Manufacturing Sheds Jobs Even as Orders Rise
The U.S. manufacturing industry shed jobs again in September even as business activity expanded for the third straight month, an influential survey showed Wednesday.
On the positive side, there was a glimmer of strength in new orders, which last month hit a high for the year, while construction figures showed home building rose to record levels in August.
However, all the omens are grim for job creation, and analysts fear September payrolls will show a decline for the eighth straight month when the figures are released Friday.
“There is nothing here that offers signs of encouragement,” said Norbert Ore, head of the committee that compiles the survey for the Institute for Supply Management, referring to the jobs outlook. “The rate of decline seems to be slowing ... but I don’t see much change in the employment picture in the next six to 12 months.”
The institute’s national manufacturing barometer slipped to 53.7 in September from 54.7 in August. Analysts had expected a slight gain to 55.0. Readings above 50 are seen as positive, since that means more companies are reporting growth than are reporting contraction.
But analysts were encouraged by a rise in the survey’s new-orders index, to 60.4 in September from 59.6.
“New orders are strong, which is key for going into next quarter,” said Kurt Karl, chief economist for North America at Swiss Re in New York. “Unfortunately, it’s not too surprising on the job front -- there seems to be no good news there.”
The employment measure of the report dipped further, to 45.7 in September from an already low 45.9 in August.
Employment research firm Challenger, Gray & Christmas reported that planned layoffs at U.S. firms slipped only slightly in September, to 76,506 from 79,925 in August. That came on top of 872,080 job cuts so far this year.
Jobs, or the lack of them, have become the hot topic for both markets and politicians, and the longer the labor market stays weak, the more chance there is that economic growth will slow again after the third quarter’s spurt.
Ford Motor Co. became the latest company to announce major job cuts, saying on Tuesday that it planned to cut 3,000 positions in the United States. Other major carmakers were expected to follow with cuts of their own, despite selling near-record numbers of vehicles.
So great is the concern over jobs that some analysts are starting to wonder whether the Federal Reserve might not have to cut interest rates again -- a radical change in thinking for markets that have been far more concerned about when the first tightening might come.
That sea change has been reflected in the Treasury market, where benchmark 10-year yields have tumbled more than half a percentage point in recent weeks to less than 4.0%.
Meanwhile, data on August construction showed that residential spending jumped to a new high of 1.4%. Total construction spending rose a more modest 0.2%.
