The December jobs report suggests that the economy is still in decent shape. Employers added more jobs than expected and the unemployment rate is back near a half-century low. Wages are growing, albeit not as rapidly as they were a few months ago. But another economic report that came out Friday morning paints a slightly different picture.
The Institute for Supply Management's (ISM) Services Index, a key measure of economic activity outside of the manufacturing sector, was much lower than what economists were expecting and could be another indicator that the economy is heading into a recession.
The ISM Services reading came in at 49.6% for December...well below November's 56.5% level and forecasts for about 55%. But what's most alarming is the fact that the number dipped below 50%. That is a sign of contraction. The last time the index was this low was during the brief Covid-induced recession in May 2020.
ISM added that its new orders index, another sign of future economic activity, also fell below 50% for the first time since May 2020.
The jobs market might finally start to show some signs of weakness in the coming months as well.
"Employment contracted due to a combination of decreased hiring due to economic uncertainty and an inability to backfill open positions," said Anthony Nieves, chair of the ISM services business survey committee, in the report.