US service firms grew at faster pace in August

Associated Press Modified: September 6, 2012 at 10:45 am •  Published: September 6, 2012
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WASHINGTON (AP) — U.S. service companies expanded at a faster pace in August than July, helped by stronger hiring. The growth at firms that employ roughly 90 percent of the work force suggests the economy is improving.

The Institute for Supply Management said Thursday that its index of non-manufacturing activity increased in August to 53.7, up from a July reading of 52.6. Any reading above 50 indicates expansion.

Service companies include everything from retail and construction companies to health care and financial services firms. The sector has grown for 32 straight months.

The report showed that the August growth was driven by a jump in hiring. A measure of employment rose to 53.8, up from 49.3 in July.

The increase in hiring was among a handful of hopeful signs about the job market that emerged one day before the government reports on August employment.

The Labor Department said applications for unemployment benefits fell by 12,000 last week to a seasonally adjusted 365,000. And payroll provider ADP said businesses added 201,000 jobs last month, the best job growth reported by the survey since March.

Economists forecast that Friday's government report will show employers added 135,000 jobs last month. The unemployment rate is expected to stay unchanged at 8.3 percent.

In July, employers added 163,000 jobs.

Chris Jones, an economist for TD Economics, said the three report hint at a "modest acceleration" in August job growth.

"We should be mindful, however, that these are imperfect indicators that don't always correlate with the actual jobs report," Jones cautioned. "Unfortunately, job growth is still more likely to come in substantially below 200K. Anything short of this threshold is simply not consistent with a falling unemployment rate."

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