Today's ISM report caught many economists by surprise.
The US non-manufacturing composite index shot up to the highest level since the Great Recession (in fact this highest in nearly 8 years). This, combined with improved ISM manufacturing data (see Twitter chart), completely contradicts the earlier results that describe a weak start to the second half of the year (see post).
The improvements in the non-manufacturing portion of the economy are also surprisingly broad with factors from orders to employment showing strength.
What does this tell us about the employment report tomorrow? Gallup (see post), ADP (see chart), and now the ISM report - all point to a solid payrolls gain.
WSJ: - The service sector has been the main driver of job growth in this recovery. The ISM reading suggests Friday's employment report should contain another solid gain in August service-sector payrolls.It is possible however that the unemployment rate will tick up, as more people enter the workforce (see Twitter post). But that should not prevent the Fed from starting to slow the securities purchases program. The market is now pricing in this policy change, with the 10yr treasury yield approaching 3%.
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