ISM Non-Manufacturing Employment

The ISM Non-Manufacturing Employment Index measures hiring breadth in United States services. It is one of four equal parts of the Services PMI, the services gauge. The Institute for Supply Management (ISM) publishes it from its monthly survey of purchasing executives.

The panel covers purchasing and supply executives across the country in 18 service categories. Replies are weighted by each industry share of gross domestic product, based on Bureau of Economic Analysis estimates. Executives report only on United States operations for the survey month against the prior month.

The index was once called the Non-Manufacturing index and later became the Services index. It tracks breadth of monthly change in staffing, not the number of jobs added or lost. Above 50% means employment is generally expanding and below 50% means it is generally contracting.

A reading of 50% signals flat breadth, not zero change in jobs. The index is a diffusion index, a gauge of direction and scope, not a payroll count.

Surveys go out in the first part of the survey month and replies cover that month alone. Most replies arrive late in the month to give an accurate view of business activity. The institute posts the report on its website on the third business day of the following month, unless the stock exchange is closed.

Each release shows the Services PMI plus activity, orders, deliveries and prices. It also shows inventories, backlog of orders, new export orders, imports and inventory sentiment. The package adds a comparison table for services against manufacturing, industry lists, quotes by industry, commodities in motion and a chair narrative.

Raw replies are never changed and published indexes are never revised. Seasonal factors change only slightly when warranted. Each release announces the next report date.

The Services PMI has four equal parts and each part captures a different monthly change. Employment moves on its own breadth and cannot be inferred from headline strength alone.

• Business Activity, equal weight: captures monthly change in the pace of services output.
• New Orders, equal weight: captures monthly change in incoming demand for services.
• Employment, equal weight: captures monthly change in services staffing levels.
• Supplier Deliveries, equal weight: captures change in delivery speed, where above 50% means slower deliveries.

Above 50% means the services economy is generally expanding and below means it is generally declining. Above 48.1% means the broad economy is generally expanding over time, and ISM revises this line over time. The farther a reading stands from its line, the stronger the expansion or decline.

Employment should be read against 50% alone. Strong orders or activity can coincide with weak hiring, so breadth needs its own verdict. The index appears before the official payroll release, so traders and investors watch it for early labor signals.

Each executive reports Higher, Same, or Lower staffing for United States operations only, for the survey month against the prior month. Replies become percentage shares for Higher, Same, and Lower. Raw replies are never changed.

The unadjusted diffusion index equals percent Higher plus half of percent Same, figured to two decimal places. The result is divided by the employment seasonal factor for that month. The quotient is rounded to one decimal place.

Only Business Activity, New Orders, Employment, and Prices use seasonal adjustment. The remaining indexes show no strong seasonality. Factors are revisited slightly when warranted.

The Services PMI averages the four parts equally, adding Business Activity, New Orders, Employment, and Supplier Deliveries and dividing by four. Replies span 18 service industries and are weighted by each industry share of gross domestic product. Small gaps can come from rounding.