Economic activity in the non-manufacturing sector grew in August for the eighth consecutive month, say the nation's purchasing and supply executives in the latest Non-Manufacturing ISM Report On Business®.

The NMI (Non-Manufacturing Index) registered 51.5 percent in August, 2.8 percentage points lower than the 54.3 percent registered in July, indicating continued growth in the non-manufacturing sector but at a slower rate. The Non-Manufacturing Business Activity Index decreased 3 percentage points to 54.4 percent, reflecting growth for the ninth consecutive month, but at a slower rate than in July. The New Orders Index decreased 4.3 percentage points to 52.4 percent, and the Employment Index decreased 2.7 percentage points to 48.2 percent, reflecting contraction after one month of growth. The Prices Index increased 7.6 percentage points to 60.3 percent in August, indicating that prices increased significantly in July. According to the NMI, nine non-manufacturing industries reported growth in August. Respondents' comments continue to be mixed about business conditions and the state of the overall economy.

Nonfarm payroll employment changed little (-54,000) in August, and the unem-
ployment rate was about unchanged at 9.6 percent, the U.S. Bureau of Labor
Statistics reported today. Government employment fell, as 114,000 temporary
workers hired for the decennial census completed their work. Private-sector
payroll employment continued to trend up modestly (+67,000).

The number of unemployed persons (14.9 million) and the unemployment rate
(9.6 percent) were little changed in August. From May through August, the
jobless rate remained in the range of 9.5 to 9.7 percent.

New orders for manufactured goods in June, down two consecutive months, decreased $5.1 billion or 1.2 percent to $406.4 billion, the U.S. Census Bureau reported today. This followed a 1.8 percent May decrease. Excluding transportation, new orders decreased 1.1 percent.

Shipments, also down two consecutive months, decreased $3.5 billion or 0.8 percent to $411.2 billion. This followed a 1.8 percent May decrease.

Unfilled orders, down slightly following two consecutive monthly increases, decreased $0.3 billion to $802.8 billion. This followed a 0.3 percent May increase. The unfilled orders-to-shipments ratio was 5.60, down from 5.61 in May.

Inventories, down two consecutive months, decreased $0.5 billion or 0.1 percent to $520.0 billion. This followed a 0.4 percent May decrease. The inventories-to-shipments ratio was unchanged at 1.26.

For the week ending August 21, 2010, the DJ-BTMU U.S. Business Barometer was unchanged following an increase of +0.2 percent in the prior week. With only one week to go it appears that August lost ground compared to a strong jump in July. Much of the reversal of fortune can be attributed to the auto sector, however, where motor vehicle assemblies and auto jobs popped up in July when automakers skipped the typical period of factory shutdowns for model changeovers. This was reflected in various July economic indicators including higher industrial production, lower initial jobless claims, and higher employment. Unfortunately, as the barometer is showing, that strength was overstated by seasonal adjustment factors that were too kind and will give way to a reversal in the August data.

Following a sharp drop in the months immediately after expiration of the home buyer tax credit, pending home sales have modestly risen, according to the National Association of Realtors®.

The Pending Home Sales Index,* a forward-looking indicator, rose 5.2 percent to 79.4 based on contracts signed in July from a downwardly revised 75.5 in June, but remains 19.1 percent below July 2009 when it was 98.1. The data reflects contracts and not closings, which normally occur with a lag time of one or two months.

Lawrence Yun, NAR chief economist, cautioned that there would be a long recovery process. “Home sales will remain soft in the months ahead, but improved affordability conditions should help with a recovery,” he said. “But the recovery looks to be a long process. Home buyers over the past year got a great deal, and buyers for the balance of this year have an edge over sellers. For those who bought at or near the peak several years ago, particularly in markets experiencing big bubbles, it may take over a decade to fully recover lost equity.”

Affordability could reach a generational high in the second half of this year because of rock-bottom mortgage interest rates, helped partly by the Fed’s very accommodative monetary policy. The loan underwriting standards are tighter, but home buyers can improve their chances of getting a loan by staying well within their budget.

The PHSI in the Northeast rose 6.3 percent to 62.5 in July but is 21.1 percent below a year ago. In the Midwest the index increased 4.1 percent to 66.7 but remains 25.7 percent below July 2009. Pending home sales in the South rose 1.2 percent to an index of 86.3, but are 15.6 percent lower than a year ago. In the West the index jumped 11.6 percent to 95.0 but is 17.6 percent below July 2009.

