Tom Moeller

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Total retail sales increased 0.5% (3.2% y/y) during May
following a 0.3% April increase, revised from a 0.2% slip reported initially. A
0.6% gain had been
expected in the Action Economics Forecast Survey. Retail sales excluding motor vehicles and
parts rose 0.5% (3.2% y/y), the same as during April, revised from 0.1%. A 0.4% gain had
been expected.
Last month, sales of motor
vehicle &amp; parts increased 0.7% (3.1% y/y) after a 0.5% fall during April.
This compared to a 6.2% gain in unit sales of motor vehicles during May.
A measure of the underlying pace of retail spending is
nonauto sales growth excluding gasoline and building materials. These sales rose
0.5% (3.4% y/y) after a 0.4% rise, revised from unchanged.
Sales strength was broad-based last month. Purchases via the
internet surged 1.4% (11.4% y/y), following a 0.5% rise. Purchases at sporting
goods, hobby, book and music stores rose 1.1% (-4.2% y/y) and repeated April's
strength. Sales of electronics &amp; appliance store also rose 1.1% (-2.4% y/y)
and reversed April's 1.3% decline. General merchandise store sales increased
0.7% (3.3% y/y), extending the strength during the prior two months. Elsewhere,
goods spending was tepid. Furniture &amp; home furnishings store sales gained
0.1% (0.6% y/y) following a 0.6% rise. Sales of building materials and garden
equipment were little changed (0.2% y/y) following a 0.6% decline. Clothing &amp; accessory store sales
also held steady (-2.3% y/y)&nbsp; after a 0.2% dip.&nbsp;
Gasoline service station sales improved 0.3% (3.2% y/y) as
prices continued to increase.
Sales of nondiscretionary items were mixed last month. Food
&amp; beverage store sales slipped 0.1% (+1.6% y/y) after a 0.2% rise.
Health &amp; personal care product store sales improved 0.6% (3.4% y/y) following
a 0.2% increase.
Restaurant &amp; drinking establishment sales&nbsp; increased
0.7% (3.7% y/y) after a 0.3% rise.
The retail sales data can be found in Haver's USECON
database. The Action Economics forecast is in the AS1REPNA database.

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<table class="centered" width="100%" border="0" cellspacing="0">
	<colgroup><col><col><col><col><col><col><col><col></colgroup>
 <thead>
 <tr>
 <th class="firstcol" scope="col" >Retail Spending (% chg)</th>
 <th scope="col" >May</th>
 <th scope="col" >Apr</th>
 <th scope="col" >Mar</th>
 <th scope="col" >May Y/Y</th>
 <th scope="col" >2018</th>
 <th scope="col" >2017</th>
 <th scope="col" >2016</th>
 </tr>
 </thead>
 <tbody>
 <tr class="grey2">
 <td class="firstcol" >Total Retail Sales &amp; Food Services</td>
 <td >0.5</td>
 <td >0.3</td>
 <td >1.8</td>
 <td >3.2</td>
 <td >4.9</td>
 <td >4.7</td>
 <td >2.9</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp;&nbsp;Excluding Autos</td>
 <td >0.5</td>
 <td >0.5</td>
 <td >1.4</td>
 <td >3.2</td>
 <td >5.5</td>
 <td >4.7</td>
 <td >2.5</td>
 </tr>
 <tr class="grey2">
 <td class="firstcol" >Retail Sales</td>
 <td >0.5</td>
 <td >0.3</td>
 <td >1.9</td>
 <td >3.1</td>
 <td >4.7</td>
 <td >5.0</td>
 <td >2.5</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp;&nbsp;Motor Vehicle &amp; Parts</td>
 <td >0.7</td>
 <td >-0.5</td>
 <td >3.2</td>
 <td >3.1</td>
 <td >2.7</td>
 <td >4.9</td>
 <td >4.3</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp;Retail Less Autos</td>
 <td >0.5</td>
 <td >0.5</td>
 <td >1.5</td>
 <td >3.1</td>
 <td >5.4</td>
 <td >5.0</td>
 <td >2.0</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp;&nbsp;Gasoline Stations</td>
 <td >0.3</td>
 <td >2.1</td>
 <td >3.6</td>
 <td >3.2</td>
 <td >12.9</td>
 <td >9.4</td>
 <td >-5.8</td>
 </tr>
 <tr class="grey2">
 <td class="firstcol" >Food Service &amp; Drinking Places
 Sales</td>
 <td >0.7</td>
 <td >0.3</td>
 <td >0.9</td>
 <td >3s.7</td>
 <td >6.1</td>
 <td >3.1</td>
 <td >5.2</td>
 </tr>
 </tbody>
</table>
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Total retail sales increased 0.5% (3.2% y/y) during May following a 0.3% April increase, revised from a 0.2% slip reported initially. A 0.6% gain had been expected in the Action Economics Forecast Survey. Retail sales excluding motor [...]

