If job openings overshot in this week’s closely-watched JOLTS report, an upbeat read on services activity in the US might’ve been amenable to a “good news is bad news” trade.
But job openings didn’t overshoot. There were far fewer vacancies on the last business day of October than economists expected, opening the door to a Goldilocks interpretation of a slightly warmer-than-anticipated ISM services print.
At 52.7, the headline was marginally ahead of estimates. Consensus was 52.3. The range of guesses was 51 to 53.5 from 62 heavily-credentialed professionals.
Meanwhile, the final read on S&P Global’s services sector gauge for November was unchanged from the flash print at 50.8. Both gauges have been above the 50 demarcation line since February.
“The services sector had a slight uptick in growth in November,” ISM’s Anthony Nieves said, adding that respondents are still concerned about inflation, rates, geopolitics, higher wage bills and labor constraints.
The ISM breakdown was profoundly unexciting. Activity ticked up a bit, the new orders gauge was unchanged (at 55.5) and the employment index rose to 50.7, still on the brink of contraction, but an improvement from the prior month’s 50.2. Inventory sentiment was the highest since April of 2020.
“While service sector businesses continued to report further output gains in November, growth remains considerably weaker than seen earlier in the year, and forward-looking indicators point to growth slowing in the months ahead,” Chris Williamson, Chief Business Economist at S&P Global Market Intelligence, remarked.
Although slower demand is a headwind for employment, it’s good news for inflation. The ISM prices paid gauge fell to 58.3, the lowest since July, and S&P Global’s Williamson suggested current trends are consistent with a return to price stability as (arbitrarily) defined by the Fed.
“The cooling jobs market has been accompanied by lower wage growth which, combined with recent oil price falls, helped pull business cost growth down to its lowest for three years, dropping in November to a level indicative of inflation approaching the Fed’s 2% target in the coming months,” he said.
Coming full circle, the combination of i) a downside read on job vacancies and ii) resilient, but far from ebullient, updates on services activity, was completely consistent with the Goldilocks meme. Hopelessly clichéd as it most assuredly is.
When will we start invoking details of the analogy? Gear down, flaps down, add throttle, flare, etc?