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US Service Economy Accelerates in March, Employment Growth Rebounds: ISM

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The US service economy accelerated in March, as an uptick in new orders led to a sharp rebound in hiring.

The Institute for Supply Management’s gauge of national service activity rose from 51.6 to 53.1, narrowly missing estimates calling for 53.5. The US service economy has been above the 50 mark that separates expansion from contraction for 50 consecutive months.

Thirteen of 18 non-manufacturing industries expanded last month, led by agriculture, forestry, fishing and hunting, transportation and warehousing, and construction. Of the five industries that declined in March, mining was the hardest hit, followed by education, and healthcare. Four industries reported a reduction in employment last month, led by mining, real estate, and rental and leasing.

Employment activity rebounded sharply after falling for the first time in more than two years, ISM data showed. The employment sub-index rose 6.1 percentage points to 53.6. In total, nine of the 18 non-manufacturing industries reported an increase in employment, led by arts and entertainment, wholesale trade, and management of companies and support services.

Managers gave mixed appraisals in March, but the underlying trend was positive.

“Outlook remains positive,” said one manager from the information industry.

“Demand is rising; while at the same time there is pressure to reduce staffing expenses,” said another from finance and insurance.

“Business was a little slower than expected due to harsh weather conditions across much of the country, but we expect a rebound as spring approaches,” said a representative from retail trade.

A separate service indicator released today by Markit Group gave a less optimistic account of hiring last month. According to Markit, the latest expansion in employment was the weakest in a year. The market research firm’s monthly gauge of US service activity rose 2 percentage points to 55.3.

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