U.S. Retail Sales Firm Broadly; Revisions Show Improvement

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Import prices fell 0.3% (-1.5% y/y) during May following a
0.1% April improvement, revised from 0.2%. The decline matched expectations in
the Action Economics Forecast Survey. These figures are not seasonally adjusted
and do not include import duties.
The weakening in import prices last month reflected a 0.9%
decline (-1.9% y/y) in petroleum import costs, following a 4.7% April rise.
Nonpetroleum import prices eased 0.3% (-1.4% y/y), the third consecutive month
of weakness. Among end-use categories, industrial supplies &amp; materials costs
excluding petroleum fell 1.1% (-4.1% y/y) after a 2.8% decline. Capital goods
prices eased 0.1% (-1.3% y/y) and have been declining since early last year. The
decline reflects lower prices (-4.7% y/y) for computers, peripherals and
semiconductors. Capital goods prices excluding these products were little
changed y/y. Motor vehicle &amp; parts prices edged 0.1% lower (-0.6% y/y) for
the fourth straight month. Nonauto consumer goods prices held steady (-0.7% y/y)
after falling 0.3% for two straight months. Meanwhile, foods, feed and beverage
prices fell 0.8% (-0.2% y/y) following a 2.7% strengthening.
Export prices declined 0.2% last month (-0.7% y/y) following
a 0.1% uptick during April revised from 0.1%. A 0.1% easing had been expected. 
Agricultural commodities prices dropped 1.0% last month
(-5.3% y/y), adding to the 1.5% decline in April. Nonagricultural export costs
slipped 0.2% (-0.2% y/y) after three consecutive monthly increases. The cost of
industrial supplies &amp; materials fell 0.5% (-2.3% y/y) with lower petroleum
prices. Prices excluding oil fell 0.3% (-1.8% y/y) after a 0.1% rise (-1.8%
y/y). Motor vehicle &amp; parts prices eased 0.1% (+0.4% y/y) after a 0.2% rise.
Consumer goods prices excluding autos slipped 0.2% (+0.2% y/y) after a 0.3%
gain. Capital goods improved 0.1% (1.1% y/y) but high-tech product prices fell
3.3% y/y. Capital goods prices excluding high-tech rose 0.2% (2.0% y/y).
Meanwhile, foods, feeds &amp; beverage prices fell 1.1% (-4.4% y/y) after
declining 1.8%.
The import and export price series can be found in Haver's USECON
database. Detailed figures are available in the USINT database. The
expectations figure from the Action Economics Forecast Survey is in the AS1REPNA
database.

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	<colgroup><col><col><col><col><col><col><col><col></colgroup>
 <thead>
 <tr>
 <th class="firstcol" scope="col" ><a href="http://www.haverselect.com/dlx/USARC04/@E8/@E807/@E807.HTM">Import/Export
 Prices (NSA, %)</a></th>
 <th scope="col" >May</th>
 <th scope="col" >Apr</th>
 <th scope="col" >Mar</th>
 <th scope="col" >May Y/Y</th>
 <th scope="col" >2018</th>
 <th scope="col" >2017</th>
 <th scope="col" >2016</th>
 </tr>
 </thead>
 <tbody>
 <tr>
 <td class="firstcol" >Imports - All Commodities</td>
 <td >-0.3</td>
 <td >0.1</td>
 <td >0.6</td>
 <td >-1.5</td>
 <td >3.1</td>
 <td >2.9</td>
 <td >-3.3</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp;&nbsp;Petroleum &amp; Petroleum
 Products</td>
 <td >-0.9</td>
 <td >4.7</td>
 <td >6.2</td>
 <td >-1.9</td>
 <td >22.0</td>
 <td >26.6</td>
 <td >-19.7</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp;&nbsp;Nonpetroleum</td>
 <td >-0.3</td>
 <td >-0.5</td>
 <td >0.0</td>
 <td >-1.4</td>
 <td >1.3</td>
 <td >1.1</td>
 <td >-1.5</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >Exports - All Commodities</td>
 <td >-0.2</td>
 <td >0.1</td>
 <td >0.8</td>
 <td >-0.7</td>
 <td >3.4</td>
 <td >2.4</td>
 <td >-3.2</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp;&nbsp;Agricultural</td>
 <td >-1.0</td>
 <td >-1.5</td>
 <td >1.0</td>
 <td >-5.3</td>
 <td >0.6</td>
 <td >1.5</td>
 <td >-5.4</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp;&nbsp;Nonagricultural</td>
 <td >-0.2</td>
 <td >0.2</td>
 <td >0.7</td>
 <td >-0.2</td>
 <td >3.7</td>
 <td >2.5</td>
 <td >-3.0</td>
 </tr>
 </tbody>
</table>

