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Services Industries Index Drops to 3-Year Low as Hiring Slows

Services Industries Index Drops to 3-Year Low as Hiring Slows

Thursday, 03 October 2019 10:09 AM

America’s service industries joined manufacturing in taking a big step back last month, fueling concerns that the global slowdown and trade war are weighing more on the broader economy. Stocks, the dollar and Treasury yields all tumbled after the report.

The Institute for Supply Management’s non-manufacturing index dropped 3.8 points to 52.6 in September, the lowest since August 2016 and well below the most pessimistic forecast in a Bloomberg survey, according to data Thursday.

Growth in orders and business activity slowed abruptly, while the employment gauge registered its weakest print in more than five years.

The same forces that continue to hammer away at U.S. manufacturing appear to be gathering a bigger foothold in the service industry, which makes up the majority of the economy and accounts for the biggest share of the labor force. Signs of contagion may augment calls for Federal Reserve officials, who meet later this month, to respond with a third straight reduction in borrowing costs.

That’s because recent economic growth has hinged on the American consumer at a time when businesses are cutting back on capital investment. Friday’s employment report, which is projected to show moderate job and wage growth, will update policy makers on how households are positioned to sustain their spending.

Four service industries reported decreased activity in September, including real estate, rental and leasing and wholesale trade.

The ISM’s gauge of services employment decreased to 50.4, the lowest level since February 2014 and just above a reading of 50 that indicates firms are neither adding to nor reducing their payrolls.

The pullback in hiring doesn’t bode well for the Labor Department’s monthly employment report. Economists expect 148,000 jobs were added to headcounts in September.

The ISM’s index of business activity among non-manufacturers, which parallels the group’s measure of factory production, fell to 55.2 in September, erasing most of the prior month’s gain. The measure of new orders dropped by the most since August 2016, reaching a three-year low of 53.7.

The group’s measure of prices paid by non-manufacturing industries climbed to 60 in September. The import gauge sank into contraction at 49 while the export index improved to 52.

Another gauge of service industries from IHS Markit rose slightly to 50.9, showing near-stagnant activity, according to a separate report Thursday.

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America's service industries joined manufacturing in taking a big step back last month, fueling concerns that the global slowdown and trade war are weighing more on the broader economy.
services, gauge, hiring, economy, industries
378
2019-09-03
Thursday, 03 October 2019 10:09 AM
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