Service sector, jobs reports offer promising signs

The U.S. service sector last month marked its fastest expansion in more than two years while two employment reports Wednesday showed promise ahead of Friday’s government jobs data.

The service sector index calculated by the Institute for Supply Management jumped to 53 in February from 50.5 in January, the highest level since December 2007. Any level above 50 represents growth, according to the Tempe, Ariz.-based nonprofit.

Employment in the service sector has declined for the last 26 months, but the institute’s employment index for the sector jumped in February to 48.6 from 44.6, suggesting that more jobs could be on the horizon.

Two reports offered a preview Wednesday of payroll numbers to be released Friday by the Bureau of Labor Statistics. The official government jobs data is expected to be heavily affected by last month’s storms.


Private, nonfarm employment fell by 20,000 last month, according to payroll company Automatic Data Processing Inc. The drop was the smallest decline since employment began tumbling in February 2008.

Service sector employment rose by 17,000 from January to February. The goods-producing sector shed 37,000 workers, though manufacturing saw a 3,000-job gain, the first increase since the start of 2008.

The Bureau of Labor Statistics counts government workers, but the report from Roseland, N.J.-based ADP looks only at private-sector positions. The company’s and the government’s numbers are based on a sample size extrapolated to represent the entire workforce.

Economic consulting firm Macroeconomic Advisers conducted the research for ADP. Also in February, planned downsizing at U.S. companies fell to its lowest level since 2006, outplacement consulting firm Challenger, Gray & Christmas Inc said.


Employers announced 42,090 job cuts last month, a 41% drop from the 71,482 in January and a 77% slide from the 186,350 in February 2009, the Chicago company said. The previous low was the 37,178 layoffs announced in July 2006.

The Challenger report is on based job-cutting plans that are publicly announced by U.S.-based businesses. The layoffs tallied monthly may not actually take place until later months.

“It is clear that employers have shifted away from downsizing and are poised to start adding workers,” Challenger Chief Executive John A. Challenger said.