Hiring in service sector may not cut jobless rate

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NEW YORK --- The U.S. service sector, the nation's predominant employer, expanded in September for a ninth month in a row, though the growth has not been consistent enough to dent the high unemployment rate.

The Institute for Supply Management said Tuesday that its service-sector index rose last month to 53.2 from 51.5 in August. The rate hit a high point of 55.4 in March, stayed there in April and May, and has fluctuated since. Readings above 50 signal growth.

Weak consumer spending has kept the service industry, which employs about 83 percent of workers in the private sector, from gaining momentum after the recession ended. Economists say Tuesday's reading was better than expected, but not enough to change their outlook of high unemployment and slow job growth for the rest of the year.

Many expect Friday's employment report to show the jobless rate rose in September to 9.7 percent from 9.6 percent, and that 75,000 private-sector jobs were added. They predict the economy will grow at about a 2 percent rate for the rest of the year, not enough to lower unemployment.

"Obviously a rise is better than a fall, but we're still faced with an economy that is growing well below its trend rate and not fast enough to generate the job gains required to drive down the unemployment rate," Paul Ashworth, a senior U.S. economist for Capital Economics, said about the service-sector survey.

The survey polls about 350 companies in 18 industries, including health care, retail, utilities, education, financial services and shipping. In September, 11 of the industries reported growth. They were led by business management and administrative services, industries that provide information, and professional and scientific services. Three industries shrank and four had the same pace of activity.

There were a few promising signals for winter. A gauge of future business, the new orders index, grew more quickly in September than in August. That suggests demand for services has increased and business activity might grow in the next few months.

A measure of how willing employers are to fill vacant positions showed slim growth in September after a pullback in August. Still, that improvement, to 50.2 from 48.2, leaves the measure stuck in the same range it has been for months. It does not suggest employers are ready to hire enough to bring down the employment rate.

Stocks surge

NEW YORK --- Stocks surged to their highest level in five months Tuesday after the release of the service sector report.

A surprise move by the Bank of Japan to cut its key interest rate to virtually zero also lifted stocks worldwide. The dollar fell as investors shed defensive assets, and a gauge of U.S. stock market volatility fell.

The Dow Jones industrial average rose 193.45 points, or 1.8 percent, to close at 10,944.72, its highest close since May 3 and its biggest gain since Sept. 24. The Dow is still 2.3 percent below is 2010 high reached on April 26, and up 5 percent for the year so far.

All but one of the 30 companies that make up the average rose, led by Boeing Co. and Bank of America Corp.

The Standard & Poor's 500 index broke through 1,150, a level it hadn't traded above since mid-May, and kept on going.

-- Associated Press


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