Economy Today

Private-sector jobs in the U.S. fell by 84,000 in December, the smallest drop since March 2008, and service providers added jobs, according to a national employment report published Wednesday by payroll company Automatic Data Processing Inc. and consultancy Macroeconomic Advisers.

Separately, the U.S. nonmanufacturing sector expanded in December, but barely, according to data released Wednesday by the Institute for Supply Management.

The ADP loss is slightly below the 90,000 drop projected by economists in a Dow Jones Newswires survey. The estimated change of employment from October to November was revised by 24,000, from a decline of 169,000 to a decline of 145,000.
More

* Econ: Will We See Job Growth Friday?

“We’re clearly moving now in the right direction,” said Joel Prakken, chairman of Macroeconomic Advisers, which compiles the survey for ADP. He expects payrolls to turn positive in the first quarter and gain strength in second half.

The ADP survey tallies only private-sector jobs, while the Bureau of Labor Statistics’ nonfarm payroll data, to be released Friday, include government workers.

Economists surveyed by Dow Jones expect the BLS will report December payrolls fell by only 10,000, following the 11,000 jobs lost in November. The expected December loss would be the best showing for the labor markets since December 2007, when jobs grew 120,000.

The December unemployment rate is projected to edge up to 10.1% from 10.0%. Friday’s report will include benchmark revisions to the household survey which includes the unemployment rate. Macroeconomic Advisers projects the jobless rate will peak above 10% in the first quarter and fall only slowly, remaining above 9% by end-2010.

The latest ADP report showed large businesses with 500 employees or more shed 34,000 jobs and medium-size businesses lost 25,000 workers in December. Small businesses that employ fewer than 50 workers cut 25,000 jobs.
Journal Community

* discuss

“ I think at this point in the recovery companies should start hiring while wages are depressed. If they wait too long to hire, the same employee they could hire now could cost them $2 or $3 more per hour as wage inflation picks up. ”

— Ralph Zuniga

Service-sector jobs added jobs, by 12,000, the first increase since March 2008, while factory jobs dropped 43,000.

Mr. Prakken pointed out that the losses in both factory and construction jobs in December were worse than in November, highlighting the unevenness in hiring.

“You want to see cyclical components in employment rising to feel very secure about the durability of the recovery,” he said.

Mr. Prakken also said nonfarm payrolls in the first half will be skewed by government hiring of workers for the 2010 U.S. Census.

ADP, of Roseland, N.J., said it processes payments of one in six U.S. workers, while Macroeconomic Advisers, based in St. Louis, is an economic-consulting firm.

In another Wednesday job report, outplacement firm Challenger, Gray & Christmas said that the number of layoffs announced by U.S. companies in December totaled 45,094, down 10% from November. It was the lowest reading since December 2007, the starting date of the recession.
Services Sector Expands Slightly

The ISM’s nonmanufacturing purchasing managers’ index rose to 50.1 last month, from 48.7 in November. The December index was slightly below the 50.5 expected by forecasters surveyed by Dow Jones Newswires. Readings above 50 indicate expanding activity.

The ISM said its December business activity/production index rose to 53.7 last month from 49.6. The new-orders index slipped to 52.1 from 55.1 in November.

The ISM report is comprised mainly of comments from service-sector companies that make up the bulk of the U.S. economy. It follows Monday’s ISM report on manufacturing that showed an accelerating expansion in the factory sector, led by a large jump in new orders and production.

Importantly, the employment index edged up to 44.0 last month from 41.6 in November. The ISM’s read on employment is not quite as optimistic as the ADP jobs survey released Wednesday that showed service-providers added 12,000 jobs in December.

Inventories, a key sector expected to have added to economic growth in the fourth quarter, showed an increase. The inventory index rose to 51.5 in December, from 45.5 in November.

Price pressures edged even higher. The December prices index rose to 58.7, from 57.8 in November. (Source: WSJ)

On the year’s first day of trading, the Dow Jones Industrial Average was up 154 points, or 1.5%, at 10580 shortly before midday. Cisco Systems led the measure, up 3.6%. Alcoa climbed 3.5%. One of the few components in the red, Walt Disney eased 0.3%.

