By Emily Sanderson
The U.S. manufacturing sector dropped 3.1 points to 47.7% on the Institute of Supply Management’s Purchasing Managers Index(PMI) in December, and it is the first month that the sector has failed to grow since January 2007, according to a recent report released by the organization.
The U.S. manufacturing sector dropped 3.1 points to 47.7% on the Institute of Supply Management’s Purchasing Managers Index (PMI) in December
The index is closely watched because a slowdown in factory production can translate to job cuts, which in turn reduce consumer spending — a major component of the economy.
”A PMI in excess of 41.9%, over a period of time, generally indicates an expansion of the overall economy. Therefore, the PMI indicates that the overall economy is growing while the manufacturing sector is contracting,” the American Machinist reported.
Department of Labor Statistics Mirror Market Sector Indicators
Accordingly, the U.S. Department of Labor’s employment report for December indicated declines in the number of non-farm construction and manufacturing jobs (goods-producing trades) and an increase in non-farm service-providing trades. The overall unemployment rate rose to 5.0%.
”Job growth in several service-providing industries, including professional and technical services, health care, and food services, was largely offset by job losses in construction and manufacturing,” the report from the U.S. Department of Labor concluded.
In response to slowing demand, employers are cutting hours for more workers to below the 35-hour-per-week threshold for full-time work, according to the Wall Street Journal.
”Hyundai Motor Manufacturing Alabama LLC, a unit of Hyundai Motor Co., idled 3,300 production workers for 10 Fridays over the past three months, effectively dropping their weekly hours to 32 during affected weeks,” the Journal reported. ”Pella Corp., a window and door manufacturer in Iowa, has trimmed hours for several hundred of its 10,000 employees over the past few months, many to part-time hours.”
Not all the news is bad for job-seekers in the manufacturing industries, according to a press release from EmploymentScape, the parent company of ManufacturingCrossing.com. ”Companies as diverse as Spherion and Peterbilt Motors are filling manufacturing positions, even with the overall decline in available manufacturing jobs.
”Professionals seeking these jobs will simply need to become more shrewd and will rely more on up-and-coming sources such as EmploymentCrossing.com that bring together jobs from employer websites and job boards, rather than relying on traditional job boards that rely on employers to post jobs.”
EmploymentCrossing.com and its industry-specific sister sites do not charge employers to post jobs.
Predictions for 2008’s Economy
The Associated Press forecasts a difficult U.S. economy in upcoming months.
”Many economists believe the U.S. economy grew at an anemic rate of about 1.5% in the final quarter of the year and that it could slow to 0.5% or less in [the first quarter] … A growing number expect a recession because of turmoil in the housing market and continuing tight credit conditions.”
However, Pensions & Investments indicated optimism for the economy in 2008.
”Money managers believe that after a rocky first half of the year, the U.S. economy and stock market will revive in the second half of 2008,” the financial newsletter reported, although it also predicted that the worst is not yet over.
”The Fed will continue to lower interest rates through the first half of the year, and more negative information likely will keep coming from banks regarding subprime exposure,” said Virginia Parker, CEO of Parker Global Strategies LLC, a hedge fund-of-funds manager based in Stamford, CT, as reported by Pensions & Investments. ”The combination of the bad news and a bit of a slowdown in the U.S. economy will continue to fuel the stock market sell-off in the first half, but we believe the market will then pick up in the last two quarters of the year.”
Nearly all money market managers interviewed by Pensions and Investments predicted that the unemployment level will remain below 5%; however, James L. Melcher, president and managing director of Balestra Capital Ltd., a New York hedge fund-of-funds manager, said that the figure is misleading because the Department of Labor statistic does not include undocumented workers, the financial newsletter reported.
The Institute for Supply Management’s Inventories Index also contracted 1.4 percentage points to 45.5% in December, the 17th consecutive month of inventory liquidation. An Inventories Index greater than 42.4%, over time, is generally an indicator of expansion in overall manufacturing inventories, according to the American Machinist.
