I wrote two posts earlier this week delving into the big divergence between the Establishment Survey portion of the Employment Report, which shows moderate growth, and the Household Survey, which is most consistent with a recession already having started.

At any given time, some data will be positive and some will be negative. That’s why I follow a whole series of reports with longer-term proven reliability. Most of those at present are positive.

But the Household Survey isn’t the only negative data point. 

Here is a graph from six months ago showing the historical record over the past 25 years of both the ISM manufacturing index and the ISM non-manufacturing index. The former has a 75 year history, but the latter was only started 25 years ago and somewhat revised 10 years later:

Since the China shock in particular following its being accorded normal trade relations in 1999, there have been a number of “false positives” in the manufacturing index. But when it has been paired with the non-manufacturing index, measuring services, and the latter has *also* dipped below the 50 mark dividing expansion from contraction, the economy *has* been in recession - with the sole exception of one month in 2022.

Since then, the manufacturing index has been generally improving, although in April it dipped back below 50 to 49.2:

Also in April, the non-manufacturing index dipped below 50 for the second time post-pandemic, to 49.4:

Again, only one month. But worth paying extra attention to. If the non-manufacturing index gives us several more readings below 50 without further improvement in the manufacturing index, that would spell trouble.

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