The tech-heavy Nasdaq Composite rose 1.8%. The Standard & Poor’s 500-share index climbed 1.5% as all of its sectors rose. The materials and energy sectors led, boosted by rising commodities prices.

Reasserting a pattern that trailed off at year’s end, U.S. stocks climbed as the dollar fell. The U.S. Dollar Index, which represents the greenback against a basket of six other currencies, dropped 0.5%. A cold snap in the northern U.S. helped to push oil prices back above $81 per barrel level for the first time in two months on Monday. Crude oil futures were recently up $2.09 to $81.45 per barrel on the New York Mercantile Exchange. Meanwhile, gold futures rose to a two-week high, boosted by strong economic data from China.
Markets Data Center

The Dow’s climb was strengthened Monday by data from the Institute for Supply Management showing a bigger-than-expected uptick in manufacturing activity during December, helped by improving production and ordering activity.

The ISM’s manufacturing purchasing managers’ index rose to 55.9 last month, from 53.6 in November. December’s reading was above the 54.0 forecasted by economists surveyed by Dow Jones Newswires.

“You’ve got a lot of the economic data working in the right direction, plus there is a lot of money being put to work to start the year,” said strategist Bruce Bittles, of R.W. Baird & Co. “That said, I think this is going to be a difficult market in which to make money in the longer term. Everything is in such a delicate state,” following a red-hot rally over the last three quarters of 2009 that included many early bets on recovery.

Echoing a widespread sentiment on Wall Street, Mr. Bittles said he expects the market to rack up a nice gain early in the year but then experience turbulence later as the threats of inflation and possible Federal Reserve rate hikes to fight it become more imminent. Over the weekend, Fed officials played down the idea of lifting its easy-money policy in early 2010, though Chairman Ben Bernanke said the Fed needs to “remain open” to raising rates to avert or pop future asset bubbles.

Mr. Bittles said a move in the 10-year Treasury yield above 4.25% would be a warning signal. In recent action, the yield stood at 3.813%, about 0.43 percentage point shy of his target.

After weeks of light volume, trading picked up intensity on Monday, with investors pushing up stocks as the dollar fell.

“The landscape we face right now is not all that different from the landscape we faced eight months ago when the weak dollar trade was in full force,” said Michael Church, president of Addison Capital. “It’s still a very low-interest-rate environment with a sluggish economy.”

Investors will be watching the stock market’s movement this month closely, as January performance tends to be a bellwether for the year to come. January was a weak month for stocks in both 2008 and 2009, though last year’s rally from its March lows helped the Dow close up 19% for the year.

Among stocks in focus, Alcon dropped 6.5% recently after Novartis AG offered to buy out minority holders of the eye-care firm for $11.2 billion. Meanwhile, Chesapeake Energy climbed 6.5% after it inked a $2.25 billion pact with Total S.A. to sell a 25% stake in Barnett shale gas assets.  (Source: WSJ)

Facing a $21 billion shortfall through June 2011, California leaders want billions of dollars in budget relief from Washington that could head off deep cuts expected to state programs.

Gov. Arnold Schwarzenegger will ask the White House to waive rules that require the state to spend its own money on certain programs to receive federal funds, according to California officials briefed on the Republican’s coming budget proposal.

Such relief, combined with additional stimulus funds, could save the state as much as $8 billion in the next 18 months, the officials said.

State Senate President Darrell Steinberg, a Democrat, will visit Washington in coming months to lobby Obama administration officials and the California congressional delegation for aid. His message: The national economy will depend on California’s recovery.

Messrs. Schwarzenegger and Steinberg will also use a longstanding argument that the state sends more tax dollars to Washington than it receives in return.

“Under President Clinton, we got 94 cents back on every dollar we sent,” said gubernatorial spokesman Aaron McLear, citing data compiled by the nonpartisan Tax Foundation. “Now it’s 78 cents on every dollar. It makes no sense that California should be subsidizing programs in other states.”

