Services activity was more robust than anticipated in January, according to ISM.
At 58.7, the headline gauge printed a sizable beat, taking the index to the highest in nearly two years in the process.
The range, from more than five-dozen economists, was 55-58. December was revised higher.
Generally speaking, this was a good report. The business activity gauge slipped, but only marginally, and new orders rose to 61.8 from 58.6.
Perhaps most encouragingly, the employment subindex jumped from 48.7 (i.e., in contraction territory) all the way to 55.2. I’d just reiterate the familiar talking point: The US economy desperately needs services sector employment to rebound. If it doesn’t, the broader recovery isn’t sustainable. Period.
If you’re inclined to get super optimistic, you might consider this (somewhat anecdotal) evidence of a rebound in service sector employment with Wednesday’s better-than-expected ADP report.
While the ADP breakdown didn’t exactly suggest the leisure and hospitality sector went on a hiring spree last month, there was evidence that some of the positions purged in December’s debacle were recovered.
Meanwhile, the final read on IHS Markit’s gauge for January was revised higher to 58.3 from 57.5 in the flash print.
The employment index in IHS Markit’s survey dropped to 51.1 from 53.4 in December. That was the lowest since July. “A softer rise in employment at service providers offset a quicker increase in job creation at manufacturers, as pressure on service sector capacity waned,” the accompanying color said.
Predictably, IHS Markit continued to flag price pressures, noting that January saw “the fastest increase in cost burdens on record.”
“The downside is that prices have risen sharply. Rising costs have fed through to higher prices charged for goods and services, which rose in January at a rate not seen since at least 2009,” Chris Williamson, Chief Business Economist at IHS Markit, remarked. “Inflation therefore looks likely to be pushed higher in the near-term.”
The good news is that upward price pressure will probably ease once supply chains normalize. “Probably” being the key word there.
