The US manufacturing sector contracted in December at a faster rate than November, and manufacturing employment dropped, according to the S&P Global US Manufacturing PMI. The index fell to a reading of 47.9 in December from 49.4 in November.

“US manufacturers ended the year on a sour note, according to S&P Global’s PMI survey,” Chris Williamson, chief business economist at S&P Global Market Intelligence, said in a press release.

Output fell at the fastest rate for six months as the recent order book decline intensified, and the slowdown is spreading to the labor markets.

“Payrolls were cut for a third month running as increasing numbers of firms grew concerned about the development of excess operating capacity,” Williamson said. “The fourth quarter has consequently seen factories reduce employment at a pace not seen since 2009 barring only the early pandemic lockdown months.”

Manufacturers also reported not replacing workers who voluntarily left in a bid to cut costs.

“Given current order book trends, the overall picture from the survey is one of supply exceeding demand for many goods, which points to downside risks to production, employment and prices as we head into 2024,” Williamson said.

However, business optimism still ticked upward in December among manufacturers, who see hope in the possibility of client demand picking up.