INDICATOR: September Supply Managers’ Non-Manufacturing Report

KEY DATA: ISM (Non-Man.): 55.1 (Up 1.4 points); Orders: Up 4.0 points: Employment: Down 2.7 points

IN A NUTSHELL: “The summer slump looks like it is over not only for manufacturers but for service firms as well.”

WHAT IT MEANS: Business activity in the construction and services sectors is on the rise again. The Institute for Supply Management’s non-manufacturing survey indicated that firms benefitted from a strong rise in orders, though almost all of that increase came from U.S. firms, as export orders slowed to a crawl.

An indication of the cautiousness of executives was seen in the employment numbers. Despite the highest reading on orders since March, firms slowed their hiring sharply.

You would think that accelerating demand would lead to a firming in the employment situation, but that just wasn’t the case. Part of the slowdown might have come from a thinning of order books.

In a separate report, the Conference Board’s Help Wanted Online Index popped up in September after posting declines over the summer. This measure does a nice job over time of tracking payrolls and the unemployment levels, so the turn back up, if sustained, would mean more jobs and fewer unemployed workers in the months ahead.

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MARKETS AND FED POLICY IMPLICATIONS: The presidential debate is tonight, and it is about domestic policy. Undoubtedly, we will be told that the economy is either a disaster or coming back. Believe the sound bites as you please.

The simple reality we have seen from most of the economic reports is that the recovery continues at the pace we have lived through for a couple of years, and despite the uncertainty created by the fiscal cliff and Europe, there really has not been any major moderation in growth.

The election, regardless of who wins, is likely to force some break in the logjam, and at least the Senate is starting to discuss a full-blown agreement.

As for the House, well it is a pox on the members. Compromise still appears to be a four-letter word, which says a lot about their ability to spell.

Anyway, Friday is the jobs report, and that could change a lot of the political dynamics no matter what happens tonight.

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