ISM Services index increases to 52.6
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Implications:  Great news on the labor market this morning.  The ADP Employment index, a measure of private payrolls, increased an eye-popping 325,000 in December, easily beating consensus expectations and the highest reading on record, which dates back to 2000.  As a result, we are moving up our private payrolls forecast for the official Labor Department report (released tomorrow morning) to 225,000.  Some of this probably reflects military reservists leaving active duty and getting back to their jobs.  In other news on the job front, initial claims for unemployment insurance declined 15,000 last week to 372,000.  The four-week average is now 373,000, the lowest since June 2008.  Continuing claims for regular state benefits dropped 22,000 to 3.595 million.  The ISM services index fell just short of expectations, but it is headed on the right direction and has remained above the critical 50 level, showing expansion, for 25 straight months.  The business activity index, which has a stronger correlation with real GDP growth than the overall index, remained strong at 56.2 in December, and the new orders index rose slightly.  On the inflation front, the prices paid index dipped to 61.2 after rising to 62.5 last month.  Even though this measure of inflation fell slightly, it remains at elevated levels, indicating upward price pressures.  In other recent news, autos and light trucks were sold at a 13.6 million annual rate in December, down slightly from November but up 8.4% from a year ago.  Look for more growth in auto sales in the year ahead as consumer purchasing grows due to wage increases and smaller debt repayments.

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Posted on Thursday, January 5, 2012 @ 10:47 AM

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