market data—which had scraped to very low levels around the turn of the year—have been rising and returning to show more encouraging job growth for an economy with closed borders and weak labor force growth. Europe, on the same metrics, faces greater challenges. Monetary policy still has to be concerned with inflation that is over the top and rate hikes are coming to be expected. In the U.S., some revival in productivity creates a counterpoint, even though service sector readings continue to be weak. Forecasting in this environment, of course, is absolutely treacherous; even discerning what the current trend is from current data has become a challenging process. Markets for the most part remain relatively upbeat as stocks continue their advance in the U.S. Bond yields have been creeping up, but without damage to stocks, so far. Financial markets, exchange rates, and central bank activity are all going to be important features to keep an eye on. The usual detailed economic reports are confusing as uncertainty stirs the pot, increasing the turbidity surrounding the economic outlook.

Composite PMIs Ride Weakening Trend

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Total job openings jumped 10.6% m/m (7.3% y/y) to 7.618 million in April, the highest level since May 2024, from a slightly upwardly revised 6.887 million in March (previously 6.866 million), according to the Job Openings and Labor Turnover Survey. Accordingly, the job openings rate (the ratio of openings to nonfarm employment plus openings) rose to 4.6% in April, its highest reading since November 2024, from an upwardly revised 4.2% in March (previously 4.1%). In April, while both the number of job openings and the number of unemployed both rose, the number of openings rose much more, leaving the number of openings above the number of unemployed for the first time in ten months, another sign that previously observed softening of labor market conditions may be stabilizing.

An 11.1% m/m jump (8.9% y/y) in private sector openings to 6.841 million, the highest level since March 2024, led the overall rise. The private sector openings rate to 4.8% in April from 4.4% in March. Gains in openings were widespread across major industries with only accommodation and food services (-74k, their third consecutive monthly decline) experiencing a monthly decline in April. Leading the rise was a 668k jump in professional and business openings, by far the largest monthly gain in the series history, more than offsetting an outsized 256k decline in March. Construction and manufacturing openings rose for the second consecutive month. Total government openings increased 47K to 777k in April, their fourth monthly increase in the past five months, with a 30k increase in state and local government openings.

In contrast to the surge in openings, total hiring fell 7.6% m/m (-419k) to 5.116 million in April from a slightly downwardly revised 5.535 million in March (previously 5.554 million). The hiring rate slumped to 3.2% in April from 3.5% in March. Private sector hiring declined 423k to 4.794 million with the private sector hiring rate falling to 3.5% from 3.9% in March. Declines were widespread across major industries with only construction (+17k) and arts and entertainment (+25k, the first monthly gain in five months) posting increases. Government hiring increased 5k following a 15k decline in March.

Total separations fell 7.4% m/m (-399k) to 4.978 million in April, the lowest level since August 2020, with declines in quits (-183k), layoffs (-192k) and other separations (-23k). The separation rate fell to 3.1%, the lowest since March 2013, from 3.4% in March. Private separations plunged 413k in April, the largest monthly decline since January 2021, reflecting a 204k drop in private quits and a 194k decline in private layoffs. The decline in layoffs was concentrated in retail trade (-88k, the first monthly decline in three months) and in professional and business services (-112k). The April decline in private quits was rather widely spread across major industries, led by an 83k decrease in trade, transportation and utilities with only construction (+6k) posting a monthly increase. One implication of the widespread decline in quits is that workers do not feel comfortable with their employment prospects and hence are choosing to remain in their current job.

On the whole, employers remain cautious in hiring. Furthermore, workers are sufficiently unsure of their alternative employment prospects that they are refraining from leaving their current position. Amid all this caution on the part of both employers and workers, openings have gradually risen since the end of last year.

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

- Openings increased to their highest level since May 2024.
- However, hiring slumped, reversing most of the March increase.
- Separations fell with declines in quits, layoffs and other separations.

