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Service Sector Expansion Continues

However, the Fed's 'beige book' says employment grew only slowly in most of the country in the last two months.

March 04, 2004|From Reuters

The vast U.S. service sector grew robustly in February, but the expansion slowed from the previous month's record and job creation remained sluggish, an industry survey showed Wednesday.

The Institute for Supply Management's nonmanufacturing index fell to 60.8 in February from 65.7 in January, below Wall Street estimates of a dip to 63. A number above 50 indicates growth.

"The one area of concern is the employment index, which moderated in the month, which suggests continued subdued job growth," said Sal Guatieri, senior economist at BMO Financial Group.

The survey's employment index slipped in February to 52.7 from 53.4 in January, suggesting an improving but still murky labor picture. Growth in new orders moderated, with that index falling to 60.3 from 64.9.

The service sector includes everything from restaurants and hotels to banks and airlines.

Many economists believe that, given the migration of many manufacturing jobs abroad, a revival of the U.S. labor market will have to take place in the service sector.

But job growth has remained persistently below trend, a tendency confirmed by the Federal Reserve's "beige book" report Wednesday. It said employment grew only slowly in most areas of the country over the last two months amid overall economic growth that ranged from moderate to accelerating.

The Fed's San Francisco bank found that the economy in the West "continued to expand soundly." Manufacturing improved, "driven in part by an increase in demand for information technology upgrades." Home construction was described as brisk and residential real estate showed solid price appreciation.

Another report found a ray of hope for frustrated job seekers. A survey of leading U.S. chief executives showed 33% expected their companies to add jobs over the next six months, up from 25% when a similar survey was released in December.

The poll from the Business Roundtable, the country's main association of CEOs, showed 45% expected no change in employment at their companies while 22% expected jobs to decline over the next six months.

Another report Wednesday showed that the buoyant U.S. housing sector has yet to run out of steam, with mortgage refinancing applications climbing last week to the highest level in seven months.

The Mortgage Bankers Assn. said its seasonally adjusted refinancing index rose 5.1% to 3,532.2 from the previous week's 3,361.9.

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