The Institute of Supply Management has released its November data for the services sector this morning. The ISM non-Manufacturing data had gotten back to growth briefly in October and September. The November figure came in at 48.7% in versus 50.6% in October. This is back in the red zone as 50.0 is the hurdle between growth and contraction. We had Bloomberg expectations of 52.0 for the month of November. Instead of growth further into the black, services are back in the red.
The good news is that the New Orders Index, a key measure for what lies ahead, was actually the highest raw reading of the lot at 55.1%. Still, that represents a 0.5 point-drop from a month ago. One worry here is the prices-paid component, which translates to inflation for the monetary hawks. This rose by 4.8 points to 57.8% and was the highest component of the broken-out data.
The overall Business Activity Index was 49.6%, and the Employment Index coming in down all the way at 41.6% is where the real drag remains. The notion that the employment reading is up 0.5% will hardly feel like a win in the sector. It remains just less-bad.
The long and short of this ISM data is that new orders are up as prices are up and overall conditions are almost flat, but the lack of hiring is keeping the reading on the services sector down. As the US is still very much a services-driven economy this is of greater concern than yesterday’s manufacturing data at 53.7%.
This data did act as a drag on stocks, but both stocks and bonds have reversed their initial moves after the data was broken down. After all, employment is a lagging indicator. The trick is when you ask a recently laid off worker how lagging of an indicator it is…
JON C. OGG
DECEMBER 3, 2009
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