The state has a fairly good chance of receiving additional federal assistance, especially from what remains in the stimulus package, said Barbara O’Connor, director of the Institute for the Study of Politics and Media at California State University, Sacramento. California has “a fairly persuasive case as to why we deserve it now,” she said.

Arturo Perez, a fiscal analyst with the National Conference of State Legislatures, said states’ requests for waivers on federally mandated spending are common, especially when states face budget deficits. Federal departments usually handle the requests; some are approved, though many are denied, Mr. Perez said.

The governor once dubbed himself the “Collectinator” for his efforts to get more federal money. He has made his case to President Barack Obama and cabinet secretaries this year. “You can expect even more of that this coming year,” Mr. McLear said.

The White House said it hadn’t received a formal request from Mr. Schwarzenegger for such assistance.

“We understand the difficult situation that many states, cities and towns face,” said Kenneth Baer, spokesman at the White House Office of Management and Budget. He cited $144 billion in state and local fiscal relief included in the stimulus package.

Mr. Schwarzenegger last week sent a letter to House Speaker Nancy Pelosi and the rest of the California congressional delegation, saying the proposed national health-care overhaul would cost the state $3 billion to $4 billion a year.

Even with federal assistance, state leaders face a formidable task in closing the $21 billion gap in the $85 billion general-fund budget over the next 18 months. Lawmakers struggled to close a cumulative $60 billion budget shortfall this year by raising taxes, cutting spending and using one-time accounting gimmicks and federal stimulus funds.

Mr. Schwarzenegger’s budget proposal will contain no new taxes, the officials briefed on the plan said. Instead, he will propose cutting $1.6 billion from state-worker compensation by continuing furloughs.

The governor will also propose repealing corporate tax breaks passed this year and tapping the coffers of local transit agencies for $1 billion. He also plans to resurrect a proposal to use existing infrastructure to drill for oil off the Santa Barbara coast to generate $200 million in revenue annually.

If the state doesn’t receive federal aid, health and welfare programs could be eliminated, the officials said.

Mr. McLear, the governor’s spokesman, declined to comment on the budget proposal, which is scheduled to be released Jan. 8.  (Source: WSJ)

Homes are selling at their fastest clip in nearly three years, the unemployment rate is falling and stocks are up 66 percent since their March lows - the best performance since the 1930s.

What’s not to like?

Plenty, according to Mohamed El-Erian, chief executive of giant bond manager Pimco. The investor says the recovery may be gaining steam but is no different than a kid who eats too much candy at one of the birthday parties his 6-year-old daughter attends.

“We’re on a sugar high,” El-Erian says. “It feels good for a while but is unsustainable.”

His point: This burst of economic activity fed by government spending and near-zero interest rates will soon peter out.

As CEO at Newport Beach, Calif.-based Pimco, El-Erian, 51, oversees nearly $1 trillion in assets, more than the gross domestic product of most countries. So when he talks, people listen.

What he’s saying now:
Story continues below

_Stocks will drop 10 percent in the space of three or four weeks, bringing the Standard & Poor’s 500 index below 1,000 - though he’s not predicting when.  (Source: AP)

Shares of mortgage-finance giants Fannie Mae and Freddie Mac were up nearly 20% in early trading Monday as investors reacted to news the U.S. Treasury Department will provide as much assistance as the companies need over the next three years.

On Christmas Eve, the Treasury said it lifted the cap on aid to Fannie (NYSE:FNM) and Freddie (NYSE:FRE) , which were placed into government conservatorship in 2008.
The Treasury said it will amend the terms of its agreements with Fannie and Freddie “to support their ongoing stability.” Amending the agreements “should leave no uncertainty about the Treasury’s commitment to support these firms as they continue to play a vital role in the housing market during this current crisis,” it said in a statement last Thursday. Read previous story on the Treasury announcement.