&nbsp;

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Import prices fell 0.3% (-1.5% y/y) during May following a 0.1% April improvement, revised from 0.2%. The decline matched expectations in the Action Economics Forecast Survey. These figures are not seasonally adjusted and do not [...]

U.S. Import and Export Prices Decline

Robert Brusca

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Sectors show some mixed consolidation after a long downward slide form early 2018.

Weakness: In EMU Industrial production (IP) excluding construction (the headline series) has fallen for two months in a row and has not risen in three-months. Month-to-month change in IP have been negative or flat in seven of the last eight months. That is quite a legacy of weakness. Manufacturing has seen two month-to-month increases in the last eight months against six declines.

EMU production clearly is weak.

Progressive weakness by sector
There is sequential or progressive weakness from 12-months to 6-months to 3-months for the headline series, for manufacturing, for consumer goods overall, for consumer goods durables, for consumer goods nondurables and for intermediate goods. The sole exception is capital goods that in any event show declines on all horizons and show a deeper decline over three months (annualized) that over 12-months.

The manufacturing weakness is deep seated and broadly affects all sectors.

Quarter-to-date weakness
The quarter-to-date declines are deep and their annualized drop also exceeds their year-over year drop for all categories. The percent of last peak calculations seem to show the most slack in consumer durables and in intermediate goods.

The manufacturing PMI diffusion index from Markit tracks IP (Yr/Yr percent changes) quite well on the way up and on the way down. While IP plunged and recouped and has weakened again the PMI gauge has continued to show straight-line ongoing weakness for EMU until this last month when it steadied.

Country by country weakness
The data in the table by country are colored coded with the red countries in the table’s stub all being IP results showing trends as sequentially deteriorating 12-months to 6-months to 3-month. Among the 14 countries in the table, eight show sequential deterioration in progress. Finland and Norway come close to showing sequential acceleration, but no country really does that. The median for EMU shows sequential deterioration. Over three-months ten of 14 countries in the table log output declines. That compares to eight over six-months and 6 over 12-months. .


While there has been ongoing declines in IP and although weakness is widespread five countries in the table still have output at 90% or better of their past cycle peak. Four more are 84 percent of their past cycle peak or better and the rest of them are no weaker than 25% below their past cycle output peaks. The weak group includes Greece, Malta, Luxembourg, Spain and Italy. The strong group includes Norway, The UK, Portugal, The Netherlands and Germany. Looking at the relation to past peaks by sector consumer durables are the weakest at 77% of their past peak. That is something to watch since durables consumption/output is highly cyclical. However, capital goods output is still strong within 5% of its last cycle peak, despite the recent slowdown

On balance Europe remains in a slowing mode. The PMI data show a more worrisome profile that the IP data by itself. And while the results for the recent 3-months seem quite grim the performance in the most recent month is not despite the decline for IP overall (which is mostly on the back of weakness in Germany).

Europe is still trying to see how it has re-invented itself in the wake of European elections. The UK is selecting a new PM and looking to renegotiate a Brexit deal with a cast that is looking much more friendly at the prospect of a hard Brexit with Mr. Boris Johnson in the lead, in better physical shape, but still without a comb… no wonder the prospect of a disorderly exit does not seem to bother him.

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Sectors show some mixed consolidation after a long downward slide form early 2018. Weakness: In EMU Industrial production (IP) excluding construction (the headline series) has fallen for two months in a row and has not risen in three- [...]

