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FILE PHOTO: The Federal Reserve on Constitution Avenue is photographed in Washington, United States, on March 19, 2019. REUTERS / Leah Millis / File Photo / File Photo / File Photo
September 5, 2019
By Lucia Mutikani
WASHINGTON (Reuters) – US service activity accelerated in August and private employers spurred hiring, suggesting the economy continued to grow at a moderate pace despite the trade tensions that fueled fears of financial market recession.
Thursday's optimistic reports benefited from this week's data showing that the manufacturing sector contracted for the first time in August, as the US-led one-year trade war with China intensified.
But given the erosion of business confidence resulting from the commercial stalemate and the threat that this represents for the longest economic expansion in history, the Federal Reserve should further reduce its rates of interest this month.
The US central bank lowered its borrowing costs in July, due to growing risks to the economy, which is now in its eleventh year of expansion, as a result of trade and economic growth. slowdown in global growth. China and the United States decided Thursday to hold high-level trade talks in early October in Washington, according to the Chinese Ministry of Commerce.
"This is the case for two cities in this economy facing uncertainties in the trade war, and today the largest service economy is weathering the storm," said Chris Rupkey, chief economist at Canada Post. MUFG in New York. "Do not count the economy yet."
The Institute for Supply Management said its non-manufacturing activity index reached 56.4 in August, up from 53.7 in July. A value greater than 50 indicates an expansion of the sector, which accounts for more than two-thirds of US economic activity.
Economists polled by Reuters had predicted that the index would rise to 54.0 in August. The ISM said the companies "remained concerned about tariffs and geopolitical uncertainty", but also said that they "were generally positive about the economic situation."
News and reports that Washington and Beijing have agreed to resume trade talks next month have propelled US stock indexes to more than their highest level in a month. US Treasury prices fell and the dollar slid against a basket of currencies.
FORT LABOR MARKET
The Atlanta Fed predicts the economy will experience annualized growth of 1.5% in the third quarter, down from the 2.0% recorded between April and June.
The increase in activity in the services sector in August reflects the increase in production and new orders. Export orders, however, declined, as did imports. ISM said 16 service industries, including retail, utilities and government, grew last month. Wholesaling is the only sector where growth has declined.
However, the employment indicator in the services sector fell to 53.1, its lowest level since March 2017, after 56.2 in July.
This, combined with a contraction in employment in the manufacturing sector, suggests that non-farm payrolls likely increased in August, although the national ADP employment report said Thursday that headcount The private sector increased by 195,000 this month after increasing by 142,000 in July.
The ADP report, which is being developed jointly with Moody's Analytics, preceded the release of the government's most comprehensive report on employment on Friday.
The ADP report, however, has a poor track record of forecasting the private component of the payroll in the government's employment report due to differences in methodology. Given that August's payroll tends to be below expectations, the ADP report has not changed economists' forecasts of steady earnings.
"While we do not believe that government data will be as strong as that of the ADP, the strength of the ADP report will dispel some concerns about the risks of loss in the job market related to the decline." recent business climate, "said Daniel Silver, an economist at JP Morgan in New York.
According to a Reuters study by economists, non-farm payrolls likely increased by 158,000 jobs last month, following a rise of 164,000 in July. Employment growth slowed compared to an average of 223,000 jobs per month in 2018.
However, the pace of employment gains remains well above the estimated 100,000 jobs needed per month to keep pace with the growth of the working-age population. The unemployment rate is expected to remain at 3.7% in August for a third consecutive month.
The resilience of the labor market was also underscored by a third report released Thursday by the Department of Labor, according to which initial claims for unemployment benefits paid by the state had increased from 1,000 to 217,000 seasonally adjusted for the week ended August 31st.
Economists polled by Reuters had forecast that the number of claims for compensation would remain unchanged at 215,000 last week.
(Graphic: ISM PMI link: Manufacturing vs. Services: https://graphics.reuters.com/USA-STOCKS/0100B27K15Z/ism-pmi.png)
(Graphic: ADP link against the US Department of Labor: https://graphics.reuters.com/USA-STOCKS/0100B27J15Y/adp.png)
(Report of Lucia Mutikani, edited by Paul Simao)
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