Welcome to Economic Decision Making: Which Way Is North?

Originally published June 7, 2024

Chief Economist Eugenio J. Alemán discusses current economic conditions.

We received mixed economic signals this week with the ISM Manufacturing PMI remaining in contraction in May after a brief, one-month, slightly expansionary reading in March, but weaker than May consensus expectations. The ISM Manufacturing PMI Employment Index improved in May, moving from contraction in April to slightly expanding in May. Factory orders, which are a bit lagging compared to the ISM Manufacturing PMI, were positive in April for the third consecutive month. This could indicate some improvement in manufacturing production down the pipeline. Meanwhile, the ISM Services PMI rebounded from a surprise contractionary reading in April and moved again into expansion in May with a stronger than expected reading for the month. However, the ISM Services PMI Employment Index remained in contraction during the month of May even though it improved slightly compared to the April reading.

Furthermore, the JOLTS report showed the lowest job openings number since February of 2021 while the number of job openings to the number of unemployed Americans declined to a level close to pre-pandemic levels.

Job Openings Per Number of Unemployed

Then, today, we saw the two employment surveys, the nonfarm payroll survey and the household survey numbers, showing either a 272,000 increase in jobs or a 408,000 decrease in jobs in May, respectively. How’s that for reassurance going into the Federal Open Market Committee (FOMC) meeting next week? This is probably one of the reasons why economists are accused of being “two handed economists,” that is, “on the one hand” employment is doing just fine but, “on the other hand,” employment is really doing bad!