ISM Report Contains Worst Employment Figure Since September 2009

The latest ISM survey results on the health of the American manufacturing sector are out, and the report contains mostly good news.

(Production and new orders are both growing, and the rate of growth for both accelerated in June. Same goes for imports and exports.)

Despite seemingly improving conditions, the ISM report's employment sub-index sank to 48.7 in June from 50.1, marking the lowest level since September 2009.

Any reading below 50 on the index indicates contraction, so the 48.7 ISM employment print suggests that in June, employment contracted at the fastest level in nearly four years.

Both stocks and bonds are moving higher on the release. Lately, good economic data have been bad news for the bond market because good data suggest that the Federal Reserve may be closer to ending its open-ended bond buying program. Given that bonds aren't selling off, it could be that the market is pricing in quantitative easing over a marginally longer timeframe than before, given that the labor market comprises the most important set of economic indicators influencing the Fed.

"The report smacks of recovering health for the broader economy, yet on the other hand, the labor market continues its struggle," says Andrew Wilkinson, Chief Economic Strategist at Miller Tabak. "But let’s not overplay this theory because, as we have recently noted, manufacturing activity accounts for only a small portion of the economy and employment gains often come secondary to plants simply levering up to meet firmer demand."

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