The overall financial sector was quiet to start the week as the Financial Select Sector SPDR Fund (NYSE:XLF) rose fractionally. The exchange-traded fund is up about 16% for the year-to-date period.

Shares of First Chester County Corp. (NASDAQ:FCEC) rose more than 70% at last check. The company early Monday said it has agreed to be acquired by Tower Bancorp Inc. (NASDAQ:TOBC) in an all-stock transaction pegged at about $65 million, or $10.22 a share.

The deal is expected to close in the second quarter of 2010, pending regulatory and shareholder approval, the companies said. According to the terms of the deal, each First Chester shareholder will receive 0.453 shares of Tower common stock for each First Chester share, although the exchange ratio is subject to upward or downward adjustment if loan delinquencies at First Chester increase or decrease beyond specified amounts.  (Source: MarketWatch)

Gold futures fell sharply Monday to settle below $1,100 for the first time since early last month, following a now-familiar pattern of losing ground when the dollar strengthens.

Investors are moving into the dollar amid signs of economic recovery and expectations that the Federal Reserve could hike rates sooner than previously anticipated. Gold hit a series of record highs last month as the dollar weakened, benefiting from an easy money policy of rates near zero, but the metal has fallen 10% since its record high on Dec. 3.

Benchmark February gold futures fell $15.50, or nearly 1.4%, on Monday to settle at $1,096 an ounce on the Comex division of the New York Mercantile Exchange. The thinly traded nearby December contract lost $15.40 to settle at $1,095.40. Gold last settled below $1,100 on Nov. 6.

Shortly after gold closed, the ICE Futures U.S. Dollar Index was up 0.216 point at 77.987 points.

Comments from Chicago Federal Reserve President Charles Evans contributed to the dollar’s rise. Evans said in an interview with CNBC that Fed officials will give rate increases closer consideration in three to four meetings.

A rate increase would begin to soak up some of the emergency liquidity pumped into financial markets, supporting the dollar and pressuring gold prices.

“Expectations have been rising that the Fed would raise rates in the middle of next year,” said Carlos Sanchez, associate director of research with CPM Group.

Evans also said that low inflation and “anchored” inflation expectations, coupled with economic slack, argue for the Fed to continue to maintain its zero-percent interest rate policy and asset market interventions.

George Gero, vice president with RBC Capital Markets Global Futures, said the comments about low inflation contributed some pressure to gold.

In addition to trading as a so-called risk play recently, luring short-term speculators looking to ride the rally, the metal continues to be viewed by some as an inflation hedge. That means that low inflation or expectations of such can be a bearish environment for gold.

Stephen Platt, analyst with Archer Financial Services, said some of the pressure on gold Monday was coming as investors were seeking a safer play in the dollar.

The metal, traditionally considered a safe haven during times of turbulence, turned into more of a risk play over the past few months, lumped in with a group of assets, such as stocks and other commodities, that could bring in higher returns than the dollar. As risk tolerance has ebbed this month, the dollar has lured the safe haven flows and gold has faltered.

Further, dollar-denominated assets like gold often trade inversely to the greenback because dollar movements make them more or less expensive for those using other currencies.

Some of gold’s volatility can be attributed to lowered liquidity because of the holidays. That market thinness meant pre-placed sell orders were easily triggered as the dollar rose.

Platt said silver prices followed gold lower. Comex March silver fell 28.5 cents to settle at $17.035 an ounce.

Platinum group metals also faltered with gold, with Nymex April platinum falling $5.90 to settle at $1,428.60 and March palladium on the exchange dipping $2.50 to finish at $365.40 an ounce.

Some trading congestion amid the rollover from January to April contracts was easing, also removing some support from platinum prices, Sanchez said.  (Source: WSJ)

Two more loss-battered Southern California banks were shut down by regulators Friday and immediately sold to two of the largest financial institutions based in the region.

Stung by defaults on tricky adjustable mortgages, 80-year-old First Federal Bank of California was closed by federal savings and loan regulators, with its 39 branches to reopen today as part of OneWest Bank.

