The Institute for Supply Management's monthly non-manufacturing index was
higher than expected in July, although not a high reading. The
non-manufacturing held steady at 55.8 in August, the same as July, and 1.3
points higher than the consensus forecast. The reading was also 2.9 points
above the ISM's manufacturing index for the month of August, about two
points less than normal.
The tight spread suggests that the composition of U.S. economic growth is skewing unfavorably, with the service sector contributing a smaller amount than before. This is a negative for U.S. employment, given that over 80% of U.S. jobs are in the service sector. Reinforcing this concern is the employment component within today's survey, which fell to its lowest since December 2002.
Some will take solace in the fact that the ISM's non-manufacturing index was higher than expected and at a level consistent with moderate growth of over 2%, but the bigger news is its continued tight spread to the factory index, the weak employment component, and the fact that the index could not yet have fully captured recent events.
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Tony Crescenzi Blog Jobless Claims Muddy Jobs View 9/6/2007 9:40 AM EDT People receiving jobless benefits on a continuous basis reached a four-month high, suggesting caution.
Tony Crescenzi Blog Beige Book Less Sanguine 9/5/2007 3:16 PM EDT The District Banks described growth in terms of 'moderate' all the way to 'slowed.'
Tony Crescenzi Blog Rate Cut Odds Hard to Gauge 9/5/2007 12:25 PM EDT A variety of factors are distorting trading in fed funds futures and the funds rate is all over the map.
Tony Crescenzi is the chief bond market strategist at Miller Tabak + Co., LLC, and advises many of the nation's top institutional investors on issues related to the bond market, the economy and other macro-related issues. At the request of the Federal Reserve, Crescenzi is a regular participant in the board's Livingston Survey of economic forecasters. He is also the author of the revised investment classic, The Money Market,
first published in 1978 by Marcia Stigum, and The Strategic Bond Investor. At the time of publication, Crescenzi or Miller Tabak had no positions in the securities mentioned in this column, although holdings can change at any time. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Crescenzi also is the founder of Bondtalk.com, a popular Web site covering the bond market and the economy. Crescenzi appreciates your feedback; click here to send him an email.
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