WRAPUP 4-US manufacturing grows in Aug, private jobs tumble

* Manufacturing index rises to 56.3 in August

* ADP shows surprise 10,000 drop in private employment

* ADP bodes ill for Friday’s nonfarm payrolls report

* Construction spending falls 1 pct, hits 10-year low
(Updates with comments from ISM chairman)

By Lucia Mutikani and Burton Frierson

NEW YORK, Sept 1 (BestGrowthStock) – The U.S. manufacturing sector
grew faster than expected in August but private employers
unexpectedly cut jobs, showing the economic recovery still
faces major headwinds.

The 13th straight month of manufacturing expansion calmed
fears U.S. economic growth was stagnating. The jobs data, and a
report construction spending hit a 10-year low in July, kept
alive concerns the economy could dip back into recession.

“We’re in the middle of what is typically a growth scare,
where the economic cycle slows down after an initial run up as
stimulus fades and we transition from stimulus to having the
economy standing on its own,” said Jason Pride, director of
investment strategy at Glenmede Investment and Wealth
Management in Philadelphia.

“Nevertheless, our expectation is that we don’t have an
economic double-dip, though we recognize that the risks of
something like that are a lot higher now that we’re closer to
zero on the growth rate.”

The Institute for Supply Management said its index of
national factory activity rose to 56.3 from 55.5 in July. That
was above financial market expectations for 53.0. A reading
above 50 indicates expansion in the sector.

Separately, the private sector cut 10,000 jobs in August
compared to a gain of 37,000 in July, ADP Employer Services

U.S. stock indexes rallied on the manufacturing report,
while prices for safe-haven government debt fell. The U.S.
dollar rose versus the yen.


For a graphic on U.S. private employment, click on:


For a graphic on U.S. planned layoffs:


For a graphic on U.S. mortgages:


For a graphic on global manufacturing:




The government is expected to report on Friday that nonfarm
payrolls dropped 100,000 in August, the third straight month of
job declines, while private sector employment increased only
41,000, according to a Reuters survey. [ID:nN31235915]

Last month, second quarter gross domestic product data
showed the economic recovery slowing as the boost from an $814
billion government stimulus package and business inventories
rebuilding fade.

But manufacturing, which has been leading the recovery, is
still showing some strength and has expanded every month since
August 2009.

“Over the first half of the year we saw much stronger
growth on average, now we’re seeing things plateau, but
certainly there’s no sign of a double dip in manufacturing,”
said Norbert Ore, chairman of the ISM manufacturing business
survey committee.

The manufacturing sector added jobs in August, according to
ISM, though Ore said pace of hiring remains fairly slow.

“We lost a lot of jobs in the manufacturing sector and
replacing them is very slow,” he said.

Departing White House economist Christina Romer called on
Wednesday for further steps to stimulate the U.S. economy,
saying high budget deficits should not be an excuse for
allowing the unemployed to suffer. [ID:nN01106363]

“We have tools that would bring unemployment down without
worsening our long-run fiscal outlook, if we can only find the
will and the wisdom to use them,” Romer said in excerpts from a
speech she will deliver later at the National Press Club.

The ADP report on private payrolls followed the Challenger
report, which showed the number of planned layoffs at U.S.
firms fell 17 percent in August from the prior month.

Employers announced 34,768 planned job cuts last month,
down from 41,676 in July, outplacement consultancy Challenger,
Gray & Christmas, Inc. said.

It was the first month-on-month decline since April, when
planned job losses had hit a seven-year low, and the lowest
level since June 2000.

Though plans for layoffs are down, however, that still
might not mean that hiring is at the top of companies’ agenda.

“I think it’s pretty clear what’s happened is firing has
stopped — we’re not losing jobs at the disheartening pace we
were a year-and-a-half ago — but widespread hiring has really
not begun,” said Joel Prakken, chairman of Macroeconomic
Advisers LLC.

Economists often refer to the ADP report to fine-tune their
expectations for the payrolls numbers, though it is not always
accurate in predicting the outcome.

In any case, the grim quality of the jobs data is likely to
rekindle debate on how to get more people back to work, with
the unemployment rate still high at 9.5 percent and expected to
rise to 9.6 percent with Friday’s report for August.

A third report on Wednesday showed construction spending
dropped 1.0 percent to an annual rate of $805.2 billion, the
lowest since July 2000. June’s construction outlays were
revised down to show a 0.8 percent fall, instead of the
previously reported 0.1 percent gain.

In other data on Wednesday, U.S. mortgage applications for
home purchasing and refinancing increased last week as interest
rates hit a new low, a glimmer of hope for a housing market
that has failed to find footing in the absence of government

(Additional reporting by Steven C Johnson, Leah Schnurr,
Edward Krudy and Ryan Vlastelica in New York; Editing by Andrew

WRAPUP 4-US manufacturing grows in Aug, private jobs tumble