Growth in the vast U.S. services sector slowed in September, but mixed data on employment Tuesday focused economists’ attention on upcoming payrolls data to get a clearer sign about the outlook.
The Institute for Supply Management’s non-manufacturing index fell to 56.7 in September, its lowest level since May, 2003, and down from 58.2 in August. The number was below Wall Street predictions for an increase to 59.0.
A number above 50 indicates growth, while a figure below that threshold denotes contraction in the sector, which accounts for about 80 percent of the U.S. economy.
“The ISM non-manufacturing index was a little softer than expected, but some of the important components still look pretty good, particularly the employment component,” said Gary Thayer, chief economist at A.G. Edwards and Sons in St. Louis, Missouri.
The ISM survey’s employment index rose to 54.6 in September from 52.5 in August.
However, data from employment consulting firm Challenger, Gray & Christmas Inc. released Tuesday painted a less optimistic portrait of U.S. employment.
Employers announced 107,863 layoffs in September, an eight-month high and 41 percent higher than in the same year-earlier month. The other half of the Challenger report showed employer hiring announcements last month at only 16,166 new job openings compared with 132,105 job openings in August.
Economists are also paying increasing attention to energy costs, watching for any signs that rising oil prices are putting a damper on growth. Oil futures in New York momentarily touched just shy of $51.
“The rate of growth in the service sector slowed a bit and announced layoffs picked up,” Drew Matis, senior financial economist at Lehman Brothers in New York said in a research report Tuesday. “It will take the employment and retail sales reports to provide conclusive evidence of post-soft patch strength in the economy,” Matis said.
On Friday, the government will report on the September employment situation, with analysts polled by Reuters on average expecting a 148,000 rise in non-farm payrolls compared with a 144,000 increase in August.
September retail sales will be released on Oct. 15, with economists calling for an average increase of 0.4 percent during the month from a decrease of 0.3 percent in August.
Data released Tuesday showed U.S. chain store sales rose 2.2 percent in the fifth week of September compared with the year-ago week. Chain stores said business picked up toward the end of the week as temperatures in parts of the country turned cooler, according to Redbook Research, an independent company.
A joint report from the International Council of Shopping Centers and UBS Tuesday said U.S. chain store retail sales rose by 0.3 percent in the week ended October 2, compared with a 0.3 percent decline in the previous week.