The vast U.S. services sector expanded in April as new orders and employment accelerated, bolstering views that economic growth would rebound after almost stalling in the first quarter.
The growth outlook was, however, dimmed by other data on Wednesday showing private employers hired the fewest number of workers in three years in April.
The Institute for Supply Management said its nonmanufacturing index rose 1.2 percentage points to a reading of 55.7 in April.
A reading above 50 indicates expansion in the services sector, which accounts for more than two-thirds of the U.S. economy. Services industry activity was last month buoyed by a 3.2 percentage point surge in new orders.
A gauge of services sector employment rose to 53.0 last month from a reading of 50.3 in March.
That strong increase should offset concerns about the labor market, which had been stoked by the ADP National Employment Report showing private payrolls increased 156,000 last month, the smallest gain since April 2013, after rising 194,000 in March.
The ADP report, which is jointly developed with Moody’s Analytics, was published ahead of the government’s more comprehensive employment report for April due on Friday.
According to a Reuters survey of economists, nonfarm payrolls likely increased by 202,000 jobs in April after rising 215,000 in March. The unemployment rate is forecast holding steady at 5.0 percent.
The labor market has so far weathered the sluggish economy, which has been slammed by weak exports as a result of a strong dollar and tepid global demand.
Growth has also been eroded by relentless aggressive spending cuts in the energy sector in the aftermath of last year’s plunge in oil prices, as well as efforts by businesses to reduce an inventory overhang.
The economy slowed to an annual growth pace of 0.5 percent in the first quarter after expanding at a 1.4 percent rate in the fourth quarter.
The ADP report showed employment in the goods-producing sector dropped by 11,000 jobs in April, with manufacturing payrolls declining by 13,000 positions. The construction industry added 14,000 jobs last month.
Services industry employment increased by 166,000 jobs in April, down from 189,000 in March.
The dollar rose against a basket of currencies on the reports. Prices for U.S. government debt fell.