Archive for the ‘ISM Index’ Category

Get Back to Work

Friday, September 6th, 2013

Labor Day has passed.  It’s time to get back to work … or at least think about work.  Work, or the lack of it, is what the economy is all about.  When Americans are working, they spend money.  When they spend money, the economy grows.

So if the economy is truly recovering, as many pundits suggest, then the unemployment rate should be dropping.  So is it?  Maybe. Gallup

On the One Hand

In today’s report, the U.S. Bureau of Labor Statistics reported that during the month of August, nonfarm payroll employment increased by 169,000, bringing the unemployment rate down from 7.4% to 7.3%.  That’s not a significant change, but it beats the 8.1% rate of a year ago.

In addition, the Institute of Supply Management reported this week that its manufacturing index edged up to 55.7 from 55.4 in July.  That’s also not a significant change, but economists had been forecasting a modest decline.  Instead, it was the third straight month of growth, as any reading above 50 indicates growth.  In addition, the new orders index jumped nearly 5% to 63.2.

(more…)

WOW! Manufacturing Index Up 0.2%!

Friday, November 2nd, 2012


“Been down so long, it looks like up to me.”

Furry Lewis

This is what passes as positive economic news these days: The Institute for Supply Management’s (ISM) reported Thursday that its index of purchasing managers edged up to 51.7% from 51.5% in September.

Wow!  A whole 0.2% gain!

Yet it was positive enough to send the Dow Jones Industrial Average up 1% (136.16 points) yesterday, in the last Thursday before the Presidential election.

It was the biggest gain since the latest round of quantitative easing (QE3) was announced on Sept. 13, 2012 – but it doesn’t erase the market drop that has taken place since then.

The gain in the ISM index is up from a three-year-low of 49.6% in August and it’s better than the 50.5% index projected by economists in a MarketWatch survey.

But put the figure in perspective.  Any number above 50% signals expansion, while a number below 50% means contraction.  Whether the number is 51.7%, 50.5% or 49.6%, it signals that the economy is standing still.  Statistics have a margin of error, which renders a gain or a loss of 0.2% meaningless.

Let’s assume, though, that the trend is upward.  After all, ISM’s new order index, which is based on future sales, moved up from 52.3% to 54.2%.  If the growth rate for September continues, after five months, the index could reach 51%!

That’s about as exciting as the 2.1% growth in gross domestic product (GDP) that we reported last week.

Economic Data Doesn’t Create Jobs

Speaking of meaningless statistical changes, the bigger news, reported today, is that the unemployment rate ticked back up to 7.9% from 7.8%.

Just last month, the U.S. Bureau of Labor Statistics, amid a great deal of skepticism, announced that the unemployment rate had fallen below 8% for the first time in nearly four years.  So much for positive trends.

Many even viewed the latest data as positive news, as 171,000 new jobs were added in October, which is higher than the expected 125,000 new jobs.  Regardless, there are not enough new jobs being created to make a dent in the unemployment rate.

As with the ISM index, it doesn’t matter much whether the jobless rate is 7.9%, 8.1% or 7.8% — especially given that it counts part-time workers as being fully employed and doesn’t include people who have given up looking for work.

The take away from this is that too many people have been out of work for a long, long time, and that stimulus programs, monetary policy and other government efforts have done little to change that.