Thursday, July 31, 2014

Jul '14 NFP and ISM manufacturing guesstimates ...

We are yet again a bit pessimistic when it comes to the monthly change in NFP.  We estimate that figure to be 190K, compared with the consensus of 233K.  While the 'do me a favor' type of hiring within different parts of the government might have begun as we get closer to the mid-term elections, we do not think they would be enough to get the overall change in NFP to above 200K.  The ADP figure, released on Wednesday, was also a bit disappointing.  Lastly, in our opinion, continuing decline in initial jobless claims does not necessarily mean that more people are being hired; it is more related to less people being fired.  Unfortunately, our NFP change guesstimate has not been very accurate the last two months.  We will see if luck will be on our side this time when the BLS employment numbers are released on Friday morning.

ISM manufacturing will also be released on Friday.  Based on positive results of the regional surveys, we expect the overall index to come in at 56.0, a slight increase from June's 55.3 and in-line with the 56.0 consensus.  We think the higher employees sub-index will be the biggest contributor to the increase.  In addition, we expect new products, production, and backlog sub-indexes to show deceleration in growth.

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