Good News Friday - September 4, 2009

Silver Lining

Before we get to this week’s good news, let’s get the bad news out of the way. The Labor Department reported this morning that net payroll job losses for the month of August totaled 216,000 while revisions to the June and July numbers wiped away another 49,000 jobs. The unemployment rate rose from 9.4 to 9.7 percent, creating what is sure to be the dominant headline in media reports over the long Labor Day weekend. But keep in mind that the trend line is headed in the right direction. The average monthly job loss in the first quarter of this year was 691,000, declining to 428,000 in the second quarter and 246,000 thus far in the third quarter. Average hourly earnings increased by a relatively strong 0.3 percent in August, important because wage growth is necessary to support consumer spending. The labor market is a lagging indicator, meaning that it may soften for several more months even as other parts of the economy begin to grow again.

Which brings us to the better news that the Institute for Supply Management’s closely watched manufacturing index rose to 52.9 in August, its first reading above the break-even level of 50 since January 2008. The new orders component of the index, which leads production activity and hiring, soared to 64.9, its highest reading since December 2004. The ISM’s non-manufacturing index increased to 48.4, its highest level since September 2008.

Have a great Labor Day weekend.

Robert Bach
SVP, Chief Economist
Grubb & Ellis
312.698.6754