Economy Watch: Non-Manufacturing Sector Expands

Recent reports from the Bureau of Labor Statistics and Institute for Supply Management suggest that most U.S. businesses are still hiring workers at a stable rate, and the labor market isn't overheated.
Source: U.S. Bureau of Labor Statistics
Source: U.S. Bureau of Labor Statistics, December 2017

Economic activity in the U.S. non-manufacturing sector grew in January for the 96th consecutive month, according to the latest Non-Manufacturing ISM Report On Business, which was released Feb. 6. The Non-Manufacturing Business Activity Index increased to 59.8 percent, which is 2 percentage points higher than the December reading of 57.8 percent.

All of the component indexes strengthened in January as well, reported the Institute for Supply Management. The New Orders Index came in at 62.7 percent, 8.2 percentage points higher than in December, while the Prices Index increased by 2 percentage points to 61.9 percent. Perhaps most notably, the Employment Index increased 5.3 percentage points in January to 61.6 percent. The report suggests that U.S. businesses are mostly keen to hire more workers, but the labor market probably isn’t overheated.

Separately, the Bureau of Labor Statistics reported on Tuesday that the number of job openings in the U.S. economy was little changed in December compared with November, coming in at 5.8 million on the last business day of 2017.

Over the month, hires and separations were little changed as well, coming in at 5.5 million and 5.2 million, respectively. Over the 12 months ending in December, hires totaled 64.7 million and separations totaled 62.6 million, yielding a net employment gain for the U.S. economy of 2.2 million. According to the BLS, these totals include workers who may have been hired and separated more than once during the year.