Manufacturing activity in the United States improved in January.
New numbers released by the Institute of Supply Management, formerly known as the National Association of Purchasing Management, show its index of business activity rose to 49.9 in January from a revised 48.1 percent in December. Analysts had been expecting a reading of 50.
The number marks the 18th straight month the index has read below 50, which indicates manufacturing activity in the country is contracting. While a reading above 50 indicates expansion, the last time that happened was July 2000.
ISM’s Production Index, a gauge of demand for factory goods in the pipeline,
stood at 52, while the New Orders Index registered 55.3 and the Export Orders Index came in at 50.8. The Employment Index and Inventories Index both improved but remain below 50.
Earlier reports had put December shipments and production close to unchanged from November. The implication for freight tonnage is that some very modest growth may be under way already in the winter quarter.
Meantime on Friday, the U.S. Labor Department reported U.S. unemployment fell 89,000 jobs in January, all in manufacturing, as the unemployment rate dropped from 5.8% to 5.6%.
The real unemployment rate is currently obscured by seasonality problems and differences between the employment surveys of businesses and of households. It did not get significantly easier to find a job in January.
The latest job loss was less than the 130,000 jobs lost in December. 89,000 lost jobs in manufacturing is approximately how much employment would be expected to drop monthly with steady production and continued strong productivity gains. It is likely that manufacturing production and freight will rise in the next few months while employment continues to fall at a slowing pace.
Total wages paid fell 2.5% in January with hours off 0.4% and wage rates down 2.1%. This is not a good sign for first quarter consumption. Hopefully, this is a false alarm because most of it was due to a production cutback in motor vehicles that is not likely to fall further this winter.