In the week ending Aug. 28, the advance figure for seasonally adjusted initial claims was 472,000, a decrease of 6,000 from the previous week's revised figure of 478,000. The 4-week moving average was 485,500, a decrease of 2,500 from the previous week's revised average of 488,000.

The advance seasonally adjusted insured unemployment rate was 3.5 percent for the week ending Aug. 21, unchanged from the prior week's unrevised rate of 3.5 percent.

The advance number for seasonally adjusted insured unemployment during the week ending Aug. 21 was 4,456,000, a decrease of 23,000 from the preceding week's revised level of 4,479,000. The 4-week moving average was 4,485,250, a decrease of 28,500 from the preceding week's revised average of 4,513,750.

The fiscal year-to-date average of seasonally adjusted weekly insured unemployment, which corresponds to the appropriated AWIU trigger, was 4.994 million.

Nonfarm business sector labor productivity decreased at a 1.8 percent
annual rate during the second quarter of 2010, the U.S. Bureau of Labor
Statistics reported today as hours increased 3.5 percent and output
increased 1.6 percent. (All quarterly percent changes in this release are
seasonally adjusted annual rates.) The second-quarter gain in hours worked
was the largest since the first quarter of 2006. From the second quarter
of 2009 to the second quarter of 2010, productivity and output both grew
3.7 percent and hours were unchanged (tables A and 2). Nonfarm business
productivity increased at an average annual rate of 2.5 percent from 2000
through 2009.

Unit labor costs in nonfarm businesses rose 1.1 percent in the second
quarter of 2010, as the 1.8 percent decline in productivity was partially
offset by a 0.7 percent decline in hourly compensation. Unit labor costs
decreased 2.8 percent over the last four quarters, as output per hour
increased faster than hourly compensation.

The U.S. Census Bureau of the Department of Commerce announced today that construction spending during July 2010 was estimated at a seasonally adjusted annual rate of $805.2 billion, 1.0 percent (±1.4%)* below the revised June estimate of $813.1 billion. The July figure is 10.7 percent (±1.8%) below the July 2009 estimate of $901.2 billion.

During the first 7 months of this year, construction spending amounted to $460.3 billion, 11.8 percent (±1.1%) below the $522.0 billion for the same period in 2009.

Economic activity in the manufacturing sector expanded in August for the 13th consecutive month, and the overall economy grew for the 16th consecutive month, say the nation's supply executives in the latest Manufacturing ISM Report On Business®.

Manufacturing activity continued at a very positive rate in August as the PMI rose slightly when compared to July. In terms of month-over-month improvement, the Production and Employment Indexes experienced the greatest gains, while new orders continued to grow but at a slightly slower rate. August represents the 13th consecutive month of growth in U.S. manufacturing.

Private sector employment decreased by 10,000 from July to August on a seasonally adjusted basis, according to the latest ADP National Employment Report® released today. The ADP National Employment Report, created by Automatic Data Processing, Inc. (ADP®), in partnership with Macroeconomic Advisers, LLC, is derived from actual payroll data and measures the change in total nonfarm private employment each month.

According to the ADP Report, employment in the service-providing sector rose by 30,000 in August, the seventh consecutive monthly gain. This increase was not enough to offset an employment decline in the goods-producing sector of 40,000. Construction employment dropped by 33,000 during August and manufacturing employment declined 6,000, the second consecutive monthly decline.

Today’s ADP National Employment Report shows that U.S. private sector employment remains essentially flat. Employers require economic certainty and a favorable environment in order to expand their businesses and create jobs. To achieve job growth, our nation’s policymakers should take stronger actions to incentivize businesses to innovate, invest and expand. The decline in private employment in August confirms a pause in the recovery already evident in other economic data. The deceleration in employment was evident in the major sectors and by size of business. This month’s decline in employment followed six monthly increases from February through July. Over those six months the average monthly gain in employment was 37,000 with no evidence of acceleration.

Unlike the estimate of total establishment employment to be released on Friday by the Bureau of Labor Statistics (BLS), today’s figure does not include the effects of federal hiring — and now firing — for the 2010 Census. Hiring for the census peaked in May. For this reason, Friday’s figure for the change in nonfarm total employment reported by the BLS might be weaker than today’s estimate for nonfarm private employment in the ADP National Employment Report.

Large businesses, defined as those with 500 or more workers, saw employment remain essentially flat while employment among medium-size businesses, defined as those with between 50 and 499 workers decreased by 5,000. Employment among small-size businesses, defined as those with fewer than 50 workers, decreased by 6,000.