Economy, Small Business

Economic Data Roundup (10/05/2016)

10/5/16 12:00 PM

iStock_000009946822_Small.jpgThere were a few important reports on the U.S. economy released this morning. First, data from ADP showed that business hiring continued to cool in America, with only 154K private-sector payrolls being added to the economy in September. That was much worse than the +170K gain economists had expected, and the smallest monthly increase since April. The August figure was also revised slightly lower, which altogether helped pull the less volatile 3-month average for ADP’s hiring estimates to +175K, a still healthy overall pace of job creation. Almost all of the private-sector payrolls added last month were in the services sector (+151K), which included a large gain in the "professional and business" arena, while payrolls in the goods-producing sector rose by just 3K. Elsewhere in the report, small business hiring slowed considerably in September, as firms with 1-49 employees added just 34K workers, the weakest monthly gain since 2013. Smaller firms earlier this year were the main driver of private-sector job growth in America but hiring among these companies has now slowed for five months in a row. Uncertainty about the economy and the upcoming election are likely causing many small business owners to remain cautious with their hiring strategies in the near-term. Mark Zandi, chief economist of Moody’s Analytics, optimistically added that “The current record of consecutive monthly job gains continued in September. With job openings at all-time highs and layoffs near all-time lows, the job market remains in full-swing. Job growth has moderated in recent months, but only because the economy is finally returning to full-employment.”

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Elsewhere the services sector purchasing managers' index (PMI) from IHS Markit ended September at 52.3, a welcome improvement from the 6-month low hit in August and the best reading since April. However, the pace of headline activity expansion remained below the recovery average, and employment growth eased to a more than 3-year low. Surveyed managers were also less positive about their growth prospects for the next twelve months, with respondents citing “fragile economic conditions” and “hopes of a rebound in client spending after the election.” Markit's chief economist Chris Williamson added that “The survey responses reveal that a heightened degree of political uncertainty is subduing the economy, manifesting itself in particular in a marked slowdown in corporate hiring. Across both manufacturing and services [arenas], the surveys point to the smallest monthly gain in jobs since April 2010, consistent with a mere 115,000 rise in non-farm payrolls.” A lot more encouraging was the Institute for Supply Management’s (ISM’s) non-manufacturing index, also released this morning, which surged to 57.1 in September. That was significantly better than economists anticipated, the largest monthly increase on record, and the highest reading since October 2015. ISM’s gauges of non-manufacturing production, new orders, employment, inventories, and foreign trade all improved last month, and comments from surveyed managers were generally positive, although one respondent said that “labor cost and availability remains a concern.”

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Sources: Econoday, Bloomberg, Twitter, ZH, ADP, IHS Markit, ISM, FRBSL

Post author: Charles Couch