The recession racking the U.S. may be turning less severe as reports today showed improvements in manufacturing and housing, the areas in steepest decline. The Institute for Supply Management’s factory index climbed to 36.3 in March, a third consecutive increase that brought it closer to the breakeven point of 50. The number of contracts to buy existing homes in February rose 2.1 percent, according to the National Association of Realtors. The smallest drop in orders in seven months propelled the advance in manufacturing, even as the industry now faces the specter of the bankruptcy of General Motors Corp. Stocks reversed earlier losses after the reports as speculation grew that the worst of the economic slump may have passed. “It does look like this very savage pace of contraction will start to ease in the months ahead,” said Julia Coronado, a senior economist at Barclays Capital Inc. in New York. “It won’t be a massive turnaround, but there are some early, positive signals of stabilization.” The Standard & Poor’s 500 stock index rose 1.2 percent to 807.28 at 12:20 p.m. in New York, and all 13 stocks in the S&P homebuilder index were up. Treasury securities were little changed. Other reports today showed the job market continued to deteriorate last month. Companies in the U.S. cut an estimated 742,000 workers in March, the most since records began in 2001, according to ADP Employer Services. Challenger, Gray & Christmas Inc., a Chicago-based placement firm, said job-cut announcements almost tripled last month from a year earlier, led by planned cutbacks at government agencies, pharmaceutical and aerospace and defense firms. Better Than Projected Economists had forecast the factory supply managers’ index would increase to 36, according to the median of 74 projections. Estimates ranged from 30 to 39. The group’s gauge of new orders jumped to 41.2 from 33.1 the prior month and its measure of export orders rose to 39 from 37.5 in February. Employment climbed from a record low. “The pace of decline is slowing down, that’s important,” David Wyss, chief economist with Standard & Poor’s in New York, said in a Bloomberg Television interview. “It is too early to look for a turnaround, but maybe it is time to start saying that things are not getting as bad as quickly as they were earlier.” Attention will now turn to the Labor Department’s March employment report, due in two days. U.S. employers may have eliminated 660,000 jobs, a fourth straight month of losses exceeding 650,000, according to the Bloomberg survey median. The unemployment rate probably climbed to a 25-year high of 8.5 percent, the survey also showed. Job Cuts Factories are among the areas that continue to trim payrolls and scale back output and investment as the global recession and the housing and credit crises sap demand. President Barack Obama believes a quick, negotiated bankruptcy is the most likely way for GM to restructure and become a competitive automaker, according to people familiar with the matter. Such an outcome would be a setback for all manufacturing, said Joseph LaVorgna, chief U.S. economist at Deutsche Bank Securities Inc. in New York. The failure of GM would cause another 1 million jobs to be lost in the auto industry and may push the jobless rate up to 11 percent, he said. Economists surveyed by Bloomberg last month said the U.S. recession that began in December 2007 will probably persist at least through the first half of this year, making it the longest downturn since 1933. The economy shrank at a 6.3 percent pace in the fourth quarter of 2008, the biggest contraction since 1982, and business investment fell at a 22 percent pace. Leading Indicator The report on pending home resales is considered a leading indicator because it tracks contract signings. The Realtors’ existing-home sales report tallies closings, which typically occur a month or two later. The improvement in home sales has been propelled by foreclosure-driven declines in prices, indicating the gains have come at a cost to many homeowners. “We are seeing a bottom in housing sales,” S&P’s Wyss said in the Bloomberg Television interview. “People are coming in as bargain hunters. This is a good time to be buying a house.” Three of four regions saw an increase in pending sales, led by a 14.5 percent jump in the Midwest, today’s report showed. The West registered a 13.5 percent drop. Builders are hurting as foreclosed properties get returned to the market at cheaper prices, competing with new houses. Lennar Corp., the fourth-biggest U.S. homebuilder by revenue, posted a wider loss in the first quarter ended Feb. 28. Recently, there are signs of stability, the Miami-based company said. “Lower rates together with seasonal trends have clearly moved sales higher in the past few weeks,” Lennar Chief Executive Officer Stuart Miller said on a conference call with analysts yesterday.

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