BryPri55,
Apart from adding an indicator at the end, you can use ALTSEQ which character EBCDIC, with alternate collating sequence, unsigned. This is similar to format CH, but the characters collate according to the ALTSEQ (alternate collating sequence) table in effect. In your case we are dealing with only numbers in first 2 bytes. So we will change the value of 5(X'F5') to A(X'CA') and 6(X'F6') to B(X'CB') and perform the sort. Note that this will only effect the sorting but contents of your records remain the same.
Use the following DFSORT JCL
//STEP0010 EXEC PGM=SORT
//SYSOUT DD SYSOUT=*
//SORTIN DD *
02SMITH
02JOHNSON
05DAVIS
06THOMPSON
02JONES
03JACKSON
05WILLIAMS
07NEWMAN
//SORTOUT DD SYSOUT=*
SORT FIELDS=(1,2,AQ,A),EQUALS
ALTSEQ CODE=(F5CA,F6CB)
//*
will produce
05DAVIS
05WILLIAMS
06THOMPSON
02SMITH
02JOHNSON
02JONES
03JACKSON
07NEWMAN