"Even with slower job growth in the months ahead, regional employment growth will exceed that of the nation by as much as 2 percent" on an annualized basis, he added.

Another component of the three-state index, supply managers' economic optimism, fell to 40.9 from 50.0 in October and 60.0 in September.

"Despite healthy growth in the region related to expansions in the mining and natural resources industry, the continuing difficulties in the housing sector and the mortgage industry primarily in metropolitan areas have hammered survey participants' economic outlook," Goss said.

Nationally, the November index indicated that new orders and production improved, but weakness in employment suggested that industrial jobs may not be as plentiful in coming months.

"While other segments of the economy are struggling, manufacturing continues to grow, due to continuing strength in new orders and a recovery in production from last month," Norbert Ore, chairman of the institute's business survey committee, said in a statement. "Prices, driven higher by energy prices, are once again the major concern."

The manufacturing report showed a decline in the employment index to 47.8 from 52.0, indicating manufacturing jobs are contracting, according to Doug Porter, deputy chief economist at BMO Capital Markets.

"The one concern in the report is the steep drop in the employment index," Porter said. The weak result could foreshadow a disappointing national employment report on Friday, he added.

The latest ISM index, while still showing growth, is down from its recent peak of 56.0 in June.

Ian Shepherdson, chief U.S. economist at High Frequency Economics, said the decline in the headline figure last month shows that "manufacturing has slowed substantially but is not so weak that recession is imminent."

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