Second Tier Reports Indicate Small Improvements of Underlying Economic Conditions
The ISM non-manufacturing survey results for January show improving conditions. The composite index moved up to 50.1 from 49.8 in January. Readings above 50.0 denote an expanding sector. The composite index has held above 50.0 in three out of the last six months. It remains to be seen if the February reading will hold above 50.0. In January, the new orders index rose 54.7, the fifth monthly mark which exceeds the 50.0 mark. The employment index moved closer to 50.0 (44.6 vs. 43.6 in January). The employment index of the ISM non-manufacturing survey has a close positive relationship with the service sector employment data of the employment report (see chart 1).
In other news, the Challenger employment survey shows a small increase in layoffs during January (see chart 2). On a year-to-year basis, layoffs fell 70.4% from a nearly 73% in December. The good news here is that layoffs are not rising at a rapid pace as was the situation in the early part of 2009.