EMU IP Continues to Erode

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Initial unemployment insurance claims rose to 222,000 in the
week ending June 8 from 219,000 during the prior week, revised from 218,000.
Claims remained near their lowest level since December 1969. The latest reading
compared to expectations for 217,000 claims in the Action Economics Forecast Survey. The
four-week moving average of initial claims rose to 217,750 from 215,250 in the
previous week. During the last 20 years, there has been a 70% correlation
between the level of initial claims and the m/m change in nonfarm payrolls.
Continuing claims for unemployment insurance gained to 1.695
million from 1.693 million in the week ending June 1. The four-week moving average of
claimants declined 1,000 to 1.673 million, the lowest level since November 1973.
The insured rate of unemployment remained at the record low
of 1.2% in the week ending June 1, where it's been for twelve months. The series
dates back to 1970.
Insured rates of unemployment vary widely by state. In the
week ending May 25, the lowest rates were in South Dakota (0.27%), Nebraska
(0.35%), Florida (0.41%), North Carolina (0.44%), Indiana (0.44%) and North
Dakota (0.44%). The highest rates were in Massachusetts (1.41%), Pennsylvania
(1.60%), Connecticut
(1.72%), California (1.86%), New Jersey (1.90%) and Alaska (2.04%). Among the
other largest states by population, the rate was 0.95% in Texas, 1.21% in New
York and 1.42% in Illinois. These state data are not seasonally adjusted.
Data on weekly unemployment claims going back to 1967 are
contained in Haver's WEEKLY database, and they are summarized monthly in USECON.
Data for individual states are in REGIONW. The expectations figure is in
the AS1REPNA database.

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	<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead>
 <tr>
 <th class="firstcol" >Unemployment Insurance (SA, 000s)</th>
 <th>06/08/19</th>
 <th>06/01/19</th>
 <th>05/25/19</th>
 <th>Y/Y %</th>
 <th>2018</th>
 <th>2017</th>
 <th>2016</th>
 </tr>
 </thead>
 <tbody>
 <tr>
 <td class="firstcol" >Initial Claims</td>
 <td >222</td>
 <td >219</td>
 <td >218</td>
 <td >1.4</td>
 <td >220</td>
 <td >244</td>
 <td >262</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >Continuing Claims&nbsp;</td>
 <td >--</td>
 <td >1,695</td>
 <td >1,693</td>
 <td >-1.6</td>
 <td >1,756</td>
 <td >1,961</td>
 <td >2,135</td>
 </tr>
 <tr>
 <td class="firstcol" >Insured Unemployment Rate (%)</td>
 <td >--</td>
 <td >1.2</td>
 <td >1.2</td>
 <td >
 1.2 
 (Jun 2018)
 </td>
 <td >1.2</td>
 <td >1.4</td>
 <td >1.6</td>
 </tr>
 </tbody>
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Initial unemployment insurance claims rose to 222,000 in the week ending June 8 from 219,000 during the prior week, revised from 218,000. Claims remained near their lowest level since December 1969. The latest reading compared to [...]

U.S. Initial Claims for Unemployment Insurance Rise

http://192.168.1.61:82/comment/comment.html?c=190612a.html
file://N:\winnie\Commentory_HTML_2_decimal points.xlsm
can be found <a href="https://www.federalreserve.gov/newsevents/speech/files/brainard20190612a.pdf" >here</a>.

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 <title>U.S. Small Business Optimism Strengthens Significantly</title>
 <desc>...</desc>
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 <period>2019-06-12</period>
 <title>U.S. Small Business Optimism Strengthens Significantly</title>
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The National Federation of Independent Business (NFIB)
reported that its Small Business Optimism Index increased to 105.0 during May,
up for the fourth straight month. It was the highest reading since October. The
index gained 1.4% m/m, but was down 2.6% y/y.
A sharply higher 30% of firms thought that now was a good
time to expand the business, up from a 20% low in January. The percentage
expecting higher real sales rose to 23%, its highest percentage since December.
An improved 16% of respondents expected the economy to improve, but that
remained down from a high of 48% in January 2017. A strengthened 30% of firms
expected to make capital outlays, above the December low of 25%, but below the
high of 33% last August.
Expected pricing power continued to deteriorate last month as
a lessened 20% of firms were planning to raise prices. It continued to slip
below November's ten-year high of 29%. Current pricing pressure also fell. A net
10% of firms were raising average selling prices, still below the 19% high last
May.
Labor market readings showed modest m/m improvement. The 21%
of respondents planning to increase employment was the most this year.
Nevertheless, that remained below the record 26% in August. The 54% of firms
that were finding few or no qualified candidates for job openings rose m/m to
the highest since December.
Pressure to raise worker compensation stabilized m/m as a
steady 34% of firms were raising worker pay. It equaled the highest percentage
in January. The percentage of firms that were planning to raise compensation
surged m/m to 24% m/m, up from 18% three months earlier.
Credit remained easy to get. Only four percent of firms
reported trouble obtaining financing, roughly equaling the percentage of the
last four years.
The small business survey inquires about additional issues
facing small business. A sharply increased 25% reported problems with the
quality of labor. That equaled November's record high. A low 16% indicated that
taxes were the largest problem, down from a December 2014 high of 27%.
Government requirements were worrisome to a lessened 12% of respondents, below
the September 2013 high of 24%. A steady eight percent of firms reported the
cost of labor as the most significant problem, down from February's increased
ten percent. Poor sales eased to eight percent of firms as the biggest problem.
Competition from large businesses rose to ten percent as the biggest problem.
Insurance costs/availability concerned a low ten percent of respondents.
Financial &amp; interest rate problems worried two percent of respondents. Inflation
worried&nbsp; two percent of respondents as the biggest problem, about where its
been since 2015.
Roughly 24 million small businesses exist in the U.S. and
they create 80% of all new jobs. The index is based 1986=100. The typical NFIB
member employs 10 people and reports gross sales of about $500,000 a year.
The NFIB figures can be found in Haver's SURVEYS
database.


