By Mark Pender

NEW YORK (MNI) – A three-tenths dip in the April employment index
reflects a persistent reluctance to hire, a reluctance however that
anecdotal commentary suggests may soon give way given production needs,
Anthony Nieves, head of the Institute For Supply Management’s
non-manufacturing report, said Wednesday.

The report’s employment index edged down to 49.5 from March’s
recovery high of 49.8.

Nieves, in a phone interview with MNI, is unwavering in his
conviction in the 50 breakeven rule of the report’s diffusion
methodology, saying firmly that April’s reading indicates a mild
month-to-month contraction in his sample’s total hiring.

“Employment is still contracting. The elephant in the room are
margins. Companies are getting very comfortable with their profit
margins,” he said.

But citing the long run of growth in new orders, at eight straight
months, Nieves said he doubts non-manufacturers can continue to extract
extreme levels of productivity from their staffs.

“More with less can’t go on forever. We’re getting to a red level
right now. The gears will start falling off soon.”

He describes employment as the single disappointment in his sample,
one that is making the difference between the non-manufacturing report
and the greater strength underway on the manufacturing side.

Nieves is at a unique spot for observing the economy. Respondents,
numbering more than 200 in any one month, offer commentary on business
conditions including employment. Here he reports a shift.

“Comments had been very consistent: ‘Attrition, not quick to
replace,’ ‘Has to be strong justification to replace position,’
‘Offering early retirement,'” Nieves said. “But the last few months
we’re starting to see: ‘Now able to hire,’ ‘With justification we can
bring people back.’

“We’ve gone from completely negative to a mixture,” he said.

Overall, he describes April’s results as strong and said they point
to a continuing string of moderate month-to-month growth for the bulk of
the nation’s economy.

In a note on ongoing U.S. dollar strength, he sees the report’s
import index moving higher as non-manufacturers seek less expensive
foreign inputs. This effect is already evident in April with the index
jumping 5-1/2 points to a nearly three-year high of 56.5.

** Market News International New York Newsroom 212-669-6430 **

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