The economy is healthy and moving more sideways now, but definitely not moving down. Last Friday’s employment report was better than the experts would have you believe based on their analyses, since the unemployment rate dropped down to 5.2%. Those pessimistic "experts" focused on 110,000 new payroll jobs, supposedly lower than needed or expected. I really didn’t see any significant mention in the business press of the 357,000 new jobs reported in the household survey. Oil prices are making CEOs skittish, not because they’re not even close to the all-time inflation corrected high of $90 a barrel, but because CEOs have not planned on oil being at $55 a barrel. Faced with the prospect of inflation in what they buy and their inability to pass increased costs to customers, CEOs will not be hiring, nor will they be loosening up discretionary budgets any time soon. As I have said before, this is not necessarily a bad thing, as it generates more outsourcing that further spurs the small business boom.

The ISM Manufacturing and Non-Manufacturing reports support my analysis. Both reports showed continued growth in their surveys, but employment growth is more subdued than prior reports. The ISM Global Manufacturing report also moved sideways, indicating some slowdown, but is now at 22 consecutive months of growth. Big company CEOs, who must look at things globally, are still not seeing robust growth in their non-U.S., non-China businesses, and this adds to their skepticism about spending money. Actions that they believe will reducing long-term, enterprise-wide costs, such as information technology investments, are getting their attention.

Large businesses outsourcing to small businesses, is a major trend in these economic conditions. Outsourcing should be a major strategy for printing businesses, because it provides flexibility and scalability for large corporate clients. Assuming the economy keeps up its pace, these outsourcing relationships will be more permanent than the CEOs might expect. I suspect that it is for this reason that the ISM non-manufacturing report was quite good, going from a reading of 59.8 to 63.1. (Remember, we still have that reporting issue with what a manufacturing job is. If a manufacturing company does its own payroll, payroll department workers are considered to have manufacturing jobs. If the company decides to outsource to a payroll service like ADP or Paychex, then the government data will show a reduction in manufacturing jobs and an increase in service jobs, even though the people doing the payroll are doing the exact same work). Strong economies have strong service sectors, and the biggest customers for service companies are manufacturers.