- The Washington Times - Thursday, January 27, 2005

ASSOCIATED PRESS

Big-ticket orders to factories shot up almost 11 percent last year, the best performance in a decade and a promising sign for beleaguered manufacturers who have lost 2.9 million jobs since mid-2000.

But the rebound in orders, while translating into higher profits for manufacturing companies, is not spurring much rehiring of laid-off workers. Businesses are boosting production with smaller work forces, analysts say.

The 10.9 percent rise in orders for all of 2004 was helped by a 0.6 percent gain in December, which followed a much bigger 1.8 percent November increase as the year ended on a strong note.

“Manufacturing came back later in this expansion than it normally does. But last year, it looks like it finally came back,” said David Wyss, chief economist at Standard & Poor’s in New York.

The annual increase in orders was the biggest since an 11.8 percent jump in 1994 in the midst of the booming economy of the 1990s. In this decade, manufacturing has fallen on hard times, seeing a plunge of 10.6 percent in orders in the recession year of 2001 and a further 1.9 percent setback in 2002. Orders rose a modest 3 percent in 2003, not enough to recoup the losses of the previous two years.

In other economic news, the Labor Department said 325,000 newly unemployed Americans filed claims for jobless benefits last week, an increase of 7,000. Claims in the previous week had fallen by the largest amount in more than three years.

Analysts were encouraged by the strong 2004 factory orders, noting they reflected in part heavy demand for business capital goods, an area that is closely watched for business plans to expand and modernize. It is this part of the economy that is expected to provide momentum for economic growth this year.

“A continued resurgence in business capital spending is critical for the manufacturing recovery in 2005,” said David Huether, chief economist for the National Association of Manufacturers.

But economists cautioned that the rebound in orders probably will not translate into a surge in hiring. Manufacturing employment’s most recent peak occurred in July 2000. Since that time, 2.9 million manufacturing jobs — one in six — have disappeared as U.S. companies have been battered by increased competition from low-wage nations.

Manufacturing employment did post a small increase of 76,000 jobs for all of last year, but that did little to make up for the heavy losses in earlier years.

One of the factors is a strong boom in productivity as U.S. companies have found ways to get more work out of their existing employees, which has meant they have been slow to rehire workers even though orders are rebounding.

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