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U.S. service firms grow at fastest pace in 6 months

WASHINGTON — U.S. service companies grew in September at the fastest pace in six months, helped by a sharp increase in customer demand.

The Institute for Supply Management, a trade group of purchasing managers, said Wednesday that its index of nonmanufacturing activity rose to 55.1, up from 53.7 in August. Any reading above 50 indicates expansion.

The report measures growth at businesses that employ roughly 90 percent of the U.S. workforce, from retail and construction companies to health care and financial services firms. The service sector has grown for 33 straight months.

In September, the survey noted that consumer demand rose sharply, which could help lift economic growth from its tepid pace and ultimately lead to more hiring.

Service companies have been a key source of job growth this year. They have created an average of 133,000 jobs per month, or 95 percent of the net jobs added since January.

Still, many of the new service jobs have been low-paying retail and restaurant positions.

"Overall, this is an encouraging survey," said Paul Dales, senior U.S. economist at Capital Economics. "But more than a couple of stronger surveys will be needed to conclude that the economic outlook has brightened dramatically."

A separate report Wednesday from payroll processor ADP said private employers added 162,000 jobs last month. While modest, such hiring is generally too little to rapidly lower the unemployment rate.

The ADP survey has also diverged sharply from the government's more closely watched employment report. The Labor Department releases its September job figures Friday.

On Wednesday, the Labor Department said unemployment rates fell in August in nearly 90 percent of large U.S. metro areas, mainly because more people gave up looking for work. Unemployment rates dropped in 329 large cities, the most in four months. Rates rose in 24 cities and were unchanged in 19.

The decline in rates across America's cities was largely for a bad reason: The government counts people as unemployed only if they are actively looking for work.

The trend closely matched the national figures. The U.S. unemployment rate fell in August to 8.1 percent from 8.3 percent, also because more people stopped searching for jobs and weren't counted.

The metro data are more volatile than the national figures because they aren't adjusted for seasonal factors, such as summer hiring.

There were some signs of progress in the report. The unemployment rate is below 7 percent in 123 metro areas, up from 73 a year ago. And the rate tops 10 percent in only 54 areas, about half the number of a year ago.

U.S. service firms grow at fastest pace in 6 months 10/03/12 [Last modified: Wednesday, October 3, 2012 10:30pm]
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