By Lucia Mutikani
WASHINGTON, Sept 3 (Reuters) - The contraction in the U.S. services sector eased last month, with a gauge of activity hitting its highest point in 11 months, a further suggestion that a modest economic recovery was under way.
The Institute for Supply Management said on Thursday that its non-manufacturing index climbed to 48.4 in August, the highest since September last year, from 46.4 in July. But the sector remains in recession.
A separate report from the Labor Department showed initial claims for state jobless benefits fell 4,000 to 570,000 last week, hinting at only a marginal slowing in the fast pace of layoffs.
The continued shrinking in the services sector, which constitutes 80 percent of U.S. economic activity, was a disappointment to analysts after a report this week showed manufacturing in August grew for the first time in 18 months.
'We have entered recovery, but the data we have seen today ... does suggest the recovery will be muted through 2010 and we don't expect to see robust growth in excess of 4 percent until 2011,' said Joseph Brusuelas, an economist at Moody's Economy.com in West Chester, Pennsylvania.
U.S. stocks rose, snapping a four-day losing streak, as better-than-expected retail sales results in August and the service sector data offset investor disappointment over the jobless claims. U.S. government bond prices fell, pulling benchmark yields off seven-week lows.
TEPID RECOVERY
Sales at stores open at least a year fell an average of 2.9 percent at the 30 retailers tracked by Thomson Reuters, better than the 3.8 percent decline analysts had forecast. Lower priced retailers fared the best, while luxury chains continued to struggle in August. For details see
While a wide range of economic data has signaled that the deepest U.S. recession in 70 years has likely ended, high unemployment has held back consumer spending, raising concerns that any recovery will be tepid.
The pace of layoffs has slowed considerably from early this year, but companies are reluctant to start aggressively hiring before they see stronger signs the recovery will be sustained.
A closely watched government report on the jobs market slated for release on Friday is expected to show employers shed another 225,000 workers last month after cutting 247,000 positions in July.
'The lack of job creation remains a big headwind for cash-starved and credit-constrained consumers, and thus a major impediment for the fledgling recovery,' said Sal Guatieri, a senior economist at BMO Capital Markets in Toronto.
Analysts reckon new applications for unemployment benefits need to move below 400,000 a week on a sustained basis to signal a recovery in the labor market.
Highlighting companies' reluctance to expand payrolls, the number of people still on the benefit rolls after at least an initial week of aid rose 92,000 to 6.23 million in the week ended Aug. 22, the Labor Department said on Thursday.
The insured unemployment rate, which measures the percentage of the insured labor force who are jobless, inched up to 4.7 percent in the week ended Aug. 22 from 4.6 percent in the prior week.
'This is consistent with the idea that employers are nervous that the economy is growing only because of policy stimulus, and that when the stimulus fades it will weaken again,' said Ian Shepherdson, chief U.S. economist at High Frequency Economics in Valhalla, New York.
(Additional reporting by Brad Dorfman in Chicago; Editing by Leslie Adler) Keywords: USA ECONOMY/ (lucia.mutikani@thomsonreuters.com; Tel: 202 898 8315; Reuters messaging: lucia.mutikani.reuters.com@reuters.net) COPYRIGHT Copyright Thomson Reuters 2009. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.
WASHINGTON, Sept 3 (Reuters) - The contraction in the U.S. services sector eased last month, with a gauge of activity hitting its highest point in 11 months, a further suggestion that a modest economic recovery was under way.
The Institute for Supply Management said on Thursday that its non-manufacturing index climbed to 48.4 in August, the highest since September last year, from 46.4 in July. But the sector remains in recession.
A separate report from the Labor Department showed initial claims for state jobless benefits fell 4,000 to 570,000 last week, hinting at only a marginal slowing in the fast pace of layoffs.
The continued shrinking in the services sector, which constitutes 80 percent of U.S. economic activity, was a disappointment to analysts after a report this week showed manufacturing in August grew for the first time in 18 months.
'We have entered recovery, but the data we have seen today ... does suggest the recovery will be muted through 2010 and we don't expect to see robust growth in excess of 4 percent until 2011,' said Joseph Brusuelas, an economist at Moody's Economy.com in West Chester, Pennsylvania.
U.S. stocks rose, snapping a four-day losing streak, as better-than-expected retail sales results in August and the service sector data offset investor disappointment over the jobless claims. U.S. government bond prices fell, pulling benchmark yields off seven-week lows.
TEPID RECOVERY
Sales at stores open at least a year fell an average of 2.9 percent at the 30 retailers tracked by Thomson Reuters, better than the 3.8 percent decline analysts had forecast. Lower priced retailers fared the best, while luxury chains continued to struggle in August. For details see
While a wide range of economic data has signaled that the deepest U.S. recession in 70 years has likely ended, high unemployment has held back consumer spending, raising concerns that any recovery will be tepid.
The pace of layoffs has slowed considerably from early this year, but companies are reluctant to start aggressively hiring before they see stronger signs the recovery will be sustained.
A closely watched government report on the jobs market slated for release on Friday is expected to show employers shed another 225,000 workers last month after cutting 247,000 positions in July.
'The lack of job creation remains a big headwind for cash-starved and credit-constrained consumers, and thus a major impediment for the fledgling recovery,' said Sal Guatieri, a senior economist at BMO Capital Markets in Toronto.
Analysts reckon new applications for unemployment benefits need to move below 400,000 a week on a sustained basis to signal a recovery in the labor market.
Highlighting companies' reluctance to expand payrolls, the number of people still on the benefit rolls after at least an initial week of aid rose 92,000 to 6.23 million in the week ended Aug. 22, the Labor Department said on Thursday.
The insured unemployment rate, which measures the percentage of the insured labor force who are jobless, inched up to 4.7 percent in the week ended Aug. 22 from 4.6 percent in the prior week.
'This is consistent with the idea that employers are nervous that the economy is growing only because of policy stimulus, and that when the stimulus fades it will weaken again,' said Ian Shepherdson, chief U.S. economist at High Frequency Economics in Valhalla, New York.
(Additional reporting by Brad Dorfman in Chicago; Editing by Leslie Adler) Keywords: USA ECONOMY/ (lucia.mutikani@thomsonreuters.com; Tel: 202 898 8315; Reuters messaging: lucia.mutikani.reuters.com@reuters.net) COPYRIGHT Copyright Thomson Reuters 2009. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.