Market watchers may be feeling queasy about the economic data rolling in as summer winds down, but the overall effect of all the ups and down is … flat.
On Wednesday, September 1, the latest report on manufacturing showed strength, but another report on company hiring showed weakness. While the Institute for Supply Management (ISM) announced that U.S. manufacturing rose in August for the 13th consecutive month, the ADP National Employment Report posted an unnerving drop in private-sector employment.
Steve Blitz, senior economist with New York-based Majestic Research, said that taken together, the ISM and ADP numbers reflect a flat economy.
"Call it 2% growth," Blitz said in an e-mail message. "This is like following a .500 baseball team. Over any 10-game period the team can look like world beaters or cellar dwellers, but in the end it evens out to an equal number of wins and losses. The economy at 2% growth, which is effectively zero growth in terms of its impact on reducing excess supply of capacity in capital and labor, is like that .500 baseball team – at least for the time being."
The ISM'S purchasing managers index (PMI) came in at 56.3 points, up 0.8% from July's 55.5. A Thomson Reuters poll of economists predicted the index would show a reading of 53. New orders slowed, however, posting a 0.4% decrease, to 53.1 from 53.5, following a 14-month trend of slower growth. Manufacturing employment was up 1.8%, to a 60.4 index reading in August versus 58.6 in July, for the ninth month in a row of growth.
High Unemployment a Sticking Point
Although manufacturing is holding up, high unemployment continues to be a sticking point in the U.S. economic recovery. Prior to this Friday's August jobs report from the U.S. Labor Department's Bureau of Labor Statistics (BLS), which is anticipated to show 100,000 lost jobs for the month, market observers are watching employment-related news closely.
According to the ADP National Employment Report also released Wednesday, private-sector employment decreased by 10,000 from July to August on a seasonally adjusted basis. The estimated change of employment from June to July was revised downward, from the previously reported increase of 42,000 to an increase of 37,000.
"Unlike the estimate of total establishment employment to be released on Friday by the BLS, today's figure does not include the effects of federal hiring — and now firing — for the 2010 Census," the ADP report's authors asserted in their release. "Hiring for the census peaked in May. For this reason, Friday's figure for the change in nonfarm total employment reported by the BLS might be weaker than today's estimate for nonfarm private employment in the ADP National Employment Report."
No Change Expected in Friday's Jobs Report
Looking at the ADP report, Ian Shepherdson, chief U.S. economist for High Frequency Economics Ltd., in Valhalla, New York, said in an analyst note that the 10,000 drop in August was below the consensus 15,000 and the first decline since January.
"The difference from the consensus is statistically insignificant but the underlying story, of a clearly softening labor market, is not," Shepherdson said. "Allowing for
