Global| Feb 03 2010Challenger Indicates Labor MarketDeterioration
by:Tom Moeller
|in:Economy in Brief
Summary
There's been little expansion but less contraction in the nonmanufacturing sector. That's the message from the Institute for Supply Management (ISM) for the service & construction sectors. Their Composite Index ticked up to 50.5 from [...]
There's
been little expansion but less contraction in the nonmanufacturing
sector. That's the message from the Institute for Supply Management
(ISM) for the service & construction sectors. Their Composite
Index ticked up to 50.5 from a downwardly revised 49.8 during December.
Material improvement is indicated by the rise in the series from a low
of 37.2 late in 2008. The latest figure about matched Consensus
expectations. Since the series' inception in 1997 there has been a 65%
correlation between the level of the composite index in the
nonmanufacturing sector and the q/q change in real GDP for the services
and the construction sectors.
ISM surveys more than 370 purchasing managers in more than 62 industries including law firms, hospitals, government and retailers. The nonmanufacturing survey dates back to July 1997. The figures are available in Haver's USECON database.
Amongst the components, the business activity index for the service sector was above break-even for the fifth month in the last six. The new orders index was even stronger as it posted a rise to the highest level since June of 2007. Also, the employment index improved to the highest level since August 2008 and was up sharply from its low at the end of that year. Since the series' inception in 1997 there has been an 80% correlation between the level of the ISM nonmanufacturing employment index and the m/m change in payroll employment in the service-producing plus the construction industries.
As activity improved, pricing power did as well with a rise for the fourth straight month to near the highest level since September 2008. The pricing index rose m/m to 58.7 and was up sharply from one year ago. Since its inception ten years ago, there has been a 73% correlation between the price index and the q/q change in the GDP services chain price index.
Beginning with the January 2008 Nonmanufacturing Report On Business ®, the composite index is calculated as an indicator of the overall economic condition for the non-manufacturing sector. It is a composite index based on the diffusion indices of four of the indicators (business activity, new orders, employment and supplier deliveries) with equal weights. The latest report from the ISM can be found here.
Recessions Happen: Now What? from the Federal Reserve Bank of St. Louis is available here here.
| ISM Nonmanufacturing Survey | January | December | November | Jan. '09 | 2009 | 2008 | 2007 |
|---|---|---|---|---|---|---|---|
| Composite Index | 50.5 | 49.8 | 48.4 | 43.2 | 46.2 | 47.3 | 53.5 |
| Business Activity | 52.2 | 53.2 | 49.6 | 44.1 | 48.0 | 47.4 | 56.0 |
| New Orders | 54.7 | 52.0 | 53.7 | 41.6 | 47.9 | 47.0 | 54.8 |
| Employment | 44.6 | 43.6 | 41.7 | 35.4 | 39.9 | 43.8 | 52.0 |
| Supplier Deliveries | 50.5 | 50.5 | 48.5 | 51.5 | 49.0 | 51.1 | 51.1 |
| Prices Index | 61.2 | 59.6 | 57.1 | 42.1 | 49.4 | 66.0 | 63.8 |
Tom Moeller
AuthorMore in Author Profile »Prior to joining Haver Analytics in 2000, Mr. Moeller worked as the Economist at Chancellor Capital Management from 1985 to 1999. There, he developed comprehensive economic forecasts and interpreted economic data for equity and fixed income portfolio managers. Also at Chancellor, Mr. Moeller worked as an equity analyst and was responsible for researching and rating companies in the economically sensitive automobile and housing industries for investment in Chancellor’s equity portfolio. Prior to joining Chancellor, Mr. Moeller was an Economist at Citibank from 1979 to 1984. He also analyzed pricing behavior in the metals industry for the Council on Wage and Price Stability in Washington, D.C. In 1999, Mr. Moeller received the award for most accurate forecast from the Forecasters' Club of New York. From 1990 to 1992 he was President of the New York Association for Business Economists. Mr. Moeller earned an M.B.A. in Finance from Fordham University, where he graduated in 1987. He holds a Bachelor of Arts in Economics from George Washington University.
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