Private Indices Foreshadow Weak Jobs Data
On Friday, the government will release the last non-farm payroll figures before the election. The consensus on Wall Street, derived by dubious polls and internal forecasts of some of the bigger trading houses, suggest the economy will have created 148,000 jobs or thereabouts. Two private organizations released figures that suggest things aren’t going particularly well, and they cast some doubt on the consensus number.
The Institute for Supply Management, which is the new moniker of the National Association of Purchasing Management, reported that its index for the “non-manufacturing” sector of the economy dropped to 56.7% in September, down from 58.2% in August, and short of the 59% many had expected. This doesn’t mean that there has been a decrease in business activity, but rather it means the rate of increase in slowing. This can be taken to mean that the economic recovery, such as it is, may have peaked in the “non-manufacturing” sector – that is the service economy that accounts for most of America’s GDP.
Meanwhile, employment services company Challenger, Gray & Christmas reported that planned layoffs at American companies have reached an eight-month high, with September’s layoffs at 107,863, up dramatically from August’s 74,150. John Challenger, the big-shot there, is on record as saying, “The end of the recession has been six months away for two years running.” This rise in layoffs could weaken the number reported on Friday.
The American economy remains troubled by oil prices, terror worries (note: no attack on American soil in over three years), and the dual deficits of trade and government budgets. As a result, the stock market is sluggish, interest rates are creeping up (needlessly), and business leaders are not in a mood to take on new staff when productivity increases give them a way to avoid it.
Private surveys like the two mentioned here are largely public relations exercises for the entity that creates them. That doesn’t mean that there is no value to them. The Dow Jones Industrial Average does a good job of getting the company name before the public, but when one is asked if the market went up or down, the DJIA is the barometer many use. Friday’s number will come out just before the second presidential debate. The White House may want to consider talking the expectations of the non-farm number down now.
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