ISM Mfg, Jobs & Consumer
CNBC | Oct 2, 2019

Lakshman Achuthan joined CNBC to discuss the latest ISM data in the context of the ongoing cyclical slowdown. Key points:

ISM Mfg fell to its worst reading since June 2009, underscoring that the manufacturing slowdown that ECRI predicted long ago is worse than analysts expected.

The popular view is that, while manufacturing has slowed, the consumer is over two-thirds of GDP and is in good shape, so economic growth should be fine.

But a month ago, before the last jobs report, we discussed on CNBC that ECRI’s Leading Employment Index (USLEI) growth rate had already plunged to its worst reading since the Great Recession. Since then, payroll jobs growth has already dropped to an 8-year low, and is set to stay in a cyclical downturn, according to the USLEI.

So, if job growth stumbles in the coming months (any monthly data point is a crapshoot), the main pillar holding up the economy in the face of the manufacturing slowdown may start to topple. Mind you, real consumer spending growth is already at a 2½-year low, barring just the December spike down.

And regarding the hope that the Citi Surprise Index moving higher is an all-clear signal, please know that surprise indexes are not very good at predicting the direction of the economic cycle. About a month ago markets were panicking about recession and that’s why economists’ expectations were lowered so much that it is easy for the actual economic data to beat. But back to reality, the economy is still slowing and the ISM underscores that.

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