U.S. JOLTS: Openings Rose and Hires Fell in April

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The U.S. trade deficit in goods and services (BOP basis) narrowed to $55.9 billion in April from a downwardly revised $56.6 billion March (previously -$60.3 billion), according to the U.S. Census Bureau. The Action Economics Forecast Survey looked for a deficit of $55.5 billion. The goods deficit declined to $83.7 billion in April from a downwardly revised $86.1 billion in March (previously -$88.7 billion) while the services surplus narrowed to $27.8 billion from an upwardly revised $29.5 billion in March (previously +$28.4 billion).

The real (inflation-adjusted) trade deficit in goods narrowed to $84.3 billion (2017$) in April from a downwardly revised $85.9 billion in March (previously -$90.8 billion). The April figure is in line with the Q1 average, indicating that net exports could be a net neutral for Q2 GDP growth. Net exports subtracted 1.3%-points from GDP growth in Q1 and 0.2%-point in last year’s fourth quarter.

Exports of goods and services increased 2.6% m/m (12.6% y/y) in April versus an upwardly revised 2.2% monthly gain in March (previously 2.0% m/m). Over the four months of this year, exports have risen 14.7%. Goods exports (Census basis) increased 3.8% m/m (16.0% y/y) in April, once again led by a surge in petroleum exports. They jumped 33.3% m/m in April on top of a 34.7% monthly surge in March. The April-March jumps in petroleum exports were the largest since June 2008. The $9.2 billion increase in exports of petroleum and petroleum products more than accounted for the $8.1 billion increase in total goods exports in April. However, there was also strength in other exports. Capital goods exports excluding autos jumped 6.1% m/m, their fifth monthly gain in the past six months. Nonfood consumer goods exports excluding autos rebounded in April, rising 7.9% m/m, almost completely reversing the 8.4% monthly plunge in March. By contrast, auto exports fell 2.6% m/m, the first monthly decline in three months, and food and feed exports slipped 0.3% m/m, their second monthly decline in the past three months. Services exports fell 0.4% m/m (+5.1% y/y) in April. Maintenance and repair services fell 5.0% m/m; transport declined 2.2% m/m; travel fell 1.5% m/m.

Imports of goods and services rose 2.0% m/m (9.1% y/y) in April following an unrevised 2.3% monthly gain in March. The annual comparison is distorted by an outsized fall in imports last April (particularly of nonmonetary gold) that had followed a surge in imports in March that was an attempt to front-run tariff increases. Goods imports (Census basis) increased 2.0% m/m (10.1% y/y). The rise in imports had a distinct AI flavor. It was led by a marked gain in imports of capital goods (up 5.8% m/m), which included a 6.8% increase in computer imports and a 19.1% m/m jump in semiconductor imports. The $7.0 billion increase in capital goods imports more than accounted for the $5.9 billion rise in total goods imports. Industrial supplies exports fell 1.7% m/m; auto imports declined 1.4% m/m; and imports of nonfood consumer goods ex autos slipped 0.5% m/m. Service imports rebounded in April, rising 1.6% m/m following a 1.8% monthly decline in March. Travel increased 2.2% m/m; transport jumped 4.1% m/m; insurance services rose 2.2% m/m.

By country, the goods trade deficit with China narrowed to $12.0 billion in April from $14.6 billion in March. The trade deficit with the European Union narrowed to $7.2 billion from $9.0 billion in March. The trade deficit with Japan declined to $2.8 billion in April from $4.0 billion in March.

The international trade data 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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- The deficit in goods and services narrowed to $55.9 billion in April from a downwardly revised $56.6 billion in March.
- Exports rose 2.6% m/m, led by a 33% monthly jump in petroleum exports.
- Imports increased by 2.0% m/m, led by a 5.8% m/m rise in capital goods imports.
- The goods deficit narrowed to $83.7 billion, and the services surplus narrowed to $27.8 billion.

U.S. Trade Deficit Narrowed in April

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