The U.S. economy’s service sector grew slightly in January, while the pace of job losses slowed, signaling a recovery still struggling to gain strength.
The Institute for Supply Management said Wednesday that its service sector index rose to 50.5 last month, from a downwardly revised 49.8 in December. Economists polled by Thomson Reuters had expected a higher level of 51 in the latest reading, but it was the index’s strongest reading since May 2008.
Any reading above 50 signals growth. That threshold was broken in September for the first time in 13 months. But the service sector’s road has been bumpy, having contracted in November and December. That’s a concern for the broader economic rebound.
“Outside the factory sector, the economy is hardly growing, largely because of continued weakness in construction and lackluster retail activity,” economist Sal Guatieri of BMO Capital Markets said in a note to investors.
The service sector relies on U.S. consumers, whose spending powers about 70 percent of the economy but “who are broke,” said economist Ian Shepherdson of High Frequency Economics.
Elements of the report suggested future growth. New orders, a signal of business activity to come, picked up in January, expanding for the fifth straight month. Business activity also expanded in January, though more slowly than in December.
The report does show job losses moderating, with the employment index improving to 44.6 in January from 43.6 in December. Still, it’s the 25th straight month of contraction in employment.