Service sector shows growth, but jobs are few

By Tali Arbel
Associated Press / January 7, 2010

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NEW YORK - A gauge of the US service sector showed growth last month, in part because of holiday retail sales. The expansion reflected a slowly improving economy - but it was too slight to generate much hiring.

The Institute for Supply Management, a trade group, said yesterday that its service index rose to 50.1 in December, from 48.7 in November. A level above 50 signals growth. Seven industries out of 18 reported growth, led by agriculture and retail.

The ISM’s employment gauge, which has not grown in two years, shrank again in December, though at a slower pace than in November. It reached 44 in December, compared with 41.6 a month earlier.

Job generation has been weak, even as layoffs have slowed. Economists expect the Labor Department to report tomorrow that the US unemployment rate ticked up to 10.1 percent in December, from 10 percent in November, and that the economy lost a net total of 8,000 jobs.

The ISM said four service-sector groups added jobs in December: retail, finance and insurance, public administration, and a category of other services. Retailers added temporary workers for the holiday season.

The overall service-sector gauge returned to growth in September for the first time in 13 months. But the comeback has been fitful amid scant gains in consumers’ incomes and weak bank lending. The ISM’s service-sector gauge is closely watched because service jobs make up more than 80 percent of nonfarm US employment.

“We don’t think the increase was all that convincing,’’ said TD Securities’ Millan Mulraine, because growth in new orders slowed and employment still signaled contraction.

The Labor Department reported last month that the service sector added jobs in November, though that wasn’t reflected in the ISM survey. The service sector is so large the ISM survey may not be effective in calculating changes in employment, Mulraine said. He predicts the economy will post a net increase of 25,000 jobs for December., a site for finance professionals, said postings for jobs involving derivatives grew 19 percent in December compared with last year. Work involving debt, fixed income, and accounting were also hot areas.

The ISM report said new orders expanded for the fourth straight month, though less quickly than in November. Business activity also grew, as did the prices paid by businesses. That may mean service companies will pass higher costs on to consumers, collecting higher revenue.

On Monday, the ISM said manufacturing grew in December for the fifth straight month. A rebound in the industrial sector has been helping the nation limp out of recession, but manufacturing doesn’t add many jobs. The service sector, which depends on consumer spending, is a much bigger factor in job creation.