Pasadena-based OneWest, created early this year from the ashes of collapsed home lender IndyMac Bank, agreed to assume all of First Federal’s deposits, so no customers will lose money, the Federal Deposit Insurance Corp. said.

In Friday’s other California failure, Imperial Capital Bank of La Jolla, rocked by troubled loans for apartments and commercial mortgages, was dealt off by the FDIC to City National Bank of Los Angeles, which is emerging as one of the survivors of the banking industry’s near-meltdown.

Like OneWest, City National agreed to assume all of the acquired bank’s deposits, even amounts that exceeded the FDIC’s caps on insurance coverage.

Imperial Capital’s nine branches — six in California, one in Maryland and two in Nevada — are to reopen Monday as City National offices.

City National was the largest commercial bank with headquarters in Southern California until Pasadena’s East West Bank agreed last month to take over a failed rival in the Chinese American niche, San Francisco’s United Commercial Bank. That deal beefed up East West, giving it $19 billion in assets to City National’s $18 billion.

The latest combinations gives City National more than $21 billion in assets and OneWest about $24 billion, although such comparisons matter little given the fact that the acquirers will have to spend much of their time downsizing by working through portfolios of distressed loans. Indeed, OneWest’s balance sheet is still stuffed with IndyMac loans that had been targeted for sale before the private market for mortgages dried up, although the FDIC is sharing losses on those loans.

The failures bring to 140 the number of U.S. banks that have gone under this year as many loans made during the housing boom earlier this decade have soured.

Of California’s 16 bank failures this year, First Federal and Imperial Capital rank No. 3 and No. 4, respectively, based on total assets.

OneWest is owned by a group of private equity investors that teamed up this year to buy IndyMac Bank from the FDIC months after the Pasadena thrift failed under the weight of defaults on lightly documented loans. The investors had said they hoped to buy nearby banks that also had run into problems with residential mortgages.

First Federal, a savings and loan originally based in Santa Monica, fit that description, having booked $547 million in losses over the last seven quarters on so-called pay-option adjustable-rate mortgages. Such loans, also known as option ARMs, allowed borrowers to pay so little each month that their loan balances could increase.

Babette Heimbuch, chief executive of First Federal and its parent company, FirstFed Financial Corp., tendered her resignation last week. The S&L had $6.1 billion in total assets and $4.5 billion in deposits as of Sept. 30.

In addition to assuming all of the deposits of the failed bank, OneWest agreed to purchase essentially all of the assets, with the FDIC absorbing some of the losses on them.

OneWest also announced that it would join in what is becoming an industry-wide moratorium on home foreclosures during the holiday season.

City National, which recently moved its headquarters from Beverly Hills to Los Angeles, serves mostly wealthy individuals and small businesses. It has remained well-capitalized despite recent losses on construction and commercial lending.

Imperial Capital, with $4 billion in assets and $2.2 billion in deposits, failed to meet a Dec. 14 deadline set by state regulators to raise $200 million in capital. It had lost $112 million in the first three quarters of this year.

City National is taking on about $3.4 billion of Imperial Capital’s assets. The FDIC agreed to assume a portion of future losses on those assets. The agency said it would keep the remainder of Imperial Capital’s portfolio for now.

“Imperial Capital Bank is a very good fit for City National, given that eight of its nine locations are in communities we serve,” Russell Goldsmith, chief executive of the bank and its parent company, City National Corp., said in a statement.

Because some of Imperial Capital’s branches are close to City National locations, Goldsmith said he expected that some branches would be closed. But others, such as Imperial’s San Francisco site, will be added to City National’s existing 64-branch network, he said.

“We haven’t made any final determinations yet,” he said.

Neither acquiring bank released details about layoffs, which normally follow bank mergers because they tend to create overlap not only in the branches but also in back-office operations.

City National said it would keep Imperial Capital’s 140 employees on the payroll, with health benefits, through the holidays while studying the issue.

The failure of First Federal is expected to cost the deposit insurance fund $146.3 million. Losses on Imperial Capital’s failure were estimated at $619.2 million.

