US service economy accelerates in April, but job growth hits 13-month low: Markit
The US service economy expanded in April, but the pace of hiring fell to a 13-month low, underscoring the lack of pressure on operating capacity.
Markit Group’s gauge of US service activity eased slightly from 55.3 to 55. A median estimate of economists called for a reading of 54.2. The composite PMI index, which covers manufacturing and services, declined marginally from 55.7 to 55.6. A reading above 50 signifies expansion in business activity, whereas a reading below that level indicates contraction.
The service economy continued to rebound in April from February’s four-month low, with overall activity expanding for the sixth consecutive month. New business growth rebounded from the previous month when it fell to the lowest level in a year and a half.
The rebound in new business growth failed to generate capacity measures, resulting in the fastest drop in work backlogs since August 2013, Markit data showed. This resulted in a slower pace of job creation, as overall hiring fell to the lowest level in 13 months.
Service providers remained upbeat about economic prospects, with more than half of purchasing managers anticipating an expansion in business activity. The business expectations sub-index was unchanged at 76.4. Upbeat business expectations were linked to the launch of new products and growing client demand.
“The survey data point to robust growth at the start of the second quarter, adding to hopes that the official data will show the economy rebounding strongly from the weather-related stalling seen in the first quarter,” said Markit chief economist Chris Williamson in a press release. “Combined with the three-year high recorded by the manufacturing survey, the two PMIs suggest that the US economy enjoyed a strong start to the second quarter.”
Markit reported last week the US manufacturing expanded sharply in April, as output rose at the fastest pace in more than three years. According to Williamson, the April data are broadly consistent with an annualized GDP growth rate of 2.5 percent.
The US economy, which expanded a mere 0.1 percent annually in the first quarter, appears to be rebounding at the start of Q2. Although Markit data showed an easing in job creation, official data courtesy of the Labor Department showed the US economy added 288,000 jobs last month. That represents the fastest growth pace in more than two years. The unemployment rate fell from 6.7 percent to 6.3 percent.
The labour market picture isn’t all rosy, however. The labour force participation rate, which captures the percentage of Americans employed or actively searching for work, declined 0.4 percentage points to 62.8 percent.
Another report released today by the Institute for Supply Management showed the non-manufacturing sectors rose sharply in April. The PMI reading of 55.2 outpaced forecasts calling for 54.1. The business activity index increased 7.5 percentage points to 60.9. The new orders index rose 4.8 percentage points to 58.2. The employment index declined 2.3 percentage points to 51.3.
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