New York, October 06: The US service sector grew in September for the first time in more than a year, creating jobs in banking and restaurants and giving a fresh sign that the economy is healing after doubts cast by recent poor data.
The Institute for Supply Management’s (ISM) services index rose on Monday to 50.9 last month, beating expectations of 50.0, the dividing line between growth and contraction.
The better news on the economy contrasted with monthly payrolls data on Friday from the US Labor Department that showed employers unexpectedly cut more jobs in September than in August, underscoring the fragility of the US economy’s recovery from its worst recession in 70 years.
“We need to see the service sector doing better because it’s such a big part of the economy,” said Michael Woolfolk, senior currency strategist at BNY Mellon in New York.
“This is a good way to start off the week after a sour non-farm payrolls on Friday.”
The services sector represents about 80 percent of US economic activity, including businesses such as banks, airlines, hotels and restaurants.
Though not planning a second stimulus package, US President Barack Obama’s advisers are considering a number of programmes for creating jobs, White House spokesman Robert Gibbs said on Monday.
The plan would also include extending unemployment payments and Cobra health insurance benefits for the unemployed and continuing the USD 8,000 tax credit for first-time home buyers, Gibbs said.
US stocks rose after the ISM data and benchmark Treasury debt prices were little changed, leaving the 10-year yield around 3.22 percent. The US dollar was flat against other major currencies (.DXY).
The euro zone’s services sector also returned to growth.
Markit’s final Eurozone Services Purchasing Managers’ Index of around 2,000 companies expanded for the first time in 16 months in September at a slightly better rate than first expected, but job losses grew.
In other data, the US job market strengthened in September for the first time since January of last year, according to the US Conference Board.
The Conference Board, a private research group, said its Employment Trends Index edged up to 88.5 in September from an upwardly revised 88.2 in August, originally reported at 88.1.
The board’s survey looks at a range of indicators for job growth ahead, including temporary hiring, industrial production and the percentage of respondents who say they find jobs hard to get.
The “road to recovery is definitely going to be bumpy and may last unusually long, given the depth of the recession we have experienced,” said Gad Levanon, senior economist at The Conference Board.
The index is now down 15.6 percent from a year ago.
Economists said on Friday that despite the worse-than-expected payrolls report on Friday, the data did not point to an end to the trend of moderating job losses.
–Agencies