The service sector continued to expand last month according to the Institute for Supply Management’s non-manufacturing index, which, at 53.3, remained above the break-even level of 50.
Values > 50 = Expansion
The most forward-looking component of the index, new orders, was 52.8, a sign that production activity is likely to expand slowly in the near future. The employment sub-index registered 51.6, meaning that service businesses added jobs at a sluggish pace last month. At first glance this contradicts the employment situation report released on Friday by the Bureau of Labor Statistics, which showed zero net new jobs created last month. However, that report was skewed lower by the temporary loss of 45,000 striking Verizon workers. Several service-related sectors added jobs in August led by education and health services, up 34,000, and professional and business services, up 28,000. The potential for a recession has increased in recent weeks as consumer confidence has cratered, the fears of financial contagion from Europe have spread, and the manufacturing sector has decelerated. In this context, the ISM non-manufacturing index, which covers 80 percent of the economy, raises some hope that the economy can stave off a near-term recession.