US ISM non-manufacturing index introduces upside risk to US NFP - RBS

Ivan Delgado Independent Analyst

According to RBS Strategy Team, the strength in the employment gauge in Wednesday's US ISM nonmanufacturing index introduces upside risk to the banks' forecast (+175,000) for Friday's jobs report.

Key Quotes

After sliding in August from 55.5 to 51.4 (a level that has historically foreshadowed recession), the ISM nonmanufacturing index rebounded strongly in September, climbing to 57.1, the best level in nearly a year. Importantly, a rebound was seen across all key activity gauges. The new orders and production measures both rose by more than eight points. In addition, the employment barometer (which does have a statistical correlation with payrolls) jumped from 50.7 to 57.2 (also the best level since October).

The strength in the employment gauge introduces upside risk to our forecast (+175,000) for Friday's jobs report. We calculate an all economy ISM employment index (based on the two ISM surveys’ employment components); that index (to 56.4 in September from 50.4 in August) signals a healthy surge in payrolls in September. Admittedly, the monthly relationship between the payroll weighted employment ISM index and reported payroll gains can vary, although the index usually captures the trend in payrolls.

Author

Ivan Delgado

Independent Analyst

Established in the Asian continent since 2009, Ivan studied a degree in Business at the University Pompeu Fabra (Barcelona), while also earning a postgraduate degree in Business Administration.

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