This week we got fresh ISM survey data for both the manufacturing and non-manufacturing areas of the economy.
Now as we’ve pointed out a billion times, there’s one thing that consistently is shown to be a driver of hiring: More sales.
Regardless of the regulatory climate, confidence, hiring, inflation, credit, etc., businesses hire more people when new orders and increase. It’s as simple as that.
And this chart shows it nicely.
The red line is the average of the employment sub-indices for both sets of ISM surveys. The blue line is the average of the new orders sub-indices. As you can see, they align nicely, and also note that for both series lately, the blue line (new orders) bottom just before hiring bottoms.
Incidentally, this ISM data reveals the absurdity of trying to “debunk” the this Friday’s excellent Non-Farm Payroll’s data from the BLS. You can try to poke holes in the model that’s used, but when other data confirms that hiring signs are robust, why would you assume that the data is wrong?
In fact, here’s the ISM survey data of hiring intentions vs. the monthly change in non-farm payrolls. Absolutely nothing out of the ordinary here.
Finally one last point in favour of the BLS data.