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Mixed economic releases




The ISM manufacturing index for July came in about as expected, and it doesn't change what we already knew: the economy is in a "slow patch" with growth likely to be between 1 and 2%, as the above chart suggests. However, there is still no sign in this indicator of a recession, and that ends up being a mild positive in my view, given how bearish the market is (e.g., 1.5% 10-yr yields). 


The ADP estimate of the change in private sector employment in July was somewhat stronger than expected (163K vs. 120K), but of course this is still a fairly weak number. However, based on the above chart, the ADP number is pointing to a stronger-than-expected payroll report this Friday. The market is expecting only 110K private sector jobs to be found in Friday's release—if it came in at or above 160K that would probably be a welcome and positive surprise for the market.


This chart from last month gives yet another reason to expect a stronger-than-expected payroll report. What stands out is the very strong gains in private sector employment that have been found in the household survey so far this year, especially when compared to the fairly weak numbers we have seen in the establishment survey. It may be time for the establishment survey to "catch up" to the household survey. 


Construction spending in June came in about as expected, and it extends the upturn in the sector which began early last year. Total construction spending is up about 13% from last year's low. That's encouraging on the margin, but nothing to write home about.


UPDATE: July auto sales were ever so slightly higher than expectations (14.05M vs. 14.0M), but this is a rounding error in a series in which monthly sales are annualized and seasonally adjusted. All we know is that the uptrend in sales, which began over three years ago, appears to remain intact: since the early 2009 low, sales are up 50%, and over the past year, sales are up 15%. Both are rather impressive figures.

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