In early U.S. trading, a surprising rebound in job vacancies and stagnant manufacturing PMI, coupled with escalating Middle East conflicts, negatively affected the stock market. According to the Bureau of Labor Statistics, job vacancies at the end of August reached 8.04 million, the highest since June, defying expectations of a decline to 7.655 million. July's figures were revised from 7.673 million to 7.711 million.
Notably, the construction sector saw the largest increase in job vacancies since 2009, and state and local government vacancies also rose. The hiring rate fell to 3.3%, the lowest since 2013, excluding the pandemic period, with retail, transportation, and warehousing sectors experiencing the most significant declines. While the layoff rate remained low, the labor market presented mixed signals.
The critical ratio of unemployed individuals to job vacancies, closely monitored by the Federal Reserve, remained near a three-year low at approximately 1.1 to 1, down from a peak of 2 to 1 in 2022.
Simultaneously, data from the Institute for Supply Management (ISM) showed that the Manufacturing Purchasing Managers' Index (PMI) for September recorded 47.2, consistent with August and below the expected rise to 47.5. PMI, a key indicator derived from monthly surveys of purchasing managers, reflects future economic trends, with readings above 50 indicating expansion and below 50 indicating contraction.
ISM's Manufacturing PMI has remained below 50 for six consecutive months, signaling a continued decline in manufacturing activity. Over the past 23 months, the index has fallen below 50 in 22 months, with only March 2023 seeing a slight expansion at 50.3.
Sub-index data revealed a slower rate of decline in orders and output compared to the previous month, but both remained in contraction territory. Order volumes shrank for the sixth consecutive month, limiting production and reducing the employment index.
The ISM Manufacturing Business Survey Committee Chairman, Timothy Fiore, noted that demand remains weak as businesses shy away from capital and inventory investments, driven by the Federal Reserve's monetary policy and election uncertainties. He also highlighted that a strike initiated by Boeing in September exacerbated the aerospace and transportation equipment sectors' downturn. Additionally, October’s report might be negatively impacted by Hurricane Helene and potential port strikes in the U.S. However, Fiore believes the strike may not last long.
