Another Weak US Jobs Number, Despite A Steady Services Sector
The services sector remains in decent shape in the US, but the jobs sector keeps getting weaker, as today’s ISM services report showed. This mixed report reflects steady expansion, though certain sectors, such as employment and export orders, saw noticeable weakening.
Both the ISM and S&P Services indexes showed some improvements in August, signaling stronger overall economic activity in this sector. However, there are signs of strain in manufacturing, the sectors that are vulnerable to high interest rates, and among lower-income consumers. Spending at higher levels remains relatively stable, although consumers are becoming more cautious about pricing. This scenario suggests no recession for the US economy, but risks remain, as highlighted by yesterday’s Beige Book. The S&P survey projects GDP growth to range between 2% and 2.5%, aligning with last month’s GDP estimate.
US ISM Services for August
- Headline ISM Services Index: 51.5 points (vs. 51.1 points expected), showing moderate expansion in the services sector.
- Business Activity Index: 53.3 points (vs. 54.5 points prior), a slight slowdown in business activity.
- Employment: 50.2 points (vs. 51.1 points prior), indicating softer hiring within the services industry.
- New Orders: 53.0 points (vs. 52.4 points prior), showing a stronger pace of incoming orders.
- Prices Paid: 57.3 points (vs. 57.0 points prior), indicating persistent pricing pressures.
- Supplier Deliveries: 49.6 points (vs. 47.6 points prior), with delivery times lengthening but still in contraction territory.
- Inventories: 52.9 points (vs. 49.8 points prior), a buildup in inventories.
- Backlog of Orders: 43.7 points (vs. 50.6 points prior), highlighting a drop in order backlogs.
- New Export Orders: 50.9 points (vs. 58.5 points prior), a sharp slowdown in export order growth.
- Imports: 50.3 points (vs. 53.3 points prior), showing a contraction in imports.
- Inventory Sentiment: 54.9 points (vs. 63.2 points prior), indicating improving sentiment towards inventory levels.
Here are the key comments from the report, reflecting the varying conditions across sectors:
- Agriculture, Forestry, Fishing & Hunting: “Generally, business is good. However, there are concerns of slowing foot traffic at restaurants and other venues where our products are sold.”
- Construction: “The housing market continues to be dampened by higher borrowing costs, affecting all segments, including single-family homes for sale, build-for-rent, and multifamily units.”
- Finance & Insurance: “Activity is increasing.”
- Health Care & Social Assistance: “Business continues to be strong.”
- Information: “Overall business is improving.”
- Management of Companies & Support Services: “Hiring of employees, contractors, and consultants continues to decline as companies seek to control costs amid economic and political uncertainty. Layoffs are ongoing across various industries.”
- Professional, Scientific & Technical Services: “Business has slowed, and it is harder to find talent, though there are fewer jobs available.”
- Transportation & Warehousing: “Up in business and activity.”
- Utilities: “Steady interest rates are affecting investment in nonregulated business areas.”
- Wholesale Trade: “High food costs are impacting customer demand, leading to weak sales performance and negative growth. Business activity is stable, and supplier costs are generally flat.”
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