Manufacturing is still in recession

We got the two big data points on US manufacturing during January on Monday.

They both showed that new orders from American manufacturers picked up last month while job gains slowed.

And overall, the sector is still in recession.

Markit Economics’ purchasing manager’s index (PMI) rose from a 38-month low to 52.4 and missed economists’ forecasts for 52.7.

The release showed that while business conditions in the sector improved, the pace of job creation slowed to a rate not seen through all of 2015, indicating that employers are still worried about the future.

Manufacturing has been under pressure for several months, as the strong dollar made US goods less attractive, global demand weakened, and capital spending in the energy sector collapsed.

Markit chief economist Chris Williamson wrote in the release: “Despite picking up slightly, the January PMI reading is one of the worst seen over the past two years, highlighting the ongoing plight of the manufacturing sector. One bright light appeared, in that order book growth picked up, led by an upturn in domestic demand.”

ISM Manufacturing

The Institute of Supply Management’s PMI shrank for a fourth straight month and came in at 48.2, versus 48.5 expected.

Any headline reading below 50 is in contractionary territory, and prints under 45 are historically associated with recessions.

There was a notable increase in the new orders index by 2.7 percentage points to 51.5 from 48.8. Like Markit’s reading, ISM’s employment gauge fell, to 45.9 from 48.

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