Employment day is a good day to check in with the economy. Overall, we remain cautiously optimistic and hopeful for stronger growth in the second half.
This month’s payroll number came in at 233,000 net new jobs, only slightly below its one year average of 250,000 jobs and at a pace to move the economy close to full employment. At Astor we had been assuming that the first quarter’s weakness – while real – should turn out to be transitory. My favorite summary chart on the economy is printed below, showing the level of total non-farm payrolls and the ISM manufacturing index since 2012
Source: Bloomberg, Astor calculations
I feel that as long as people are still getting jobs, and the manufacturing activity as measured by the ISM survey continues to expand, we can hope for continued reasonably strong growth in the economy. We would need to see employment growth falter or sustained contraction in the manufacturing sector to begin to get nervous about the economy.
The global manufacturing environment continues to be a source of concern. The chart below averages the PMIs of the g-20 group of countries, weighted by GDP.
Source: Bloomberg, Markit, Astor calculations
Despite noticeable improvement in Europe, this measure continues to decline dragged recently by China and to a lesser extent, Asia broadly. The heatmap below gives the details, click for a clearer view.
Source: Bloomberg, Markit, Astor calculations