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The Institute for Supply Management survey of U.S. purchasing managers was reported above expectations Wednesday, but the underlying reading on employment provided an ominous omen for the month's most important data point – Friday's Non-Farm Payroll.
The ISM surveys more than 400 services companies each month with a number of questions on production, orders for new product, inventories and deliveries. The resulting index is designed to show a level of 50 when there's no change in any of these factors.
Wednesday's report showed the index 0.2 points above economist expectations at 53.7 – a bullish sign for the U.S. economy. However, the survey questions also highlighted a sharp drop in hiring activity to 50.1 from 52.0.
The employment component of the ISM Services index has often provided an early look at monthly Non-Farm Payrolls (see chart). Investors will be hoping this trend doesn't hold this month, because it implies that payrolls will be announced well below the consensus estimate of 165,000 new jobs.
U.S. Non-Farm Payrolls are released on the first Friday of every month, and the report is arguably the most market-affecting of any economic data. A disappointment would likely result in market declines.
Scott Barlow is a contributor to ROB Insight, the business commentary service available to Globe Unlimited subscribers. Click here to read more of his Insights , and follow Scott on Twitter at @SBarlow_ROB .
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Scott Barlow