Services Rebound, Private Payrolls Cool: U.S. Economic Takeaways

  • ISM non-factory gauge climbs to highest since October 2015
  • ADP employment count posts smallest advance in five months

What you need to know about Wednesday’s U.S. economic data:

ISM NON-MANUFACTURING INDEX (SEPTEMBER)

  • Jumped to 57.1 (forecast was 53), highest since October 2015, from 51.4 in August that was the weakest in more than six years
  • Services employment gauge climbed by a record 6.5 points to 57.2
  • Business activity index advanced to 60.3 from a 51.8 reading that was the weakest since the start of 2010

The Takeaway: The ISM figures offered a sigh of relief that the slump in August may have been more a by-product of quirks related to the back-to-school season than a durable plunge in the industries that make up almost 90 percent of the economy. Even with the September spike, the gauge’s 54.7 average over the past three months is down from 55.3 at the start of the year. Limited progress in the the group’s factory gauge data also is in line with economists’ projections that demand will cool a bit heading into the end of 2016.

ADP PRIVATE EMPLOYMENT (SEPTEMBER)

  • Rose 154,000 (forecast was 165,000), weakest in five months 
  • Goods-producing industries, which include manufacturers and builders, boosted headcount by 3,000 as construction hiring led to the first gain since March
  • Service providers’ payrolls climbed by 151,000

The Takeaway: The figures suggest a more modest increase in the government’s official tally of September total employment when the Labor Department issues its count on Friday. Hiring managers might be having some trouble finding skilled workers to fill vacancies, helping explain the cooling in payroll gains even as the labor market remains healthy.

TRADE BALANCE (AUGUST)

  • Deficit widened 3 percent to $40.7 billion (forecast was $39.2 billion) from $39.5 billion
  • Imports increased 1.2 percent to $228.6 billion, reflecting a temporary boost from rights fees (intellectual property) to broadcast the Summer Olympics
  • Exports climbed 0.8 percent to $187.9 billion on sales of pharmaceuticals and industrial supplies such as oil

The Takeaway: While temporary factors held sway over the nominal figures for August, trade will probably contribute to economic growth in the third quarter. Imports for the use of intellectual property rose to the highest level on record. Adjusting for changes in prices, the figures used to calculate trade’s impact on gross domestic product, the total shortfall in goods and services trade shrank to $57.5 billion. That left the average for the first two months of the quarter below the second quarter’s $60.9 billion.

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