WASHINGTON (AP) — A measure of U.S. manufacturing activity fell to a 26-year low in November as new orders dropped for the twelfth consecutive month, a trade group said Monday.

The Institute for Supply Management’s monthly index of manufacturing activity fell to 36.2 from October’s 38.9. The reading is worse than Wall Street economists’ expectations of 38.4, according to a survey by Thomson Reuters. A figure below 50 indicates the sector is contracting.

The November reading is the lowest since May 1982, the Tempe, Ariz.-based ISM said, when the economy was in the midst of a painful recession.

Economists said the report indicates that the economy is likely in a steep recession and times will remain tough for manufacturing companies in the coming months.

Separately, the Commerce Department reported Monday that construction spending fell by 1.2 percent in October, much more than the 0.9 percent drop analysts expected.

The stock markets reacted badly to the news. The Dow Jones industrial average dropped 410 points, or 4.7 percent, in morning trading.

The ISM’s new orders index fell to 27.9 from 32.2, its lowest level since June 1980. The backlog of orders figure fell to 27, its lowest level since the ISM began tracking the number in 1993.

“Manufacturing is in freefall, with output collapsing,” Ian Shepherdson, chief U.S. economist for High Frequency Economics, wrote in a note. “We see no prospect for near-term improvement.”

Exports, a key source of business for manufacturers earlier this year, are no longer a bright spot, the survey found. The ISM’s new export orders index remained at 41, the same as in October. That’s down from 57 as recently as August.

“Rapid export growth was a crucial support to the economy for most of this year,” said Nigel Gault, chief U.S. economist for IHS Global Insight. “That key prop is now being knocked away as a global recession takes hold.”

Manufacturing employers continue to cut jobs, the survey found. The employment index fell to 34.2 from 34.6, its fourth straight drop.

Manufacturers have been hit hard by the housing slump and financial crisis, which have led to cutbacks in business and consumer spending.

Boeing Co. said last month it will cut 800 jobs at a facility in Wichita, Kans. and also said it may lay off workers next year.

Deere & Co., which makes agriculture and construction machinery, has seen its profit fall amid the economic downturn. The Moline, Ill.-based company said last week that its fourth-quarter earnings fell 18 percent and it forecast that profit will drop by 7 percent in 2009.