One swallow doesn't make a summer -- and one month's surge in U.S. industrial demand doesn't make an American manufacturing renaissance.

The Institute for Supply Management announced last Monday that its widely watched new orders index soared last month to its highest level in nearly twenty years. This is good news but it is hardly cause for anyone to break out the champagne.

To be sure, the news helped share prices finish at their highest level in eighteen months. But it is important to realize what this index does NOT measure. All Wall Street's euphoria to the contrary, the index does not measure the absolute level of manufacturing activity. As its name implies, it merely measures the inflow of new orders. So yes, the November surge is a harbinger of much higher manufacturing activity in the weeks ahead -- but higher merely compared to the abysmal levels America has gotten used to in recent years.

What the index is emphatically not saying is that America has returned to 1983 levels of manufacturing prowess. Far from it. In reality on key measures American manufacturing is much reduced compared to twenty years ago.

One such measure is jobs. As of October the number of Americans employed in manufacturing had fallen to a mere 14.5 million. This represented a decline of 27 percent compared to the 1983 total of 19.9 million.

The huge decline in manufacturing employment is all the more striking for the fact that employment in non-manufacturing activities has generally soared in the last two decades. Thus manufacturing workers now represent a mere 10.5 percent of the total American employed workforce, compared to 19.8 percent in 1983.

Does this matter? Actually yes -- crucially. For one thing the precipitate loss of manufacturing jobs has greatly contributed to the widening income gap in American society in recent years. The point is that manufacturing jobs pay far better than most of the service jobs available to redundant manufacturing workers.

For more than a decade now successive Washington administrations have largely ignored the America's manufacturing decline and the consequential layoffs. But the problems cannot be swept under the carpet forever. For one thing, the problems in American manufacturing have been closely associated with a rapidly deteriorating trend in U.S trade figures. With much of America's once world-beating manufacturing base now shuttered, the U.S. is importing on an ever larger scale. So much so that the deficit in the U.S. current account (the widest and most meaningful measure of trade) is likely to exceed $510 billion this year. This would be more than eleven times the $46 billion deficit of 1983.

This presages a dramatic reduction in American economic power, as a growing group of concerned American opinion leaders has been pointing out. Both the MIT economist Lester Thurow and the plutocratic investor Warren Buffett have recently suggested that the trade deficits are setting the United States up for a devastating currency crisis. On Thurow's figures the crisis could at a stroke cut the dollar's value by half -- and the resulting dislocation to international trade would throw the entire global economy into a 1930s-style slump.

For President Bush, an even more compelling wake-up call has come from his father's old colleague, Henry Kissinger. Earlier this year Kissinger reportedly commented that a nation without manufacturing cannot hope to remain a major power for long. That is quite a statement coming from the ultimate aficionado of power politics.

A Tokyo-based former editor for Forbes and the Financial Times, Eamonn Fingleton is the author most recently of Unsustainable: How Economic Dogma Is Destroying American Prosperity (Nation Books, 2003).

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