ISM mfr'g still soft and now the employment component is buckling

The July ISM manufacturing index continued its string of below 50 prints as it fell to 46.8 from 48.5. That’s the lowest since November. New orders too as they fell almost 2 pts to 47.4 while backlogs were unchanged at well below 50 at 41.7. No inventory build just yet even though things remain lean at 44.5 and with the customer inventory figure at 45.8. Ahead of tomorrow’s jobs data, the employment component fell to just 43.4, the lowest since May 2009 not including the Covid plunge. Supplier deliveries jumped back above 50 at 52.6 and I wonder if some of that is related to the container shipping issues. Prices paid rose .8 pts to 52.9 but after falling by about 5 pts last month. Export orders were little changed but still below 50 at 49.

Specifically on the employment component, the ISM said “Respondents’ companies are continuing to reduce head counts through layoffs, attrition and hiring freezes. Panelists’ comments in July indicated a notable increase in staff reductions compared to June, supported by the approximately 1 to 1.8 ratio of hiring vs head count reduction comments.” Just 2 of 18 industries saw a rise in employment.

On inventories, “None of the six big industries reported increased manufacturing inventories in July. Continuing demand uncertainty is causing panelists’ companies to reduce investment in inventory and remain reliant on suppliers to carry ‘on demand’ inventory.”

On exports, “As was experienced in June, new export orders remain sluggish as international trading partners continue to struggle with weak economies.”