German Manufacturing New OrdersDecline In October

German manufacturing new orders in volume terms fell 2.14% in October to 91.4 (2005=100) from 93.4 in September.  This was the first drop since orders began to rise in March of this year.  Domestic orders were down only 0.55% but foreign orders declined 3.48%. The continued rise in the Euro is taking its toll on German exports.  A decline of 6.74% in foreign demand for investment goods accounted for the drop in foreign orders. Foreign orders for consumer goods actually increased by 5.27% in October and foreign orders for intermediate goods rose slightly--0.30% .  Foreign orders are shown in the first chart.

Domestic demand for investment goods also declined in October, but only by 1.18%.  In contrast to the rising foreign trend, orders for domestic consumer goods fell by 5.84%, reflecting lack luster retail sales.  Domestic demand for intermediate goods increased by 1.20%.  Domestic orders are shown in the second chart.

An indicator of the price level of new orders can be computed by dividing the value series by the volume series.  The resulting calculation is shown in the third chart compared with the Producer Price Index for manufacturing.  The two indexes show the same broad trends.  The PPI has been falling since June 2008 and appears to be leveling off.  The new orders index has been declining since September 2008 and is yet to level off.  

The November employment report indicated that the number of temporary help jobs grew by 52,400, the fourth consecutive month of increase. Since July temp employment grew by 116,900 (6.7%), a gain which outstripped the 95,500 (0.7%) four-month increase in health care employment, the 48,800 (1.9%) rise in social assistance payrolls, the 40,000 (0.8%) gain in state gov't jobs as well as the few others.

Not only has the growth in temp jobs been impressive, but as a leading indicator of full-time employment it bodes well for the job market. During the last two economic cycles temporary employment began growing a year or two before the recoveries in total employment, which both lagged the official end of the recessions.

The ratio of temp employment-to-total payroll jobs also has value as a cyclical indicator. During the last ten years there has been an 85% correlation between the ratio and real GDP growth. Five years ago, a higher ratio near 2.0% was consistent with 3.0% growth in real GDP. Temporary help jobs increased due to workers' hours-worked flexibility and, for the most part, lower benefit costs. Then, as economic growth eased, the ratio fell to its current 1.4%, the lowest level since 1994.

Overall, economic recovery will bolster not only full-time employment, as usual, but temp jobs as well. If the Consensus 3.0% growth forecast through the end of next year is on the mark, temp employment should rise along with its share of the total; indicating a greater number of workers re-entering the workforce. That would turn-around the decline in the labor force participation rate which recently has plumbed a 25-year low of 65.0%. However, the "quality" of those new jobs likely will differ greatly from the benefits of full-time employment.

Why do firms use temporary workers? from the Federal Reserve Bank of Chicago can be found here.

Today's speech titled by Frequently Asked Questions Fed Chairman Ben S. Bernanke is available here.