Clearly, the news du jour is encouraging, although it also comes with plenty of caveats. The headline ISM Manufacturing Index inched higher in October to levels last seen in early 2011. It’s tempting to take the numbers at face value and declare that all’s well in the land of macro. But a closer look at today’s report suggests a bit more caution is in order. In particular, the employment component slipped, as the chart below shows. True, it’s a mild retreat, although this week’s soft numbers on private payrolls for October via ADP also suggest that the economy’s forward momentum on the all-important issue of creating jobs is still stuck in low gear.
Nonetheless, it’s impressive that today’s headline ISM number continues to show resilience in the face of recent obstacles, including the recent government shutdown. Even so, it’s easy to find demons lurking in the shadows. But a broad review of the numbers still show minimal signs of imminent danger for the US business cycle and today’s ISM data certainly doesn’t contradict that big-picture analysis.
The question is what happens next with an economy that’s still delivering modest growth and uninspiring news on payrolls? Hold that thought as we await the next big numbers on the economy: the government’s updates on personal income and spending for September and the October employment report, both scheduled for release on Nov. 8.
This piece is cross-posted from The Capital Spectator with permission.