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Thread: BIG miss on ISM non-manufacturing report

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    Default BIG miss on ISM non-manufacturing report

    from

    (snip)"Oh, A Worse-Than-Expected Surprise (Non-Manuf ISM)

    Now this isn't good...

    "The NMI (Non-Manufacturing Index) registered 51.5 percent in August, 2.8 percentage points lower than the 54.3 percent registered in July, indicating continued growth in the non-manufacturing sector but at a slower rate.

    Still growth, so good, right? Uh, there's a problem, and it's internal.

    the Employment Index decreased 2.7 percentage points to 48.2 percent, reflecting contraction after one month of growth. The Prices Index increased 7.6 percentage points to 60.3 percent in August, indicating that prices increased significantly in July.

    Prices up and employment down.

    Note that services are 60% of our economy, and now we have a report that says that employment is contracting in that part of the economic spectrum.

    Now in contraction are both employment and new export orders, which is a horrifying development from a trade-balance perspective.

    Backlogs are also to parity at 50.5, while imports are now at 50.5 as well, so there's no growth there either - only balance. Finally, inventory is too high.

    This is the worst number since January, which registered a 50.5, and is a monstrous drop from last month, which measured 54.3. Coming into the end of year (holidays anyone?) and particularly when one considers that services are a big part of getting goods to stores and such, this appears to validate the anecdotes that I've been hearing the last couple of weeks where service demand (particularly in the freight sector) absolutely went into the toilet during the last two weeks of August.

    I was scratching my head at the manufacturing ISM yesterday, since it flew in the face of the Fed surveys and the anecdotal evidence that I had in various sectors, particularly freight. This report appears to confirm the anecdotes. Worse, it appears that it may be validating one of my fears with the ISM manufacturing numbers - the inventory build may well be involuntary, (as I noted last night) and if so, big trouble is right around the corner.

    It certainly appears that the pump monkeys got a bit ahead of themselves with their chortling over "no double dip." I'd say the jury isn't back on that one yet folks.....

    Incidentally, I happen to agree that we won't have a double-dip, but for a different reason: I don't believe we ever left the recession in the first place!"(snip)

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    Default Re: BIG miss on ISM non-manufacturing report

    and while we're on the subject of economic news ...



    (snip)"This morning the BLS reported a decrease of 64,000 jobs. However, that reflects a decrease of 114,000 temporary census workers.

    Excluding the census effect, government lost 7,000 jobs. Were the trend to continue, this would be a good thing because Firing Public Union Workers Creates Real Jobs.

    Unfortunately, politicians and Keynesian clown economists will not see it that way. Indeed there is a $26 billion bill giving money to the states to keep bureaucrats employed. This is unfortunate because we need to shed government jobs.

    Birth-Death Model

    Hidden beneath the surface the BLS Black Box - Birth Death Model added 115,000 jobs, a number likely to be revised lower in coming years. Please note you cannot directly subtract the number from the total because of the way the BLS computes its overall number.

    Participation Rate Effects

    The civilian labor force participation rate (64.7 percent) and the employment-population ratio (58.5 percent) were essentially unchanged from last month's report. However, these measures have declined by 0.5 percentage points and 0.3 points, respectively, since April.

    The drop in participation rate this year is the only reason the unemployment rate is not over 10%. The drop in participation rates is not that surprising because some of the long-term unemployed stopped looking jobs, or opted for retirement.

    Nonetheless, I still do not think the top in the unemployment rate is in and expect it may rise substantially later this year as the recovery heads into a coma and states are forced to cut back workers unless Congress does substantially more to support states.(snip)

    (snip)"Major Discrepancies

    The BLS jobs report for August does not match ADP payroll estimates. Moreover, neither the BLS jobs report nor the ADP jobs report is consistent with the hot ISM number reported Wednesday. Both the BLS (details below) and ADP have a decline in manufacturing employment while ISM had a rise.

    Please see Rosenberg says "ISM Flunks Sniff Test "; Cashin calls ISM "an Outlier"; ADP, Other Data Does Not Confirm for more details that suggest the ISM number is nonsense.

    Part-Time Employment

    The number of involuntary part-time workers increased by 331,000 over the month to 8.9 million. In January, the number of employees working "part-time for economic reasons" was 8.6 million.(snip)





    (snip)Highlights

    •54,000 jobs were lost
    •19,000 construction jobs were added
    •27,000 manufacturing jobs were lost

    •38,000 service providing jobs were added
    •67,00 retail trade jobs were added
    •20,000 professional and business services jobs were added
    •45,000 education and health services jobs were added
    •13,000 leisure and hospitality jobs were added

    •121,000 government jobs were lost. Of them, 143,000 were temporary census workers
    Note: some of the above categories overlap as shown in the preceding chart, so do not attempt to total them up."(snip)

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