WASHINGTON -- U.S. service-industry activity slowed for a second straight month in October, suggesting some loss of momentum in the economy early in the fourth quarter.
Still, the economy remains on solid ground as other data Wednesday showed a pick-up in private sector hiring last month.
The Institute for Supply Management said its services index fell to 57.1 last month from a reading of 58.6 in September, drifting further from August's post-recession high of 59.6.
Nevertheless, the survey showed the key services sector, which accounts for roughly two-thirds of the economy, remained solidly in growth mode. A reading above 50 indicates expansion.
"The recent moderation in the surveys is broadly consistent with our view that growth cooled off between the third and fourth quarters," said Daniel Silver, an economist at JPMorgan (JPM) in New York.
%VIRTUAL-pullquote-The economy is growing fast enough to bring the unemployment rate down for the right reasons.%Separately, the ADP National Employment Report showed private payrolls increased by 230,000 in October, for a record seven straight months of job gains exceeding 200,000. Private hiring had risen 225,000 in September.
Job gains last month were broad-based, with mid-sized businesses adding the most workers in more than seven years.
"The economy is growing fast enough to bring the unemployment rate down for the right reasons," said Chris Rupkey chief financial economist at MUFG Union Bank in New York.
The employment data helped to lift stocks. Investors also were cheered by midterm elections that put the Republican Party, considered friendlier to business, in control of the Senate.
The dollar was trading higher against a basket of currencies, while prices for U.S. government debt fell.
A strengthening labor market is seen tempering some of the anticipated economic slowdown, which is driven in part by weakening global demand, especially in key markets like China and the eurozone.
Data ranging from consumer spending, trade and business spending suggest the economy exited the third quarter with less steam, setting it up for a further moderation in the final three months of the year.
Third-quarter gross domestic product was initially estimated to have expanded at a 3.5 percent annual pace, but the weak trade data implied growth would be lowered to around a 3 percent rate.
The ADP (ADP) figures come ahead of the U.S. Labor Department's more comprehensive nonfarm payrolls report on Friday, which includes both public and private sector employment.
Economists polled by Reuters are looking for total U.S. employment to have grown by 231,000 jobs in October, down from 248,000 in September, with private-sector hiring seen at 222,000 compared with 236,000 the month before.
Despite the pullback in services activity last month, employment growth was robust.
ISM's employment index rose to 59.6, the highest since August 2005, compared with 58.5 in September. Services-sector employment has rebounded rapidly in the last several months from a four-year low touched in February, when a harsh U.S. winter contributed to a sharp slowdown in economic activity.
9 Numbers That'll Tell You How the Economy's Really Doing
The gross domestic product measures the level of economic activity within a country. To figure the number, the Bureau of Economic Analysis combines the total consumption of goods and services by private individuals and businesses; the total investment in capital for producing goods and services; the total amount spent and consumed by federal, state, and local government entities; and total net exports. It's important, because it serves as the primary gauge of whether the economy is growing or not. Most economists define a recession as two or more consecutive quarters of shrinking GDP.
The CPI measures current price levels for the goods and services that Americans buy. The Bureau of Labor Statistics collects price data on a basket of different items, ranging from necessities like food, clothing and housing to more discretionary expenses like eating out and entertainment. The resulting figure is then compared to those of previous months to determine the inflation rate, which is used in a variety of ways, including cost-of-living increases for Social Security and other government benefits.
The unemployment rate measures the percentage of workers within the total labor force who don't have a job, but who have looked for work in the past four weeks, and who are available to work. Those temporarily laid off from their jobs are also included as unemployed. Yet as critical as the figure is as a measure of how many people are out of work and therefore suffering financial hardship from a lack of a paycheck, one key item to note about the unemployment rate is that the number does not reflect workers who have stopped looking for work entirely. It's therefore important to look beyond the headline numbers to see whether the overall workforce is growing or shrinking.
The trade deficit measures the difference between the value of a nation's imported and exported goods. When exports exceed imports, a country runs a trade surplus. But in the U.S., imports have exceeded exports consistently for decades. The figure is important as a measure of U.S. competitiveness in the global market, as well as the nation's dependence on foreign countries.
Each month, the Bureau of Economic Analysis measures changes in the total amount of income that the U.S. population earns, as well as the total amount they spend on goods and services. But there's a reason we've combined them on one slide: In addition to being useful statistics separately for gauging Americans' earning power and spending activity, looking at those numbers in combination gives you a sense of how much people are saving for their future.
Consumers play a vital role in powering the overall economy, and so measures of how confident they are about the economy's prospects are important in predicting its future health. The Conference Board does a survey asking consumers to give their assessment of both current and future economic conditions, with questions about business and employment conditions as well as expected future family income.
The health of the housing market is closely tied to the overall direction of the broader economy. The S&P/Case-Shiller Home Price Index, named for economists Karl Case and Robert Shiller, provides a way to measure home prices, allowing comparisons not just across time but also among different markets in cities and regions of the nation. The number is important not just to home builders and home buyers, but to the millions of people with jobs related to housing and construction.
Most economic data provides a backward-looking view of what has already happened to the economy. But the Conference Board's Leading Economic Index attempts to gauge the future. To do so, the index looks at data on employment, manufacturing, home construction, consumer sentiment, and the stock and bond markets to put together a complete picture of expected economic conditions ahead.