WASHINGTON (MarketWatch) — A closely followed index of Philadelphia area manufacturing conditions soured in January as local companies reported fewer new orders and hiring fewer employees.

The Philadelphia Fed’s manufacturing index went negative in January, slipping to -5.8 in January from +4.6 in December.

Economists polled by MarketWatch expected a positive 5.0 reading.

The Philadelphia Fed’s gauge is a diffusion index, taken by subtracting the number of respondents who say conditions worsened from those who reported an improvement. A similar gauge of New York-area conditions also was negative in January. Read more on Empire State index

What it shows is the fiscal cliff agreement reached at the end of the year hasn’t resulted in a wave of new activity — perhaps because looming questions over the debt ceiling and scheduled spending cuts still remain.

“This particular survey has often been volatile around periods of political uncertainty, and it is possible respondents are still wary of upcoming decisions over spending cuts and the debt ceiling,” said Andrew Grantham of CIBC World Markets.

The Philly Fed data is at odds with the tone of other economics releases Thursday, which included a five-year low for jobless claims and a four-year peak for housing starts.

The new-orders index fell to -4.3 from 4.9 in December, and the employment index fell to -5.2 from -0.2 in December.

Jobless claims fall, housing starts rise

The prices received index decreased 14 points, from 12.4 to -1.1.

However, the future general activity index increased from a revised reading of 23.7 to 29.2.

In a special question — one that gets to the heart of the economics debate — the Philly Fed asked what are the three most important factors that are restraining hiring plans.

The most important, at 27.4%, was expected growth of sales is low; the second-most important, at 19.2%, was firm wants to keep operating costs low; and the third-most important at 15.1% was the cost of health insurance.

The answer gives ammunition to Democrats who want fiscal stimulus to bolster demand, as well as Republicans who want to repeal President Obama’s signature health-care law.

The rancorous debate between the two parties also is hurting: 37% reported federal fiscal policy developments have decreased hiring plans, but only 4.1% say those developments have increased them.