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	<colgroup><col><col><col><col><col><col><col><col></colgroup>
 <thead>
 <tr>
 <th class="firstcol" scope="col" >National Federation of
 Independent Business (SA, Net % of Firms)</th>
 <th scope="col" >May</th>
 <th scope="col" >Apr</th>
 <th scope="col" >Mar</th>
 <th scope="col" >May'18</th>
 <th scope="col" >2018</th>
 <th scope="col" >2017</th>
 <th scope="col" >2016</th>
 </tr>
 </thead>
 <tbody>
 <tr>
 <td class="firstcol" >Small Business Optimism Index (1986=100)</td>
 <td >105.0</td>
 <td >103.5</td>
 <td >101.8</td>
 <td >107.8</td>
 <td >106.7</td>
 <td >104.9</td>
 <td >95.3</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >Firms Expecting Economy to Improve</td>
 <td >16</td>
 <td >13</td>
 <td >11</td>
 <td >37</td>
 <td >32</td>
 <td >39</td>
 <td >-5</td>
 </tr>
 <tr>
 <td class="firstcol" >Firms Expecting Higher Real Sales</td>
 <td >23</td>
 <td >20</td>
 <td >19</td>
 <td >31</td>
 <td >26</td>
 <td >23</td>
 <td >5</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >Firms Reporting Now Is a Good Time to
 Expand the Business</td>
 <td >30</td>
 <td >25</td>
 <td >23</td>
 <td >34</td>
 <td >30</td>
 <td >23</td>
 <td >10</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >Firms Planning to Increase Employment</td>
 <td >21</td>
 <td >20</td>
 <td >18</td>
 <td >18</td>
 <td >21</td>
 <td >18</td>
 <td >11</td>
 </tr>
 <tr>
 <td class="firstcol" >Firms With Few or No Qualified
 Applicants for Job Openings (%)</td>
 <td >54</td>
 <td >49</td>
 <td >54</td>
 <td >48</td>
 <td >51</td>
 <td >49</td>
 <td >46</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >Firms Expecting to Make Capital Outlays</td>
 <td >30</td>
 <td >27</td>
 <td >27</td>
 <td >30</td>
 <td >29</td>
 <td >28</td>
 <td >26</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >Firms Reporting That Credit Was Harder
 to Get</td>
 <td >4</td>
 <td >4</td>
 <td >6</td>
 <td >5</td>
 <td >4</td>
 <td >4</td>
 <td >5</td>
 </tr>
 <tr>
 <td class="firstcol" >Firms Raising Average Selling Prices</td>
 <td >10</td>
 <td >13</td>
 <td >12</td>
 <td >19</td>
 <td >15</td>
 <td >7</td>
 <td >0</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >Firms Raising Worker Compensation</td>
 <td >34</td>
 <td >34</td>
 <td >33</td>
 <td >35</td>
 <td >33</td>
 <td >27</td>
 <td >24</td>
 </tr>
 </tbody>
</table>


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The National Federation of Independent Business (NFIB) reported that its Small Business Optimism Index increased to 105.0 during May, up for the fourth straight month. It was the highest reading since October. The index gained 1.4% [...]

