Implications: While Washington offered us plenty of drama in October, the private sector continued to plow forward. Despite supposed fears of a drop in activity from a partial government shutdown, today we got a very strong report for the ISM index, a measure of manufacturing sentiment around the country. The ISM came in at the highest level since April 2011, easily beating consensus expectations. According to the Institute for Supply Management, an overall index level of 56.4 is consistent with real GDP growth of 4.4% annually. We don't expect real GDP grew anywhere near that pace in Q3, probably more like a 1.9% rate instead, but we do expect faster growth in 2014. The new orders index rose to 60.6 for October, and remains near its highest levels since early 2011. The one negative was the employment index which declined to 53.2 from 55.4. This remains consistent with the plow horse growth we have been getting out of the labor market over the past few years. On the inflation front, the prices paid index declined to 55.5 in October from 56.5 in September. Still, little sign of inflation, but we don't expect this to last given loose monetary policy. In other recent news, initial claims for unemployment insurance declined 10,000 last week to 340,000. Continuing claims for regular state benefits increased 31,000 to 2.88 million. Plugging these figures into our payroll models, we're now forecasting October gains of 80,000 nonfarm and 125,000 private. Not bad at all considering the partial government shutdown. If we're right about October, we anticipate a sharp upturn in job growth in November.
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Posted on Friday, November 1, 2013 @ 11:21 AM
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