Peeling the ionion: Aug jobs report and ISM manufacturing

Last week, we received two very important macroeconomic reports, one of them being the August jobs report.

August jobs report

US businesses (non-farm) hired only 187k workers in Aug versus the 170k estimate and July’s 157k hires. Wage growth also slowed down to 9.5% for new hires and 5.9% for existing workers. The unemployment rate rose to 3.8%.

There are currently about 8.8M job openings as of end-July, which is about 338k lower than June and the lowest reading since March 2021. There are now 1.5 jobs available for each unemployed person in the US, down from 1.6 in June. Job growth in the last three months has been about half of that in the first three months of 2023….we shed about 1.49M job openings during this time frame.

Looking at the trend in the chart below, it is clear that the job market is slowing down, including lower revisions (corrections) for seven consecutive months now.

Wall street cheered this “bad news” assuming that bad news is good news ahead of the US Feds Sept meeting. Investors believe that there is less than a 10% chance that the FOMC will raise interest rates this month.

Investor take-away

With inflation quickly becoming a non-story, in the sense that most inflation indexes are trending lower…investors are looking at other macro indicators to better understand where the economy is heading. They are monitoring wage growth, new job openings and unemployment claims numbers.

The question to ask is how much job weakness can the economy tolerate before a recession becomes imminent. The answer is not clear at this time because, imo, every time is different.

This time we have a lot more onshoring of manufacturing in the US. Manufacturing related construction spending is at all time highs est. $201B in 2023. It was only $114B in 2022 and the previous peak was $83B in 2015. All these new factories will need workers.

Is manufacturing back?

Talking about factories, the ISM manufacturing index reported a better than expected 47.6 reading for Aug. This is a closely watched metric that signals the health of the US manufacturing base…businesses that make stuff that consumers buy.

Since March 2021, manufacturing activity has been slowing down. A reading below 50 is seen as recessionary. The index has been sub-50 since Nov 2022. However, Aug marked a change in trend, turning up higher.

New manufacturing orders, though declined 2.1% in July and continue to be volatile while trying to establish a base. Economists usually want to see both the ISM reading and the new orders reading go higher in tandem before getting optimistic about the future. We are not there yet.

Investor take-away

Today, I consider the NFIB index to be one of the most important macro indicators. It measures the strength of small and medium sized businesses in the US. If this index falls, we might be getting closer to a recessionary slowdown.

Additionally, the ISM manufacturing and services indexes are also critical to monitor. When they mark a bottom and start trending higher consistently, they could be signalling better days ahead for the US economy.

As an investor, I do not want to wait for them to get above 50 before I put money to work. I might want to catch that wave earlier…if I trust the trend higher.

Here’s why…

When the ISM is below 50 and rising, the SP 500 has returned about 17.6% average over the next 12 months.


The US dollar is trending up and the bond market is sellling off after making a move that suggested interest rate hikes were going to hold or decrease. Are you worried about these indicators? I wonder how strong an indicator those two variables are. There is so much data to digest. That chart is very helpful by the way…doc


Hi Doc,

Yes, so many macro indicators and it is difficult to figure out which ones are the most impactful at any point in time. I think it changes over time and depending on where we are in the calendar year or the economic cycle. I personally track about 43 macro indicators on a spreadsheet, but I use a few of them at any given time.

RE the US $…as long as the DXY stays in the $105 to $100 range, it is not a good macro indicator imo. Above $110 consistently and it becomes bearish for stocks. Below $95 consistently and it becomes bullish, imo. Otherwise it is just noise.

Yields, especially the 10 year yield, are very important imo. It is currently at 4.26%. It needs to come lower in order for us to have a soft landing. If it continues to rise or even stays elevated that is not bullish.


Thanks for the response and love your writeup on NVDA…doc

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Hey Beach, you should give yourself more credit! Link to your blog/newsletter. :wink:

Market whispers - Sept 5th 2023 - Beachman’s Newsletter.


Just a note that it was below 95 between 2003 and 2014. It was a bullish period except for a blip in 2008…



Too much econ data to make any decisions.

Econ is often far wide of what a good entry would be.

Look at charts for an entry. But really even then no one will agree. Unless they have no independent opinion to run with then talking them into anything might be possible. Same with the econ data here.