U.S. Small Business Optimism Strengthens Significantly

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The U.S. Treasury Department reported that the federal
government ran a $207.8 billion budget deficit during May compared to a $146.8
billion deficit one year earlier. A $198.2 billion deficit had been expected in
the Action Economics Forecast Survey. During the first eight months of FY'19,
the budget deficit deepened to $738.6 billion compared to a deficit of $532.2
billion during the first eight months of FY'18.
Net revenues rose 2.3% y/y so far this fiscal year compared
to a 2.6% y/y gain during in first eight months of FY'18. Individual income
receipts rose 1.5% y/y so far in FY'19, compared to a 9.0% y/y rise in the first
eight months of FY'18. Corporate tax receipts fell by 8.6% y/y so far this year
after a 25.4% eight-month y/y drop last year. Social insurance receipts rose
4.5% y/y following a 2.1% gain early in FY'18, and excise taxes rose by 15.1%
y/y after last year's 11.5% increase.
Government spending increased 9.3% y/y so far in FY'19 after
a 5.9% y/y rise last year over the same eight-month period. National defense
spending strengthened 12.4% y/y following no change y/y in the first eight
months last year. Spending on health programs increased 5.3% y/y, half the gain
last year while Medicare outlays rose by roughly one-quarter y/y following a
2.5% eight-month rise last year. Growth in income security payments have
increased 7.6% y/y so far in FY'19 after a slight decline in the first eight
months of FY'18. Social Security payments gained 5.7% y/y after rising 4.3% in
the first eight months of FY'18. Interest payments rose by 15.6% y/y, about the
same as last year. 
Haver's data on Federal Government outlays and receipts are
contained in USECON. Considerable detail is given in the separate GOVFIN
database. The Action Economics Forecast Survey numbers are in the AS1REPNA
database.

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<table class="centered" width="100%" border="0" cellspacing="0">
	<colgroup><col><col><col><col><col><col><col><col></colgroup>
 <thead>
 <tr>
 <th class="firstcol" scope="col" >United States Government
 Finance</th>
 <th scope="col" ></th>
 <th scope="col" >May</th>
 <th scope="col" >FY'18</th>
 <th scope="col" >FY'17</th>
 <th scope="col" >FY'16</th>
 <th scope="col" >FY'15</th>
 </tr>
 </thead>
 <tbody>
 <tr>
 <td class="firstcol" >Budget Balance (Billions)</td>
 <td >--</td>
 <td >$-207.8</td>
 <td >$-779.0</td>
 <td >$-665.8</td>
 <td >$-585.6</td>
 <td >$-439.1</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >Fiscal 'YTD</td>
 <td >--</td>
 <td >$-738.6</td>
 <td >--</td>
 <td >--</td>
 <td >--</td>
 <td >--</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp;&nbsp;As a percent of GDP</td>
 <td >--</td>
 <td >--</td>
 <td >3.9%</td>
 <td >3.5%</td>
 <td >3.2%</td>
 <td >2.5%</td>
 </tr>
 <tr class="grey3">
 <td class="firstcol" ></td>
 <td >% of Total</td>
 <td ></td>
 <td ></td>
 <td ></td>
 <td ></td>
 <td ></td>
 </tr>
 <tr>
 <td class="firstcol" >Net Revenues (Fiscal Year YTD 2018, Y/Y
 Change)</td>
 <td >100</td>
 <td >2.3%</td>
 <td >0.4%</td>
 <td >1.5%</td>
 <td >0.6%</td>
 <td >7.6%</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp;&nbsp;Individual Income Taxes</td>
 <td >51</td>
 <td >1.5</td>
 <td >6.1</td>
 <td >2.7</td>
 <td >0.3</td>
 <td >10.5</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp;&nbsp;Corporate Income Taxes</td>
 <td >--</td>
 <td >-8.6</td>
 <td >-31.1</td>
 <td >-0.8</td>
 <td >-12.9</td>
 <td >7.2</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp;&nbsp;Social Insurance Taxes</td>
 <td >35</td>
 <td >4.5</td>
 <td >0.8</td>
 <td >4.2</td>
 <td >4.7</td>
 <td >4.1</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp; Excise Taxes</td>
 <td >3</td>
 <td >15.1</td>
 <td >13.3</td>
 <td >-11.8</td>
 <td >-3.3</td>
 <td >5.3</td>
 </tr>
 <tr>
 <td class="firstcol" ></td>
 <td ></td>
 <td ></td>
 <td ></td>
 <td ></td>
 <td ></td>
 <td ></td>
 </tr>
 <tr>
 <td class="firstcol" >Net Outlays&nbsp; (Fiscal Year 2017 YTD,
 Y/Y % Change)</td>
 <td >100</td>
 <td >9.3</td>
 <td >3.2</td>
 <td >3.3</td>
 <td >4.5</td>
 <td >5.3</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp;&nbsp;National Defense</td>
 <td >16</td>
 <td >12.4</td>
 <td >5.3</td>
 <td >6.1</td>
 <td >0.7</td>
 <td >-2.3</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp;&nbsp;Health</td>
 <td >13</td>
 <td >5.3</td>
 <td >3.3</td>
 <td >-1.9</td>
 <td >6.2</td>
 <td >17.8</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp;&nbsp;Medicare</td>
 <td >14</td>
 <td >22.7</td>
 <td >-1.4</td>
 <td >0.6</td>
 <td >8.7</td>
 <td >6.7</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp;&nbsp;Income Security</td>
 <td >12</td>
 <td >7.6</td>
 <td >-1.6</td>
 <td >-2.1</td>
 <td >1.0</td>
 <td >-0.9</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp;&nbsp;Social Security</td>
 <td >24</td>
 <td >5.7</td>
 <td >4.5</td>
 <td >3.1</td>
 <td >3.2</td>
 <td >4.4</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp; Veterans Benefits &amp; Services</td>
 <td >4</td>
 <td >22.8</td>
 <td >1.3</td>
 <td >1.2</td>
 <td >9.3</td>
 <td >6.8</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp; Education, Training, Employment
 &amp; Social Services</td>
 <td >2</td>
 <td >5.2</td>
 <td >-34.0</td>
 <td >31.6</td>
 <td >-10.2</td>
 <td >34.7</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp;&nbsp;Interest</td>
 <td >8</td>
 <td >15.6</td>
 <td >23.6</td>
 <td >9.1</td>
 <td >7.8</td>
 <td >-1.8</td>
 </tr>
 </tbody>
</table>


