The U.S. services sector -- like its sister sector, manufacturing -- continues to confirm an ongoing economic recovery. The Institute for Supply Management reported today that its services index unexpectedly rose 1.7 points in September to 53.2.

ISM services index readings above 50 signal an expansion; below 50, a contraction. A Bloomberg survey had expected the measure to rise to 52 in September from 51.5 in August.

Equally significant, the index's key components continued to signal growth in September, as well.

Better Job Growth Ahead?

The closely watched new-orders component -- a gauge of future demand -- jumped 2.5 points to 54.9. In addition, the employment component popped back above the 50 mark to 50.2 in September from 48.2 in August. That surprising rise could result in higher-than-forecast job growth in the immediate quarters ahead.

Although the prices component dipped to 60.1 in September from 60.3 in August and the business-activity component fell to 52.8 from 54.4, both remained at levels that still signal growth, but at a slightly slower pace.

The nonmanufacturing survey polls about 400 firms in 60 sectors. The respondents to the September survey indicated mixed reactions to business conditions, but were slightly tilted toward optimism. Among their comments:

  • "Signs that the economy may be improving, but our sector is still flat or declining" (professional, scientific, and technical services sector).
  • "Business activity is generally stable -- slightly better than last year" (accommodations and food-services sector).
  • "Third quarter is looking profitable with improving confidence and expectations in the economy. Capital expenditures are being approved (wholesale trade sector).
  • "Business seems to be flat from last month" (finance and insurance sector).
  • "General state of the business has not changed in the last three months. The market is still soft for new sales due to financing requirements" (construction sector).
Economists, business executives and policy makers monitor the ISM services index due to the large role services play in the U.S. economy -- historically about 65% to 70%.

September's unexpectedly pleasant report makes the probability of a double-dip recession even more remote. To be sure, the housing sector, with a large inventory of unsold homes, remains subpar, and retail sales have been tepid. But both the giant services and manufacturing sectors continue to expand -- which will keep the U.S. economy growing at a modest pace in the next few quarters.

If hiring in the services sector increases in the fourth quarter of 2010 and the first quarter of 2011, that would likely increase U.S. GDP growth.

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26 Comments

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Jetncat

Is that Gov't union jobs? Can't be private sector both of my kids work in restaurants and they said they are dead slow. All the servers has been cut in half and fight for just a couple of hours a week. This is a pre-election lie

October 05 2010 at 4:53 PM Report abuse +2 rate up rate down Reply
prognesub

Headline should read: "With midterm election a month away the service sector expanded more than expected on Sept thanks to government massaging of numbers". The stock market surged thanks to massive cash injection by the Fed, as well as an engineered massive dive in the value ot the dollar to spur foriegn buying of American stocks. The wise buy gold in times like these.

October 05 2010 at 4:10 PM Report abuse +3 rate up rate down Reply
malcolm

YooHoo!...The recession is over..everyone is hiring..health care costs are going down..Major insitutions are throwing money in the market...until tomorrow

October 05 2010 at 3:23 PM Report abuse +3 rate up rate down Reply
georgetroll4

It's increasinly clear that the economy is recovering. With the manufacturing and service sectors surging, it will be hard for the enemies of the Democratic party to gain enough seats in Congress to cause gridloack in the next 2 years. If you are a democrat, get out and vote in November so that griddlock is not achieved by default. George

October 05 2010 at 2:55 PM Report abuse -1 rate up rate down Reply
2 replies to georgetroll4's comment
itacurubi

Unfortunately, the Republicans will continue in a position to cause gridlock in the Senate because the nature of the filibuster and cloture rule mean that a . "supermajority" is needed to pass bills. I think the Democrats made a big mistake in not letting the GOP actually go into filibuster and letting the American people see they have no policy clothes; instead, alas, the Democrats tried to negotiate or water down bills.

October 05 2010 at 3:11 PM Report abuse -1 rate up rate down Reply
ingfp

George, what a pathetic response. Typical democrat... why would anyone buy into a short term yippy yi yay suckers market? PRESS PRESS PRESS... this is a weak at best attempt to sway any intelligence! Do some homework please!

October 05 2010 at 7:41 PM Report abuse rate up rate down Reply
Bearmaul

Lets see, the GOP is suppose to regain control of the house and maybe even the senate and the economy rebounds slightly, I sure hope the market isn't counting the chickens before the egg hatches, if the GOP oesn't regain control then unemployment will top 10% and we'll be in for two more years of hellish behavior from these liberal progressive morons.........

October 05 2010 at 2:04 PM Report abuse +2 rate up rate down Reply
tj1108

When unemployemnt is back under 6% then I will get back into the market. But right now to believe things are improving when less than 200,000 jobs have been created and over 9 million lost your not intouch with reality.

October 05 2010 at 1:24 PM Report abuse +6 rate up rate down Reply
2 replies to tj1108's comment
itacurubi

(1) The idea is to buy low, sell high. Why would you wait for high to buy. (2) Unemployment almost always increases at the end of recessions, as discouraged workers re-enter the job market and the Workforce Participation Rate -- a key item in the denominator of the unemployment rate calculation -- increases. This is well-known; this is well-documented. (It might be wise for you to consider removing anything containing the words "finance" or "statistical analysis" from your list of potential careers.)

October 05 2010 at 1:40 PM Report abuse +2 rate up rate down Reply
chris1011

Itacurubi, you cannot try to explain things to T-baggers, things that are as complicated as buy low, sell high. Doncha know they follow only Fox News rules, and the Beckster who is touting gold?

October 05 2010 at 8:13 PM Report abuse +1 rate up rate down Reply
ltsadv

Good news for the American Economy, bad new for the GOP and the Tea Party. It is un-American to root against the economy, and that is what they have done - come November people will realize that, and with the threat of the double dip deminished, the moderates and dems will prevail.

October 05 2010 at 1:05 PM Report abuse -6 rate up rate down Reply
2 replies to ltsadv's comment
Maryanne

You're dreaming - fantasy land

October 05 2010 at 1:17 PM Report abuse +5 rate up rate down Reply
tj1108

This is spin. This is bad news for the ecomomy. People are not replacing with new. The service sector is up because people are not spending money except when they have to. Service sector is up because goods/appliances/equipment are being repaired and not replaced.

October 05 2010 at 1:19 PM Report abuse +9 rate up rate down Reply
Maryanne

I DON'T believe any of it - all doctored up information. I work for the service sector and we are NOT seeing it. Things are tight and people are let go. Who are they trying to kid??

October 05 2010 at 1:04 PM Report abuse +8 rate up rate down Reply
4 replies to Maryanne's comment
ajgorm

Hey WoW now we have more reason to dump Gold and buy stocks. With everything improving here Gold will be priced too high. Roll the dice !

October 05 2010 at 12:51 PM Report abuse +2 rate up rate down Reply
rosecabinets

The media just keeps reporting all the "good" But as a small business owner there is no good - Only BAD! The recession is not over in fact it keeps getting worse- its' great that Obama and his fans in the media only report the lies that will make the Democracts looks good. But reality hurts! Open your eyes and look around. The recession is not over, things are not better and the media can manipulate the numbers any way they like it's all BS!

October 05 2010 at 12:41 PM Report abuse +10 rate up rate down Reply
3 replies to rosecabinets's comment