US services sector picks up steam
New York, September 7, 2011
The dominant US services sector picked up steam unexpectedly last month, snapping a three-month streak of slower growth, though the pace of hiring eased slightly, underscoring broader job market concerns.
The surprise jump in the Institute for Supply Management's (ISM) non-manufacturing index was cause for some encouragement, analysts said, as it suggested consumers were holding up better than thought in what appears to be a stalling US economy.
Yet it probably will not be enough to relieve pressure on President Barack Obama to spur more job creation. Obama is due to detail a new jobs plan in a national speech on Thursday.
Last week, government data showed the economy added no new jobs in August, leaving the jobless rate at or above nine per cent for a fifth consecutive month.
"The unexpected rebound (in the ISM report) will help to ease recession fears following last week's news that payroll employment stagnated," said Capital Economics chief US economist Paul Ashworth.
But he said the ISM reading of 53.3 in August, while up from July's 17-month low of 52.7, "is consistent with only muted economic growth of about 1.5pc."
Economists had expected a 51 reading. A reading above 50 indicates expansion.
While new orders rose, suggesting continued demand, the employment index slipped to 51.6, its lowest since September 2010, underscoring the difficulties facing the roughly 14 million Americans who are out of work.
High Frequency Economics chief US economist Ian Shepherdson said the ISM employment reading indicates payroll growth "of only about 50,000," well below what would be needed to make a dent in the jobless rate.
He also warned that the report is "little more than a lagging indicator of the rate of growth of core retail sales, which have held up well in recent months."
"There are signs that the economy continues to be under stress," Lockheed Martin Corporation chief executive Robert Stevens said.
Speaking at the Reuters Aerospace and Defence Summit in Washington, Stevens cited high US unemployment and weak economic growth.
But he added, "It's not clear to me whether that conveys a sense of a double-dip recession."-Reuters