Services Sector Expanded, But Growth Slowed in September

Growth in the vast U.S. services sector slowed modestly in September as a contraction in employment eclipsed a jump in new orders, data showed on Wednesday.

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The Institute for Supply Management said its services index dipped to 53.0 last month from 53.3 in August. A reading above 50 indicates expansion in the sector. Economists polled by Reuters had expected a reading of 52.9 in September.

Employment in the sector, which accounts for about 80 percent of U.S. economic activity and nonfarm payrolls, fell last month to its lowest level since April 2010. A gauge of new orders rose to 56.9 from 52.8 in August.

But in a separate report from payrolls processor ADP overall private payrolls rose by 91,000 above expectations for a gain of 75,000 in a Reuters poll.

August private payrolls were revised down to an increase of 89,000 from the previously reported 91,000.

A separate report showed the number of planned layoffs at U.S. firms in September jumped to its highest in more than two years due to heavy cutbacks by the U.S. military and Bank of America, another report on Wednesday showed.

Employers announced 115,730 planned job cuts last month, more than double August's total of 51,114, according to the report from consultants Challenger, Gray & Christmas, Inc.

The figure was the highest since April 2009 when 132,590 layoffs were announced.

September's job cuts were also much higher than the same time a year ago, tripling from the 37,151 job cuts announced in September 2010. For 2011 so far, employers have announced 479,064 cuts, up 16.5 percent from the first nine months of 2010.

"It looks like we're still seeing the private sector create jobs, which is consistent with a slow-growing economy,'' said Gary Thayer, chief macroeconomic strategist, at Wells Fargo Advisors, in St. Louis, Missouri. "The problem is the government sector is cutting jobs. So it looks like we'll get a weak, but slightly positive, jobs number on Friday.''