ISM Non-manufacturing Index was exactly the same as last month, at 55.8. New orders were up, but employment was down. Initial jobless claims... went down! This was despite the claimed rapid layoffs in construction and in the mortgage industry. The 4-week average of claims went up only slightly, so in essence, it's been steady. Productivity was revised... up! Retail sales were incredibly good compared to expectations.

　　As I go through the tables of these reports, productivity is up 2.1% on a year/year basis, and GDP is up 1.9% on the same basis. For the last quarter, however, GDP was up 4.0%, and productivity was up 3.5%. That means that we're growing faster than we're producing, which is a bullish sign for hiring. The expected bulge in unemployment is not likely to happen. Construction has been slowing for a while, house prices have been headed down for a while, too.

　　These workers have been absorbed for months, and are not coming into the employment markets all at once. Financial services workers displaced by the subprime crisis are likely to be absorbed as well, in time. Many of them may not be claiming unemployment yet because they have severance payments they are still getting.

　　Also, the changes in adjustable rate mortgages may send more people into the workforce. An increase in the size of the workforce will temporarily make unemployment rates rise, slightly, but will keep wages from rising because of the increased number of workers. The net effect is that wage inflation is likely to ease.

　　Retail sales may have been good because prices are actually declining. Automakers are being aggressive in their discounts (though rebates have not shown up yet, but perhaps they are using more honest pricing strategies rather than gimmicks -- I know-- hard to believe). Retailers are worried that holiday sales may not be good and will probably be, as usual, discounting significantly in coming months.

　　The Fed is likely to cut rates by a quarter point on 9/18, and may use the the excuse that inflation fears have ebbed, and the frothiness of the credit markets is undergoing a correction phase. There is no downside to an ease since they have been so active in providing liquidity to the markets. There is, however, little downside to staying the course.

　　But doing so may make them appear out of touch with what's been happening in credit and bond markets as yields indicate expectations of a cut. The quarter point is just enough to say that they're engaged, and will assist the markets in dealing with another month's round of adjustable rate mortgage revisions.

　　Tomorrow's employment data will have yet more clues as to the short-term effects of the subprime "crisis." The report is likely to be better than the experts expect. But as noted in my column, expectations are not news, the data are. We'd rather wait for the real thing.

[时间：2007-09-07  作者：Joe Webb  来源：信息中心]