EconoFACTS

November 01, 2022 | 10:53

Jolted by the JOLTS, even as ISM Manufacturing Slows

Economist

Jennifer Lee

Senior Economist and Managing Director
Economics

(Read more)

Jennifer Lee

Senior Economist and Managing Director
Economics

(Read more)

Let me give away the ending .... the Fed's job is difficult and today's round of data is not making things easier.

With that out of the way, I have good news (for those hunting for work) and bad news (for those hunting for workers).... where to begin?

Let's do both at the same time! There are still plenty of job openings out there in the USA. The number of openings rose 4.3% (an unexpected move) to 10.717 mln in September, which is on top of the upwardly revised figured for August. This marks the 15th consecutive month of over 10 mln job openings in the country. We're no longer in record-high territory but these are still towering over the number of unemployed Americans out there.

Out of curiosity, I dug into old emails, and found this one from September 2021, when openings topped the 10 mln mark for two straight months, but that "total hires actually dropped for the first time this year, an indication that the ongoing struggle to find the right worker for the right role continues." What the heck, i might as well plagiarize myself and update that line. Total hires did indeed decline again in September 2022 (-4%) for the 7th time so far this year. At least there were fewer quits in the month (perhaps workers are realizing they should hold onto a good thing?).

Now for the other two items...

U.S. factory activity is still growing but at the slowest pace since COVID days. The manufacturing ISM fell 0.7 pts to 50.2 in October; however, the negative headline masks some better (but not great) details beneath the surface. Of the five equally weighed components, new orders, production and employment climbed (although orders are still below the 50 mark). However, supplier delivery delays fell and at 46.8 (lowest since March 2009 and the first sub-50 reading in almost seven years), that means that there were no delays. I'm going to call that good news. (The fifth component, inventories, fell 3 pts to 52.5.) This is positive news for prices, as was the 5.1 pt drop in prices paid to 46.6. Progress on the pricing front!

Regardless, only eight (8, VIII, 18-10) industries grew in the month, out of the 18 in the entire survey, which is the fewest since 2020. The comments were mostly downbeat, including reports of order cancellation (but might be due to the anticipation of lower prices to come), budget cuts, slower customer demand, and international conditions. However, at least the transportation sector reported "easing" labor challenges, and the plastics & rubber products sector said that lead times were improving and that plastic prices were declining. One also said "Suppliers are trying to hold off decreases, but competition is increasing." Again.... progress on the pricing front!

Finally, U.S. construction spending unexpectedly rose in September, with the 0.2% gain all based on private sector nonresidential projects. But, as we say time and time again, this is a notoriously volatile report that is very much prone to revisions. August was tweaked a bit (now -0.6%; was -0.7%), but July's 0.6% decline was erased to now reflect a 0.8% gain.

Bottom Line: This was ok news but it all comes down to the tight labor market and little has changed there. That's probably why the 10-year Treasury is back above 4% this morning ahead of tomorrow's FOMC announcement.

Table 1 - United States — ISM Manufacturing PMI

(percent reporting)

Source: BMO Economics, Haver Analytics