Expansion in US service industries during March was the slowest in seven months, with businesses creating fewer jobs than had been expected – all signs that the economy as a whole is taking a turn for the worst.
According to the Institute for Supply Management, its gauge for measuring non-manufacturing industries fell to 54.4, which starkly contrasts with the previous year high of 56. In addition, job creations in the private sector totaled 158,000 for the month of March, which the ADP reports is the lowest level of improvement since October last year.
Lower service industry growth and further reports indicating an overall slide in manufacturing across the US add credence to concerns regarding the economic dangers of across-the-board federal budget cuts.
Meanwhile, cheaper borrowing and gains in income have the potential to serve as a buffer for big name retailers, while the ongoing recovery in the housing market could see the nation’s builders, lenders and realtors better off.
“Growth is set to slow somewhat in the second quarter after a spurt of activity in the first quarter,” according to HSBC economist Ryan Wang speaking this week to Reuters.
“Employers are cautiously optimistic but also closely monitoring new orders as they make hiring decisions.”
The report sparked a slide from the S&P 500’s record-high and a decline in Treasury yields. At the end of the day’s trading in New York, the S&P 500 was down 1.1% to come out at 1,533.69. Yields on 10-year Treasury Notes fell from 1.86% to 1.81%.
As far as non-manufacturing industries are concerned, a total of fifteen experience growth last month including finance, construction and real estate, while a further three industries reported contractions. While the slowdown has generally been interpreted as a cause for concern, some economists and analysts have stated that the index is still looking relatively safe and that sustainable growth at a slower rate is a preferable reality.
Employment seems to be improving though by way of a job market that’s experiencing rather unstable peaks and troughs rather than a steady and predictable uptick. For the month of March, small companies added a further 74,000 workers across the US, mid-sized businesses with between 50 and 499 employees took on 37,000 new recruits and larger businesses with more than 499 workers created 47,000 new jobs, according to reports.
Some of the lowest mortgage rates in US history are continuing to offer a serious boost to the housing market, with reports for February confirming the highest level of pre-owned home sales in over three years. And during the same month, new home sales showed their biggest signs of improvement in over four years.
Average mortgage rates for 30 year fixed rate loans as of last week were according to Freddie Mac as low as 3.57% – not a million miles from the all-time record-low of 3.31% hit last November.
Automobile sales are also on the up due to pent up demand, with the annual rate for the first quarter averaging 15.26 – the highest recorded in five years.