US Economic Week in Review: The Manufacturing and Service Sectors Are Growing Solidly
The US manufacturing sector is very good shape. The latest ISM reading was 58.2 – a modest decrease from the previous month, but still a very strong level. Last month’s reading was one of the strongest since the recession and continues this series’ recent uptrend:
The internals were very strong: new orders rose .6 to 64 while production was up 2.9 to 63.9. The latest Markit report – which reported an increase in orders, employment and volumes — confirms these trends. The anecdotal comments were very strong, containing nothing negative:
Remember, however, that this is a sentiment indicator. The actual data from the industrial sector has been weaker than implied ye this report. Durable goods durable goods orders have fluctuated between $220 and $240 million for the last few years. However, there have been some positive developments in several subcategories of the durable goods report:
Non-defense capital goods excluding aircraft (top chart) and machinery orders (bottom chart) are both increasing at strong clips. In addition, employment in this segment of the economy is growing:
The chart about contains the 3, 6, and 12 month moving average of job growth are all rising.
Services – which comprise a far larger percentage of the US economy – continue to do well. While the number decreased 2.7%, the headline number was a robust 57.4, continuing this series’ strong performance:
Production was up modestly (.9 to 62.2) while new orders were marginally off (-.2 to 62.8). The Markit service sector report confirms these readings. The anecdotal comments weren’t as strong as the manufacturing report:
There are three areas of weakness: health care, hurricane-related issues and some segments of the oil market. And this week’s employment report showed continued job growth in the service sector, although the overall pace is declining:
The top chart contains the 3, 6, and 12-month moving average of service sector job growth. While growing the trend is declining. The bottom chart shows the Y/Y percentage change of service sector job growth, which is also moving lower.
All the other news this week was employment related. First, the 4-week moving average of initial unemployment claims dropped slightly. The overall trend is still very positive:
And the BLS released the latest employment report. The headline number was 228,000 jobs added with a 4.1% unemployment rate. The report contained the following additional positive data:
The 3, 6, and 12 month moving average of total job growth are all above 170,000.
The labor force participation rate continues to move sideways, indicating this statistic is probably at its best level.
The employment/population ratio continues to move higher.