Market Insider

US Factory Growth Shows Jobs Might Be Picking Up

US manufacturing activity—as well as employment in the sector—rose to its highest level since June, joining a series of economic reports that indicates Friday’s jobs number may be better than some expect.

Unemployed Americans attend a National Career Fair
Mark Ralston | AFP | Getty Images

The growth in the ISM Manufacturing indexalso matches a global trend of improving factory activity in December from the month before. The ISM index rose to 53.9 from 52.7 in November and 50.8 in October. A reading above 50 shows economic expansion.

“I thought the details were solid. Orders were up. Inventories were down. It suggests that maybe some of the momentum in the fourth quarter will carry into the new year,” said J.P. Morgan economist Michael Feroli.

The employment component rose to 55.1 from 51.8 in November, the highest since June.

“Manufacturing might be a kind of small part of the employment picture, but it’s consistent with some of the other indicators which should show it (December employment) to be a good report,” Feroli said.

Feroli said he is currently expecting December nonfarm payrolls of 185,000, above the consensus 150,000. The report is released Friday morning.

Pierpont Securities Chief Economist Stephen Stanley said while he does not see the employment component of the ISM to be that predictive of jobs, he does see the improvement in the index as a measure that could reflect a better hiring environment.

“There’ve been a lot of encouraging signs over the last month or two. Claims numbers are lower, certainly. The confidence board indicators are better. That’s something people look at, and it just seems anecdotally that things are getting better,” Stanley said. “I think there’s every indication the jobs market is improving.”

He said he forecast nonfarm payrolls at 135,000 at December but expects to revise up his preliminary number.

“I don’t expect any explosion in hiring over the next couple of months, but I think we’ll keep looking at incremental gains,” he said.

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