Manufacturing Grows. Will Jobs?

By John S. McClenahen In January, the manufacturing sector of the U.S. economy grew for the eighth consecutive month, with the Institute for Supply Management's (ISM) closely watched PMI index rising to 63.6% from 63.4% in December 2003. An index number above 50% indicates manufacturing is expending; a figure below 50% signals that manufacturing is contracting. January's figure was the highest since December 1983, notes David Huether, chief economist at the National Association of Manufacturers, Washington, D.C. It "conforms to what we have been hearing from our members, namely that business is finally picking up after a tough three-year period of weak demand both at home and abroad," says Huether. Thomas J. Duesterberg, president and CEO of the Manufacturers Alliance/MAPI, an Arlington, Va.-based business and public policy research group, believes the latest ISM data are "consistent with the broad evidence of a strong and sustainable recovery in manufacturing." The alliance is projecting more than 6% growth for manufacturing this year and the creation of 75,000 jobs. However, there are some cautionary data in the latest ISM report on manufacturing. While still showing growth, the employment element of the PMI fell six-tenths of a percentage point between December and January to 52.9%. And new orders, although still growing, slowed by an even larger number. January's 71.1% new orders index was two full percentage points below December's 73.1%. "Seventeen out of 20 [PMI] industries reported growth in January. But it remains to be seen if manufacturing payrolls will follow suit," states Gerald D. Cohen, a senior economist at Merrill Lynch & Co., New York.

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