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As a subscriber you can listen to articles at work, in the car, or while you work out. Subscribe NowThe U.S. manufacturing downturn deepened last month, fueled by a further pullback in orders and factory production.
The Institute for Supply Management’s gauge of factory activity fell for a fifth straight month in January to 47.4, the weakest since May 2020 and less than the median estimate in a Bloomberg survey of economists. Readings below 50 indicate contraction.
The latest data—released Wednesday—underscores how a combination of rising interest rates, waning demand for merchandise, and economic uncertainty are weighing on factory activity.
The ISM gauges of both orders and production slipped further into contraction territory in January, also falling to their lowest levels since mid-2020.
Fifteen manufacturing industries reported contraction last month, led by wood products, textiles, paper products and furniture. Only two—miscellaneous manufacturing and transportation equipment—reported growth.
Meanwhile, the snarled supply chains that haunted factories in recent years continue to improve. That, paired with moderating demand both at home and abroad, has helped alleviate backlogs and shorten delivery times.
The reading “reflects companies slowing outputs to better match demand in the first half of 2023 and prepare for growth in the second half of the year,” Timothy Fiore, chair of ISM’s Manufacturing Business Survey Committee, said in a statement.
On Tuesday, heavy-equipment maker Caterpillar posted lower-than-expected quarterly profit and said that sales in China will be softer this year.
The ISM’s measure of prices paid for materials increased for the first time in nearly a year, to 44.5. However, the figure still suggests easing inflationary pressures.
The employment measure indicated a modest increase in head count in the month. That’s consistent with economists’ median forecast of 6,000 more manufacturing jobs in Friday’s employment report. Across the economy, forecasters predict payrolls increased by 190,000 in January.
“Panelists’ companies are indicating that they are not going to substantially reduce head counts as they are positive about the second half of the year,” Fiore said.
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So the reaction is not to layoff workers, or very few. Seems they know the worker shortage is a bigger issue than most believe. The larger companies layoffs are marketing related, cloud pushers. Tech workers are fine. Goldman types always layoff when it slows, again sales types. So dump over the staffed at higher salary and then hire from a more depressed pool of people
needing work.