Healthy service sector takes economic spotlight
After disappointing reports last week on August job growth and manufacturing, a holiday-shortened, light week of economic news will highlight the economy’s bright spots: the service sector, consumer spending and the booming labor market in July.
The U.S. service sector generally has been insulated from the overseas economic weakness that has clobbered manufacturers’ exports and helped push factory activity back into contraction territory last month. The Institute for Supply Management’s (ISM) non-manufacturing index dipped in July but remained firmly in expansion mode. That’s largely because American consumers are in pretty good shape as a result of solid job and income growth, low gasoline prices and healthy balance sheets. But retail sales flat-lined in August after three strong monthly gains, and Nomura economist Lewis Alexander says that likely tempered service-sector activity. Economists expect ISM on Tuesday to report another slight dip in its index last month to a still-healthy level.
On Wednesday, the Labor Department takes a closer look at Micah Bassett, 5, makes a face as Michael Eckert gets to work last week at Sim’s Barbershop in Pittsfield, Mass. The service sector has been a source of strength. payroll growth in July, when the economy generated a blockbuster 275,000 jobs. But while job openings have hovered near record levels, hiring has been solid but lagging. That suggests many employers can’t find qualified workers or there are some mismatches between job requirements and candidates’ skills. As a result, a significant portion of the net increase in employment that the government reports each month may be due to fewer layoffs rather than stronger hiring. A pickup in hiring in Labor’s Job Openings and Labor Turnover Survey would be a good sign for the job market.
The Federal Reserve releases a report on consumer credit growth
Thursday. For several years after the Great Recession in 2007-09, household credit growth was overwhelmingly driven by student and auto debt as many consumers kept their credit cards in their wallets. But credit card outlays have picked up this year, providing more support for consumption, which makes up 70% of economic activity.
In June, outstanding credit gains slowed to $12.3 billion from $17.9 billion the previous month, but most of that came from credit cards. Economists expect the Fed to report a $15.5 billion a jump in outstanding credit for July.
Consumers are in pretty good shape as a result of solid job and income growth and low gas prices.