DATA POINTS – NOT GOOD NEWS

The economic recovery is on increasingly unsure footing if this morning’s data has anything to say about it.  There was quite a bit of data out so let’s take a quick look:

• The composite Mortgage Bankers Association index showed a 4% decline in just another string of horrible data points in the housing market.  QE2 sure helped to bolster the housing market as Ben Bernanke envisioned last October….

• Challenger announced a slight up-tick in layoffs to 37135, up from 36,490 last month.  This is not a huge jump and should not be seen as all that alarming.  John Challenger said this month’s report does not point to permanent economic slowdown:

“Despite several signs of weakness in the recovery, the continued slow pace of downsizing outside of the government sector suggests that employers do not see these as long-term problems.  Most employers realize that these types of ups and downs are typical during recoveries.  So, it is unlikely that we will see a sudden resurgence in corporate downsizing in the months ahead unless there is a major shock to the economy.”

• The ADP job report came in at 38,000 total private sector jobs.  This was substantially lower than the 210,000 jobs that analysts expected.  This, clearly, is worrisome for Friday’s employment report.  Anything in the 38,000 range this far into an economic recovery is just downright pathetic.  The weak job’s recovery continues.

• Adding insult to injury is the ISM Manufacturing report.  Like recent regional reports, this month’s ISM report showed a sharp contraction.  This should come as a huge surprise given the tendency for mean reversion in these diffusion indices.  The good news is that the economy is still growing, however, the bad news is that the report shows broad underlying weakness in the data.  Econoday details the report:

“Monthly growth slowed very significantly in the manufacturing sector during May, according to the Institute For Supply Management whose headline composite dropped 6.9 points to a much lower-than-expected 53.5. Importantly, new orders slowed a very significant 10.7 points to 51.0, still over 50 to indicate growth compared to April but well under April to indicate a much slower rate of growth. Manufacturers drew heavily on backlog orders which fell 10.5 points to 50.5.

Other readings show a significant slowing in production, a moderate slowing in hiring, and decreasing delays in delivery times that are consistent with slowing conditions. Inventories interestingly contracted in the month, suggesting that manufacturers were quick to keep levels down given slowing demand. It also perhaps reflects supply shortages tied to Japan.”