Service sector grows for the 4th consecutive month

The U.S. services sector, where most Americans work, grew for a fourth consecutive month in September as the country attempts to re-open from earlier COVID-19 shutdowns.

The Institute for Supply Management reported Monday that its index of services activity rose to a reading of 57.8 last month, 0.9 percentage point higher than the August reading of 56.9. Any reading above 50 signifies expansion in services industries such as restaurants, department stores and delivery companies.

The index fell sharply for three months starting in March as shutdowns aimed at containing the virus closed many businesses and put millions of Americans out of work. But starting in June, the index began to rise again and now stands above its February level of 57.3.

However, if U.S. infections continue to spread as the are now in the upper Midwest, economists fear a retreat in the service sector, and all the jobs it brings.

“Recovery in the service sector is ongoing as activity continues to come back online more completely,” said Rubeela Farooqi, chief U.S. economist at High Frequency Economics. “However, risks remain to the downside from virus outbreaks and restrictions as well as subdued demand that could weigh on activity going forward.”

The strength in September reflected big gains in new orders and the employment index, which rose above 50 for the first time since February.

Anthony Nieves, head of the ISM services survey committee, said that while the rise in the employment index was encouraging, it remains far from the job levels last recorded in January and February.

A key factor going forward will be whether Congress is able to end months of stalemate and approve another round of support for individuals and small businesses, Nieves said.

“A stimulus package is really necessary for many of these small businesses to avoid becoming a business fatality,” Nieves said. He said that one problem will be the loss of outside dining as the weather gets colder.