ISM Index Higher than Expected

[Doc Holliday]

The ISM report came in much higher than expected, further evidence that the economy is improving.

http://www.ism.ws/ISMReport/MfgROB.cfm

The manufacturing sector grew for the third consecutive month in October, and the rate of growth is the highest since April 2006 when the PMI registered 56 percent. The jump in the index was driven by production and employment, with both registering significant gains.

In October, 13 of the 18 manufacturing industries reported growth.

The employment index was much talked about on CNBC this morning. It jumped up by 6.9 from September's 46.2 to 53.1.

Now, here is the interesting thing: it is almost unheard of for that index to be above 50 at the same time net payrolls are showing losses, so that makes Friday's jobs report very intriguing, to say the least.

ISM's Employment Index registered 53.1 percent in October, which is 6.9 percentage points higher than the 46.2 percent reported in September. This is the first month of growth in manufacturing employment following 14 consecutive months of decline. An Employment Index above 49.7 percent, over time, is generally consistent with an increase in the Bureau of Labor Statistics (BLS) data on manufacturing employment.

Of course, the one thing that popped into my mind amidst all the celebration was the relative importance of manufacturing employment in today's economy........ nonetheless, I can't wait for Friday's report...

[ninetoes]

The ISM report came in much higher than expected, further evidence that the economy is improving.

http://www.ism.ws/ISMReport/MfgROB.cfm





The employment index was much talked about on CNBC this morning. It jumped up by 6.9 from September's 46.2 to 53.1.

Now, here is the interesting thing: it is almost unheard of for that index to be above 50 at the same time net payrolls are showing losses, so that makes Friday's jobs report very intriguing, to say the least.



Of course, the one thing that popped into my mind amidst all the celebration was the relative importance of manufacturing employment in today's economy........ nonetheless, I can't wait for Friday's report...

I think companies are producing more with fewer employee's, perhaps? Obama just stated he expects job losses for quite a while yet, so that would be the only conclusion I can come up with right now.

[Doc Holliday]

I think companies are producing more with fewer employee's, perhaps? Obama just stated he expects job losses for quite a while yet, so that would be the only conclusion I can come up with right now.

It's intriguing and I can't wait for the jobs report. According to DailyFX, the consensus is for a payroll loss of 175,000.

According to the economics reporter at CNBC, if I heard him right, only three months in thirty years have we seen net payroll loss when that manufacturing index was above 50.

A lot of strange things have happened in this recession.....a good reading of the manufacturing employment index in the midst of a worsening labor market is just as possible as anything else.

Or.. maybe that one model which showed fairly significant job gains for the end of year before declining again early next year is correct after all. Maybe that model was just off by a couple of months!

Can't wait for Friday!

[Doc Holliday]

Always impressed with your knowledge, Doc .

BTW .... Beautiful day in our neck of the woods:wink:

jmo

Yep, and enjoy it because the rest of the week looks bad.... rain and snow mixes.. yuck! (and I have to travel for business on Wed too.. double yuck).

[watcher2005]

Did anyone read the section what respondents are saying?

[Doc Holliday]

Did anyone read the section what respondents are saying?

That's a small sample that doesn't mean anything. The last one, for example, came from Primary Metals which is one of the three industries showing contraction. The second to last one correlates with the fact that new orders is still increasing but at a slower pace than in September.

Anyway, from Market Watch:

It's getting harder for the skeptics to explain away all the good news about U.S. manufacturing. The sector is bouncing back from the worst downturn since World War II.

http://www.marketwatch.com/story/manufacturing-recovery-hard-to-ignore-2009-11-02

[ninetoes]

That's a small sample that doesn't mean anything. The last one, for example, came from Primary Metals which is one of the three industries showing contraction. The second to last one correlates with the fact that new orders is still increasing but at a slower pace than in September.

Anyway, from Market Watch:



http://www.marketwatch.com/story/manufacturing-recovery-hard-to-ignore-2009-11-02

Right. Cant realy deny the facts when it comes down to it. I guess we just hope that somehow increases in manufacturing equates to increases in jobs. That will be the true sign of recovery for most folks...having a job that will last more than a few months.

[Doc Holliday]

Right. Cant realy deny the facts when it comes down to it. I guess we just hope that somehow increases in manufacturing equates to increases in jobs. That will be the true sign of recovery for most folks...having a job that will last more than a few months.


Agreed. I could have sworn I saw Kudlow screaming about a V-shape recovery now. But all I could think was that manufacturing has declined in relative importance so that it might not matter so much for the whole labor market that the manufacturing employment index rose so much. This seems obvious to me, but I must be missing something.

