US services industry activity cooled in October amid a slowdown in new orders and hiring, suggesting a moderation in economic growth early in the fourth quarter.
Other data yesterday showed planned job cuts by US-based employers dropped 31% to a five-month low last month.
That underscored the labour market’s healthy fundamentals, though more Americans filed for unemployment benefits last week.
The mixed reports came a day after the Federal Reserve offered a fairly upbeat assessment of the economy and signaled it could raise interest rates next month.
The Institute for Supply Management (ISM) said its non-manufacturing index fell 2.3 percentage points to a reading of 54.8% in October.
A reading above 50 indicates expansion in the services sector, which accounts for more than two-thirds of the US economy.
Services industries reported a moderation in new orders and employment, as well as demand for exports.
The new orders sub-index dropped 2.3 percentage points to 57.7, while a measure of services sector employment decreased 4.1 percentage points to 53.1.
A sub-index for export orders fell 1.0 percentage point last month.
The economy grew at a 2.9% pace in the third quarter after expanding at a 1.4% rate in the April-June period.
Separately, the Labour Department said yesterday that initial claims for state unemployment benefits increased 7,000 to a seasonally adjusted 265,000 for the week ended Oct.
29, the highest level since early August.
It was still the 87th straight week that claims remained below 300,000, a threshold associated with a healthy labour market.
That is the longest stretch since 1970, when the labour market was much smaller.
“US jobless claims remain supportive of labour market improvement,” said Michael Gapen, chief economist at Barclays in New York.
The four-week moving average of claims, considered a better measure of labour market trends as it irons out week-to-week volatility, increased 4,750 to 257,750 last week.
US stocks were mixed in mid-morning trading, while prices for US Treasuries fell.
The dollar was weaker against a basket of currencies.
The Fed on Wednesday held interest rates steady but said its monetary policy-setting committee “judges that the case for an increase in the federal funds rate has continued to strengthen.”
The US central bank is widely expected to increase its overnight benchmark interest rate in December, but the decision could depend on the outcome of the November 8 US presidential election.
The tightening of the race between Democratic candidate Hillary Clinton and her Republican rival Donald Trump has rattled financial markets.
The Fed raised borrowing costs last December for the first time in nearly a decade.
Last week’s claims report has no bearing on October’s employment report, which is scheduled for release on Friday, as it falls outside the survey period.
According to a Reuters survey of economists, non-farm payrolls likely increased by 175,000 last month after rising by 151,000 in September.
The unemployment rate is seen slipping one-tenth of a percentage point to 4.9%.
Expectations of an upbeat October employment report were supported by a report yesterday from global outplacement consultancy Challenger, Gray & Christmas showing employers announced 30,740 job cuts last month, down from 44,324 in September.
“This low monthly total is most likely due to the fact the economy is relatively healthy and that most employers don’t see those conditions changing in the next three to six months,” said John Challenger, chief executive officer of Challenger, Gray & Christmas. Job cuts in October were concentrated in the computer industry, where employers announced 4,792 layoffs.
Most of the computer job cuts came from HP Inc, which laid off another 4,000 workers last month.
That was in addition to the 30,000 job cuts the company announced in 2015.
In another report, the Labour Department said nonfarm productivity, which measures hourly output per worker, rose at a 3.1% annual rate.
The increase ended three straight quarters of decline.
Productivity fell at a 0.2% rate in the second quarter.
Despite the rise, the trend in productivity remains weak.
Productivity was unchanged compared to the third quarter of 2015.
Unit labour costs, the price of labour per single unit of output, rose at a 0.3% pace in the third quarter after increasing at a 3.9% rate in the second quarter.
Another report by the Commerce Department showed new orders for manufactured goods increased 0.3% in September after rising 0.4% gain in August.
Unfilled orders at factories, however, fell for a fourth straight month.
Manufacturing, which accounts for about 12% of the economy, has been hurt by a strong dollar and weak global demand.
Production has also been undermined by the collapse in oil drilling activity in the wake of the plunge in oil prices.