Signs of growth sprouting

By Paul Davidson, USA TODAY

WASHINGTON – March 4, 2010 – A batch of economic reports Wednesday depicted a broadening recovery, with services industries last month growing at the fastest pace in more than two years and job losses slowing despite snowstorms that hampered key sectors such as retail.

Growth remains relatively modest, held back at least partly by brutal slumps in commercial real estate and construction, and tight credit markets, according to a nationwide report from the Federal Reserve. Still, notable gains by finance, insurance and other services industries heartened economists who have lamented that the services sector – which makes up the bulk of the economy – had not kept pace with a more robust rebound in manufacturing.

A closely watched index of service-sector activity jumped from 50.5 to 53 in February, according to the Institute for Supply Management (ISM), solidly beating estimates and reaching its highest level since December 2007. Above 50 indicates expansion; below means contraction.

“Services are a big piece of the economy, and they hadn’t come to the party until last month,” says economist Brian Bethune of IHS Global Insight.

The index hovered around 50 for eight months, hindered by a shrinking labor force. But in February, the employment measure jumped from 44.6 to 48.6, indicating jobs fell at a far slower pace and are poised to rise in March, Bethune says. The trend was supported by a couple of wider job-market indicators. Employers across all industries shed 20,000 jobs in February, the least in two years, according to the ADP National Employment Report. Small businesses lost 18,000 jobs vs. 10,000 for large companies. Midsize firms added 8,000 jobs. The ADP report is considered a precursor to Friday’s more closely watched jobs survey from the Labor Department.

But economists expect severe weather across the USA in early February to inflate by tens of thousands the number of job losses in the government report. ADP, by contrast, counts all employees on a payroll even if they don’t make it to work in the survey period.

The stabilizing job market was further underscored in a report by outplacement firm Challenger Gray & Christmas that showed companies announced 42,090 layoffs last month, the least since July 2006.