[daniel green]

MORE good news! YAYYYYYYY!!!!

Thx for explaining this, Doc, as always!

[theal3]

MORE good news! YAYYYYYYY!!!!

Thx for explaining this, Doc, as always!

Yes, he does..... and I'm giving it more time......Geeze & the whiners who think we could recover in a few months. Jobs always lag, give it another year, IMHO.

[Doc Holliday]

Calculated Risk is on it, complete with a nice graph showing the relation between the employment index and the change in manufacturing employment as reported by the BLS.

Looks like there is a good chance of seeing one part of the BLS report show some positive job growth.... the only question is how much and what will the whole job report show?

I wish it were Friday now!

http://www.calculatedriskblog.com/2009/11/ism-and-manufacturing-employment.html

[watcher2005]

Yes, he does..... and I'm giving it more time......Geeze & the whiners who think we could recover in a few months. Jobs always lag, give it another year, IMHO.

That's not exactly what the "whiners" are whining about. :laugh:

[ninetoes]

That's not exactly what the "whiners" are whining about. :laugh:

I dont see it as whining...I see it as realism. People need jobs. If saying so is considered whining, then so be it. Somehow I doubt those without a job see it that way, though. I would imagine those without a job really dont care much what the statistics show about the GDP, or anything else for that matter.

[watcher2005]

I dont see it as whining...I see it as realism. People need jobs. If saying so is considered whining, then so be it. Somehow I doubt those without a job see it that way, though. I would imagine those without a job really dont care much what the statistics show about the GDP, or anything else for that matter.


The very report has statements suggesting things aren't well.

[Doc Holliday]

The employment index was much talked about on CNBC this morning. It jumped up by 6.9 from September's 46.2 to 53.1.

Now, here is the interesting thing: it is almost unheard of for that index to be above 50 at the same time net payrolls are showing losses, so that makes Friday's jobs report very intriguing, to say the least.


False alarm people.

The other ISM report was out this morning (the non-manufacturing one) and it was disappointing. Although the index was still above 50, it was smaller than September's number. http://www.ism.ws/ISMReport/NonMfgROB.cfm

But it was the employment index which stuck out. It really shrunk.

As Calculated Risk (http://www.calculatedriskblog.com/2009/11/ism-and-employment-manufacturing-gives.html) points out, the decrease in the service sector more than washes out the increase in the manufacturing sector.

Checkmate.

You can never predict with certainty because of all the noise, but I wouldn't be surprised to see another payroll loss just south of 200k on Friday.

Haven't been in all day, so I don't know if Larry Kudlow is still screaming about a V-shape recovery.

[ninetoes]

False alarm people.

The other ISM report was out this morning (the non-manufacturing one) and it was disappointing. Although the index was still above 50, it was smaller than September's number. http://www.ism.ws/ISMReport/NonMfgROB.cfm

But it was the employment index which stuck out. It really shrunk.

As Calculated Risk (http://www.calculatedriskblog.com/2009/11/ism-and-employment-manufacturing-gives.html) points out, the decrease in the service sector more than washes out the increase in the manufacturing sector.

Checkmate.

You can never predict with certainty because of all the noise, but I wouldn't be surprised to see another payroll loss just south of 200k on Friday.

Haven't been in all day, so I don't know if Larry Kudlow is still screaming about a V-shape recovery.

Was speaking with a friend in the financial sector today, he's hearing unemployment will be a 9.9, if not 10% when the reports are out the end of the week.

[Doc Holliday]

Was speaking with a friend in the financial sector today, he's hearing unemployment will be a 9.9, if not 10% when the reports are out the end of the week.

The "consensus" is for the unemployment rate (U3) to increase from 9.8% to 9.9%.

But here's the deal with the unemployment rate: there is a lot of noise in the month to month movements, so all you can really say is that it's pretty certain that the rate will either decrease to 9.7%, stay the same at 9.8%, increase to 9.9%, or increase to 10%.

When the unemployment rate dropped in July to 9.4% from June's 9.5%, I got excited along with a lot of other people. But then I ran into somebody much smarter and he said "relax, it's just statistical noise". Sure enough, the following month (August) it jumped all the way up to 9.7%.

If you go through and take a rolling 3-month average, which smooths out the fluctuations, you'll see that it has increased every single month since early in 2008.

So all of those options - 9.7, 9.8, 9.9, 10.0 - mean the employment situation is getting worse.

So what's the point with all this gibberish? Well, I stopped wondering and worrying about a particular month's unemployment rate and I started just looking at the payroll number instead.

And that's probably more than anybody cared to know.......