BY EILEEN ALT POWELL

The Associated Press

NEW YORK - Manufacturing activity picked up strongly in August for a second straight month, suggesting the fragile industrial sector is in the midst of a turnaround despite a bleak job picture.

The Institute for Supply Management reported Tuesday that its manufacturing index rose to 54.7 last month from 51.8 in July. A reading above 50 indicates expansion, while one below 50 indicates that manufacturing activity is slowing.

The index in August was at its highest level since last December and was stronger than analysts had been expecting.

"Though two months of growth do not establish a trend, there is strength in the various segments of this report that we have not seen for some time," Norbert J. Ore, who oversees the index for the ISM, said in a statement accompanying the report.

He noted that new orders and production have both had readings above 50 percent for four consecutive months, indicating that "the continuation of a second-half recovery appears on track."

Still, employment continued to deteriorate.

The manufacturing sector has lost 2.7 million jobs since June 2000, and the Institute for Supply Management's index for employment fell to 45.9 in August from 46.1 in July.

On Wall Street, the Dow Jones average rose 107 points to 9,523, while the S&P 500 gained 14 points to 1,022 and the Nasdaq rose 31 points to 1,841.

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