Service sector index grows again in October

The U.S. services sector grew modestly for a second month in a row in October and private sector employers cut jobs at the slowest pace in more than a year, adding to signs that the economy is crawling back to health.

The services sector, which represents about 80% of U.S. economic activity, grew in October, but the growth was less than forecast and the survey’s employment index disappointed analysts.

“On balance, the non-manufacturing survey suggests that economic growth is continuing at a moderate pace, but that the labor market is still in rough shape,” JPMorgan Chase analysts wrote in a note to clients.

The Institute for Supply Management’s U.S. services data followed European surveys showing service sector activity expanded at its fastest pace in 22 months in October in the euro zone, and in Britain at its briskest since August 2007, when the global credit crunch struck.

The ISM services index slipped to 50.6 last month from 50.9 in September, below economists’ median forecast for a rise to 51.5. A reading above 50 indicates growth. The employment index fell to 41.1 in October from 44.3 in September.

A separate report showed that while companies are still cutting jobs, they are doing so at a slower pace.

The private sector jobs report by ADP Employer Services showed that companies cut 203,000 jobs in October, fewer than the revised 227,000 in September and the lowest since July 2008.

The ADP report is seen by many analysts as a proxy for the government’s closely watched monthly report on nonfarm payrolls, which will be released Friday.

Analysts polled by Reuters expect Friday’s employment report to show U.S. payrolls shrank by 175,000 and the unemployment rate hit a new 26-year high of 9.9% in October.