Service sector gauge shows growth in January

February 3, 2010 12:00:00 AM PST
The economy's service sector grew in January for the first time since September while the pace of job losses moderated, a private trade group said Wednesday.The Institute for Supply Management said its service sector index rose to 50.5 last month from a revised 49.8 in December. Economists polled by Thomson Reuters had expected a reading of 51.

Any reading above 50 signals growth. That threshold was broken in September for the first time in 13 months. The service sector's recovery has been bumpy since, shrinking in November and December.

ISM originally said December's measurement was 50.1, a growth reading, but revised it lower to 49.8 in its yearly seasonal adjustment late last month.

New orders, a signal of future business activity, picked up in January, showing growth for the fifth straight month. Business activity also expanded in January, although more slowly than in December.

More sales for the country's hospitals, shops, retail, financial services companies or shippers should mean that service companies will be more inclined to hire.

Of the 18 industries ISM surveyed, however, only four grew -- other services, which include a grab bag of smaller sectors such as advocacy, dry cleaning and machinery repair; utilities; information and wholesale trade. Eleven industries were still shrinking, led by arts and entertainment, mining, retail and transportation. Three didn't shrink or grow in January.

The group's employment index, which measures companies' intent to hire, showed job losses moderating. It improved to 44.6 in January from 43.6 in December. Still, its the 25th straight month of jobs contraction.

The service-sector gauge is closely watched because service jobs comprise more than 80 percent of non-farm U.S. employment. The service sector is highly dependent on consumer spending, which powers about 70 percent of the economy.

ADP, a payroll company, reported Wednesday that 22,000 non-farm, private jobs were cut last month. That was the best showing since employment started to decline in February 2008.

The government is scheduled to report January employment data on Friday. Economists expect the Labor Department to say that employers added 5,000 jobs last month, but that the unemployment rate rose to 10.1 percent from 10 percent in December.


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