Yes And No Taper To Labor (And Inflation)

And maybe the best single example of this is the ISM’s PMI estimates. Being September 1, that means the ISM reports today its estimate for August 2021 manufacturing. The headline index bucked the recent trend, mildly, by rising 0.4 pts to 59.9 from July’s 59.5. These are 2018-type numbers, so already nothing really extraordinary.

They do stand in sharp contrast to one particular subset mixed up in the overall calculation: the ISM M’s employment subindex. This part has been “unusually” weak since peaking all the way back in March (again, March and April show up everywhere around the world). But even in March, and going back to last year’s recession, this substantial difference between the headline index and its employment component stands out.

No more so than this latest update for the month of August when the ISM reports a few more manufacturing employers said they cut workers than replied they had added them; the subindex dropped from nearly four points, from 52.9 in July to just 49.0 in August. It was the second month below fifty out of the last three.

In other words, according to the ISM (and we’ll see on Friday if the same holds for their Services PMI in August as it already has up to last month), it sort of looks like manufacturing is doing well except that these businesses aren’t really hiring as if that was the case; an excellent example of this labor “conundrum.”

COVID? Cold/warm weather? Xi Jinping’s crackdown cybergoons? What was it about March/April (or February around the 24th and 25th?)

Before thinking about the shrinking possibility the labor market’s apparent problems might really stem from some shortage, payroll processing provider ADP today also released its payroll number for the same month of August 2021.

In years past, +374,000 (private) would’ve been decent even excellent; in 2021, it counts as a pretty sizable disappointment and for the second straight month. This is about half the monthly rate set by, and expected for, the taper-rationalizing Establishment Survey.

And it is uncomfortably too close to slowdown pattern showing up in the ISM’s; along with the same apex falling right after March/April. Even ADP’s resident Economist couldn’t deny this “unexpected” detour:

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Disclosure: This material has been distributed for informational purposes only. It is the opinion of the author and should not be considered as investment advice or a recommendation of any ...

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