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The U.S. Treasury Department reported that the federal government ran a $207.8 billion budget deficit during May compared to a $146.8 billion deficit one year earlier. A $198.2 billion deficit had been expected in the Action Economics [...]

U.S. Government Budget Deficit Deepens

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The Mortgage Bankers Association reported that its total
Mortgage Applications Index surged 26.8% (45.0% y/y) during the week ending June
7 after the prior week's 1.5% rise. The rise reflected a 46.5% jump in
applications to refinance an existing loan, which have doubled y/y. Applications
to purchase a home increased 10.0% (11.8% y/y) after declining in six of the
prior seven weeks.
The effective interest rate on a 15-year fixed-rate mortgage
fell w/w to 3.61%, compared to a high of 4.71% early in November 2018. The
effective rate on a 30-year fixed-rate loan declined to 4.21% and remained below
the November high of 5.33%. The rate on a 30-year Jumbo mortgage fell to 4.09%,
down from its October peak of 5.09%. The rate on an adjustable 5-year mortgage
eased to 3.55%. It's recent high was 4.52% averaged last October.&nbsp; 
The average mortgage loan size surged w/w to $358,100 (20.7%
y/y) but remained below the record of $381,700 in late-March. For purchases, the
average loan size eased to $329,600 (+5.4% y/y). The average loan refinancing
size jumped to $386,800 (44.6% y/y). These series date back to 1990.
Applications for fixed-rate loans rose 43.3% y/y, while
adjustable rate loan applications gained 69.2% y/y.
The survey covers over 75% of all U.S. retail residential
mortgage applications and has been conducted weekly since 1990. Respondents
include mortgage bankers, commercial banks and thrifts. The base period and
value for all indexes is March 16, 1990=100. The figures for weekly mortgage
applications and interest rates are available in Haver's SURVEYW
database.

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<table class="centered" width="100%" border="0" cellspacing="0">
	<colgroup><col><col><col><col><col><col><col><col></colgroup>
 <thead>
 <tr>
 <th class="firstcol" scope="col">MBA Mortgage Applications (%,
 SA)</th>
 <th width="152">6/7/2019</th>
 <th width="152">5/31/2019</th>
 <th width="152">5/24/2019</th>
 <th width="152">Y/Y</th>
 <th width="152">2018</th>
 <th width="153">2017</th>
 <th width="153">2016</th>
 </tr>
 </thead>
 <tbody>
 <tr class="odd">
 <td class="firstcol">Total Market Index</td>
 <td>26.8</td>
 <td>1.5</td>
 <td>-3.3</td>
 <td>45.0</td>
 <td>-10.4</td>
 <td>-17.8</td>
 <td>15.6</td>
 </tr>
 <tr>
 <td class="firstcol">&nbsp;&nbsp;Purchase</td>
 <td>10.0</td>
 <td>-2.4</td>
 <td>-1.4</td>
 <td>11.8</td>
 <td>2.1</td>
 <td>5.6</td>
 <td>13.3</td>
 </tr>
 <tr class="odd">
 <td class="firstcol">&nbsp;&nbsp;Refinancing</td>
 <td>46.5</td>
 <td>6.4</td>
 <td>-6.0</td>
 <td>97.2</td>
 <td>-24.3</td>
 <td>-34.0</td>
 <td>17.3</td>
 </tr>
 <tr>
 <td class="firstcol">15-Year Mortgage Effective Interest Rate
 (%)</td>
 <td>3.61</td>
 <td>3.74</td>
 <td>3.83</td>
 <td>4.37 (June '18)</td>
 <td>4.35</td>
 <td>3.59</td>
 <td>3.22</td>
 </tr>
 </tbody>
</table>


