Making good
Manufacturing rebounds as factory orders surge; hiring picks up in Nov.
By Robert Gavin, Globe Staff, 12/2/2003
Even manufacturing is getting better.
Activity in US factories surged in November to its highest level in nearly two decades as new orders poured in, and manufacturers began hiring for the first time in more than three years, according to a closely watched business survey.
The economy's hardest-hit sector also appears on the mend in Massachusetts, where manufacturers have added a small number of jobs in each of the past three months. Exports are growing at a double-digit pace, and business confidence is growing, according to government and industry reports.
"The last year has been a roller coaster," said Edward Fitzgerald, president of Fitz Machine Inc., a Wakefield machine shop that has seen business pick up enough to recall a laid-off worker and add an apprentice. "But the last couple of months, things have definitely taken an upward swing."
Manufacturers across the nation have been waiting a long time for an upward swing. But yesterday, the Institute for Supply Management -- an Arizona trade group that conducts a monthly survey of factory activity -- reported it may at last be here. The group's manufacturing index jumped to 62.8 from 57 in October, its highest reading since December 1983.
Perhaps most significantly, the report indicated that manufacturers are hiring again after 37 consecutive months of cutting payrolls, with the subindex that measures employment jumping to 51 from 47.7 in October. A reading above 50 indicates expansion; below 50 means contraction.
The surprisingly strong report added to evidence that the United States is beginning a self-sustaining recovery, sending stock markets soaring yesterday to their highest levels in more than a year. The Dow Jones industrial average rose 116.59 points, or 1.2 percent, to 9,899.05, its highest close since May 2002. The tech-heavy Nasdaq Composite index jumped 29.56, or 1.5 percent, to close at 1,989.82, its highest level since January 2002.
"It looks like we're finally getting the business sector involved in this recovery," said Nigel Gault, a US economist at Global Insight, the Waltham economics consulting firm. "They are feeling more confidence; they're spending on equipment; and they're hiring."
The strong manufacturing report is just the latest data showing the US economy growing at a torrid pace.
Also yesterday, the Commerce Department reported construction spending grew for the fifth consecutive month, accelerating to its fastest pace since the building boom ended in early 2000. Last week, it said the US economy -- as measured by the output of goods and services, or gross domestic product -- grew at its fastest pace in more than 19 years during the quarter ended Sept. 30.
Massachusetts's long-suffering manufacturing sector, which shed nearly 20 percent of its jobs during a nearly three-year downturn, also appears to be pulling out of its nose dive.
Fitzgerald, the owner of the Wakefield machine shop, said he is getting more orders from a wide range of customers, including the makers of medical devices, semiconductors, and defense-related products. In addition, said Fitzgerald, his firm of 11 employees is even getting contracts from big machine shops, an indication that they have more work than they can handle.
Haywood Schmidt, president of Littleton-based RenTec Corp., which makes components for machines for the semiconductor industry, also said more orders are coming in, leading the company to contact some laid-off workers about possibly coming back. If the orders hold up, Schmidt added, he expects the company, which employs about 60, to hire about 10 more workers next year.
"We heard a lot about things picking up before, but now it appears that it's actually happening," Schmidt said. "2004 is starting to look quite productive for us."
Indeed, yesterday's national report forecast continued strength in US manufacturing. Orders -- a leading indicator of future activity -- surged in November, with that subindex jumping 9.4 points to 73.7, also the highest reading since December 1983.
"All the external shocks were holding things down, but now we're seeing both employment and investment jump strongly," said Ian Shepherdson, chief US economist for High Frequency Economics in Valhalla, N.Y. "This is huge."
Robert Gavin can be reached at rgavin@globe.com.
Published in the Boston Globe 12-02-03
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