'Normal' Manufacturing Data Set Up a Strong Jobs Report Friday
NEW YORK ( TheStreet) -- Glitches aside , this week's manufacturing data look pretty normal, reinforcing the picture of steady, if not spectacular, cyclical growth that will push private employment up when closely watched jobs reports hit later this week.
The Census Bureau reported Tuesday that April factory orders rose 0.7%, topping forecasts of 0.5% growth and hitting the highest level since the factory orders index was first calculated in its current form in 1992. The March increase was also revised upward, to 1.5%.
The orders report comes a day after the Institute of Supply Managers' purchasing managers survey reported its measures of sentiment, new orders and hiring plans pointed to slightly stronger growth than in April, continuing a recovery from this winter's weakness. At least, it did once ISM fixed its software error that mistakenly caused the institute to report a slowdown in manufacturing growth.
The details of the report point to more growth ahead. In particular, Tuesday's report -- showing unfilled orders for capital goods are up 1.1% -- suggest manufacturers will continue to need more workers. That buttresses the expectations that Friday's jobs report will include at least the 213,000 new jobs projected in a survey of economists by Econoday. A preview will come when payroll processor ADP reports private-sector hiring on Wednesday.
Some details of the shape of the new and unfilled orders are especially encouraging. Unfilled orders for computers rose 4.7%, while those construction materials rose 1.1%. Consumers generally are in a buying mood, with new orders for non-durable consumer goods rising 1.0%, more than enough to offset a decline in the much smaller category of consumer durables like refrigerators. Overall, consumer orders rose 0.7%.
But there are plenty of caveats, especially when it comes to business investment, whose sluggishness has emerged as the biggest reason why the recovery hasn't accelerated. New orders excluding the aircraft (where big orders are intermittent enough to distort results) and defense spending actually dropped 1.2%. Monday's ISM survey painted an oddly pessimistic picture on hiring plans at manufacturers, given recent gains, especially since indices of new orders are pointing to somewhat faster growth.
The bottom line: We have a consumer-led recovery, in which increasingly bold consumers are showing business the demand is finally there to support more investment. This is true notwithstanding the sluggish growth in wages that Federal Reserve Chair Janet Yellen has repeatedly cited as a sign of the economy's lingering weakness.
The biggest test of whether the recovery will truly accelerate in the second half is whether Corporate America finally takes that hint and stops sitting on its collective wallet.
This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.