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Canwest News Service
NEW YORK — Drew Greenblatt has added a couple of engineers, a robot and a third production schedule to meet the jump in demand from automakers, pharmaceutical companies and other customers who use his assembly-line baskets.
"Our guys are running overtime to keep pace with the backlog," says Mr. Greenblatt, owner of Marlin Steel Wire Products in Baltimore.
The U.S. economic recovery is showing up in the unlikeliest of placesthe U.S. factory floor.
U.S. economic figures out yesterday show factories are revving up production and gearing up to start hiring again.
In a surprise sign of strength, the U.S. manufacturing sector grew in October at its fastest pace since April 2006, says the Institute for Supply Management. The ISM’s gauge of manufacturing activity jumped to 55.7 from 52.6 in September, the third consecutive monthly reading above 50, the line that divides expansion from retrenchment. Also unexpectedly, hiring plans in the beleaguered sector turned positive for the first time in more than a year.
The output boost comes after U.S. retailers, wholesalers and factories cut inventories at a record pace in the first half of the year. They’ve seen their stockpiles depleted further still as U.S. consumers have started opening up their wallets again.
"As demand for goods picks up, companies are going to have to refill their stockrooms to make the sale," said Bernard Baumohl, chief global economist with the Economic Outlook Group. "You can’t produce revenues if your stockrooms and back lots are empty or contain goods no one wants."
Some economists say they were most encouraged by the signs of hiring in the sector, which has been slashing jobs amid the downturn. The employment index surged to 53.1 from 46.2.
"In the "jobless recovery" that followed the 2001 recession, the employment index did not breach the 50-mark until November 2003, two years after the recession ended," says Nigel Gault, chief U.S. economist with IHS Global Insight. "Assuming that the current recession ended in June, it has taken just four months for the employment index to breach 50."
The quick shift could be a sign that firms need to rehire more quickly than in previous downturns because they’ve cut employment so sharply,Mr. Gault said. "If that’s right, then consumers will start to get some support from rising incomes."
While the factory data may help bolster the case that the U.S. economy is on the mend, some economists cautioned against expectations that U.S. manufacturers will start adding workers anytime soon. The boost in the data was probably caused by expected callbacks of laid-off employees and opportunities for temporary workers.
"I don’t think manufacturing employment is going to start rising until maybe the second half of next year," says Dave Huether, chief economist with the National Association of Manufacturers. "In the last few months, manufacturing employment has been trending down about 50,000 jobs. When we see the figures come out on Friday, maybe that will be cut in half."
Manufacturing still faces dark clouds, including low consumer confidence and the end of U.S. government stimulus efforts such as "Cash for Clunkers." But the signs are encouraging.
"Everyone has been in this mode of very cautious,’" says Mr. Greenblatt of Marlin Steel Wire Products. "When they buy that new technology to stay competitive, they’re doing it because they’re forced to in order to meet up with client demand. In the battle between caution and competition, they’ve got no choice but to crank it up."
Financial Post
jwhitman@nationalpost.com
