And manufacturers could face strains overseas in key export markets, especially if Europe's debt crisis worsens and leads the continent into another recession.

For now, factories are growing. The Institute for Supply Management, a trade group of purchasing managers, said Thursday that its manufacturing index rose to 52.7 in November, up from 50.8 in October. Any reading above 50 indicates expansion.

An index that measures new orders rose to a seven-month high.

Bradley Holcomb, chair of the ISM's survey committee, said manufacturers "are cautiously more optimistic about the next few months based on lower raw materials pricing and favorable levels of new orders," he said.

Still, companies have tempered their outlook with concerns about future economic growth, government regulation and the debt crisis in Europe, he added.

Ian Shepherdson, an economist at High Frequency Economics, said the increase in new orders suggested that factory output will expand at an even faster pace next month.

"The economy seems finally to be developing real momentum; growth is accelerating," he said in a note to clients.

Manufacturing has grown for 28 straight months, according to the index. Factories were among the first businesses to start growing after the recession officially ended in June 2009.

Still, the report is consistent with only modest economic growth. Earlier this year, the index topped 60 for four straight months.

Separately, the Labor Department said the number of people who applied for unemployment benefits last week rose above 400,000 for the first time in four weeks. The increase comes after applications had drifted lower over the past two months.

A third report showed that U.S. builders spent more in October on new homes, offices and shopping centers. Construction spending rose for a third straight month, the Commerce Department said. Despite the gains, overall construction spending remained depressed.

The projected job growth in November would be an improvement from the previous month, when the economy added just 80,000 jobs.

Some economists are more optimistic after payroll provider ADP said Wednesday that companies added 206,000 workers last month, the most this year. That survey doesn't include government agencies, which have been cutting jobs.

Other economic indicators reinforce the outlook for an improving economy. Retailers reported a strong start to holiday sales over the Thanksgiving weekend, consumer confidence surged in November to the highest level since July, and Americans' pay rose in October by the most in seven months.

Those reports have caused many economists to forecast a pickup in growth in the final three months of the year, to about a 3 percent annual rate. That would be an improvement from growth of 2 percent in the July-September period.