Here's a challenge for you: find something upbeat to say about the U.S. industrial economy. Whether you are a person who sees the glass half full or half empty, it has been difficult to do anything but tremble as the once-roaring engines of factories across the nation sputter and stall before our eyes. And from the words and deeds of the Federal Reserve in recent weeks, you can tell that the unrelenting job and production cuts by the nation's manufacturers has made policymakers in Washington plenty nervous, too.

In a sense, the second quarter report card on the U.S. economy, to be released in the preliminary report on Gross Domestic Product, is shaping up as the most difficult test yet for the services and knowledge-based side of the economy. With the good-producing side of economic activity so clearly contracting, it will be up to the softer side of the economy to make up the difference if the longest economic expansion in modern history is to be kept alive.

The Federal Reserve’s Index of Industrial Production for manufacturing slipped by 0.8 percent in the month of June, the ninth consecutive monthly decline in the output of factories nationwide. While a few smaller industrial categories showed upticks for the month, every major sector of both durable and non-durable goods manufacturing is operating at a lower level today than they were 12 months ago. For the Primary Metals and Apparel industries, the news is especially grim. Battered by imports and slumping demand, output is down 12.4 and 15.3 percent for these industries compared to last year, respectively.

But the search for silver linings doesn't come up totally empty. One saving thought in all of these depressing reports is that the frenzied activity that marked the mid-2000 economy --our basis for comparison -- was unsustainable. The bursting of the expectations bubble that had fueled so much runaway spending by businesses was, in hindsight, an inevitable outcome, with predictably dour consequences for those who profited by it.

What is less predictable is the near-term future for manufacturing. The mainstream scenario still calls for a modest rebound in the second half of the year, but that time is now upon us with few signs of relief in sight.

Bad news for manufacturing is usually bad for Indiana, and the state government's worsening fiscal situation bears this out. But there are a few, tentative signs emerging that the worst may be over for the state economy.

One is the stabilizing of job losses at factories in the state. In the national economy, job losses in manufacturing have accelerated for three consecutive quarters, with each quarters job cuts averaging nearly double the previous three months. In the April-June period, U.S. factories cut jobs at the rate of 100,000 jobs per month.

The Indiana manufacturing economy followed suit until April, when the picture began to stabilize. Helped by a see-sawing rebound in motor vehicle employment, Indiana's rate of job loss fell to just 600 jobs per month in the second quarter.

Is it the beginning of a turnaround? That's a tough call. But if you're looking for silver linings these days in manufacturing, it’s about the best you can find.