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Aug. 29, 2001, 9:31PM

Recovery predicted for manufacturing

Reuters News Service

WASHINGTON -- The hard-hit U.S. manufacturing sector will start to recover this fall and end a yearlong hemorrhage of factory jobs before new hiring starts in 2002, the National Association of Manufacturers said Wednesday.

In an annual report on the state of the work force, NAM said a reduction in excess inventories that had burdened manufacturers, combined with a double shot of stimuli from lower interest rates and tax rebates and cuts, should help crank up production lines before year's end.

"The recent data has been somewhat favorable and suggests that we are nearing a turning point," NAM President Jerry Jasinowski said in a statement.

U.S. manufacturers have cut their payrolls by 837,000 jobs in the past year to 17.7 million, according to the Labor Department's Bureau of Labor Statistics.

Jasinowski blamed manufacturers' woes on a combination of factors, including mismanaging their inventories, high interest rates before the onset of rate cutting by the Federal Reserve early this year, soaring energy costs, increased regulatory and legal costs and an "overvalued" dollar.

"Manufacturing job losses have been exceptionally large in industrial equipment, transportation and electronics," he said.

"These industries are among the most export-intensive and therefore especially vulnerable to the high value of the dollar and slow growth overseas."

While inventory drawdowns and perked up consumer spending should help manufacturers stop the bleeding this year, export and business demand are less encouraging, Jasinowski said.

"Manufacturing still faces challenges at home and overseas," he said. "Exports have declined for three straight quarters, and the dollar remains at or near a 15-year high against other currencies -- although it has recently shown some signs of rationalizing."

The group's long-term outlook was mixed with optimism -- a pickup in production and higher productivity growth in 2002 -- and a call for its "pro-growth" legislative agenda.

"Our argument here is that there's no reason to be optimistic that we're out of the woods yet," Jasinowski said.

NAM, in rare harmony with organized labor, has been outspoken in urging the Bush administration to allow the dollar to ease in an effort to narrow the gaping U.S. trade gap.

Its other policy goals are making permanent the recent $1.35 trillion tax cut that expires in 10 years, granting the president "fast track" trade negotiating authority, getting the Senate to follow the House in passing an energy bill that includes opening Alaska's Arctic National Wildlife Refuge to oil drilling and cutting business regulations.

-- Anonymous, August 30, 2001