The prices paid index rose to 82 from 81.5, the highest level since July, 2008 when oil prices were reaching record highs. Prior to that, the prices index was last at this level in the summer of 2005.
"While the absolute level doesn't tell you anything, the direction does. Increasing input costs are troublesome for business," said Dan Greenhaus, chief economic strategist at Miller Tabak. (Watch his CNBC interview here.)
"The employment component went up again. There's definitely a relationship between the ISM employment component of the manufacturing index and manufacturing payrolls in Friday's report," he said.
Credit Suisse economist Jonathan Basile points out in a note that the employment index has only been above the 60 mark four times in the last 30 years.
"Back when the US economy was more manufacturing based, readings like the Feb's would have meant mfg payrolls rising on the order of about 100k in the same month. We wouldn't go that far, but the risk is clear for Friday's report where the consensus is 25K (after a strong 49k last month)," Basile wrote.
The Bureau of Labor Statistics reported in January that while manufacturing jobs rose by 49,000 and retail jobs increased by 28,000, employment declined in construction and transportation and warehousing.
Economists currently expect a total of about 200,000 jobs were added in February, after a disappointing total 36,000 jobs were added in January. The report is released at 8:30am ET Friday.
Basile also points out that the new order index in ISM hit a 7-year high and export orders were the highest level since December 1988.
Economists will also be watching Thursday's release of the ISM nonmanufacturing survey, which reflects the larger service sector of the economy.
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