Service industry labor market weakens

Activity in the US service sector halted as new orders slowed in September, the Institute for Supply Management reported last week.

Employment in the service sector also remains “in contraction territory, thanks to a combination of delayed hiring efforts and difficulty finding qualified staff,” Steve Miller, chair of the services business survey committee at the ISM, said in a statement.

“Ten [service] industries reported growth in September, two fewer than in August,” the report noted. Seven industries contracted for the month, including mining, construction, and retail trade. That was an increase from four industries in contraction the month before.

Additionally, the survey revealed that prices paid by service orgs for materials and inputs increased “for the 100th consecutive month,” also marking “the index’s second-highest [reading] since October 2022.”

The ISM survey offers some much-needed insight into at least one aspect of the labor market after the US government shutdown delayed the release of September’s jobs numbers, which might not be released until the government opens again. The withheld employment report marked the first time since 2013 that the data wasn’t available, per Reuters, complicating the decision-making process for economists, businesses, and the central bank.

“There’s no question—the best jobs data in the world comes from the Bureau of Labor Statistics,” Chicago Fed President Austan Goolsbee told CFO Dive last week. “We need that data, we want that data.”

And not having that data poses its own problems. “In this environment, the risk of slower growth stems from reduced visibility into the economy in an already uncertain period, and less so from the shutdown itself,” Mike Reid, Carrie Freestone, and Imri Haggin, RBC economists, wrote in a note.