Over the last two days, two good reports on the growth of both manufacturing and services from the Institute for Supply Management.

The Philadelphia Inquirer story on manufacturing:

The nation's manufacturing sector registered its highest level of activity in nearly four years in October, according to an industry report, suggesting that the solid economic growth of the third quarter is continuing in the fourth.

In another positive sign, construction spending in September posted its best month on record, with spending by private builders also hitting a new high, the government said.

"The U.S. economy has solid momentum" carrying on into the October-to-December quarter, said Sherry Cooper, chief economist at BMO Nesbitt Burns.

The Institute for Supply Management reported yesterday that its manufacturing index rose to 57 last month from 53.7 in September.

It was the fourth consecutive monthly gain and pushed the index to its highest level since January 2000, when it last registered 57. The October reading was well above the 55.5 that analysts had expected.

An index reading above 50 indicates expansion; one below 50 indicates that manufacturing activity is contracting. From March through June, the index was below 50.

The service sector, which has been the mainstay of the economy during the recent lean years, is heating up even more, according to the Financial Times:

The ISM's index of non-manufacturing businesses, intended to act as a precursor of official data, rose from 63.3 in September to 64.7 - well above the 50 level intended to separate expansion from contraction. This was the fifth month in a row that the index had been above 60.

Economists were particularly encouraged by the survey of companies' staffing levels, which raised hopes of a robust increase in official non-farm payroll data, released on Friday.

The employment component of the report rose to 52.9, from 49.1 the previous month. This was the strongest employment reading since November 2000 and suggests that companies may finally be willing to hire additional staff in response to stronger growth.

Click here for ISM's own summary of the data.

Two cautionary notes. First, this data failed to impress the stock market. Second, the key question remains whether this boom in production translates into an increase in job creation. Again from the FT:

Ethan Harris, chief US economist at Lehman Brothers, said the ISM employment index had a poor correlation with the official figures.

Mark Zandi, chief economist at Economy.com, said that employment growth would continue to be slowed by the relocation of jobs abroad by US companies and by tax incentives to invest rather than hire. "It may be over a year before we start to see really strong jobs growth," he said

Developing....

UPDATE: Josh Chafetz links to more good economic news.