ISM Manufacturing Index says the worst is not over yet in the U.S. Economy

So we were just talking about how the GDP is not a very consistent measure of the economy.
The Institute for Supply Managements Manufacturing index (formerly known as the NAPM Survey) just came out today and this little guy's been historically good at measuring contractions. The Index is constructed such that levels at 50 or above signal growth in the manufacturing sector, which is a good measure of actual demand. Levels between 43 and 50 indicate the economy is still growing but the manufacturing sector is slowing down it's activities in anticipation of lowering demand. Levels below 43 indicate that the manufacturing sector is taking drastic measures to counter a significant and extended slowdown in demand- basically the manufacturing sector considers the economy in deep recession. Guess what the Index number that came out today read? 38.9- a 26 year low, just 1 basis point above the September 1982 low of 38.8! This underscores the importance of credit in today's economy in a way, the bank's tightening of the credit faucet, and the events in the Financial markets and broader economy, consumer spending has taken a beating. Another point no one is factoring is the impact of people becoming austere in their spending to shore up their battered retirement accounts. With over a Trillion dollars lost in the country's retirement funds, people who were planning to retire within the next 1 to 2 decades are going to need to increase their savings rate to offset the loss of this year. Guess what that means for spending?

The Employment Situation report is coming out later this week, with such a drastic drop in manufacturing, I am expecting a pretty gloomy picture with the Non Farm Payroll number.