Economy, Small Business

Economic Data Roundup (10/04/2017)

10/4/17 12:00 PM

/iStock-177853320.jpgThere were a few important reports on the U.S. economy released this morning. First, data from ADP showed that 135K private-sector payrolls were added to the economy in September. That was worse than anticipated and the smallest monthly gain since October of last year. The August figure was revised lower, which together with the weak September print pulled the less volatile 3-month average for ADP’s hiring estimate to just +187K. That is the softest reading year-to-date but still an overall healthy pace of job creation that should maintain the downward trend in unemployment. Under the hood, most of the private-sector payrolls added last month were as usual found in the services sector but the gain was much smaller than normal (+88K). At the same time, payrolls in the goods-producing sector jumped by 48K last month, driven by strong manufacturing and construction hiring. This is likely a side effect of the rebuilding efforts following hurricanes Harvey and Irma. Small businesses appeared to be especially hurt by recent tropical activity, as payrolls at firms with 1-49 employees fell by 7K in September, the first monthly decline since 2013. However, hiring had already started softening earlier this year at smaller firms, something which ADP vice president Ahu Yildirmaz said “could be due to a lack of competitive compensation to attract skilled talent.”

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Elsewhere, the purchasing managers' index (PMI) from IHS Markit for the U.S. services sector, which accounts for a much larger share of the overall economy than manufacturing, ended September at 55.3. That was the first monthly decline in roughly half a year but still slightly better than economists had expected. New business growth and hiring both cooled in September but overall theses gauges remained historically strong. On the inflation front, margin strain intensified for service providers last month as hurricanes Harvey and Irma impacted energy, fuel, and raw material prices. Even more encouraging was the Institute for Supply Management’s (ISM’s) non-manufacturing index, also released this morning, which surged to 59.8 in September, a 13-year high. Measures of production, new orders, and employment improved last month, and comments from surveyed managers were generally positive. Looking ahead, though, IHS Markit chief business economist Chris Williamson cautioned that “While rebuilding and a return to normal business conditions after the hurricanes will hopefully boost growth in the fourth quarter, it’s worrying to see business expectations about activity levels over the coming year drop in September. Measured across both manufacturing and services, future optimism is at its lowest since February, suggesting companies have become increasingly cautious about the outlook.”

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Sources: Econoday, ADP, IHS Markit, ISM, FRBSL

Post author: Charles Couch