No one has crystal balls to know what the future holds for the economy. One moment it will appear that the economy has weathered the storm and that we can look forward to improved economic climes. The very next moment, the headlines will be filled with disheartening economic news and you’ll be left wondering if the dark clouds hanging over the economy will ever lift off.
However, economists know how to draw insights and inferences from current economic data to make projections about what we can expect from the economy in the future. The U.S. economic scorecard is being filled as the release of market-moving economic data starts to make headlines. This piece seeks to draw insights on where the economy is headed based on some fresh economic reports.
Here’s what the ISM non-mfg says about the economy
On Monday, the Institute for Supply Management released its nonmanufacturing data for the U.S. economy. The ISM compiles the non-mfg data from a survey of business executives in charge of ordering raw materials and supply for their firms. In May, the ISM non-mfg data scored a 0.6 points monthly decline to 56.9%. A reading above 50 indicates an expansion in the economy while a reading below 50 indicates a contraction in the economy.
The decline in the May non-mfg data suggests that business executives are less optimistic in May than they were in April about economic growth in the U.S. However, the fact that the reading is still way about the 50 mark suggests that there’s still a strong undercurrent of optimism about the prospects of the economy. Anthony Nieves who manages that ISM Service Index observes that “the majority of respondents’ comments continue to indicate optimism about business conditions and the overall economy.”
Here’s what the Labor report says about the economy
Last Friday, the Bureau of Labor Statistics released its monthly snapshot on labor trends in May. The May Employment Situation released by the BLS show that U.S. employers added 138,000 jobs in May down from the initial 211,000 jobs reported in April. Economists had been optimistic that U.S. employers would add about 185,000 jobs in May; hence, the May jobs report underperforms expectations.
More troubling is the fact that the Labor Department made some downward revisions to the job data published a couple of months ago. For instance, the Labor Department reduced the April jobs number by 37,000 jobs from 211,000 jobs to 174,000 jobs. The March jobs number was also reduced by a massive 29,000 jobs from 79,000 to 50,000 jobs. The downward revisions suggest that some of the earlier optimism about economic growth in the last two months might have been placed on a faulty assumption.
Job growth seems to be slowing across the U.S. because monthly job additions had an average increase of 121,000 jobs in the last three months compared to an average job gain of 181,000 jobs in the last 12 months. However, there’s a sliver of hope of the economy going forward. The May jobs report indicates that the unemployment rate in the U.S. dropped to 4.3% to mark the lowest score of the unemployment rate in the last 16 years.