Earlier Friday, regulators closed five banks in other states: RockBridge Commercial Bank in Atlanta; New South Federal Savings Bank of Irondale, Ala.; People’s First Community Bank of Panama City, Fla.; Independent Bankers’ Bank of Springfield, Ill.; and Citizens State Bank, New Baltimore, Mich. (Source: LATimes)

Former Federal Reserve Chairman Alan Greenspan said in prepared testimony the threat to U.S. fiscal stability is larger than ever, mostly because of rising medical costs.

Averting a situation where the U.S. struggles to finance unprecedented budget deficits “is more urgent than at any time in our history,” he said in testimony Thursday before the Senate Committee on Homeland Security and Governmental Affairs.

Mr. Greenspan argued that the problem of large projected shortfalls in Medicare and Medicaid can’t be wiped away with more appropriations from Congress. “It is a physical resource crisis,” he argued, which will suck more of the U.S. labor force and capital investment into the medical sector.

“A dollar of the nation’s scarce savings employed to finance a new medical technology investment is a dollar not available to fund other critical, non-medical, cutting-edge technologies that enhance our material wellbeing,” he said.

The hearing comes amid growing unease on Capitol Hill over the budget gap, which reached $1.4 trillion in fiscal year 2009. The House on Wednesday approved a short-term $290 billion extension in the debt limit, after leadership scrapped an earlier plan to approve a $1.8 trillion increase to support the government through 2010. The decision was made after the larger increase appeared unlikely to gain enough support in the Senate.

Sens. Kent Conrad (D., N.D.) and Judd Gregg (R., N.H.) testified before the panel about their legislation to establish a bipartisan task force comprised of members of Congress and the Treasury secretary. The task force would propose recommendations for reining in the deficit that would receive fast-track consideration in the House and Senate. (Source: WSJ)

Gold futures are gaining after strong euro-zone economic data, while participants wait to see whether the U.S. Federal Reserve will issue a hawkish interest rate statement Wednesday.

In recent trading, benchmark gold futures for February delivery were up $8.80 at $1,131.80 an ounce on the Comex division of the New York Mercantile Exchange.

View Full Image
gold1216
Bloomberg News
gold1216
gold1216

The euro was up after the euro-zone purchasing manager composite index in December jumped to a 26-month high of 54.2. Meanwhile, the dollar was slipping against its major rivals, reflecting less certainty in the market that the Federal Open Market Committee will deliver a more hawkish statement.

The dollar pared some of these losses after U.S. consumer price data was in line with analysts’ estimates.

While the U.S. central bank is widely expected to reiterate its commitment to keeping rates low for “an extended period,” the wording of the statement accompanying the decision — expected around 2:15 p.m. ET — will be key for gold and other commodities.

Increasing optimism about the U.S. economic recovery, especially after strong jobs numbers, has led some to think the Federal Reserve may in 2010 raise benchmark interest rates from near-zero levels sooner than previously expected.

“Although rates are unlikely to be changed this time, the accompanying statement will be scrutinized for signs of when the stimulus measures may be withdrawn, particularly coming on the back of improving payroll numbers,” said Standard Bank analyst Leon Westgate.

Anything indicating the Fed will move sooner to sponge up liquidity from the market would likely boost the U.S. dollar, pressuring gold.

While the metal often trades inversely with the dollar as a greenback hedge, this relationship has particularly ratcheted up in recent weeks — sending gold to a record above $1,200 last month — as gold has traded as a risk asset and the dollar as a safe-haven.

Gold remained higher Wednesday morning as data showed U.S. consumer prices rose in line with analyst expectations in November. Gold is often bought as a hedge against rising prices.

Driven by increasing energy costs, the seasonally adjusted consumer price index rose 0.4% in November, the Labor Department said Wednesday. The core CPI, which strips out volatile food and energy prices, was unchanged after rising 0.2% in October. Economists had expected November CPI would climb by 0.4% and projected the core figure would rise by 0.1%. (Source: WSJ)

Factories in the New York region unexpectedly expanded at the slowest pace in five months in December, indicating manufacturing may provide less of a thrust for the economy in coming months.

