Here’s What the Non-Manufacturing Report Says About the U.S. Economy

The 10-second takeaway from the January 2013 Non-Manufacturing ISM Report on Business is captured by a comment from Anthony Nieves, who chairs the Institute for Supply Management. Nieves said: “Respondents’ comments are mixed about the economy and business conditions; however, the majority of respondents are optimistic about the overall direction.”

January’s NMI came in at 55.2 percent, 0.5 points lower than December’s reading, but a fraction higher than estimates. This reading suggests that overall non-manufacturing business activity is growing, but the rate of growth has slowed down slightly. The 12-month average growth rate for the NMI is 54.5.

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Tuesday’s NMI report follows the comparable manufacturing PMI report, which was released last Friday. The manufacturing PMI made a tremendous 2.9 percent leap indicating an acceleration in the rate of manufacturing sector growth. The manufacturing PMI was supported by factory orders data, released on Monday.

However, what’s really interesting about the January report is the increase in the employment index…

January’s employment index reading came in at 57.3, a 2.2 point increase over December. This suggests that not only is the non-manufacturing employment situation improving, but it is improving at a faster rate than before. This information compliments the Bureau of Labor Statistics’ January Employment Situation report, which showed that while the U-3 unemployment rate ticked up to 7.9 percent, the average rate of job creation in 2012 was 181,000, higher than previously estimated.

January December Percent Change Direction Rate of Change
Non-Manufacturing Index 55.2 55.7 -0.5 Growing Slower
Business Activity/Production 56.4 60.8 -4.4 Growing Slower
New Orders 54.4 58.3 -3.9 Growing Slower
Employment 57.5 55.3 +2.2 Growing Faster

As with any trend in the economy, we want multiple reports all pointing in the same direction. Fortunately for the labor market, the ADP National Employment Report for January showed 192,000 private-sector job gains, the sixth consecutive month of accelerating private-sector job growth.

ADP National Employment Report - January 2013 - NER

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