Manufacturing, Housing Data Whispers That Jobs Report Will Beat the Number

NEW YORK (TheStreet) -- Forecasters say the economy probably generated about 211,000 new jobs in June -- not much fewer than the 217,000 it churned out during May. But the drip of data coming out about the economy increasingly suggests that is too low.

The reason: Housing and manufacturing, two of the industries that most need to get cracking to get the unemployment below 6%, are finding a new gear. And if the better reports from those sectors turn into more jobs, then the summer will bring the expected bounce back from the first quarter, when job creation held up despite a 2.9% decline in gross domestic product.

The latest data today come from the Institute of Supply Management, whose monthly index of manufacturing activity dipped slightly to 55.3, on a scale where anything above 50 shows an expansion and above 55 generally means a strong one.  It was 55.4 last month, and as low as 51.3 in January -- and the crucial index of new orders rose 2 points to 58.9.

The Emperor's New Clothes

Why General Electric's Stock Can Still Shock Investors After Alstom

That followed a big gain in the Dallas Federal Reserve Bank's assessment of manufacturing conditions in the Lone Star state, released on Monday. The regional Chicago purchasing managers' index, also released by the ISM, showed a decline, but the index stayed at a very robust 62.6 and the production index (which measures how much is being made now) topped 70.

The news from housing -- the economy's big worry just a few weeks ago -- is also improving. Pending home sales jumped 6.1% in May, the National Association of Realtors said Monday. That's the biggest monthly jump since 2010, when an expiring tax credit created artificial demand. That followed a 19% gain in new home sales for May reported earlier in the month.

Housing and manufacturing are two of the key elements of any plan to get job creation up toward 250,000 a month. Construction added only 6,000 jobs in May -- but more new home construction will translate quickly into at least three jobs per new single-family home, according to rules of thumb used by economists at Moody's Analytics and IHS Global Insight.

A healthy recovery would feature about 20,000 construction hires a month -- a level we've seen in four of the last eight months. A housing uptick should help construction get there and stay there-- if not this month, then soon.

It would help the recovery if manufacturing could spit out a steady 10,000 new jobs a month, but hiring has been up and down recently. Today's ISM report showed hiring intentions were the same as in May. If manufacturing can just match the 10,000 new jobs the sector created in May, on a base of 12 million, the overall jobs report should be strong. And the manufacturing data suggest that's possible, even likely. Today's data on June car sales will tell us more.

If housing and manufacturing are doing well, the services part of the economy should tend to take care of itself. When job prospects are improving, and houses and cars are selling, there's rarely much quibbling about whether there's enough money left over for a trip to Applebee's. Even last week's soft data on May consumer spending, which caused economists to trim some second-quarter forecasts, was released in the same report as news of a modest increase in wage growth. 

Bottom line: The fundamentals are coming together for the economy to do significantly better. There is a lot of noise in data, especially around spending for health care and government benefits, which dragged down both first-quarter GDP and the May consumer spending report.

But the signal is this: More houses, more cars, more manufacturing growth. That's likely to mean more jobs than we think on Thursday -- and if not then, soon.

This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.

More from Opinion

Tuesday Turnaround: Micron, Autonomous Driving, and J.C. Penney

Tuesday Turnaround: Micron, Autonomous Driving, and J.C. Penney

Cable Stock Investors Should Keep an Eye On Wireless Broadband's Rise

Cable Stock Investors Should Keep an Eye On Wireless Broadband's Rise

Trump Blinks on China Trade War That's Looking Harder to Win

Trump Blinks on China Trade War That's Looking Harder to Win

Monday Madness: GE, China, and Micron

Monday Madness: GE, China, and Micron

Attention 60 Minutes: Google Isn't the Only Big-Tech Monopoly

Attention 60 Minutes: Google Isn't the Only Big-Tech Monopoly