A gauge of the US service sector returned to growth last month, aided by the holiday season’s retail sales. The expansion reflected a slowly improving economy — but it was too slight to generate much hiring.
The Institute for Supply Management (ISM), a private trade group, said on Wednesday its service index rose to 50.1 last month from 48.7 in November. A level above 50 signals growth. Seven industries out of 18 reported growth, led by agriculture and retail.
The ISM’s employment gauge, which hasn’t grown in two years, shrank again last month, though at a slower pace than in November. It reached 44 last month, compared with 41.6 a month earlier.
Job generation throughout the economy has been weak even as layoffs have slowed. Economists expect the US Labor Department to report today that the unemployment rate ticked up to 10.1 percent last month from 10 percent in November and that the economy lost a net total of 8,000 jobs.
The ISM said the four service-sector groups that added jobs last month were retail, finance and insurance, public administration and a category of other services. Retailers added temporary workers, as they normally do for holiday shopping seasons.
The overall service-sector gauge returned to growth in September for the first time in 13 months, but the comeback has been fitful amid scant gains in consumers’ incomes and weak bank lending. The ISM’s service-sector gauge is closely watched because service jobs make up more than 80 percent of non-farm US employment.
“We don’t think the increase was all that convincing,” said Millan Mulraine of TD Securities because growth in new orders slowed and employment still signaled contraction.
The Labor Department reported last month that the service sector added jobs in November, even though that wasn’t reflected in the ISM survey.
The service sector is so large that the ISM survey may not be effective in calculating changes in employment, said Mulraine, who forecast that jobs may have posted a net increase of 25,000 last month.
The ISM report said finance and accounting was another area that added jobs.
EFinancialCareers.com, a jobs site aimed at finance professionals, said postings for jobs involving derivatives grew 19 percent last month compared with last year. Work involving debt, fixed income and accounting were also hot areas.
“Companies have let go of too many people in certain parts of their business,” eFinancial CEO John Benson said.
As confidence increases in financial markets, they’re looking to rebuild, he said, especially in profitable areas.
The ISM report said new orders, a signal of future business, expanded for the fourth straight month, though less quickly than in November. Business activity also grew, as did the prices paid by businesses. That may mean service companies will pass their higher costs on to consumers, collecting higher revenue.
More spending by US consumers would translate into higher sales for the nation’s service providers, and eventually, should mean more jobs.
“Retail might very well be the shot in the arm,” Capital Economics’ Paul Ashworth said.
The ADP National Employment Report said on Wednesday that 84,000 private-sector jobs were lost last month, an improvement from November.
ADP said private nonfarm employment in the service sector grew by 12,000 jobs, while manufacturing lost 43,000 jobs.
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