The positive economic news out of the U.S. continues, with the number of layoffs declining in December, while a key manufacturing index at its second-highest reading in two and a half years.
There were also gains in construction activity, with U.S. construction spending at its highest level in nearly five years in November.
The Institute for Supply Management Manufacturing index was at its lowest level in four years last May, but has rebounded ever since, with six consecutive gains through November. In December, it slipped slightly, from 57 to 57.3, but any reading above 50 signals growth.
New factory orders rising
At the same time, the new-orders sub-component rose by 0.6 points to 64.2 and inventories continued to decline, as factories look at stronger order books and a return to hiring.
“The fact that new-orders have posted gains in each of the last three months while inventories have continued to decline bodes well for future production,” TD economist Thomas Feltmate said in a note to investors.
“Taking this alongside an elevated level of backlog orders and the expectation of a gradually improving global economic backdrop, should prove supportive for the manufacturing sector as we move into 2014.”
Markit chief economist Chris Williamson said the ISM employment sub-index had its best showing in nine months, suggesting manufacturing jobs are being created at a rate of about 20,000 per month.
The U.S. Labor Department said the number of Americans seeking unemployment benefits dipped 2,000 in the last week of December, to a seasonally adjusted 339,000, evidence that layoffs are low and hiring will likely remain steady.
4.5 million jobless Americans
However, nearly 4.5 million Americans remain out of work and receiving some form of unemployment benefits in the week ending Dec. 14.
There remains concern about the long-term unemployed, including about 1.3 million people who could lose benefits this month after Congress decided not to renew an federal program that extended benefits for up to 47 weeks.
Economists predict that the benefit cutoff will cause the unemployment rate to fall by as much as a quarter of percentage point in early 2014 as those people won’t be counted as jobless. But they worry there are millions of Americans who have given up on the job search because of the protracted downturn.
In the third quarter, the U.S. economy grew at a brisk 4.1 percent annual rate, justifying the Fed’s decision in December to begin tapering its bond-buying program.
Construction spending in November increased 1 per cent to an annual rate of $934.4 billion US, the highest level since March 2009, according to the Commerce Department.
While public sector construction spending fell by 1.8 per cent, there was a jump in private construction projects of 2.2 per cent. There were strong gains in spending on both residential and nonresidential projects including factories and gas pipelines.