Tempe, AZ, Dec. 1--Manufacturing had its best month in nearly 20 years as job growth returned to the sector after a three-year slump that erased millions of jobs.
The Institute for Supply Management reported Monday that its manufacturing index shot up to 62.8 in November, the fifth straight month of growth and the strongest report since December 1983. The index was at 57 in October. Readings above 50 point to expansion in activity, while those below indicate contraction.
Economists had expected the November index to come in at 59, according to a survey by Dow Jones and CNBC.
Strength was broad-based as gauges of new orders and production were higher.
But the real story was the return of job growth. The employment index jumped to 51 from 47.7 in October, after 37 consecutive months of decline. The last time the employment gauge was above 50 was September 2000.
"This expansion is the real thing," wrote Joel Naroff, chief U.S. economist at MFR Inc. "We even have the possibility that in the payroll report, the manufacturing sector may no longer be a drag. While actual job increases may not show up for a while, we might expect that the losses will be minimal in November."
Other economists were equally impressed.
"This is an extremely robust manufacturing report that strongly confirms that the economy is in a cyclical upswing," John Ryding, chief market economist at Bear Stearns, wrote in a research note to clients. He said the report could set the stage for Federal Reserve policy makers next week to soften their promise to keep interest rates low for "a considerable period."
The recovery "is gaining momentum," said Norbert Ore, who directs the survey for the ISM. "Indications are that the manufacturing sector is ending 2003 on a very positive note, and all of the indexes support continued strength into 2004."
Various industry segments started to see improvement, according to the survey. But the sector isn't out of the woods yet. While overall employment appears to be improving, respondents still mentioned some current or impending layoffs. Several signaled they might transfer production of certain product lines to offshore manufacturing.