The Federal Reserve Bank of New York’s general economic index fell to 2.6 from 23.5 in November, the bank said today. Readings above zero signal manufacturing expansion in the state and parts of New Jersey and Connecticut. In October, the index jumped to 34.6, the highest since May 2004.

Measures of orders, sales and employment all declined during the month, pointing to an uneven pace of expansion in manufacturing, which led the U.S. out of the worst recession since the 1930s. Companies may be limiting orders to ensure the progress they’ve made in paring inventories this year.

“The pace of manufacturing-sector improvement has slowed noticeably,” Guy LeBas, chief fixed-income strategist at Janney Montgomery Scott LLC in Philadelphia, said before the report. “Production conditions are now more in equilibrium.”

Futures on the Standard & Poor’s 500 index extended declines after the report, falling 0.5 percent to 1,102.6 at 8:41 a.m. in New York.

Wholesale prices in the U.S. increased more than anticipated in November, led by a jump in fuel costs and a rebound in truck prices, a separate report from the Labor Department showed today.

The 1.8 percent increase in prices paid to factories, farmers and other producers was more than twice as large as anticipated and followed a 0.3 percent gain in October.

Fed Meeting

Fed policy makers, who begin a two-day meeting today, will keep their benchmark interest rate close to zero to bolster the economic recovery, according to the median of 97 economists in a Bloomberg News survey.

Economists forecast the New York Fed’s index would increase to 24, according to the median of 55 projections in a Bloomberg survey. Estimates ranged from 15.6 to 30. Manufacturers account for 6 percent of New York’s $1.1 trillion economy.

The New York Fed’s gauge of new factory orders dropped to 2.2 from 16.7, while a measure of shipments declined to 6.3 from 13. The inventory index fell to minus 18.4 from minus 17.1, showing a faster pace of drawdown, and a measure of employment declined to minus 5.3, a three-month low, from 1.3 in November.

A gauge of prices paid rose to 19.7 from 10.5, while prices received fell to minus 9.2 from minus 2.6.

Future Expectations

Factory executives in the New York Fed’s district turned less optimistic about the future. The gauge measuring the outlook six months ahead declined to 43 from 57, which was the highest since October 2004.

The Fed is forecast to report later today a 0.5 percent rise in November industrial production, while data on Dec. 17 may show manufacturing in the Philadelphia region expanded for a fifth month in December, according to Bloomberg surveys.

The Institute for Supply Management said on Dec. 8 that manufacturers have a more optimistic outlook for sales in 2010 than their service industry counterparts. Purchasing managers at U.S. factories expect sales will grow 5.7 percent next year, exceeding the 1.3 percent gain projected by services, according to the group’s semiannual forecast.

Inventories, Production

Recent reports suggest companies are more comfortable with their levels of inventories after drawing them down at a record pace in the first nine months of the year. Stockpiles rose in October for the first time in more than a year, suggesting businesses will pick up the pace of orders and boost production as sales rebound.

Even with the rise in sales during the month, companies had enough goods on hand to last 1.3 months, the fewest since August 2008, the Commerce Department’s report on inventories showed Dec. 11.

Unexpected inventory growth and a narrowing in the U.S. trade deficit in October led some economists, including those at JPMorgan Chase & Co., to raise their fourth-quarter growth forecast. The economy grew at a 2.8 percent annual rate in the third quarter, the first period of growth in more than year.

Corning Inc., the world’s biggest maker of glass for liquid-crystal displays, last week increased its fourth-quarter glass volume forecast and said the 2010 market could be larger than previously estimated. Demand for the quarter will be flat to slightly up, the Corning, New York-based company said in a statement. Previously, it had expected sales volume to be flat to slightly down.

“Demand is still exceeding our ability to supply,” Corning Chief Financial Officer James Flaws said during a presentation at the Barclays Capital Global Technology Conference in San Francisco.  (Source: Bloomberg)