American Factory Activity Contracts

U.S. manufacturing shrank in November as employers curbed hiring and investment because of uncertainty about the country's budget crisis, according to the Tempe, Ariz.-based Institute for Supply Management.

ISM says the "big worry" is the fiscal cliff, the steep drop in the economy that is expected in January if the White House and Congress don't reach a balanced-budget agreement by year-end.

The research group's index of manufacturing activity fell to 49.5 last month the lowest level since July 2009 from 51.7 in October. A reading below 50% indicates contraction. November marked the fourth month of shrinkage in the last six months.

Factory employment fell for the first time in three years. Inventories, a gauge of expected future demand, also contracted sharply. Production expansion accelerated, but order backlogs declined. New orders grew more slowly last month than in October.