Doug Noland: Strong Data and Conspicuous Bubble Excess

Jon Economy

Analysis surrounding economic data is especially interesting these days. As always, there’s ample opportunity to pick and choose data points to support a particular perspective. I hold the view that economic activity is generally more robust than given credit for (especially in bond markets). The analytical community for the most part downplays economic strength. No reason to stir the Fed or the fixed-income markets. Besides, these days most economic data have minimal market impact. Beyond reports on consumer inflation and wage growth, little seems to garner much interest from Federal Reserve officials.
U. S. Manufacturing payrolls increased 36,000 (estimate 8k) in August, the strongest monthly gain since March 2012. Moreover, July growth was revised up 10,000 to 26,000. One must look all the way back to the 2010 recovery for a stronger two-month period of manufacturing job gains. And while overall August payroll gains (156k) lagged expectations (180k), it’s worth mentioning the much stronger number out of ADP. At 236,600 jobs added, August ADP was the strongest since March (255k). One must go back many years to find a stronger August report from ADP.
The US ISM Manufacturing index was reported Friday at a stronger-than-expected 58.8, the highest reading since April 2011. Prices Paid remained unchanged at an elevated 62, with Production up slightly to 61. New Orders were little changed at 60.3. Notably, Employment jumped 4.7 points to 59.9, the strongest reading since June 2011. Manufacturing strength was broad-based, with 14 of 18 industries reporting growth for the month. A Bloomberg article quoted Timothy Fiore, chairman of ISM’s factory survey committee: ‘Really, really strong month for manufacturing… We’re seeing a significant expansion.’ And with an estimated 500,000 vehicles to be scrapped after hurricane Harvey, the auto manufactures no longer face much of an inventory issue. Ford and GM gained about 5% in three sessions.

This post was published at Wall Street Examiner on September 2, 2017.