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Economy in Brief

ISM Non-Manufacturing Index Down, Employment At Record High
by Tom Moeller July 6, 2004

The Business Activity Index for the Non-manufacturing Sector, reported by the Institute for Supply Management, fell last month to 59.9 from 65.2 in May. Consensus expectations had been for little change at 64.0.

Since the series' inception in 1997 there has been a 60% correlation between the Business Activity Index and the q/q change in GDP services plus construction.

The employment index added to prior gains and rose to 57.4, a record high. Higher employment was reported by 27% of firms versus 17% last year and 12% in 2002.

Since the series' inception in 1997 there has been a 60% correlation between the level of the ISM non-manufacturing employment index and the m/m change in payroll employment in the service producing and construction industries.

The new orders index rose to 62.4 from 61.3 in May.

Business activity for the non-manufacturing sector is a question separate from the subgroups mentioned above. In contrast, the NAPM manufacturing sector composite index is a weighted average five components.

The seasonally adjusted prices index ticked higher to another record high of 74.6.

ISM surveys more than 370 purchasing managers in more than 62 industries including construction, law firms, hospitals, government and retailers. The non-manufacturing survey dates only to July 1997, therefore its seasonal adjustment should be viewed tentatively.

ISM Non-manufacturing Survey June May June '03 2003 2002 2001
Business Activity Index 59.9 65.2 59.5 58.1 55.1 48.9
Prices Index 74.6 74.4 52.7 56.7 53.9 51.5
Challenger Layoffs Lowest In A Year
by Tom Moeller July 6, 2004

Challenger, Gray & Christmas reported that announced job cuts in June fell 12.3% m/m to 64,343, the lowest level in a year.

The three month moving average of job cut announcements fell to its lowest level since late 2000 (-23.6% y/y).

During the last ten years there has been an 86% (inverse) correlation between the three month moving average of announced job cuts and the three month change payroll employment.

Job cut announcements differ from layoffs. Many are achieved through attrition, early retirement or just never occur.

Challenger, Gray & Christmas June May Y/Y 2003 2002 2001
Announced Job Cuts 64,343 73,368 7.8% 1,236,426 1,431,052 1,956,876
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