Moments ago, the Institute for Supply Management, reported some blistering numbers in the August Non-Manufacturing Report, whose headline print rose once again, this time to 59.6, or the highest since August 2005 [2]. Not only that, but the all-important employment component, ahead of tomorrow's NFP report, which also rose to 57.1, printed at what, at least on the surface, was the highest number since February 2006!
[3]
Superficially, this is great news. And yet, remember: this is the seasonal-adjustment challenged ISM [4], the same ISM which for some inexplicable reason believes that survey responses (not hard, or soft data), have to be seasonally adjusted.
So what happens when one looks below the seasonally-adjusted surface. Well, then things get uglier.
In fact, if one looks at the two most important data series that comprise the ISM report, New Orders and Employment, one sees that the number of respondents who reply with "Higher", i.e., are optimistic about current conditions, is actually sliding at the fast pace in a year!
Specifically, the number of respondents who saw "Higher" employment dropped to just 22, a plunge from the 26 in July and 29 in June. This is happening as the actual number, net of seasonal adjustments, rose to, as noted above, the highest since 2006! It was also the lowest number since February when the unadjusted % of respondents seeing "Higher" jobs was at 16.
[5]
What about New Orders? Pretty much the same thing: at 29 responding "Higher", this was the drop from the 32% in July, the 31% in June and 36% in May. In fact, a print of 29% was matched for lowest since March of 2014! Quite a bit of difference from a headline, adjusted number which is near the highs of a decade.
[6]
So, if for some reason you lose your job because your employer doesn't share the S&P's enthusiasm about the economy, just tell them to seasonally adjust the pink slip to a bonus check - the strategy seems to be working for everyone else, so why not for Joe Sixpack?
Source: ISM [7] [7]
