Manufacturing and Production Point to Muted Payrolls and Unemployment Report

Jon C. Ogg

This week brought many economic reports on the services and manufacturing segments of the economy. All in all, these were mixed, but they add up to what may be a muted payrolls report this Friday. No report is more closely followed than the monthly payrolls and unemployment report.

The Institute for Supply Management (ISM) and Markit both showed their manufacturing and non-manufacturing data. What matters here is that each report was also for July and each report had a comment about labor in them.

The Markit PMI Manufacturing reading was 52.9 in July, up from 51.3 in May. This report had stronger new orders (including exports). Employment was positive and looked to be the best level in a year, and output was strong.

ISM Manufacturing ticked lower, down to 52.6 in July from the 53.2 reading in June. Employment ticked down slightly and there were delays in delivery times. New orders were strong at 56.9, indicating future employment and deliveries strength.

PMI Services came in at 51.4 in July, the same as in June. Markit’s reading was actually up a half-point from the July flash reading. New orders was a negative, but employment managed to bounce back after a low was put in during June. The year-ahead outlook was also positive for future employment.

ISM Non-Manufacturing came in at 55.5 in July, down from 56.5 in June. Strength was seen in orders (60.3) and delivery times acted as the drag. There was a noticeable tick down in employment of 1.3 points to 51.4. Overall, that does not point toward much strength for this Friday’s employment report. Strength was seen in business activity at 59.3, export orders at 55.5 and total backlog orders at 51.0, for a 4.5 point gain.

ADP’s private sector payrolls report also came in only at 179,000 during the month of June.

So this week’s economic reporting points toward a muted payrolls report. The estimates vary, but most are under 200,000 in nonfarm and private sector payrolls. Bloomberg’s consensus estimates are 185,000 in nonfarm payrolls and 175,000 in private sector payrolls. Those were 287,000 and 265,000, respectively, in June.

Reuters is calling for 180,000 in nonfarm payrolls and 170,000 in private sector payrolls.