After adjusting for the storm effects, both initial and continuing claims appear to be near their pre-hurricane levels, indicating that labor markets remain strong despite the weak October payroll employment report.

The narrowing of the budget shortfall in October is largely due to timing factors. Nevertheless, there is no apparent deterioration caused by the federal relief efforts following Hurricanes Katrina and Rita,

Productivity has slowed during the past year because output has fallen more quickly than employment and hours have been trimmed.

The terrorist attacks are going to make a bad situation even worse.

The signals in the manufacturing sector have become quite mixed. The diffusion indices suggest a slowing pace of growth while the factory and durable goods reports indicate an acceleration. In the past, when this type of divergence has occurred, the diffusion indices have usually been the better indicator.

The spring slowdown in factory activity, due largely to an inventory adjustment cycle, is now history,

The strong historical relationship between the level of the help-wanted index and the year-on-year growth of payroll employment has broken down completely.

The slowdown in manufacturing activity will be welcomed at the Federal Reserve, where any sign of economic slowing will be cheered.

These data add to the growing evidence that economic activity has slowed and that any re-acceleration is likely to be short-lived.

These data are broadly consistent with payroll employment gains in the 200,000 to 250,000 (monthly) range.