ISM suggests the US economy started 2026 in a good place

In terms of the details, on the positive side, the new orders number posted a very strong print of 60.6 from 58.6. However, the business activity component dropped to 53.9 from 59.9 and the employment component dropped from 51.8 to just 45.2. That is well below the break-even 50 level and is also substantially below the six-month average of 49.3.

While Friday’s jobs number (+178k) was better than expected, with the service sector contributing 135k jobs in March, this was boosted by the return of striking workers in the healthcare sector and a rebound in employment after a very weak weather-induced drop in broader payrolls in February. Non-farm payrolls’ employment growth in general has been disappointing, averaging 20,000 per month since the start of 2025. The worry is that if the US economy wasn’t generating jobs in the good times, a situation where we have significant geopolitical, financial market and economic uncertainty means that we could risk outright job losses in coming months. Today’s hefty drop in ISM employment has done nothing to dispel those fears.