- US ISM Manufacturing PMI Employment Index plummeted in August.
- Very negative signal for Friday's jobs report.
- Negative surprises outweigh positive ones in the NFP leading indicators table.
The Employment Index in the ISM Manufacturing PMI survey plunged in August to 47.4, falling well below the neutral 50 level from the 51.2 printed in July. This report shows a very strong negative signal for next Friday's US employment report, as pessimism is expanding through manufacturers, which could cut the number of jobs added. Markets have certainly reacted to the news selling the US Dollar, with EUR/USD quickly bouncing back 30 pips.
According to our NFP Crash Course, the US ISM Manufacturing PMI tends to provide a meaningful signal to Non-Farm Payrolls as manufacturing jobs are easier to measure than service-sector ones.
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This is the fifth leading indicator published for the upcoming Non-Farm Payrolls report. As of now, the couple of negative signals released seem to outweigh the positive ones, as both this ISM Manufacturing PMI and the University of Michigan Consumer Sentiment survey printed big negative surprises. The Conference Board Consumer Confidence survey and the JOLTS Job Openings reported better-than-expected numbers, which might temper a bit negative expectations for next Friday.
Thursday will be a big US-data-release day, as five more key NFP leading indicators will be released, with the ADP Employment Report and the ISM Non-Manufacturing PMI getting the bigger focus.
US jobs report pre-release checklist – Sep 6th, 2019
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Another sign of the good health of the US economy came in response to firm flash US Manufacturing and Services PMIs, which in turn reinforced further the already strong performance of the US Dollar, relegating EUR/USD to the 1.0400 neighbourhood on Friday.
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Persistent safe haven demand continues to prop up the march north in Gold prices so far on Friday, hitting new two-week tops past the key $2,700 mark per troy ounce despite extra strength in the Greenback and mixed US yields.
Geopolitics back on the radar
Rising tensions between Russia and Ukraine caused renewed unease in the markets this week. Putin signed an amendment to Russian nuclear doctrine, which allows Russia to use nuclear weapons for retaliating against strikes carried out with conventional weapons.
Eurozone PMI sounds the alarm about growth once more
The composite PMI dropped from 50 to 48.1, once more stressing growth concerns for the eurozone. Hard data has actually come in better than expected recently – so ahead of the December meeting, the ECB has to figure out whether this is the PMI crying wolf or whether it should take this signal seriously. We think it’s the latter.
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