Factory Growth Cools to 54.6% in August While July Job Openings Edge Up to 7.27 Million

by Tomas Ferreira · September 1, 2026

Markets Reporter, US Market Current

Two of the month's more closely watched reads on the US economy landed within the same minute Tuesday morning, and they pointed in slightly different directions. The Institute for Supply Management said its Manufacturing PMI registered 54.6% in August, down a full percentage point from July, while the Labor Department's Job Openings and Labor Turnover Survey put July job openings at roughly 7.3 million, little changed from June.

The ISM figure marks an eighth consecutive month of expansion in the factory sector — any reading above 50% signals growth in ISM's diffusion methodology — but it came in softer than economists had penciled in. Reuters, in its write-up of the release, said economists it polled had looked for a decline to 55.2%. Susan Spence, who chairs the ISM Manufacturing Business Survey Committee, opened the report by noting that "The Manufacturing PMI registered 54.6 percent in August, 1 percentage point below the July figure of 55.6 percent." ISM said the August reading corresponds to a 2.4% annualized increase in real gross domestic product.

The composition of the decline is where the report gets more interesting than the headline. New orders fell three points to 53.7% from 56.7%. Backlog of orders dropped 3.2 points to 51.8% from 55.0%. Imports slid 3.2 points to 52.5% from 55.7%. Production, by contrast, was nearly unchanged at 58.3% versus 58.5% in July, and new export orders ticked up two-tenths to 53.2%. Output is still running hot while the order book thins — a divergence the release itself does not attempt to resolve.

The factory employment gauge fell 1.6 points to 51.2%, after having rebounded to 52.8% in July. ISM said the positive-to-negative hiring commentary ratio among survey panelists ran 1.3-to-1 in August. Reuters cautioned in its report that the ISM employment measure has been "a poor predictor of manufacturing employment in the government's monthly employment report," a caveat worth carrying into Friday.

The line that did not move at all was the Prices Index, which held at 71.1% for a second straight month. ISM said raw materials prices rose for a 23rd consecutive month; steel, aluminum and energy costs are what the survey's own panelists named repeatedly in their commentary. Supplier Deliveries came in at 59.3%, up four-tenths from July; in ISM's convention a higher reading there means deliveries are slowing, not speeding up. Inventories eased to 50.6% from 51.2%. Fifteen manufacturing industries reported expansion in August against two reporting contraction.

Panelist commentary published with the release reinforced the cost story. A respondent in machinery reported that "Prices continue to rise on all goods," citing suppliers pointing to energy, steel and labor. A primary metals respondent said "Steel prices continue to climb as supply diminishes, aluminum is rising after dropping." A transportation equipment respondent tied the squeeze directly to trade policy, saying "High steel and aluminum prices (due to Section 232 tariffs) continue to make profitability a challenge."

The JOLTS report told a quieter story. The Bureau of Labor Statistics said the number and rate of job openings were little changed at 7.3 million and 4.4% on a seasonally adjusted basis in July. The financial news service InvestingLive, reporting the release Tuesday, put the unrounded figure at 7.271 million against a consensus estimate of 7.300 million, with the prior month at 7.182 million — meaning openings ticked up on the month even as they came in modestly below what forecasters expected. InvestingLive did not report a revision to the June figure.

Beneath the headline, the survey's flow measures were similarly flat. Hires were little changed at 5.1 million, a 3.2% rate. Total separations were also 5.1 million at a 3.2% rate. Quits held at 3.1 million and a 1.9% rate, and layoffs and discharges stayed at 1.7 million and a 1.0% rate. A quits rate stuck at 1.9% is the signature of a labor market where workers are not resigning at pace.

Industry detail supplied some texture. Job openings rose by 76,000 in durable goods manufacturing. Hires fell by 188,000 in professional and business services, the largest single-sector move in the report's hiring detail. Quits declined by 46,000 in other services, and layoffs and discharges fell by 22,000 in finance and insurance.

The backdrop for both releases is a labor market that has already turned softer. The July employment report, published August 7, showed nonfarm payrolls declined by 23,000, against a consensus that had looked for a gain of about 80,000, according to First Trust Advisors' analysis of the release. May and June gains were revised down by a combined 103,000. The unemployment rate nonetheless fell to 4.1% from 4.2%, helped by a labor force that shrank by 264,000. Average hourly earnings rose 0.1% month over month and 3.2% from a year earlier.

The rest of this week fills in the picture. The ADP National Employment Report for August is scheduled for Wednesday morning, with factory orders for July at 10 a.m. and the Federal Reserve's Beige Book at 2 p.m., according to Kiplinger's calendar for the week. Weekly jobless claims, the July trade balance and the ISM Services PMI for August are set for Thursday. The Bureau of Labor Statistics is scheduled to release the August employment situation report on Friday at 8:30 a.m. ET.

Forecasters are not expecting much from it. Barclays Economics looks for 25,000 jobs added in August with the unemployment rate holding at 4.1%, and projects a three-month moving average of roughly 7,000 — "right near the breakeven pace," per the figures Kiplinger cited on August 28. David Payne of The Kiplinger Letter wrote that "The new normal for jobs reports going forward is likely to be gains of fewer than 100,000, rather than additions in six digits." None of that has happened yet; the report is still three days out.

The policy stakes are unusual for a soft labor print. The federal funds target range currently tops out at 3.75%, and the Federal Open Market Committee next meets September 15-16. Reuters reported Tuesday that financial markets were pricing a roughly 70% chance of a 25 basis point increase at that meeting, citing CME Group's FedWatch tool. Tech Times, writing Tuesday morning, put the same CME FedWatch reading in a 65% to 68% range as of the market open — the same compiler at a different moment, not a disagreement between sources. Fed Chair Kevin Warsh, whose Jackson Hole remarks Liz Ann Sonders of the Schwab Center for Financial Research characterized as hawkish, said of the summer inflation data: "While this summer's PCE and CPI readings were better than expected, they do not tell me that underlying trends have meaningfully improved."

That is the tension the August data leaves in place: a thinning order book, a flat hiring pipeline, and an input-cost index that has not cooled in nearly two years. Which of those the committee weights most heavily is what the next two weeks will settle.