by Bill McBride on 1/06/2014 01:29:00 PM
Monday, January 06, 2014
Every month I post an employment preview, and two of the data points I use are the ISM manufacturing employment index, and the ISM non-manufacturing employment index. In the monthly preview, I mention the historical correlation.
Here are two scatter graphs showing the relationship between the ISM employment indexes for manufacturing and service, and monthly changes in BLS payroll employment.
Click on graph for larger image.
This graph shows the relationship between the ISM manufacturing employment index and the change in BLS manufacturing employment (as a percent of the previous month employment).
The yellow dot is a forecast for December based on the ISM employment reading of 56.9. This suggests about 18,000 manufacturing jobs added in December (although there is plenty of noise, and R-squared is 0.63.
This is also noisy (R-squared is 0.68), but a reading of 55.8 suggests an increase of about 227,000 service sector payroll jobs in December (blue dot on graph). So the ISM reports suggests private sector job growth in December of around 245,000.
I'll mention this again in the monthly preview. This is useful but "noisy".