U.S. private sector hiring drops 31%, hits 5-month low in October
U.S. services industry activity cooled in October amid a slowdown in new orders and hiring, suggesting a moderation in economic growth early in the fourth quarter.
Other data on Thursday showed planned job cuts by U.S.-based employers dropped 31 percent to a five-month low last month. That underscored the labor market’s healthy fundamentals, though more Americans filed for unemployment benefits last week.
The mixed reports came a day after the Federal Reserve offered a fairly upbeat assessment of the economy and signaled it could raise interest rates next month.
“While the services report was weak, it is not nearly weak enough to disrupt Fed plans to hike in December. It is consistent with a softer pace of economic growth,” said Andrew Hollenhorst, an economist at Citigroup in New York.
The Institute for Supply Management (ISM) said its non-manufacturing index fell 2.3 percentage points to a reading of 54.8 percent in October. A reading above 50 indicates expansion in the services sector, which accounts for more than two-thirds of the economy.
It said respondents’ comments remained mostly positive about business conditions and the overall economy, but added that “several” had highlighted uncertainty about the impact of the Nov. 8 U.S. presidential election.
Services industries reported a slowdown in new orders and employment, as well as demand for exports.
The new orders sub-index dropped 2.3 percentage points to 57.7, while a measure of services sector employment decreased 4.1 percentage points to 53.1. A sub-index for export orders fell 1.0 percentage point last month.
Thirteen services industries including information, professional, retail and finance reported growth in October. The five industries reporting contraction included education, public administration and arts, entertainment and recreation.
The economy grew at a 2.9 percent pace in the third quarter after expanding at a 1.4 percent rate in the April-June period.
Separately, the Labor Department said on Thursday that initial claims for state unemployment benefits increased 7,000 to a seasonally adjusted 265,000 for the week ended Oct. 29, the highest level since early August.
