Gloomy jobs outlook tempers factory report
U.S. manufacturing expanded in November as new orders and production improved, but weakness in employment suggested that industrial jobs might not be as plentiful in coming months.
The Institute for Supply Management, a Tempe, Ariz.-based trade group, said Monday that its manufacturing index registered 50.8 last month, down from 50.9 in October. A reading above 50 indicates growth; below that spells contraction.
The November results, which marked the 10th consecutive monthly expansion, were slightly stronger than the 50.1 expected by analysts polled by Thomson/IFR Markets.
“While other segments of the economy are struggling, manufacturing continues to grow due to continuing strength in new orders and a recovery in production from last month,” said Norbert Ore, chairman of the institute’s business survey committee. “Prices, driven higher by energy prices, are once again the major concern.”
The manufacturing report showed a decline in the employment index to 47.8 from 52.0, indicating manufacturing jobs were contracting, according to Doug Porter, deputy chief economist at BMO Capital Markets.
“The one concern in the report is the steep drop in the employment index,” Porter said. The weak result could foreshadow a disappointing national employment report on Friday, he added.
The latest ISM index, though still showing growth, is down from its recent peak of 56.0 in June.
Ian Shepherdson, chief U.S. economist at High Frequency Economics, said the decline in the headline figure last month showed that “manufacturing has slowed substantially, but is not so weak that recession is imminent.”
According to the institute, the index for new orders rose to 52.6 in November from 52.5 in October, while production expanded to 51.9 last month from 49.6 in October.
Seven industries reported growth in November: apparel and leather; food, beverage and tobacco; paper products; chemical products; machinery; electrical equipment, appliances and components; and computer and electronic products.
The latest report also showed strong growth in export orders, which registered 58.5 in November, up from 57.0 in October.
The price index, meanwhile, advanced to 67.5 from 63.0 the month before.
Joe Patire, managing director of YieldQuest Advisors, warned against reading too much into the report, given that the U.S. economy was more heavily concentrated in services than in manufacturing.
Thomson/IFR Markets projects that the index reading to be released Wednesday for the services sector survey will fall to 53.9 from 55.8 in October.
