U.S. Jobs Grow as Business Confidence Rises

The U.S. manufacturing sector showed signs of recovery in November 2024, with the S&P Global U.S. Manufacturing PMI improving to 49.7, up from October's 48.5. Though still below the neutral 50.0 threshold, the index indicates a slower contraction in the sector and offers hope for stabilization as the year closes.

Key Highlights:

1. Improved Business Optimism: Manufacturers reported increased confidence in the future, reaching the highest optimism levels in over two and a half years. This was attributed to reduced pre-election uncertainty and the incoming Trump administration's potential policies favoring economic growth and domestic industry.
2. Employment Growth: Businesses expanded their workforce in November, ending a three-month streak of job cuts. The added capacity helped firms clear backlogs of work at the fastest rate in 16 months.
3. New Orders and Demand Trends: New orders declined marginally, marking the slowest contraction in five months. However, export demand weakened, with international orders dropping at their steepest pace since June 2023. Domestically, conditions showed improvement, possibly driven by post-election stability.
4. Production Challenges: Output levels fell for the fourth consecutive month, influenced by lingering hurricane disruptions, inflation, and residual uncertainty. The decline was the steepest in nearly 18 months.
5. Cost and Pricing Dynamics: Input cost inflation eased to its slowest pace in a year, providing relief to manufacturers. However, output prices rose slightly faster, reflecting pressures from potential tariff-related costs.
6. Supply Chain Constraints: Suppliers’ delivery times lengthened, attributed to labor shortages and logistical challenges. Many manufacturers also increased input purchases to hedge against anticipated import tariffs.

Economic Implications

Chris Williamson, Chief Business Economist at S&P Global Market Intelligence, noted the optimism in the sector but emphasized the gap between current output levels and future expectations. The anticipation of stronger domestic demand and protective trade policies could drive manufacturing growth into 2025.

While challenges persist, including weak international demand and supply chain delays, the easing of domestic pressures offers cautious optimism for the sector’s recovery in the coming months.