Tags: Services | Sector | Expands

Services Sector Grows More Than Expected as Hiring Rises

Tuesday, 05 Oct 2010 10:11 AM

The pace of growth in the U.S. nonmanufacturing sector accelerated more quickly than economists had expected last month and hiring increased, according to an industry report released on Tuesday

The jump in the Institute for Supply Management's services sector index to 53.2 in September from 51.5 in August provided some hope that economic activity picked up in the third quarter. The reading was above the 52.0 median forecast of 74 economists surveyed by Reuters.

A reading above 50 indicates expansion in the sector.

The nonmanufacturing sector, which comprises mostly service sector firms, accounts for two-thirds or more of U.S. economic activity.

"The numbers are obviously better than expected," said Vassili Serebriakov, Wells Fargo currency strategist. "We are in a sweet spot where indicators no longer point to a double-dip recession. Instead, they are consistent with a slow recovery."

The index showed services firms took on more workers in September, with the employment component rising to 50.2. Though that reflected only modest hiring, it was above August's reading of 48.2, which shows the sector shed jobs that month. New orders rose to 54.9 from 52.4.

U.S. stocks held gains after the report. U.S. Treasuries were little changed, though, as bond investors continued to brace for more monetary easing from the Federal Reserve.

However, the ISM report's subcomponent business activity or production index slipped to 52.8, its lowest level since January, from 54.4.

Tepid hiring and a resulting high jobless rate continue to weigh on the U.S. economy, even though the recession ended over a year ago, keeping the pace of recovery modest.

The U.S. economy grew at a 1.7 percent annual pace in the second quarter, compared to 3.7 percent between January and March. The jobless rate stood at 9.5 percent through August, and data due Friday is expected to reveal it rose to 9.7 percent in September.

Opposition Republican Party candidates, expected to regain control of the U.S. House at next month's Congressional elections, argue billions of dollars in stimulus spending have failed to jolt the economy back to life and are calling for trimming record government budget deficits.

But some economists and investors say any move toward cutting spending and trimming the fiscal deficit will plunge the country deeper in to the economic doldrums.

In an op-ed published in the London Financial Times newspaper on Tuesday, billionaire investor George Soros said there was "a strong case for further stimulus," adding "to cut government spending at a time of large-scale unemployment would be to ignore the lessons of history."

Federal Reserve officials have indicated that they may resort to pumping more money into the economy, likely via purchases of government and mortgage-backed bonds, if the economic outlook doesn't improve.

© 2017 Thomson/Reuters. All rights reserved.

 
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The pace of growth in the U.S. nonmanufacturing sector accelerated more quickly than economists had expected last month and hiring increased, according to an industry report released on Tuesday The jump in the Institute for Supply Management's services sector index to 53.2...
Services,Sector,Expands,
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2010-11-05
Tuesday, 05 Oct 2010 10:11 AM
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