US Service Industry Sector Slows To Six Year Low

Service Industry SectorYou may not know this, but the service industries is the most important sector of the US labor market. You may not also know that activity in this sector has been very low and a recent report says that this index has remained near the contraction threshold for six straight years.

The Institute for Supply Management reported that is nonmanufacturing index fell from 55.4 in July to 51.4 in August. An index below 50, they report, indicates contraction. Unfortunately, economists had been expecting August should have a reading of 55.

According to ISM survey overseer Anthony Nieves, “The majority of the respondents’ comments indicate that there has been a slowing in the level of business for their respective companies,” adding that it is still too early to judge whether if we have a sustained slowdown. He also notes that last month’s growth rate was, alas, “not a sustainable level.”
Looking more closely at these numbers, the metric of orders and business activity have slipped the most since 2008. You may recall that the United States was in a recession and during that time, the employment index slowed to nearly zero. And now, with this report, we can see that while the slowdown in manufacturing might not reflect an overall downturn, the slowdown in the service industries could certainly raise many questions about the overall strength of the American economy.

According to Moody’s Analytics, Inc senior economist, Ryan Sweet, “There’s no good news in this report, but it is just one month. September’s going to be very important — if the weakness persists, then that would raise some concern about the health of the non-manufacturing segment of the economy.”

Overall, the employment rate grew at its slowest pace since December of 2014. And in a survey, Market chief economist Chris Williamson notes that client demand for these is now very understated. He goes on to say that when you take these variables together, it points to an “annualized GDP growth rate of a mere 1%,” adding that this is similar to the slower pace the surveys have indicated throughout the year. Thus, he suggests that those who are looking to strengthen economic growth will likely be disappointed; again.

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