As I hinted earlier today, the August 2010 Manufacturing ISM Report On Business came in with unexpectedly good results (the data from the Fed indicated a lower reading, but as CalculatedRisk points out, the Fed and ISM data sometimes diverge temporarily). The PMI came in at a fairly strong 56.3, while the Bloomberg consensus range was 51.5 to 54.5. Last month’s reading was 55.5, and this reading was even stronger than the 56.2 in May’s reading. Any number over 50 indicates expansion.

The employment index came in at a strong 60.4. From the report (emphasis mine):

ISM’s Employment Index registered 60.4 percent in August, which is 1.8 percentage points higher than the 58.6 percent reported in July. This is the ninth consecutive month of growth in manufacturing employment. An Employment Index above 49.8 percent, over time, is generally consistent with an increase in the Bureau of Labor Statistics (BLS) data on manufacturing employment.

Ten of the 18 manufacturing industries reported growth in employment in August in the following order: Transportation Equipment; Paper Products; Printing & Related Support Activities; Primary Metals; Computer & Electronic Products; Fabricated Metal Products; Electrical Equipment, Appliances & Components; Miscellaneous Manufacturing; Food, Beverage & Tobacco Products; and Chemical Products. Furniture & Related Products is the only industry reporting a decrease in employment during August.

Not bad at all. The rest of the report overall was better than last month. Production grew by 2.9 points to 59.9, also considered a positive sign. A little concerning was the fact that imports grew faster than exports. Imports had a reading of 56.5 while exports shrunk to 55.5 (still indicating expansion, just slower expansion than last month).

The divergence of this report and the lower Fed numbers is not unusual by itself. A convergence is expected, though. This either means better Fed numbers (good) or a worse ISM (bad). Most bets are on a lower ISM reading in future months.