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The Mortgage Bankers Association reported that its total Mortgage Applications Index surged 26.8% (45.0% y/y) during the week ending June 7 after the prior week's 1.5% rise. The rise reflected a 46.5% jump in applications to refinance [...]

U.S. Mortgage Loan Applications Surge; Interest Rates Fall Further

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Japan's orders surged in April. Both overall and core orders rose briskly in April with each gaining more than 4% month-to-month. The paths taken by total and core orders are quite different, however, Total orders decline over 12-months and fall even faster over 6-months, but log a strong 22.8% annual rate gain over three-months on strong gains in two of the past three months.

Core orders show accumulating strength. Core orders are barely lower falling by 0.4% over 12-months then they rise at a strong 9.8% pace over six months and at a whopping 52.5% annualized rate over three-months. Core orders have been rising by solid-to-strong amounts in each of the past three-months.

The core orders report is designed to be more stable by omitting the kinds of very large projects that are not consistent, that come and go, and can wreak havoc with the calculation of growth rates for orders. However, over three months both versions of the order series are looking hot.

Clearly orders are driven by domestic demand where they are up by 3.5% over 12-months, lower at a 3.2% annual rate over six-months, then rising at a strong annualized rate of 29.5% over three-months. Domestic orders are up extremely strongly in April driving the 3-month results against declines in each of the two previous months.

Foreign demand has been persistently weak. Foreign orders are down by 20.5% over 12-months they are down at a steep 40.5% annualized plunge over six-months and then are falling at a more moderate but sill fast annualized pace of 9.0% over three-months. Foreign demand is off very sharply in April falling by 24.7% month-to-month after solid-to-strong increases in each of the previous two months.



Japan’s PMI data tell an expanded story about the economy. The PMI story shows a moderate but expanding service sector against a manufacturing sector that has been weakening since late 2018 and that has been is a state of contraction since February of this year. Against that background the orders report is surprisingly strong. Clearly foreign weakness is depressing orders and holding back the manufacturing sector. And there must be negative knock-on effects for services as well. Fortunately there has been strength in domestic orders despite still moderate (below target) inflation and ongoing demographic headwinds.

On balance the orders report is encouraging. But orders are too volatile to be reassuring. The global environment remains difficult with Japan’s two largest trade partners locked in a trade war. The strong-seeming domestic environment for now is a backstop but with a consumption tax still scheduled for this year how long can that underpinning last?







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Japan's orders surged in April. Both overall and core orders rose briskly in April with each gaining more than 4% month-to-month. The paths taken by total and core orders are quite different, however, Total orders decline over [...]

Japan’s Orders Surge in April

US and China big leaders in adoption of AI models

Robust US demand for advanced technology products

China's export growth rotating away from the US

More pronounced upward revisions in countries more exposed to AI investment

Stable job openings and hiring rates point to cautious hiring

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

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

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

Tighter US immigration enforcement adversely impacting labor force

Economic policy uncertainty, while still elevated, is declining

Gradual disinflation and easier monetary policies across advanced economies

Largest October layoffs since 2003, led by technology

Subdued global shipping costs not yet pointing to supply chain problems

PMIs show still-elevated but slowing US inflation

AI boosting US investment in data centers

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

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

US financial markets have gotten used to elevated policy uncertainty

FOMC now expects more rate cuts going forward than in June

China gaining ASEAN exports while US exports slump

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

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

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

Equity market exuberance outpacing macroeconomic data

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

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Andrew Cates

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

260205Z1.jpg

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

260205Z2.jpg

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

260205Z3.jpg

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

260205Z4.jpg

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

260205Z5.jpg

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

260205Z6.jpg

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

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

260206E.jpg

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

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

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

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

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

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

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

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

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

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

Germany

German IP Reveals Chaotic Trends

Winnie Tapasanun

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

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

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

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

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

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

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

Sandy Batten

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

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

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

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

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

U.S. Initial Unemployment Claims Surged in Latest Week

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

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

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

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

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

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

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