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Thu, Jul 03, 2003 - Page 12 News List

US indicators encourage recovery hope

READY, SET, GO!A recent battery of economic reports in the US are indicative of the belief by many analysts that the world's largest economy is poised for recovery


Factories and the jobs market, the grimmest areas of the US economy, may be ready to emerge from a long slump, analysts said Tuesday after the release of two industry surveys.

Manufacturing activity did shrink last month despite signs of a tentative recovery in the overall US economy, said a survey by the Institute for Supply Management.

Its purchasing managers' index, based on a survey of supply executives, rose by a smaller-than-expected margin to 49.8 points last month from 49.4 points in May.

Any reading below 50 points indicates an industry contraction.

But the pace of the slide was clearly slowing, and a breakdown of the data showed new orders, production and new export orders rising at a faster pace than in May.

"The improved showing of the new orders, production, and new export orders indexes is encouraging as it appears that manufacturing is positioned for a recovery in the second half," said the survey chief, Norbert Ore.

Manufacturers shed more jobs, but they cut at a slower rate, the institute's survey showed.

"It seems like small steps on the road to recovery are finally being taken by the nation's manufacturing sector," said Naroff Economic Advisors president Joel Naroff.

"I don't think many people really expect the manufacturing sector to be the economy's leading light any time soon. However, it would be nice if it were not constraining the economy so significantly. That seems to be the situation that is developing," Naroff said.

A weaker dollar seemed to be helping with exports, he said.

Wells Fargo Banks chief economist Sung Won Sohn agreed that the rise in new orders was encouraging.

"Employment is making strides in the right direction," Sohn added.

"All of this indicates the manufacturing sector is poised for a rebound, although it will probably be a more gradual process rather than a surge," he said.

A separate, private survey showed US companies generally eased back on job cutting in June, with announced layoffs at their lowest level since November 2000.

Planned workforce reductions declined to 59,715, 13 percent lower than the 68,623 announced in May, the outplacement firm Challenger Gray and Christmas said.

The survey provides some evidence that the massive cutting of jobs over the past two years was easing. But the firm said it did not necessarily mean growth in jobs is coming.

Economists have been closely watching the labor market because although the US economy is growing, the pace is too slow to stem the decline in jobs. Higher unemployment could crimp the fragile recovery and eventually push the US economy into recession.

"The decline in job cuts is, of course, good news for workers who might begin to sleep a little easier at night. However, it does not necessarily mean an immediate rebound for the millions of people who remain jobless," said John Challenger, chief executive of the firm.

"The slowdown in job cuts may actually bring a slowdown in hiring. Evidence of the slowdown in hiring can be found in announced government figures through May that showed 1,930,000 unemployed for 27 weeks or more," Challenger said.

"The fall in job cuts may mean that employers are simply staying with the workers they have, resulting in a stagnant job market," he said.

US unemployment numbers for the whole of June are scheduled to be released Thursday. The unemployment rate hit a nine-year high of 6.1 percent in May as businesses axed 17,000 jobs.

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