Economic and Market Comments From Goldman Sachs & Co.

I thought I would share some of the recent highlights from comments made by Goldmand Sachs & Co.

The ISM Manufacturing Index rose to 55.9 from 53.6 in December, beating expectations and marking the fastest expansion since April 2006. New orders hit a high of 65.5 and the orders/inventories gap widened anew to 22.1. Readings should be supportive of healthy growth in industrial production in the coming months.

Pending home sales fell a sharp 16% in November, providing strong proof that the home buyer tax credit boosted sales earlier in 2009. The credit was set to expire on 11/30, but has since been extended. Therefore, sales were likely accelerated in anticipation of the expiration.

Factory orders rose a larger-than-expected 1.1% in November. This was primarily driven by orders of nondurable goods, most likely reflecting the higher prices of petroleum products. The data on inventories and capital goods shipments increases upside risk to our 4% Q4 GDP estimate.

The ISM Non-Manufacturing Index disappointed expectations, rising to only 50.1 in December, only slightly above the 50-point dividing line between growth and contraction. Of the four component indices, the most forward-looking new orders index slipped 3 points to 52.1.

Nonfarm payrolls fell 85k in December after a positive, but in consequential, revision from -11k to +4k the previous month. However, the household survey was considerably weaker. While the unemployment rate remained flat at 10% in December, the labor force and employment dropped sharply. At 64.6%, the labor force participation rate is at its lowest level in 25 years. With part of this drop likely to reverse in coming months, job growth will be needed to keep unemployment from rising.