US services firms grow at slower pace in March

Cos add 263,000 jobs last month

WASHINGTON, April 5, (AP): US services companies saw their growth rate taper off in March, as hiring and business activity remained positive but dipped relative to February.

The Institute for Supply Management, a trade group for purchasing managers, said Wednesday that its services index fell to 55.2 last month from 57.6 in February. Any reading above 50 signals growth.

The report points to the United States continuing its nearly 8-year recovery from the Great Recession, a sign that many consumers and businesses are on a solid footing. Services — which can range from home buying to doctor’s visits to hair salons — account for the vast majority of the US economic activity.

But some firms also reported a degree of uncertainty regarding the Trump administration in the survey used to compile the report.

One finance company said there is a “large amount of future uncertainty” regarding efforts to replace former President Barack Obama’s health insurance law. Another health care firm highlighted uncertainty as well, while a company in the accommodation and food services sector said there are possible challenges because President Donald Trump’s exact policies on trade and immigration are “unknown.”

The services sector has now expanded for 87 straight months. But the employment reading dropped to 51.6 last month from 55.2 in February, while business activity and production pulled back to a reading of 58.9 from a solid 63.6.

Fifteen services industries reported growth in March, including retailers, real estate and food services. But three sectors contracted: information, education and scientific and technical services.

US private businesses added the most jobs in more than two years last month, a private survey found, a third straight month of robust gains.

Payroll processor ADP said Wednesday that businesses added 263,000 jobs in March, the most since December 2014. That is up from 245,000 in February, which was revised lower.

The figure is much higher than economists’ forecasts for the government’s jobs report, to be released Friday. Analysts predict that report will show 178,000 jobs were added, according to data provider FactSet.

The healthy gain follows solid increases in January and February and suggests that rising business confidence is translating into stronger hiring. Small business optimism soared after the November presidential election and is near a record high. Widespread improvement in the global economy has also bolstered larger firms’ outlook.

The data also indicates that hiring remains strong even though growth appeared to slow in the January-March quarter. Many economists estimate that the economy grew at roughly a 1 percent annual rate in the first three months of the year. That would be half the 2.1 percent pace in last year’s fourth quarter.

The ADP report “is clearly another indication that, despite the apparent slowdown in GDP growth in the first quarter, labor market conditions have remained unusually strong,” Andrew Hunter, US economist at Capital Economics, a forecasting firm, said.

Small and medium-sized businesses posted the biggest increases. Small companies with fewer than 50 employees added 118,000 jobs, while medium-sized firms added 100,000.

The job gains were led by big increases in construction, manufacturing, and professional and business services, which includes high-paying fields such as accounting and engineering.

Construction companies added 49,000 jobs, a third straight month of robust gains that partly reflects the unseasonably warm winter weather experienced by much of the country. Yet homebuilders are also stepping up construction in response to heavy demand for homes.

Businesses that serve consumers also added a healthy number of positions, a sign that companies are seeing stronger demand.

A category that includes retailers and shippers added 34,000 jobs, while restaurants, hotels and amusement parks added 55,000 jobs.