There were a few important reports on the U.S. economy released this morning. First, data from ADP showed that 235K private-sector payrolls were added to the economy in October. That was a better rebound than anticipated from September’s downward-revised 110K gain and the best month for job growth since March. The less volatile 3-month average of ADP’s hiring estimates ended October at 191K, low compared to earlier this year 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 (+150K) but the goods-producing sector posted a significant 85K gain thanks to strong manufacturing and construction hiring. This was likely a side effect of the rebuilding efforts following hurricanes Harvey and Irma. Small businesses also appeared to be quickly recovering from the tropical storms, as payrolls at firms with 1-49 employees jumped by 79K in October, the largest monthly gain since March.
Next, the manufacturing purchasing managers' index (PMI) from IHS Markit lifted to 54.6 in October, better than anticipated. Under the hood, production and new orders both increased at faster rates last month, and employment expanded at the best pace in more than two years. Inflation pressures, though, continued to build, implying greater margin strain. Chris Williamson, Markit’s chief business economist, added that “an important change in October was the broadening out of the expansion to smaller firms, which have lagged behind the strong growth reported by larger rivals throughout much of the year.” Somewhat less encouraging is the Institute for Supply Management's (ISM's) manufacturing index, also released this morning, which fell to 58.7 last month. That was worse than expected and the lowest headline reading since July. Measures of new orders, production, and employment all expanded at slower rates in October but comments from surveyed managers were generally positive.
Sources: Econoday, Bloomberg, Twitter, ZH, ADP, IHS Markit, ISM, FRBSLPost author: Charles Couch