WASHINGTON (Reuters) – U.S. service sector activity was steady in August but job growth slowed, in line with an improving labor market.
The Institute for Supply Management (ISM) reported on Thursday that its non-manufacturing purchasing managers’ index (PMI) was little changed last month at 51.5, compared with 51.4 in July.
A PMI reading above 50 indicates growth in the services sector, which accounts for more than two-thirds of the economy. The ISM considers readings above 49 over time to indicate expansion in the overall economy.
Economists polled by Reuters had forecast the services PMI would fall to 51.1. The report added to solid consumer spending in July and suggested the economy was continuing to expand, albeit at a moderate pace compared to last year.
A jump in the unemployment rate to a nearly three-year high of 4.3% in July raised recession fears and put a 50 basis point rate cut on the table this month, when the Federal Reserve is expected to begin an easing cycle.
The new ISM survey order measure rose to 53.0 from 52.4 in July. The service employment measure fell to 50.2 from 51.1 in July.
The labor market is slowing but barely deteriorating. Government data on Wednesday showed there were 1.07 job openings for every unemployed person in July, down from 1.16 in June.
Job growth is expected to have picked up in August, according to a Reuters survey. The survey forecast nonfarm payrolls rose by 160,000 last month, after rising by 114,000 in July. The unemployment rate is expected to fall to 4.2%.
Inflation in the services sector was little changed last month. The ISM price payments measure for services inputs rose slightly to 57.3 from 57.0 in July. Price pressures in the economy are easing as higher borrowing costs constrain demand.
(Reporting by Lucia Mutikani; Editing by Andrea Ricci)
